AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 8, 1998
among
QWEST COMMUNICATIONS INTERNATIONAL INC.,
QWEST 1998-L ACQUISITION CORP.
and
LCI INTERNATIONAL, INC.
TABLE OF CONTENTS
ARTICLE I
THE MERGER . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . . 2
1.5 Certificate of Incorporation . . . . . . . . . . . 2
1.6 By-Laws . . . . . . . . . . . . . . . . . . . . . 3
1.7 Officers and Directors of Surviving
Corporation . . . . . . . . . . . . . . . . . . . 3
1.8 Effect on Capital Stock . . . . . . . . . . . . . 3
1.9 Voting Agreement . . . . . . . . . . . . . . . . . 4
ARTICLE II
EXCHANGE OF CERTIFICATES . . . . . . . . . . 4
2.1 Exchange Fund . . . . . . . . . . . . . . . . . . 4
2.2 Exchange Procedures . . . . . . . . . . . . . . . 4
2.3 Distributions with Respect to Unexchanged
Shares . . . . . . . . . . . . . . . . . . . . . . 5
2.4 No Further Ownership Rights in LCI Common
Stock . . . . . . . . . . . . . . . . . . . . . . 5
2.5 No Fractional Shares of Qwest Common Stock . . . . 5
2.6 Termination of Exchange Fund . . . . . . . . . . . 6
2.7 No Liability . . . . . . . . . . . . . . . . . . . 6
2.8 Investment of the Exchange Fund . . . . . . . . . 6
2.9 Lost Certificates . . . . . . . . . . . . . . . . 6
2.10 Withholding Rights . . . . . . . . . . . . . . . . 7
2.11 Further Assurances . . . . . . . . . . . . . . . . 7
2.12 Stock Transfer Books . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . 8
3.1 Representations and Warranties of LCI . . . . . . 8
(a) Organization, Standing and Power . . . . . 8
(b) Capital Structure . . . . . . . . . . . . 8
(c) Authority; No Conflicts . . . . . . . . . 9
(d) Reports and Financial Statements . . . . . 11
(e) Information Supplied . . . . . . . . . . . 12
(f) Board Approval . . . . . . . . . . . . . . 12
(g) Vote Required . . . . . . . . . . . . . . 13
(h) Rights Agreement . . . . . . . . . . . . . 13
(i) Brokers or Finders . . . . . . . . . . . . 13
(j) Opinion of LCI Financial Advisor . . . . . 13
(k) Affiliate Letter . . . . . . . . . . . . . 13
3.2 Representations and Warranties of Qwest . . . . . 13
(a) Organization, Standing and Power . . . . . 13
(b) Capital Structure . . . . . . . . . . . . 14
(c) Authority; No Conflicts . . . . . . . . . 15
(d) Reports and Financial Statements . . . . . 16
(e) Information Supplied . . . . . . . . . . . 17
(f) Board Approval . . . . . . . . . . . . . . 17
(g) Vote Required . . . . . . . . . . . . . . 17
(h) Brokers or Finders . . . . . . . . . . . . 18
3.3 Representations and Warranties of Qwest and
Merger Sub . . . . . . . . . . . . . . . . . . . . 18
(a) Organization and Corporate Power . . . . . 18
(b) Corporate Authorization . . . . . . . . . 18
(c) Non-Contravention . . . . . . . . . . . . 18
(d) No Business Activities . . . . . . . . . . 18
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . 19
4.1 Covenants of LCI . . . . . . . . . . . . . . . . . 19
(a) Ordinary Course . . . . . . . . . . . . . 19
(b) Dividends; Changes in Share Capital . . . 19
(c) Issuance of Securities . . . . . . . . . . 20
(d) Governing Documents . . . . . . . . . . . 20
(e) No Acquisitions . . . . . . . . . . . . . 20
(f) No Dispositions . . . . . . . . . . . . . 20
(g) Investments; Indebtedness . . . . . . . . 21
(h) Tax-Free Qualification . . . . . . . . . . 21
(i) Compensation . . . . . . . . . . . . . . . 21
(j) Other Actions . . . . . . . . . . . . . . 21
(k) Accounting Methods; Income Tax
Elections . . . . . . . . . . . . . . . . 21
(l) Rights Agreement . . . . . . . . . . . . . 22
4.2 Covenants of Qwest . . . . . . . . . . . . . . . . 22
(a) Ordinary Course . . . . . . . . . . . . . 22
(b) Dividends; Changes in Share Capital . . . 22
(c) Issuance of Securities . . . . . . . . . . 23
(d) Governing Documents . . . . . . . . . . . 23
(e) No Acquisitions . . . . . . . . . . . . . 23
(f) No Dispositions . . . . . . . . . . . . . 23
(g) Investments . . . . . . . . . . . . . . . 24
(h) Tax-Free Qualification . . . . . . . . . . 24
(i) Other Actions . . . . . . . . . . . . . . 24
(j) Accounting Methods; Income Tax
Elections . . . . . . . . . . . . . . . . 24
4.3 Advice of Changes; Governmental Filings . . . . . 24
4.4 Transition Planning . . . . . . . . . . . . . . . 25
4.5 Control of Other Party's Business . . . . . . . . 25
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . 25
5.1 Preparation of Proxy Statement; LCI
Stockholders Meeting . . . . . . . . . . . . . . . 25
5.2 Qwest Board of Directors . . . . . . . . . . . . . 26
5.3 Access to Information . . . . . . . . . . . . . . 27
5.4 Best Efforts . . . . . . . . . . . . . . . . . . . 27
5.5 Acquisition Proposals . . . . . . . . . . . . . . 29
5.6 Assumption of LCI Stock Options; Other Stock
Plans; Employee Benefits Matters . . . . . . . . . 30
5.7 Fees and Expenses . . . . . . . . . . . . . . . . 31
5.8 Directors' and Officers' Indemnification and
Insurance . . . . . . . . . . . . . . . . . . . . 31
5.9 Rights Agreement . . . . . . . . . . . . . . . . . 31
5.10 Public Announcements . . . . . . . . . . . . . . . 32
5.11 Accountants' Letters . . . . . . . . . . . . . . . 32
5.12 Listing of Shares of Qwest Common Stock . . . . . 32
5.13 Voting Trust . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . 32
6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . . . . . 32
(a) Stockholder Approval . . . . . . . . . . . 33
(b) No Injunctions or Restraints,
Illegality . . . . . . . . . . . . . . . . 33
(c) FCC and Public Utility Commission
Approvals . . . . . . . . . . . . . . . . 33
(d) HSR Act . . . . . . . . . . . . . . . . . 33
(e) NASDAQ Listing . . . . . . . . . . . . . . 33
(f) Effectiveness of the Form S-4 . . . . . . 33
6.2 Additional Conditions to Obligations of Qwest
and Merger Sub . . . . . . . . . . . . . . . . . . 33
(a) Representations and Warranties . . . . . . 33
(b) Performance of Obligations of LCI . . . . 33
(c) Tax Opinion . . . . . . . . . . . . . . . 34
6.3 Additional Conditions to Obligations of LCI . . . 34
(a) Representations and Warranties . . . . . . 34
(b) Performance of Obligations of Qwest . . . 34
(c) Tax Opinion . . . . . . . . . . . . . . . 34
ARTICLE VII
TERMINATION AND AMENDMENT . . . . . . . . . . 35
7.1 Termination . . . . . . . . . . . . . . . . . . . 35
7.2 Effect of Termination . . . . . . . . . . . . . . 36
7.3 Amendment . . . . . . . . . . . . . . . . . . . . 37
7.4 Extension; Waiver . . . . . . . . . . . . . . . . 37
ARTICLE VIII
GENERAL PROVISIONS . . . . . . . . . . . . 38
8.1 Non-Survival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . . . 38
8.2 Notices . . . . . . . . . . . . . . . . . . . . . 38
8.3 Interpretation . . . . . . . . . . . . . . . . . . 39
8.4 Counterparts . . . . . . . . . . . . . . . . . . . 39
8.5 Entire Agreement; No Third Party Beneficiaries . . 40
8.6 Governing Law . . . . . . . . . . . . . . . . . . 40
8.7 Severability . . . . . . . . . . . . . . . . . . . 40
8.8 Assignment . . . . . . . . . . . . . . . . . . . . 40
8.9 Submission to Jurisdiction; Waivers . . . . . . . 40
8.10 Enforcement . . . . . . . . . . . . . . . . . . . 41
8.11 Definitions . . . . . . . . . . . . . . . . . . . 41
8.12 Other Agreements . . . . . . . . . . . . . . . . . 42
LIST OF EXHIBITS
Exhibit Title
1.9 Form of Voting Agreement
5.6 Assumption of LCI Stock Options and LCI Warrant
6.2(c)(1) Form of Qwest Tax Opinion
6.2(c)(2) Form of Qwest Representations Letter
6.2(c)(3) Form of LCI Representations Letter
6.3(c)(1) Form of LCI Tax Opinion
GLOSSARY DEFINED TERMS
Definition Location of Definition
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . Section 5.5
Adjustment Election . . . . . . . . . . . . . . . . . . . . . . Section 7.1(i)
Adjustment Election Period . . . . . . . . . . . . . . . . . . Section 7.1(i)
Affiliate Agreement . . . . . . . . . . . . . . . . . . . . . . Section 3.1(k)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Average Price . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(a)
Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Board Approval . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(f)
Board of Directors . . . . . . . . . . . . . . . . . . . . . Section 8.11(b)
Business Day . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(c)
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Communications Act . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . Section 5.3
Delaware Certificate of Merger . . . . . . . . . . . . . . . . . Section 1.3
Determination Date . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
DOJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4(b)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(a)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.7
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)(i)
Governmental Entity . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
LCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
LCI Affiliate Letter . . . . . . . . . . . . . . . . . . . . . Section 3.1(k)
LCI Benefit Plans . . . . . . . . . . . . . . . . . . . . . . Section 5.6.(b)
LCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
LCI Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . Section 3.1
LCI Draft Disclosures . . . . . . . . . . . . . . . . . . . Section 3.1(d)(ii)
LCI Employees . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.6(b)
LCI Evaluation Period . . . . . . . . . . . . . . . . . . . . . Section 7.1(i)
LCI Financial Advisor . . . . . . . . . . . . . . . . . . . . . Section 3.1(i)
LCI SEC Reports . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)(i)
LCI Stockholders Meeting . . . . . . . . . . . . . . . . . . . Section 5.1(b)
LCI Stock Option Plans . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
LCI Stock Options . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
LCI Transaction Information . . . . . . . . . . . . . . . . Section 3.1(d)(ii)
LCI Voting Debt . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(ii)
LCI Warrant . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
Material Adverse Effect . . . . . . . . . . . . . . . . . . . Section 8.11(d)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Merger Consideration . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(f)
Principal Stockholder . . . . . . . . . . . . . . . . . . . . . . . . Recitals
PUCs . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Qwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Qwest Charter Amendment . . . . . . . . . . . . . . . . . . Section 3.2(c)(i)
Qwest Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Qwest Disclosure Schedule . . . . . . . . . . . . . . . . . . . . Section 3.2
Qwest Draft Disclosures . . . . . . . . . . . . . . . . . . Section 3.2(d)(ii)
Qwest Financial Advisor . . . . . . . . . . . . . . . . . . . . Section 3.2(h)
Qwest SEC Reports . . . . . . . . . . . . . . . . . . . . . Section 3.2 (d)(i)
Qwest Stockholders Meeting . . . . . . . . . . . . . . . . . . Section 5.1(c)
Qwest Transaction Information . . . . . . . . . . . . . . . Section 3.2(d)(ii)
Qwest Voting Debt . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)(ii)
Qwest Warrants . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)(i)
Regulatory Law . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4(b)
Required Consents . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Required LCI Vote . . . . . . . . . . . . . . . . . . . . . . . Section 3.l(g)
Required Qwest Vote . . . . . . . . . . . . . . . . . . . . . . Section 3.2(g)
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
Rights Agreement . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
Rule 145 . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(k)
SAS 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.11
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)(i)
Securities Act . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Share Issuance . . . . . . . . . . . . . . . . . . . . . . Section 3.2(c)(i)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(g)
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Termination Date . . . . . . . . . . . . . . . . . . . . . . . Section 7.1(b)
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(b)
Termination Notice . . . . . . . . . . . . . . . . . . . . . . Section 7.1(i)
the other party . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(e)
Violation . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(ii)
Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . Section 1.9
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 8, 1998
(this "Agreement"), among QWEST COMMUNICATIONS INTERNATIONAL INC., a Delaware
corporation ("Qwest"), QWEST 1998-L ACQUISITION CORP., a Delaware corporation
and a direct wholly-owned subsidiary of Qwest ("Merger Sub"), and LCI
INTERNATIONAL, INC., a Delaware corporation ("LCI").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Qwest, Merger
Sub and LCI have each determined that the merger of Merger Sub with and into
LCI (the "Merger") is in the best interests of their respective stockholders,
and such Boards of Directors have approved such Merger, upon the terms and
subject to the conditions set forth in this Agreement, pursuant to which each
outstanding share of common stock, par value $.01 per share, of LCI ("LCI
Common Stock") issued and outstanding immediately prior to the Effective Time
(as defined in Section 1.3), other than shares owned or held directly or
indirectly by Qwest or directly by LCI will be converted into the right to
receive shares of common stock, par value $.01 per share, of Qwest ("Qwest
Common Stock") as set forth in Section 1.8;
WHEREAS, Qwest, Merger Sub and LCI desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to
the transactions contemplated hereby;
WHEREAS, Qwest, Merger Sub and LCI intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder; and
WHEREAS, concurrently herewith the record and beneficial
owners of not less than 80% of the outstanding shares of Qwest Common Stock
(collectively, the "Principal Stockholder") has agreed to vote such shares in
favor of the transactions contemplated hereby pursuant to the Voting
Agreement (as defined in Section 1.9).
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Merger Sub shall be merged with and into LCI at
the Effective Time. Following the Merger, the separate corporate existence
of Merger Sub shall cease and LCI shall continue as the surviving corporation
(the "Surviving Corporation") under the name "LCI International, Inc."
1.2 Closing. The closing of the Merger (the "Closing") will
take place on the second Business Day after the satisfaction or waiver
(subject to applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article
VI (the "Closing Date"), provided, however, that, if the Average Price is
less than $26.9531, then the Closing shall not occur prior to (i) if LCI
shall not deliver a Termination Notice (as defined in Section 7.1(i)) to
Qwest in accordance with Section 7.1(i), the second Business Day following
the expiration of the LCI Evaluation Period (as defined in Section 7.1(i)) or
(ii) if LCI shall deliver a Termination Notice to Qwest in accordance with
Section 7.1(i), the second Business Day following the earlier of (A) Qwest's
delivery of an Adjustment Election (as defined in Section 7.1(i)) and (B) the
expiration of the Adjustment Election Period (as defined in Section 7.1(i)),
in each case, unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of O'Melveny &
Xxxxx LLP, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, unless another
place is agreed to in writing by the parties hereto.
1.3 Effective Time. As soon as practicable following the
Closing, the parties shall (i) file a certificate of merger (the "Delaware
Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the DGCL and (ii) make all other
filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Delaware Certificate of Merger is duly filed
with the Delaware Secretary of State or at such subsequent time as Qwest and
LCI shall agree and be specified in the Delaware Certificate of Merger (the
date and time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. At and after the Effective Time,
the Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of LCI and Merger Sub
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of LCI and Merger Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
1.5 Certificate of Incorporation. At the Effective Time, the
certificate of incorporation of the Surviving Corporation shall be amended in
accordance with the DGCL such that the certificate of incorporation of the
Surviving Corporation shall consist of the provisions of the certificate of
incorporation of Merger Sub, except that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "The name of this Corporation is 'LCI International,
Inc.'".
1.6 By-Laws. The by-laws of Merger Sub as in effect at the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.7 Officers and Directors of Surviving Corporation. The
officers of LCI as of the Effective Time shall be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
otherwise ceasing to be an officer or until their respective successors are
duly elected and qualified, as the case may be. The directors of Merger Sub
as of the Effective Time shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or otherwise ceasing to be
a director or until their respective successors are duly elected and
qualified.
1.8 Effect on Capital Stock.
(a) At the Effective Time by virtue of the Merger and without
any action on the part of the holder thereof, each share of LCI Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of LCI Common Stock owned by Qwest or Merger Sub or held by LCI, all
of which shall be canceled as provided in Section 1.8(c)) shall be converted
into the right to receive that number of shares of Qwest Common Stock equal
to the Exchange Ratio (as defined below) (the "Merger Consideration").
"Exchange Ratio" means the quotient (rounded to the nearest 1/10,000)
determined by dividing $42 by the average (rounded to the nearest 1/10,000)
(the "Average Price") of the volume weighted averages (rounded to the nearest
1/10,000) of the trading prices of Qwest Common Stock on the Nasdaq National
Market ("NASDAQ"), as reported by Bloomberg Financial Markets (or such other
source as the parties shall agree in writing), for each of the 15 consecutive
trading days ending on the trading day immediately preceding the date on
which all the conditions to Closing (other than conditions that, by their
terms, cannot be satisfied until the Closing Date) set forth in Article VI
shall have been satisfied or waived (the "Determination Date"); provided,
that the Exchange Ratio shall not be less than 1.0625 or, unless Qwest shall
have exercised its rights under Section 7.1(i), greater than 1.5583.
(b) As a result of the Merger and without any action on the
part of the holders thereof, at the Effective Time, all shares of LCI Common
Stock shall cease to be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate which immediately
prior to the Effective Time represented any such shares of LCI Common Stock
(a "Certificate") (other than Merger Sub, Qwest and LCI) shall thereafter
cease to have any rights with respect to such shares of LCI Common Stock,
except the right to receive the applicable Merger Consideration in accordance
with Article II upon the surrender of such certificate.
(c) Each share of LCI Common Stock issued and owned or held by
Qwest, Merger Sub or LCI at the Effective Time shall, by virtue of the
Merger, cease to be outstanding and shall be canceled and retired and no
stock of Qwest or other consideration shall be delivered in exchange
therefor.
(d) Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time,
shall remain issued, outstanding and unchanged as validly issued, fully paid
and nonassessable shares of common stock, par value $.01 per share, of the
Surviving Corporation as of the Effective Time.
1.9 Voting Agreement. Concurrently with the execution and
delivery of this Agreement, LCI, and the Principal Stockholder are executing
and delivering an agreement substantially in the form of Exhibit 1.9 hereto,
pursuant to which, among other things, the Principal Stockholder is agreeing
to vote all of the shares of Qwest Common Stock owned, beneficially or of
record, by it to approve the Share Issuance and the Qwest Charter Amendment
(as defined in Section 3.2(c)(i)).
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund. Prior to the Effective Time, Qwest shall
appoint Xxxxx Xxxxxx Shareholder Services or another commercial bank or trust
company having net capital of not less than $100,000,000, or a subsidiary
thereof, to act as exchange agent hereunder for the purpose of exchanging
Certificates for the Merger Consideration (the "Exchange Agent"). At or
prior to the Effective Time, Qwest shall deposit with the Exchange Agent, in
trust for the benefit of holders of shares of LCI Common Stock, certificates
representing the Qwest Common Stock issuable pursuant to Section 1.8 in
exchange for outstanding shares of LCI Common Stock. Qwest agrees to make
available to the Exchange Agent from time to time as needed, cash sufficient
to pay cash in lieu of fractional shares pursuant to Section 2.5 and any
dividends and other distributions pursuant to Section 2.3. Any cash and
certificates of Qwest Common Stock deposited with the Exchange Agent shall
hereinafter be referred to as the "Exchange Fund".
2.2 Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to mail to each holder of a Certificate (i) a letter of transmittal
which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates
to the Exchange Agent, and which letter shall be in customary form and have
such other provisions as Qwest may reasonably specify and (ii) instructions
for effecting the surrender of such Certificates in exchange for the
applicable Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor (A) one or
more shares of Qwest Common Stock representing, in the aggregate, the whole
number of shares that such holder has the right to receive pursuant to
Section 1.8 (after taking into account all shares of LCI Common Stock then
held by such holder) and (B) a check in the amount equal to the cash that
such holder has the right to receive pursuant to the provisions of this
Article II, including cash in lieu of any fractional shares of Qwest Common
Stock pursuant to Section 2.5. No interest will be paid or will accrue on
any cash payable pursuant to Section 2.3 or Section 2.5. In the event of a
transfer of ownership of LCI Common Stock which is not registered in the
transfer records of LCI, one or more shares of Qwest Common Stock evidencing,
in the aggregate, the proper number of shares of Qwest Common Stock, a check
in the proper amount of cash in lieu of any fractional shares of Qwest Common
Stock pursuant to Section 2.5 and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.3, may be issued with
respect to such LCI Common Stock to such a transferee if the Certificate
representing such shares of LCI Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
2.3 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to shares of
Qwest Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Qwest Common Stock that such holder would be entitled to receive upon
surrender of such Certificate and no cash payment in lieu of fractional
shares of Qwest Common Stock shall be paid to any such holder pursuant to
Section 2.5 until such holder shall surrender such Certificate in accordance
with Section 2.2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to such holder of
shares of Qwest Common Stock issuable in exchange therefor, without interest,
(a) promptly after the time of such surrender, the amount of any cash payable
in lieu of fractional shares of Qwest Common Stock to which such holder is
entitled pursuant to Section 2.5 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Qwest Common Stock, and (b) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such shares
of Qwest Common Stock.
2.4 No Further Ownership Rights in LCI Common Stock. All
shares of Qwest Common Stock issued and cash paid upon conversion of shares
of LCI Common Stock in accordance with the terms of Article I and this
Article II (including any cash paid pursuant to Section 2.3 or 2.5) shall be
deemed to have been issued or paid in full satisfaction of all rights
pertaining to the shares of LCI Common Stock.
2.5 No Fractional Shares of Qwest Common Stock.
(a) No certificates or scrip or shares of Qwest Common Stock
representing fractional shares of Qwest Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional share interests
will not entitle the owner thereof to vote or to have any rights of a
shareholder of Qwest or a holder of shares of Qwest Common Stock.
(b) Notwithstanding any other provision of this Agreement,
each holder of shares of LCI Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Qwest Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to the product of (i) such fractional part of a share of Qwest
Common Stock multiplied by (ii) the last sales price per share of Qwest
Common Stock reported on NASDAQ in The Wall Street Journal, Eastern edition,
with respect to the Closing Date. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify Qwest, and Qwest
shall cause the Surviving Corporation to deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to such
holders of fractional interests subject to and in accordance with the terms
hereof.
2.6 Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for twelve
months after the Effective Time shall be delivered to the Surviving
Corporation or otherwise on the instruction of the Surviving Corporation, and
any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation and Qwest
for the Merger Consideration with respect to the shares of LCI Common Stock
formerly represented thereby to which such holders are entitled pursuant to
Section 1.8 and Section 2.2, any cash in lieu of fractional shares of Qwest
Common Stock to which such holders are entitled pursuant to Section 2.5 and
any dividends or distributions with respect to shares of Qwest Common Stock
to which such holders are entitled pursuant to Section 2.3. Any such portion
of the Exchange Fund remaining unclaimed by holders of shares of LCI Common
Stock five years after the Effective Time (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to or become
property of any Governmental Entity (as defined in Section 3.1(c)(iii)))
shall, to the extent permitted by law, become the property of the Surviving
Corporation free and clear of any claims or interest of any Person previously
entitled thereto.
2.7 No Liability. None of Qwest, Merger Sub, LCI, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.8 Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by the Surviving
Corporation on a daily basis. Any interest and other income resulting from
such investments shall promptly be paid to the Surviving Corporation.
2.9 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond
in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration with
respect to the shares of LCI Common Stock formerly represented thereby, any
cash in lieu of fractional shares of Qwest Common Stock, and unpaid dividends
and distributions on shares of Qwest Common Stock deliverable in respect
thereof, pursuant to this Agreement.
2.10 Withholding Rights. Each of the Surviving Corporation and
Qwest shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of LCI
Common Stock such amounts as it is required to deduct and withhold with
respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or Qwest, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of LCI Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Qwest, as the case may
be.
2.11 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of LCI or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of LCI or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.
2.12 Stock Transfer Books. At the close of business, New York
City time, on the day the Effective Time occurs, the stock transfer books of
LCI shall be closed and there shall be no further registration of transfers
of shares of LCI Common Stock thereafter on the records of LCI. From and
after the Effective Time, the holders of Certificates shall cease to have any
rights with respect to such shares of LCI Common Stock formerly represented
thereby, except as otherwise provided herein or by law. On or after the
Effective Time, any Certificates presented to the Exchange Agent or Qwest for
any reason shall be converted into the Merger Consideration with respect to
the shares of LCI Common Stock formerly represented thereby, any cash in lieu
of fractional shares of Qwest Common Stock to which the holders thereof are
entitled pursuant to Section 2.5 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of LCI. Except as set
forth in the LCI Disclosure Schedule delivered by LCI to Qwest prior to the
execution of this Agreement (the "LCI Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), LCI represents and warrants to
Qwest as follows:
(a) Organization, Standing and Power. Each of LCI and each of
its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify would not, either individually
or in the aggregate, have a Material Adverse Effect (as defined in Section
8.11(d)) on LCI. The copies of the certificate of incorporation and by-laws
of LCI which were previously furnished to Qwest are true, complete and
correct copies of such documents as in effect on the date of this Agreement.
(b) Capital Structure.
(i) As of February 28, 1998, the authorized capital
stock of LCI consisted of (A) 300,000,000 shares of LCI Common Stock,
of which 96,814,777 shares were outstanding and (B) 15,000,000 shares
of Preferred Stock, par value $.01 per share, of which no shares were
outstanding and 500,000 shares of which have been designated Junior
Participating Preferred Stock and reserved for issuance upon exercise
of the rights (the "Rights") distributed to the holders of LCI Common
Stock pursuant to Rights Agreement dated as of January 22, 1997,
between LCI and Fifth Third Bank, as Rights Agent, as amended (the
"Rights Agreement"). Since February 28, 1998 to the date of this
Agreement, there have been no issuances of shares of the capital
stock of LCI or any other securities of LCI other than issuances of
shares (and accompanying Rights) pursuant to options or rights
outstanding as of February 28, 1998 under the Benefit Plans (as
defined in Section 8.11(a)) of LCI. All issued and outstanding
shares of the capital stock of LCI are duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock
is entitled to preemptive rights. There were outstanding as of
February 28, 1998 no options, warrants or other rights to acquire
capital stock from LCI other than (x) the Rights, (y) options
representing in the aggregate the right to purchase 14,302,838 shares
of LCI Common Stock (collectively, the "LCI Stock Options") under the
LCI International, Inc. 1992 Stock Option Plan, LiTel Communications,
Inc. 1993 Stock Option Plan, LCI International, Inc. 1994/1995 Stock
Option Plan, LCI International, Inc. 1995/1996 Stock Option Plan,
1997/1998 LCI International, Inc. Stock Option Plan, LCI
International, Inc. and Subsidiaries Nonqualified Stock Option Plan
for Directors, USLD Communications Corp. 1990 Employee Stock Option
Plan, and USLD Communications Corp. 1993 Non-Employee Director Plan,
(collectively, the "LCI Stock Option Plans"), and (z) a warrant
representing the right to purchase 75,760 shares of LCI Common Stock
(the "LCI Warrant"). As of February 28, 1998, LCI had further
reserved 623,081 shares of LCI Common Stock for purchase pursuant to
the LCI International, Inc. Amended and Restated Employee Stock
Purchase Plan and 474,393 shares of LCI Common Stock for purchase
pursuant to the LCI International 401(k) Savings Plan. Other than
the associated Rights issued with the shares issued as described
above and options or warrants or other rights to acquire no more than
100,000 shares of LCI Common Stock in the aggregate, no options or
warrants or other rights to acquire capital stock from LCI have been
issued or granted since February 28, 1998 to the date of this
Agreement.
(ii) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of LCI having the right to
vote on any matters on which stockholders may vote ("LCI Voting
Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b)
and as contemplated by Section 5.6, as of the date of this Agreement,
there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to
which LCI or any of its Subsidiaries is a party or by which any of
them is bound obligating LCI or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of LCI or any of
its Subsidiaries or obligating LCI or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no
outstanding obligations of LCI or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock
of LCI or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) LCI has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required LCI Vote (as
defined in Section 3.1(g)). The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of LCI, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required LCI Vote.
This Agreement has been duly executed and delivered by LCI and
constitutes a valid and binding agreement of LCI, enforceable against
it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally, by general
equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied
covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement by LCI
does not or will not, as the case may be, and the consummation of the
Merger by LCI and the other transactions contemplated hereby will
not, conflict with, or result in any violation of, or constitute a
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge
or other encumbrance on any assets (any such conflict, violation,
default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "Violation") pursuant to: (A) any
provision of the certificate of incorporation or by-laws of LCI or
any Subsidiary of LCI, or (B) except as would not have a Material
Adverse Effect on LCI, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to LCI or any Subsidiary of LCI or
their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational,
national, state, municipal or local government, any instrumentality,
subdivision, court, administrative agency or commission or other
authority thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority (a "Governmental Entity"), is required
by or with respect to LCI or any Subsidiary of LCI in connection with
the execution and delivery of this Agreement by LCI or the
consummation of the Merger and the other transactions contemplated
hereby, except for those required under or in relation to (A) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (B) the Communications Act of 1934, as amended (the
"Communications Act"), and any rules, regulations, practices and
policies promulgated by the Federal Communications Commission
("FCC"), (C) state securities or "blue sky" laws (the "Blue Sky
Laws"), (D) the Securities Act of 1933, as amended (the "Securities
Act"), (E) the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (F) the DGCL with respect to the filing of the
Delaware Certificate of Merger, (G) laws, rules, regulations,
practices and orders of any state public service commissions
("PUCs"), foreign telecommunications regulatory agencies or similar
state or foreign regulatory bodies, (H) rules and regulations of
NASDAQ and the New York Stock Exchange, Inc. (the "NYSE"), (I)
antitrust or other competition laws of other jurisdictions, and (J)
such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain would
not have a Material Adverse Effect on LCI. Consents, approvals,
orders, authorizations, registrations, declarations and filings
required under or in relation to any of the foregoing clauses (A)
through (I) are hereinafter referred to as "Required Consents."
(d) Reports and Financial Statements.
(i) LCI has filed all required reports, schedules,
forms, statements and other documents required to be filed by it with
the Securities and Exchange Commission (the "SEC") since January 1,
1997 (collectively, including all exhibits thereto, the "LCI SEC
Reports"). No Subsidiary of LCI is required to file any form, report
or other document with the SEC. None of the LCI SEC Reports, as of
their respective dates (and, if amended or superseded by a filing
prior to the date of this Agreement or the Closing Date, then on the
date of such filing), contained or will contain any untrue statement
of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements (including the
related notes) included in the LCI SEC Reports presents fairly, in
all material respects, the consolidated financial position and
consolidated results of operations and cash flows of LCI and its
Subsidiaries as of the respective dates or for the respective periods
set forth therein, all in conformity with United States generally
accepted accounting principles ("GAAP") consistently applied during
the periods involved except as otherwise noted therein, and subject,
in the case of the unaudited interim financial statements, to normal
and recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such LCI SEC Reports, as
of their respective dates (and as of the date of any amendment to the
respective LCI SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated
thereunder.
(ii) LCI has made available to Qwest drafts of the
consolidated financial statements of LCI and its Subsidiaries at and
for the year ended December 31, 1997 of LCI and a proxy statement of
LCI with respect to the proposed 1998 annual meeting of stockholders
of LCI (each in the respective form thereof as of the date of this
Agreement, collectively, the "LCI Draft Disclosures"). To the
knowledge of LCI, each of the LCI Draft Disclosures is in
substantially final form, except that the LCI Draft Disclosures do
not disclose any information with respect to this Agreement, the
transactions contemplated hereby or the effect that this Agreement or
such transactions might have on the business, financial condition or
results of operations (actual, pro forma or projected) of LCI and its
Subsidiaries (collectively, the "LCI Transaction Information"). The
LCI Draft Disclosures were not prepared for the purpose of providing
to Qwest or any other Person any LCI Transaction Information. To the
knowledge of LCI, except in each case with respect to LCI Transaction
Information, (x) the draft proxy statement included in the LCI Draft
Disclosures, as of the date of this Agreement, does not contain any
untrue statement of a material fact and does not omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
are made, not misleading, (y) the draft financial statements
(including the related notes) included in the LCI Draft Disclosures
present fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of LCI
and its Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted therein
and (z) all of the LCI Draft Disclosures comply as to form in all
material respects with the applicable requirements of the Exchange
Act and the rules and regulations promulgated thereunder.
(iii) From December 31, 1997 until the date of this
Agreement, LCI and its Subsidiaries have not incurred any liabilities
that are of a nature that would be required to be disclosed on a
balance sheet of LCI and its Subsidiaries or the footnotes thereto
prepared in conformity with GAAP, other than (A) liabilities incurred
in the ordinary course of business or (B) liabilities that would not
have a Material Adverse Effect on LCI and its Subsidiaries, taken
together.
(e) Information Supplied.
(i) None of the information supplied or to be supplied
by LCI for inclusion or incorporation by reference in (A) the
registration statement on Form S-4 (as defined in Section 5.1) to be
filed with the SEC by Qwest in connection with the issuance of the
Qwest Common Stock in the Merger will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or at
the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 5.1) included in the Form
S-4 related to the LCI Stockholders Meeting and the Qwest
Stockholders Meeting (each, as defined in Section 5.1) and the Qwest
Common Stock to be issued in the Merger will, on the date it is first
mailed to LCI stockholders or Qwest Stockholders or at the time of
the LCI Stockholders Meeting or the Qwest Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they were made, not misleading.
(ii) Notwithstanding the foregoing provisions of this
Section 3.1(e), no representation or warranty is made by LCI with
respect to statements made or incorporated by reference in the Form
S-4 or the Joint Proxy Statement/Prospectus based on information
supplied by Qwest for inclusion or incorporation by reference
therein.
(f) Board Approval. The Board of Directors of LCI, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "Board Approval"), has
duly (i) determined that this Agreement and the Merger are in the best
interests of LCI and its stockholders, (ii) approved this Agreement and the
Merger and (iii) recommended that the stockholders of LCI approve this
Agreement and the Merger. The LCI Board Approval constitutes approval of
this Agreement and the Merger for purposes of Section 203 of the DGCL.
(g) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of LCI Common Stock to approve the Merger
(the "Required LCI Vote") is the only vote of the holders of any class or
series of LCI capital stock necessary to adopt this Agreement and approve the
transactions contemplated hereby (assuming that Qwest is not an "interested
stockholder" of LCI under Section 203 of the DGCL immediately before the
execution and delivery of this Agreement).
(h) Rights Agreement. The Board of Directors of LCI has
approved an amendment to the Rights Agreement to the effect that Qwest,
Merger Sub and their affiliates shall not become an "Acquiring Person" (as
defined in the Rights Agreement) by reason of the execution of the Merger
Agreement or the consummation of the Merger.
(i) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement, except Xxxxxx
Brothers Inc. (the "LCI Financial Advisor"), whose fees and expenses will be
paid by LCI in accordance with LCI's agreement with such firm, based upon
arrangements made by or on behalf of LCI and previously disclosed to Qwest.
(j) Opinion of LCI Financial Advisor. LCI has received the
opinion of the LCI Financial Advisor, dated the date of this Agreement, to
the effect that, as of such date, the Exchange Ratio is fair, from a
financial point of view, to the holders of LCI Common Stock, a copy of which
opinion has been made available to Qwest.
(k) Affiliate Letter. On or prior to the date of the LCI
Stockholder Meeting, LCI will deliver to Qwest a letter (the "LCI Affiliate
Letter") identifying all persons who are "affiliates" of LCI for purposes of
Rule 145 under the Securities Act ("Rule 145"). On or prior to the Closing
Date, LCI will use all reasonable efforts to cause each person identified as
an "affiliate" in the LCI Affiliate Letter to deliver a written agreement (an
"Affiliate Agreement") in connection with restrictions on affiliates under
Rule 145.
3.2 Representations and Warranties of Qwest. Qwest represents
and warrants to LCI as follows:
(a) Organization, Standing and Power. Each of Qwest and each
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good standing would
not, either individually or in the aggregate, have a Material Adverse Effect
on Qwest. The copies of the certificate of incorporation and by-laws of
Qwest which were previously furnished to LCI are true, complete and correct
copies of such documents as in effect on the date of this Agreement.
(b) Capital Structure.
(i) As of February 28, 1998, the authorized capital
stock of Qwest consisted of (A) 400,000,000 shares of Qwest Common
Stock of which 206,669,874 shares were outstanding and in excess of
80% of such outstanding shares were held of record by the Principal
Stockholder as of such date and (B) 25,000,000 shares of Preferred
Stock, par value $.01 per share, of which no shares were outstanding.
Since February 28, 1998 to the date of this Agreement, there have
been no issuances of shares of the capital stock of Qwest or any
other securities of Qwest other than issuances of shares pursuant to
options or rights outstanding as of February 28, 1998 under the
Benefit Plans (as defined in Section 8.11(h)) of Qwest. All issued
and outstanding shares of the capital stock of Qwest are duly
authorized, validly issued, fully paid and nonassessable, and no
class of capital stock is entitled to preemptive rights. There were
outstanding as of February 28, 1998 no options, warrants or other
rights to acquire capital stock from Qwest other than (x) options
representing in the aggregate the right to purchase 15,374,000 shares
of Qwest Common Stock issued to current or former employees and
directors of Qwest and its Subsidiaries pursuant to Qwest's Equity
Incentive Plan, (y) warrants representing in the aggregate the right
to purchase 8,600,000 shares of Qwest Common Stock issued by Qwest to
Anschutz Family Investment Company LLC (the "Qwest Warrants") and (z)
rights to acquire shares of Qwest Common Stock pursuant to the
Amended and Restated Agreement and Plan of Merger dated as of
December 3, 1997 among Phoenix Network, Inc., Qwest and a subsidiary
of Qwest. Other than options or warrants or other rights to acquire
no more than 1,800,000 shares of Qwest Common Stock in the aggregate,
no options or warrants or other rights to acquire capital stock from
Qwest have been issued or granted since February 28, 1998 to the date
of this Agreement.
(ii) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Qwest having the right to
vote on any matters on which stockholders may vote ("Qwest Voting
Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section
3.2(b), as of the date of this Agreement, there are no securities,
options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Qwest or any of its
Subsidiaries is a party or by which any of them is bound obligating
Qwest or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock
or other voting securities of Qwest or any of its Subsidiaries or
obligating Qwest or any of its Subsidiaries to issue, grant, extend
or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, there are no outstanding obligations of Qwest or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of Qwest or any of its Subsidiaries.
(c) Authority; No Conflicts.
(i) Qwest has all requisite corporate power and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject, in the case of the
issuance of the shares of Qwest Common Stock to be issued in the
Merger (the "Share Issuance"), to the adoption of this Agreement and
the adoption of an amendment to the certificate of incorporation of
Qwest increasing the number of authorized shares of Qwest Common
Stock to not less than 600,000,000 shares (the "Qwest Charter
Amendment") by the Required Qwest Vote (as defined in Section 3.2(g))
and the filing of the Qwest Charter Amendment with the Delaware
Secretary of State. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
Qwest, subject to the approval by the stockholders of Qwest of the
Share Issuance. This Agreement has been duly executed and delivered
by Qwest and constitutes a valid and binding agreement of Qwest,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally, by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity
or at law) or by an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement by
Qwest does not or will not, as the case may be, and the consummation
by Qwest of the Merger and the other transactions contemplated hereby
will not, conflict with, or result in a Violation pursuant to: (A)
any provision of the certificate of incorporation or by-laws of Qwest
or any Subsidiary of Qwest, (B) except as would not have a Material
Adverse Effect on Qwest, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Qwest or any Subsidiary of Qwest or
their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Qwest or any Subsidiary of Qwest in
connection with the execution and delivery of this Agreement by Qwest
or the consummation of the Merger and the other transactions
contemplated hereby, except for the Required Consents and such
consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain would
not have a Material Adverse Effect on Qwest.
(d) Reports and Financial Statements.
(i) Qwest has filed all required reports, schedules,
forms, statements and other documents required to be filed by it with
the SEC since January 1, 1997 (collectively, including all exhibits
thereto, the "Qwest SEC Reports"). No Subsidiary of Qwest is
required to file any form, report or other document with the SEC.
None of the Qwest SEC Reports, as of their respective dates (and, if
amended or superseded by a filing prior to the date of this Agreement
or the Closing Date, then on the date of such filing), contained or
will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the Qwest SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of
operations and cash flows of Qwest and its Subsidiaries as of the
respective dates or for the respective periods set forth therein, all
in conformity with GAAP consistently applied during the periods
involved except as otherwise noted therein, and subject, in the case
of the unaudited interim financial statements, to normal and
recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such Qwest SEC Reports, as
of their respective dates (and as of the date of any amendment to the
respective Qwest SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and
the Exchange Act and the rules and regulations promulgated
thereunder.
(ii) Qwest has made available to LCI drafts of the
consolidated financial statements of Qwest and its Subsidiaries at
and for the year ended December 31, 1997 of Qwest and a proxy
statement of Qwest with respect to the proposed 1998 annual meeting
of stockholders of Qwest (each in the respective form thereof as of
the date of this Agreement, collectively, the "Qwest Draft
Disclosures"). To the knowledge of Qwest, each of the Qwest Draft
Disclosures, including the financial statements included therein, is
in substantially final form, except that the Qwest Draft Disclosures
do not disclose any information with respect to this Agreement, the
transactions contemplated hereby or the effect that this Agreement or
such transactions might have on the business, financial condition or
results of operations (actual, pro forma or projected) of Qwest and
its Subsidiaries (collectively, the "Qwest Transaction Information").
The Qwest Draft Disclosures were not prepared for the purpose of
providing to LCI or any other Person any Qwest Transaction
Information. To the knowledge of Qwest, except in each case with
respect to Qwest Transaction Information, (x) the draft proxy
statement included in the Qwest Draft Disclosures, as of the date of
this Agreement, does not contain any untrue statement of a material
fact and does not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading, (y) the
draft financial statements (including the related notes) included in
the Qwest Draft Disclosures present fairly, in all material respects,
the consolidated financial position and consolidated results of
operations and cash flows of Qwest and its Subsidiaries as of the
respective dates or for the respective periods set forth therein, all
in conformity with GAAP consistently applied during the periods
involved except as otherwise noted therein and (z) all of the Qwest
Draft Disclosures comply as to form in all material respects with the
applicable requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
(iii) From December 31, 1997 until the date of this
Agreement, Qwest and its Subsidiaries have not incurred any
liabilities that are of a nature that would be required to be
disclosed on a balance sheet of Qwest and its Subsidiaries or the
footnotes thereto prepared in conformity with GAAP, other than
(A) liabilities incurred in the ordinary course of business or
(B) liabilities that would not have a Material Adverse Effect on
Qwest and its Subsidiaries, taken together.
(e) Information Supplied.
(i) None of the information supplied or to be supplied
by Qwest for inclusion or incorporation by reference in (A) the Form
S-4 will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (B)
the Joint Proxy Statement/Prospectus will, on the date it is first
mailed to LCI stockholders or Qwest stockholders or at the time of
the LCI Stockholders Meeting or the Qwest Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they were made, not misleading. The Form S-4 and the Joint
Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this
Section 3.2(e), no representation or warranty is made by Qwest with
respect to statements made or incorporated by reference in the Form
S-4 or the Joint Proxy Statement/Prospectus based on information
supplied by LCI for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of Qwest, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way, has duly (i) determined that
this Agreement and the Merger are in the best interests of Qwest and its
stockholders, (ii) approved this Agreement and the Merger, (iii) approved the
Qwest Charter Amendment and (iv) recommended that the stockholders of Qwest
approve the Qwest Charter Amendment and the Share Issuance.
(g) Vote Required. The affirmative vote of holders of shares
of Qwest Common Stock representing a majority of the outstanding Qwest Common
Stock (in the case of the Qwest Charter Amendment) and of the total votes
cast at a meeting of the holders of outstanding shares of Qwest Common Stock
(in the case of the Share Issuance) (collectively, the "Required Qwest
Vote"), is the only vote of the holders of any class or series of Qwest
capital stock necessary to approve the Qwest Charter Amendment and the Share
Issuance.
(h) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Qwest, except Salomon Brothers Inc (the
"Qwest Financial Advisor"), whose fees and expenses will be paid by Qwest in
accordance with Qwest's agreement with such firm based upon arrangements made
by or on behalf of Qwest and previously disclosed to LCI.
(i) Opinion of Financial Advisor. Qwest has received the
opinion of the Qwest Financial Advisor, dated the date of this Agreement, to
the effect that, as of such date, the Exchange Ratio is fair, from a
financial point of view, to Qwest, a copy of which opinion has been made
available to LCI.
3.3 Representations and Warranties of Qwest and Merger Sub.
Qwest and Merger Sub represent and warrant to LCI as follows:
(a) Organization and Corporate Power. Merger Sub is a
corporation duly incorporated, validly existing and in good standing under
the laws of Delaware. Merger Sub is a direct wholly-owned subsidiary of
Qwest.
(b) Corporate Authorization. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger
Sub of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Merger Sub. This Agreement has
been duly executed and delivered by Merger Sub and constitutes a valid and
binding agreement of Merger Sub, enforceable against it in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, by general equity principles (regardless or
whether such enforceability is considered in a proceeding in equity or at
law) or by an implied covenant of good faith and fair dealing.
(c) Non-Contravention. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by Merger
Sub of the transactions contemplated hereby do not and will not contravene or
conflict with the certificate of incorporation or by-laws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of LCI. During the period from the date of this
Agreement and continuing until the Effective Time, LCI agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by
this Agreement or as otherwise indicated on the LCI Disclosure Schedule or as
required by a Governmental Entity of competent jurisdiction or to the extent
that Qwest shall otherwise consent in writing):
(a) Ordinary Course.
(i) LCI and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in
all material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to preserve intact
their present lines of business, maintain their rights and franchises
and preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that no action by LCI or its
Subsidiaries with respect to matters specifically addressed by any
other provision of this Section 4.1 shall be deemed a breach of this
Section 4.1(a)(i) unless such action would constitute a breach of one
or more of such other provisions.
(ii) LCI shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of business or
(B) incur or commit to any capital expenditures other than capital
expenditures incurred or committed to in the ordinary course of
business consistent with past practice and which, together with all
such expenditures incurred or committed since January 1, 1998, are
not in excess of the respective amounts by category or in the
aggregate set forth in LCI's 1998 capital expenditure budget, as
previously disclosed to Qwest or, if the Closing Date has not
occurred prior to December 31, 1998, such additional amounts for any
subsequent period as may be consented to by Qwest, such consent not
to be unreasonably withheld, or, if Qwest shall not have so
consented, an amount not greater than an amount equal to a pro rata
portion of LCI's 1998 Capital Expenditure Budget.
(b) Dividends; Changes in Share Capital. LCI shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any
of its capital stock, except dividends by wholly owned Subsidiaries of LCI,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock, except for any
such transaction by a wholly owned Subsidiary of LCI which remains a wholly
owned Subsidiary after consummation of such transaction, or (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock except
for the purchase from time to time by LCI of LCI Common Stock (and the
associated Rights) in the ordinary course of business consistent with past
practice in connection with the LCI Benefit Plans.
(c) Issuance of Securities. LCI shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any LCI Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or LCI Voting Debt, or enter into any agreement with respect to any of
the foregoing, other than (i) the issuance of LCI Common Stock (and the
associated Rights) upon the exercise of LCI Warrants or stock options or in
connection with other stock-based benefits plans outstanding on the date
hereof in accordance with their present terms, (ii) issuances by a wholly
owned Subsidiary of LCI of capital stock to such Subsidiary's parent, (iii)
issuances in accordance with the Rights Agreement or (iv) issuances of
shares, options, rights or other awards and amendments to equity-related
awards in numbers not greater than those set forth in Section 4.1(c) of the
LCI Disclosure Schedule.
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or
required by the rules and regulations of the NYSE, LCI and its material
Subsidiaries shall not amend, in the case of Subsidiaries, in any material
respect, or propose to so amend their respective certificates of
incorporation, by-laws or other governing documents.
(e) No Acquisitions. LCI shall not, and shall not permit any
of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other
than the acquisition of assets used in the operations of the business of LCI
and its Subsidiaries in the ordinary course); provided, however, that the
foregoing shall not prohibit (x) internal reorganizations or consolidations
involving existing Subsidiaries of LCI, (y) the creation of new Subsidiaries
of LCI organized to conduct or continue activities otherwise permitted by
this Agreement or (z) after September 8, 1998, acquisitions by LCI and its
Subsidiaries the fair market value of the total consideration (including the
value of indebtedness or other liability acquired or assumed) for which does
not exceed $400 million in the aggregate.
(f) No Dispositions. Other than (i) internal reorganizations
or consolidations involving existing Subsidiaries of LCI, (ii) dispositions
referred to in LCI SEC Reports filed prior to the date of this Agreement,
(iii) as may be required by or in conformance with law or regulation in order
to permit or facilitate the consummation of the transactions contemplated
hereby or (iv) in the ordinary course of business, LCI shall not, and shall
not permit any Subsidiary of LCI to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease, encumber or otherwise dispose of, any of
its assets (including capital stock of Subsidiaries of LCI) which are
material, individually or in the aggregate, to LCI.
(g) Investments; Indebtedness. LCI shall not, and shall not
permit any of its Subsidiaries to, (i) other than in connection with actions
permitted by Section 4.1(e), make any loans, advances or capital
contributions to, or investments in, any other Person, other than by LCI or a
Subsidiary of LCI to or in LCI or any Subsidiary of LCI, (ii) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than loans, advances,
capital contributions, investments, payments, discharges or satisfactions
incurred or committed to in the ordinary course of business consistent with
past practice or (iii) other than in connection with actions permitted by
Section 4.1(e), create, incur, assume or suffer to exist any indebtedness,
issuances of debt securities, guarantees, loans or advances not in existence
as of the date of this Agreement except pursuant to the credit facilities,
indentures and other arrangements in existence on the date of this Agreement
and in the ordinary course of business, and any other indebtedness existing
on the date of this Agreement, in each case as such credit facilities,
indentures, other arrangements and other existing indebtedness may be
amended, extended, modified, refunded, renewed or refinanced after the date
of this Agreement, but only if the aggregate principal amount thereof is not
increased thereby, the term thereof is not extended thereby and the other
terms and conditions thereof, taken as a whole, are not less advantageous to
LCI and its Subsidiaries than those in existence as of the date of this
Agreement.
(h) Tax-Free Qualification. LCI shall not, and shall not
permit any of its Subsidiaries to, take any action that would prevent or
impede the Merger from qualifying as a reorganization under Section 368 of
the Code.
(i) Compensation. Other than as contemplated by Section 5.6
or by Schedule 4.1(i), LCI shall not, and shall not permit any of its
Subsidiaries to, increase the amount of compensation of any senior executive
officer except in the ordinary course of business consistent with past
practice or as required by an existing agreement, make any increase in or
commitment to increase any employee benefits, issue any additional LCI Stock
Options, adopt or make any commitment to adopt any additional employee
benefit plan or make any contribution, other than regularly scheduled
contributions, to any Benefit Plan.
(j) Other Actions. LCI shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in, except as otherwise permitted by Section 5.5, any of
the conditions to the Merger set forth in Article VI not being satisfied.
(k) Accounting Methods; Income Tax Elections. Except as
disclosed in LCI SEC Reports filed prior to the date of this Agreement, or as
required by a Governmental Entity, LCI shall not change its methods of
accounting in effect at December 31, 1997, except as required by changes in
GAAP as concurred in by LCI's independent auditors. LCI shall not (i) change
its fiscal year or (ii) make any material tax election, other than in the
ordinary course of business consistent with past practice, without
consultation with Qwest.
(l) Rights Agreement. Except as provided in Section 5.9, LCI
shall not amend, modify or waive any provision of the Rights Agreement, and
shall not take any action to redeem the Rights or render the Rights
inapplicable to any transaction, other than to permit another transaction
that the LCI Board has determined is a Superior Proposal (as defined in
Section 8.11), to be consummated after termination of this Agreement.
4.2 Covenants of Qwest. During the period from the date of
this Agreement and continuing until the Effective Time, Qwest agrees as to
itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement or as otherwise indicated on the Qwest Disclosure
Schedule or as required by a Governmental Entity of competent jurisdiction or
to the extent that LCI shall otherwise consent in writing):
(a) Ordinary Course.
(i) Qwest and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in
all material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to preserve intact
their present lines of business, maintain their rights and franchises
and preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that no action by Qwest or its
Subsidiaries with respect to matters specifically addressed by any
other provisions of this Section 4.2 shall be deemed a breach of this
Section 4.2(a)(i) unless such action would constitute a breach of one
or more of such other provisions.
(ii) Qwest shall not, and shall not permit any of its
Subsidiaries to, enter into any new material line of business that is
not part of the communications business, other than incidentally as
part of a larger acquisition within an existing line of business.
(b) Dividends; Changes in Share Capital. Qwest shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any
of its capital stock, except dividends by wholly owned Subsidiaries of Qwest,
(ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock, except for any
such transaction by a wholly owned Subsidiary of Qwest which remains a wholly
owned Subsidiary after consummation of such transaction, (iii) repurchase,
redeem or otherwise acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital stock except
for the purchase from time to time by Qwest of Qwest Common Stock in the
ordinary course of business required by its 401(k) plan on a non-
discretionary basis or in connection with rights to purchase shares directly
from holders who received such shares in an acquisition by Qwest previously
disclosed to LCI and permitted by Section 4.2(e).
(c) Issuance of Securities. Qwest shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any Qwest Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or Qwest Voting Debt, or enter into any agreement with respect to any
of the foregoing, or amend the Qwest Warrants other than (i) the issuance of
Qwest Common Stock upon the exercise of stock options, (ii) issuances by a
wholly owned Subsidiary of Qwest of capital stock to such Subsidiary's parent
or another wholly owned Subsidiary of Qwest, (iii) issuances of options,
awards, and amendments to equity-related awards pursuant to Qwest benefit
plans as in effect from time to time, or (iv) issuances in respect of any
acquisitions, mergers, share exchanges, consolidations, business combinations
or similar transactions by Qwest or its Subsidiaries permitted by Sections
4.2(e) and 4.2(k).
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or
required by the rules and regulations of NASDAQ, Qwest and its material
Subsidiaries shall not amend, in the case of Subsidiaries, in any material
respect, or propose to so amend their respective certificates of
incorporation, by-laws or other governing documents, except that Merger Sub
may amend its certificate of incorporation to increase the number of
authorized shares of its common stock.
(e) No Acquisitions. Other than acquisitions the fair market
value of the total consideration (including the value of indebtedness or
other liability acquired or assumed) for which does not exceed $1 billion in
the aggregate, Qwest shall not, and shall not permit any of its Subsidiaries
to, acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets (other than the
acquisition of assets used in the ordinary course); provided, however, that
the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of Qwest or (y) the creation
of new Subsidiaries of Qwest organized to conduct or continue activities
otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations
or consolidations involving existing Subsidiaries of Qwest, (ii) dispositions
referred to in Qwest SEC Reports filed prior to the date of this Agreement,
(iii) as may be required by or in conformance with law or regulation in order
to permit or facilitate the consummation of the transactions contemplated
hereby or (iv) in the ordinary course of business, Qwest shall not, and shall
not permit any Subsidiary of Qwest to, sell, lease, encumber or otherwise
dispose of, or agree to sell, lease, encumber or otherwise dispose of, any of
its assets (including capital stock of Subsidiaries of Qwest) which are
material, individually or in the aggregate, to Qwest.
(g) Investments. Other than in the ordinary course of
business or as permitted by Section 4.2(e), Qwest shall not, and shall not
permit any of its Subsidiaries to make any loans, advances or capital
contributions to, or investments in, any other Person, other than by Qwest or
a Subsidiary of Qwest to or in Qwest or any Subsidiary of Qwest.
(h) Tax-Free Qualification. Qwest shall not, and shall not
permit any of its Subsidiaries to, take any action that would prevent or
impede the Merger from qualifying as a reorganization under Section 368 of
the Code.
(i) Other Actions. Qwest shall not, and shall not permit any
of its Subsidiaries to, take any action that would, or that could reasonably
be expected to, result in any of the conditions to the Merger set forth in
Article VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in Qwest SEC Reports filed prior to the date of this Agreement, or
as required by a Governmental Entity, Qwest shall not change its methods of
accounting in effect at December 31, 1997, except as required by changes in
GAAP as concurred in by Qwest's independent auditors. Qwest shall not (i)
change its fiscal year or (ii) make any material tax election, other than in
the ordinary course of business consistent with past practice, without
consultation with LCI.
(k) Qwest agrees that prior to the Closing Date it shall not,
without the prior written consent of LCI (such consent not to be unreasonably
withheld), agree to enter into any merger, reorganization, share exchange,
business combination or similar transaction pursuant to which any stockholder
of Qwest shall receive any consideration (whether payable in cash,
securities, property or other consideration) in exchange for its shares of
Qwest Common Stock unless both (i) such transaction is not to be consummated
until after the termination of this Agreement pursuant to Section 7.1 or the
Effective Time and (ii) the consideration per share of Qwest Common Stock
payable in connection therewith has a value, as reasonably determined by
Qwest, of not less than $35-15/16.
4.3 Advice of Changes; Governmental Filings. Each party shall
(a) confer on a regular and frequent basis with the other and (b) report (to
the extent permitted by law or regulation or any applicable confidentiality
agreement) on operational matters. LCI and Qwest shall file all reports
required to be filed by each of them with the SEC (and all other Governmental
Entities) between the date of this Agreement and the Effective Time and shall
(to the extent permitted by law or regulation or any applicable
confidentiality agreement) deliver to the other party copies of all such
reports, announcements and publications promptly after the same are filed.
Subject to applicable laws relating to the exchange of information, each of
LCI and Qwest shall have the right to review in advance, and will consult
with the other with respect to, all the information relating to the other
party and each of their respective Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials
submitted to, any third party or any Governmental Entity in connection with
the transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party agrees that, to the extent practicable and as timely
as practicable, it will consult with, and provide all appropriate and
necessary assistance to, the other party with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other party
apprised of the status of matters relating to completion of the transactions
contemplated hereby.
4.4 Transition Planning; Continued Operations of LCI.
LCI and Qwest shall each appoint four officers to serve from time to time as
their respective representatives on a committee that will be responsible for
coordinating transition planning and implementation relating to the Merger.
The initial representatives of LCI shall be H. Xxxxx Xxxxxxxx, Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxx and Xxxxx Xxxxx. The initial representatives of Qwest
shall be Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx and Xxxxx X.
Xxxxx. It is the current intention of Qwest that LCI will continue to
operate LCI's offices and facilities in Fairfax County, Virginia and Dublin,
Ohio.
4.5 Control of Other Party's Business. Nothing contained in
this Agreement shall give LCI, directly or indirectly, the right to control
or direct Qwest's operations prior to the Effective Time. Nothing contained
in this Agreement shall give Qwest, directly or indirectly, the right to
control or direct LCI's operations prior to the Effective Time. Prior to the
Effective Time, each of LCI and Qwest shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; LCI Stockholders Meeting.
(a) As promptly as practicable following the date hereof,
Qwest shall, in cooperation with LCI, prepare and file with the SEC
preliminary proxy materials which shall constitute the Joint Proxy
Statement/Prospectus (such proxy statement/prospectus, and any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") and a
registration statement on Form S-4 with respect to the issuance of Qwest
Common Stock in the Merger (the "Form S-4"). The Joint Proxy
Statement/Prospectus will be included in the Form S-4 as Qwest's prospectus.
The Form S-4 and the Joint Proxy Statement/Prospectus shall comply as to form
in all material respects with the applicable provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder. Each of Qwest
and LCI shall use all reasonable efforts to have the Form S-4 cleared by the
SEC as promptly as practicable after filing with the SEC and to keep the Form
S-4 effective as long as is necessary to consummate the Merger. Qwest shall,
as promptly as practicable after receipt thereof, provide copies of any
written comments received from the SEC with respect to the Joint Proxy
Statement/Prospectus to LCI and advise LCI of any oral comments with respect
to the Proxy Statement/Prospectus received from the SEC. Qwest agrees that
none of the information supplied or to be supplied by Qwest for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the
time of the LCI Stockholders Meeting or the Qwest Stockholders Meeting, will
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. LCI agrees that none of the information supplied or to be
supplied by LCI for inclusion or incorporation by reference in the Joint
Proxy Statement/Prospectus and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the LCI Stockholders Meeting or
the Qwest Stockholders Meeting, will contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. For purposes of the foregoing,
it is understood and agreed that information concerning or related to Qwest
and the Qwest Stockholders Meeting will be deemed to have been supplied by
Qwest and information concerning or related to LCI and the LCI Stockholders
Meeting shall be deemed to have been supplied by LCI. Qwest will provide LCI
with a reasonable opportunity to review and comment on any amendment or
supplement to the Joint Proxy Statement/Prospectus prior to filing such with
the SEC, and will provide LCI with a copy of all such filings made with the
SEC. No amendment or supplement to the information supplied by LCI for
inclusion in the Joint Proxy Statement/Prospectus shall be made without the
approval of LCI, which approval shall not be unreasonably withheld or
delayed.
(b) Subject to Sections 5.5 and 7.1(f), LCI shall, as promptly
as practicable following the execution of this Agreement, duly call, give
notice of, convene and hold a meeting of its stockholders (the "LCI
Stockholders Meeting") for the purpose of obtaining the Required LCI Vote
with respect to the transactions contemplated by this Agreement, shall take
all lawful action to solicit the adoption of this Agreement by the Required
LCI Vote and the Board of Directors of LCI shall recommend adoption of this
Agreement by the stockholders of LCI. Without limiting the generality of the
foregoing but subject to its rights pursuant to Sections 5.5 and 7.1(f), LCI
agrees that its obligations pursuant to the first sentence of this Section
5.1(b) shall not be affected by the commencement, public proposal, public
disclosure or communication to LCI of any Acquisition Proposal.
(c) Qwest shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "Qwest Stockholders Meeting") for the
purpose of obtaining the Required Qwest Vote, shall take all lawful action to
solicit the approval of the Share Issuance by the Required Qwest Vote and the
Board of Directors of Qwest shall recommend approval of the transactions
contemplated by this Agreement by the stockholders of Qwest.
5.2 Qwest Board of Directors. At or prior to the Effective
Time, the Board of Directors of Qwest will take all action necessary to elect
the Chief Executive Officer and one other director of LCI on the date of this
Agreement selected by LCI as members of the Board of Directors of Qwest to
serve until the end of the term beginning at the annual meeting of Qwest's
stockholders in 1999. In the event that such Chief Executive Officer is so
elected and agrees to serve as a director of Qwest, the Board of Directors of
Qwest shall appoint him as Vice Chairman of Qwest.
5.3 Access to Information. Upon reasonable notice, each party
shall (and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives
of the other party reasonable access during normal business hours, during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, such party shall (and shall
cause its Subsidiaries to) furnish promptly to the other party (a) a copy of
each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under applicable
law), and (b) consistent with its legal obligations, all other information
concerning its business, properties and personnel as such other party may
reasonably request; provided, however, that either party may restrict the
foregoing access to the extent that (i) a Governmental Entity requires such
party or any of its Subsidiaries to restrict access to any properties or
information reasonably related to any such contract on the basis of
applicable laws and regulations with respect to national security matters or
(ii) any law, treaty, rule or regulation of any Governmental Entity
applicable to such party requires such party or its Subsidiaries to restrict
access to any properties or information. The parties will hold any such
information which is non-public in confidence to the extent required by, and
in accordance with, the provisions of the letter dated February 25, 1998
between LCI and Qwest (the "Confidentiality Agreement"). Any investigation
by Qwest or LCI shall not affect the representations and warranties of LCI or
Qwest, as the case may be.
5.4 Best Efforts.
(a) Subject to the terms and conditions of this Agreement,
each party will use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable
after the date hereof. In furtherance and not in limitation of the
foregoing, each party hereto agrees to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable after the date
hereof and to supply as promptly as practicable any additional information
and documentary material that may be requested pursuant to the HSR Act and to
take all other actions necessary to cause the expiration or termination of
the applicable waiting periods under the HSR Act as soon as practicable.
Nothing in this Section 5.4(a) shall require any of Qwest and its
Subsidiaries to sell or otherwise dispose of, or permit the sale or other
disposition of, any assets of Qwest, LCI or their respective Subsidiaries,
whether as a condition to obtaining any approval from a Governmental Entity
or any other Person or for any other reason, if Qwest reasonably determines
that such sale or other disposition would have or is likely to have a
Material Adverse Effect on Qwest and its Subsidiaries (including the
Surviving Corporation and its Subsidiaries), taken together, after giving
effect to the Merger.
(b) Each of Qwest and LCI shall, in connection with the
efforts referenced in Section 5.4(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Merger Agreement
under the HSR Act or any other Regulatory Law (as defined below), use its
best efforts to (i) cooperate in all respects with each other in connection
with any filing or submission and in connection with any investigation or
other inquiry, including any proceeding initiated by a private party, (ii)
promptly inform the other party of any communication received by such party
from, or given by such party to, the FCC, PUCs, the Antitrust Division of the
Department of Justice (the "DOJ") or any other Governmental Entity and of any
material communication received or given in connection with any proceeding by
a private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication given by
it to, and consult with each other in advance of any meeting or conference
with, the FCC, PUCs, the DOJ or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person, and
to the extent permitted by the FCC, PUCs, the DOJ or such other applicable
Governmental Entity or other Person, give the other party the opportunity to
attend and participate in such meetings and conferences. For purposes of
this Agreement, "Regulatory Law" means the Xxxxxxx Act, as amended, the
Xxxxxxx Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, the Federal Communications Act, as amended, and all other federal,
state and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition,
whether in the communications industry or otherwise through merger or
acquisition.
(c) In furtherance and not in limitation of the covenants of
the parties contained in Sections 5.4(a) and 5.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party,
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of
Qwest and LCI shall cooperate in all respects with each other and use its
respective best efforts to contest and resist any such action or proceeding
and to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that
is in effect and that prohibits, prevents or restricts consummation of the
transactions contemplated by this Agreement. Notwithstanding the foregoing
or any other provision of this Agreement, nothing in this Section 5.4 shall
limit a party's right to terminate this Agreement pursuant to Section 7.1(b)
or 7.1(c) so long as such party has up to then complied in all respects with
its obligations under this Section 5.4.
(d) If any objections are asserted with respect to the
transactions contemplated hereby under any Regulatory Law or if any suit is
instituted by any Governmental Entity or any private party challenging any of
the transactions contemplated hereby as violative of any Regulatory Law, each
of Qwest and LCI shall use its best efforts to resolve any such objections or
challenge as such Governmental Entity or private party may have to such
transactions under such Regulatory Law so as to permit consummation of the
transactions contemplated by this Agreement.
(e) Each of Qwest, Merger Sub and LCI shall use its best
efforts to cause the Merger to qualify and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
5.5 Acquisition Proposals. LCI agrees that neither it nor any
of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and use its best efforts to
cause its and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or
any of its Subsidiaries) not to, directly or indirectly, initiate, solicit,
encourage or knowingly facilitate (including by way of furnishing
information) any inquiries or the making of any proposal or offer with
respect to a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase or sale of all or any significant
portion of the assets or more than 15% (or in the case of acquisition by an
Institutional Investor (as defined in the Rights Plan) more than 20%) of the
common stock of, it or any of its Subsidiaries (any such proposal or offer
(other than a proposal or offer made by Qwest or an affiliate thereof) being
hereinafter referred to as an "Acquisition Proposal"). LCI further agrees
that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use
its best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
have any discussion with or provide any confidential information or data to
any Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding the foregoing, LCI or its Board of Directors shall
be permitted to (A) to the extent applicable, comply with Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal, (B) in response to an unsolicited bona fide written Acquisition
Proposal by any Person, recommend approval of such an unsolicited bona fide
written Acquisition Proposal to the stockholders of LCI or withdraw or modify
in any adverse manner the Board Approval or (C) engage in any discussions or
negotiations with, or provide any information to, any Person in response to
an unsolicited bona fide written Acquisition Proposal by any such Person, if
and only to the extent that, in any such case as is referred to in clause (B)
or (C), (i) the LCI Stockholders Meeting shall not have occurred, (ii) the
Board of Directors of LCI concludes in good faith that such Acquisition
Proposal (x) in the case of clause (B) above would, if consummated,
constitute a Superior Proposal or (y) in the case of clause (C) above could
reasonably be expected to constitute a Superior Proposal, (iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, the LCI Board of Directors receives
from such Person an executed confidentiality agreement on terms substantially
similar to those contained in the Confidentiality Agreement (except as to the
standstill provisions, provided that if under the aforementioned
circumstances LCI enters into any such confidentiality agreement without
standstill provisions substantially similar to those contained in the
Confidentiality Agreement, then Qwest shall to the extent of the difference
be relieved of compliance with the Confidentiality Agreement's standstill
provisions), and (iv) prior to providing any information or data to any
Person or entering into discussions or negotiations with any Person, the
Board of Directors of LCI notifies Qwest promptly of such inquiries,
proposals or offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or continued with,
any of its representatives indicating, in connection with such notice, the
name of such Person and the material terms and conditions of any proposals or
offers. LCI agrees that it will keep Qwest informed, on a current basis, of
the status and terms of any such proposals or offers and the status of any
such discussions or negotiations. LCI agrees that it will immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. LCI agrees that it will take the necessary steps to
promptly inform the individuals or entities referred to in the first sentence
of this Section 5.5 of the obligations undertaken in this Section 5.5.
Nothing in this Section 5.5 shall (x) permit LCI to terminate this Agreement
(except as specifically provided in Article VII hereof) or (y) affect any
other obligation of LCI under this Agreement.
5.6 Assumption of LCI Stock Options; Other Stock Plans;
Employee Benefits Matters.
(a) Qwest shall assume the LCI Stock Options on the terms set
forth in Exhibit 5.6 hereto. LCI and Qwest agree that LCI's other stock
plans and treatment of LCI's officers and employees shall be as set forth in
Exhibit 5.6 hereto.
(b) Employee Benefits.
(i) Obligations of Qwest; Comparability of Benefits. Each
Benefit Plan (as defined in Section 8.11(a)) as to which LCI or any
of its Subsidiaries has any obligation with respect to any current or
former employee (the "LCI Employees")(the "LCI Benefit Plans") shall
be the obligations of Qwest and the Surviving Corporation at the
Effective Time and for at least two years thereafter, Qwest shall, or
shall cause the Surviving Corporation to, provide benefits, in the
aggregate, that are no less favorable than the benefits provided, in
the aggregate, under such Benefit Plans to the LCI Employees
immediately prior to the Effective Time. Notwithstanding the
foregoing, nothing herein shall require (A) the continuation of any
particular LCI Benefit Plan or prevent the amendment or termination
thereof (subject to the maintenance, in the aggregate, of the
benefits as provided in the preceding sentence) or (B) require Qwest
or the Surviving Corporation to continue or maintain any stock
purchase or other equity plan related to the equity of LCI or the
Surviving Corporation.
(ii) Pre-Existing Limitations; Deductible; Service Credit.
With respect to any Benefit Plans of Qwest in which the LCI Employees
participate effective as of the Closing Date, Qwest shall, or shall
cause the Surviving Corporation to: (A) not impose any limitations
more onerous than those currently in effect as to pre-existing
conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the LCI
Employees under which any welfare Benefit Plan in which such
employees may be eligible to participate after the Effective Time,
(B) provide each LCI Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare
Benefit Plan in which such employees may be eligible to participate
after the Effective Time, and (C) recognize all service of the LCI
Employees with LCI for all purposes (including, without limitation,
purposes of eligibility to participate, vesting credit, entitlement
for benefits, and benefit accrual) in any Benefit Plan in which such
employees may be eligible to participate after the Effective Time, to
the same extent taken into account under a comparable LCI Benefit
Plan immediately prior to the Closing Date.
5.7 Fees and Expenses. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, any and all property or transfer taxes
imposed on LCI or its Subsidiaries and any real property transfer tax imposed
on any holder of shares of capital stock of LCI resulting from the Merger,
(b) Expenses incurred in connection with the filing, printing and mailing of
the Joint Proxy Statement/Prospectus, which shall be shared equally by Qwest
and LCI and (c) as provided in Section 7.2. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Joint Proxy
Statement/Prospectus and the solicitation of stockholder approvals and all
other matters related to the transactions contemplated hereby.
5.8 Directors' and Officers' Indemnification and Insurance.
The Surviving Corporation shall cause to be maintained in effect in its
certificate of incorporation and by-laws (i) for a period of six years after
the Effective Time, the current provisions regarding elimination of liability
of directors and indemnification of officers, directors and employees
contained in the certificate of incorporation and by-laws of LCI and (ii) for
a period of six years, the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by LCI
(provided that the Surviving Corporation may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions which
are, in the aggregate, no less advantageous to the insured) with respect to
claims arising from facts or events that occurred on or before the Effective
Time; provided, however, that in no event shall the Surviving Corporation be
required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by LCI for such insurance; and, provided, further,
that if the annual premiums of such insurance coverage exceed such amount,
the Surviving Corporation shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
5.9 Rights Agreement. The Board of Directors of LCI shall
take all further action (in addition to that referred to in Section 3.1(h))
necessary (including redeeming the Rights immediately prior to the Effective
Time or amending the Rights Agreement) in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
5.10 Public Announcements. LCI and Qwest shall use all
reasonable efforts to develop a joint communications plan and each party
shall use all reasonable efforts (i) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (ii) unless
otherwise required by applicable law or by obligations pursuant to any
listing agreement with or rules of any securities exchange, to consult with
each other before issuing any press release or otherwise making any public
statement with respect to this Agreement or the transactions contemplated
hereby.
5.11 Accountants' Letters. Upon reasonable notice from the
other, LCI and Qwest shall use their respective reasonable best efforts to
cause Xxxxxx Xxxxxxxx LLP and KPMG Peat Marwick LLP, respectively, to deliver
to LCI or Qwest, as the case may be, a letter, dated within two business days
of the Effective Time of the Form S-4 covering such matters as are requested
by Qwest or LCI, as the case may be, and as are customarily addressed in
accountant's "comfort" letters. In connection with LCI's efforts to obtain
such letter, if requested by Xxxxxx Xxxxxxxx XXX, Xxxxx shall provide a
representation letter to Xxxxxx Xxxxxxxx LLP complying with the statement on
Auditing Standards No. 72 ("SAS 72"), if then required. In connection with
Qwest's efforts to obtain such letter, if requested by KPMG Peat Marwick LLP,
LCI shall provide a representation letter to KPMG Peat Marwick LLP complying
with SAS 72, if then required.
5.12 Listing of Shares of Qwest Common Stock. Qwest shall use
its best efforts to cause the shares of Qwest Common Stock to be issued in
the Merger and the shares of Qwest Common Stock to be reserved for issuance
upon exercise of the LCI Stock Options and LCI Warrants to be approved for
quotation, upon official notice of issuance, on NASDAQ.
5.13 Voting Trust. If at any time prior to the LCI
Stockholders Meeting a third party shall make an unsolicited tender or
exchange offer to acquire control of LCI, which offer is not recommended by
LCI's Board of Directors, then Qwest and LCI will use their reasonable best
efforts to consummate the transactions contemplated hereby by implementing a
"voting trust" or similar structure permitting consummation of the
transactions contemplated hereby prior to the receipt of final FCC and PUC
approvals.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligations of LCI, Qwest and Merger Sub to effect the Merger
are subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Stockholder Approval. (i) LCI shall have obtained the
Required LCI Vote in connection with the adoption of this Agreement by the
stockholders of LCI and (ii) Qwest shall have obtained the Required Qwest
Vote in connection with the approval of the Share Issuance by the
stockholders of Qwest.
(b) No Injunctions or Restraints, Illegality. No Laws shall
have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect, having the
effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; provided, however, that the provisions of this Section 6.1(b)
shall not be available to any party whose failure to fulfill its obligations
pursuant to Section 5.4 shall have been the cause of, or shall have resulted
in, such order or injunction.
(c) FCC and Public Utility Commission Approvals. All
approvals for the Merger from the FCC and from the PUCs shall have been
obtained other than those the failure of which to be obtained would not
reasonably be expected to have individually or in the aggregate a Material
Adverse Effect on Qwest and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), taken together.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(e) NASDAQ Listing. The shares of Qwest Common Stock to be
issued in the Merger and such other shares to be reserved for issuance in
connection with the Merger shall have been approved upon official notice of
issuance for quotation on NASDAQ.
(f) Effectiveness of the Form S-4. The Form S-4 shall have
been declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or
threatened by the SEC.
6.2 Additional Conditions to Obligations of Qwest and Merger
Sub. The obligations of Qwest and Merger Sub to effect the Merger are
subject to the satisfaction of, or waiver by Qwest, on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of LCI set forth in this Agreement that is
qualified as to materiality shall have been true and correct on the date of
this Agreement, and each of the representations and warranties of LCI that is
not so qualified shall have been true and correct in all material respects on
the date of this Agreement, and Qwest shall have received a certificate of
the chief executive officer and the chief financial officer of LCI to such
effect.
(b) Performance of Obligations of LCI. LCI shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality and shall have performed or complied in all
material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
not so qualified as to materiality, and Qwest shall have received a
certificate of the chief executive officer and the chief financial officer of
LCI to such effect.
(c) Tax Opinion. Qwest shall have received from O'Melveny &
Xxxxx LLP, counsel to Qwest, on the Closing Date, a written opinion dated as
of such date substantially in the form of Exhibit 6.2(c)(1). In rendering
such opinion, counsel to Qwest shall be entitled to rely upon representations
of officers of Qwest and LCI substantially in the form of Exhibits 6.2(c)(2)
and 6.2(c)(3) (allowing for such amendments to the representations as counsel
to Qwest deems necessary).
6.3 Additional Conditions to Obligations of LCI. The
obligations of LCI to effect the Merger are subject to the satisfaction of,
or waiver by LCI, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Qwest and Merger Sub set forth in this
Agreement that is qualified as to materiality shall have been true and
correct on the date of this Agreement, and each of the representations and
warranties of each of Qwest and Merger Sub that is not so qualified shall
have been true and correct in all material respects on the date of this
Agreement, and LCI shall have received a certificate of the chief executive
officer and the chief financial officer of Qwest to such effect.
(b) Performance of Obligations of Qwest. Qwest shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality and shall have performed or complied in all
material respects with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are not so
qualified as to materiality, and LCI shall have received a certificate of the
chief executive officer and the chief financial officer of Qwest to such
effect.
(c) Tax Opinion. LCI shall have received from Kramer, Levin,
Naftalis & Xxxxxxx, counsel to LCI, on the Closing Date, a written opinion
dated as of such date substantially in the form of Exhibit 6.3(c)(1). In
rendering such opinion, counsel to LCI shall be entitled to rely upon
representations of officers of Qwest and LCI substantially in the form of
Exhibits 6.2(c)(2) and 6.2(c)(3) (allowing for such amendments to the
representations as counsel to LCI deems necessary).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided below,
whether before or after approval of the matters presented in connection with
the Merger by the stockholders of LCI or Qwest:
(a) By mutual written consent of Qwest and LCI, by action of
their respective Boards of Directors;
(b) By either LCI or Qwest if the Effective Time shall not
have occurred on or before the first anniversary of the date of this
Agreement (the "Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement
(including without limitation Section 5.4) has to any extent been the cause
of, or resulted in, the failure of the Effective Time to occur on or before
the Termination Date;
(c) By either LCI or Qwest if any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action (which
the parties shall have used their best efforts to resist, resolve or lift, as
applicable, in accordance with Section 5.4) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree
or ruling or to take any other action (which order, decree, ruling or other
action the parties shall have used their best efforts to obtain, in
accordance with Section 5.4), in each case (i) and (ii) which is necessary to
fulfill the conditions set forth in subsections 6.1(c) and (d), as
applicable, and such denial of a request to issue such order, decree, ruling
or take such other action shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement under this
Section 7.1(c) shall not be available to any party whose failure to comply
with Section 5.4 has to any extent been the cause of such action or inaction;
(d) By either LCI or Qwest if (i) the approval by the
stockholders of LCI required for the consummation of the Merger shall not
have been obtained by reason of the failure to obtain the Required LCI Vote
or (ii) the approval by the stockholders of Qwest required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the Required Qwest Vote, in each case upon the taking of
such vote at a duly held meeting of stockholders of LCI or Qwest, as the case
may be, or at any adjournment thereof;
(e) By Qwest if the Board of Directors of LCI, prior to the
LCI Stockholders Meeting (i) shall withdraw or modify in any adverse manner
the Board Approval, (ii) shall approve or recommend a Superior Proposal
pursuant to Section 5.5 or (iii) shall resolve to take any of the actions
specified in clauses (i) or (ii) above;
(f) By LCI at any time prior to the LCI Stockholders Meeting,
upon three Business Days' prior notice to Qwest, if the Board of Directors of
LCI shall approve a Superior Proposal; provided, however, that (i) LCI shall
have complied with Section 5.5, (ii) the Board of Directors of LCI shall have
concluded in good faith, after giving effect to all concessions which may be
offered by Qwest pursuant to clause (iii) below, on the basis of the advice
of its financial advisors and outside counsel, that such proposal is a
Superior Proposal and (iii) prior to any such termination, LCI shall, and
shall cause its financial and legal advisors to, negotiate with Qwest to make
such adjustments in the terms and conditions of this Agreement as would
enable Qwest to proceed with the transactions contemplated hereby; provided,
however, that it shall be a condition to termination by LCI pursuant to this
Section 7.l(f) that LCI shall have made the payment of the Termination Fee to
Qwest required by Section 7.2(b);
(g) By Qwest if any Person who is not an affiliate of Qwest
shall have acquired more than 50% of the LCI Common Stock;
(h) By Qwest if a Stock Acquisition Date (as defined in the
Rights Agreement) shall have occurred; and
(i) By LCI, if its Board of Directors so determines by a vote
of the majority of the members of its entire Board, at any time during the
three-Business Day period commencing on the Determination Date (the "LCI
Evaluation Period"), if the Average Price is less than $26.9531, subject,
however, to the following: (A) if LCI elects to exercise its termination
right pursuant to this Section 7.1(i), it shall give Qwest written notice of
its intention to terminate (the "Termination Notice"), which termination
shall be effective at the close of business on the third Business Day
following the delivery of the Termination Notice (which Termination Notice
may be withdrawn by LCI at any time prior to the effectiveness of such
termination), (B) during the two-Business Day period commencing with the
delivery of a Termination Notice (the "Adjustment Election Period"), Qwest
shall have the option of adjusting the Exchange Ratio to equal the quotient
determined by dividing $42 by the Average Price (rounded to the nearest
1/10,000) by delivering written notice to LCI within such two-Business Day
period of its intention to so adjust the Exchange Ratio and (C) if Qwest
makes an election to adjust the Exchange Ratio pursuant to the preceding
clause (B) (an "Adjustment Election"), then this Agreement shall not
terminate pursuant to this Section 7.1(i) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified), and any references in this Agreement to "Exchange Ratio"
shall thereafter be deemed to refer to the Exchange Ratio as adjusted
pursuant to this Section 7.1(i).
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
LCI or Qwest as provided in Section 7.1, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of
Qwest or LCI or their respective officers or directors except with respect to
Section 3.1(i), Section 3.2(h), the second sentence of Section 5.3, Section
5.7, this Section 7.2 and Article VIII.
(b) Qwest and LCI agree that LCI shall pay to Qwest the sum of
$133 million (the "Termination Fee") solely as follows: (i) if LCI shall
terminate this Agreement pursuant to Section 7.1(f), (ii) if (A) LCI or Qwest
shall terminate this Agreement pursuant to Section 7.1(d)(i) due to the
failure of LCI's stockholders to approve and adopt this Agreement, (B) at any
time after the date of this Agreement and at or before the time of the event
giving rise to such termination there shall exist an Acquisition Proposal
with respect to LCI and (C) within 12 months of the termination of this
Agreement, LCI enters into a definitive agreement with any third party with
respect to an Acquisition Proposal or an Acquisition Proposal is consummated,
(iii) if Qwest shall terminate this Agreement pursuant to Section 7.1(e),
7.1(g) or 7.1(h), or (iv) if (A) Qwest shall terminate this Agreement
pursuant to Section 7.1(b) or LCI or Qwest shall terminate this Agreement
pursuant to Section 7.1(c), (B) at any time after the date of this Agreement
and at or before the time of the event giving rise to such termination there
shall exist an Acquisition Proposal, (C) following the existence of such
Acquisition Proposal and prior to any such termination, LCI shall have
intentionally breached (and not cured after notice thereof) any of its
material covenants or agreements set forth in this Agreement in any material
respect and (D) within 12 months of any such termination of this Agreement,
LCI shall enter into a definitive agreement with any third party with respect
to an Acquisition Proposal or an Acquisition Proposal is consummated.
(c) The Termination Fee required to be paid pursuant to
Section 7.2(b) shall be made prior to, and shall be a pre-condition to the
effectiveness of termination of this Agreement by LCI pursuant to Section
7.1(f). Any other payment required to be made pursuant to Section 7.2(b)
shall be made to Qwest not later than two Business Days after the entering
into of a definitive agreement with respect to, or the consummation of, an
Acquisition Proposal, as applicable, or a termination pursuant to Section
7.1(e), 7.1(g) or 7.1(h). All payments under this Section 7.2 shall be made
by wire transfer of immediately available funds to an account designated by
the party entitled to receive payment.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of LCI and Qwest, but, after
any such approval, no amendment shall be made which by law or in accordance
with the rules of any relevant stock exchange requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained
herein and therein that by their terms apply or are to be performed in whole
or in part after the Effective Time and this Article VIII. Nothing in this
Section 8.1 shall relieve any party for any breach of any representation,
warranty, covenant or other agreement in this Agreement occurring prior to
termination.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of
delivery if delivered personally, or by telecopy or telefacsimile, upon
confirmation of receipt, (b) on the first Business Day following the date of
dispatch if delivered by a recognized next-day courier service, or (c) on the
tenth Business Day following the date of mailing if delivered by registered
or certified mail, return receipt requested, postage prepaid. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
(a) if to Qwest or Merger Sub, to
Qwest Communications International Inc.
0000 Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
with a copy to
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Drake S. Tempest
and with a copy to
Holme Xxxxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx
(b) if to LCI to
LCI International, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
and with a copy to
Kramer, Levin, Naftalis
& Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
8.3 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents, glossary of defined terms and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation".
8.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement and the agreements referred to in Sections
1.9 and 5.3 constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, other than the Confidentiality
Agreement, which shall survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 5.8 (which is intended to be for the benefit of
the Persons covered thereby and may be enforced by such Persons).
8.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
8.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other party, and any attempt to make
any such assignment without such consent shall be null and void, except that
Merger Sub may assign, in its sole discretion, any or all of its rights,
interests and obligations under this Agreement to any direct wholly owned
Subsidiary of Qwest without the consent of LCI, but no such assignment shall
relieve Merger Sub of any of its obligations under this Agreement. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
8.9 Submission to Jurisdiction; Waivers. Each of Qwest and
LCI irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Chancery or other Courts of the State of
Delaware, and each of Qwest and LCI hereby irrevocably submits with regard to
any such action or proceeding for itself and in respect to its property,
generally and unconditionally, to the nonexclusive jurisdiction of the
aforesaid courts. Each of Qwest and LCI hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in
any action or proceeding with respect to this Agreement, (a) any claim that
it is not personally subject to the jurisdiction of the above-named courts
for any reason other than the failure to serve process in accordance with
this Section 8.9, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable law, that
(i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts. This Agreement does not involve less than
$100,000, and the parties intend that 6 Del.C. Section 2708 shall apply to
this Agreement.
8.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms. It is accordingly
agreed that the parties shall be entitled to specific performance of the
terms hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
8.11 Definitions. As used in this Agreement:
(a) "Benefit Plans" means, with respect to any Person, each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any
bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, change in
control and severance plan, program, arrangement and contract) all of the
foregoing in effect on the date of this Agreement or disclosed on Section
4.1(c) of the LCI Disclosure Schedule, to which such Person or its Subsidiary
is a party, which is maintained or contributed to by such Person, or with
respect to which such Person could incur material liability under Section
4069, 4201 or 4212(c) of ERISA.
(b) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(c) "Business Day" means any day on which banks are not
required or authorized to close in the City of New York.
(d) "Material Adverse Effect" means, with respect to any
entity, any adverse change, circumstance or effect that, individually or in
the aggregate with all other adverse changes, circumstances and effects, is
or is reasonably likely to be materially adverse to the business, financial
condition or results of operations of such entity and its Subsidiaries taken
as a whole, other than any change, circumstance or effect relating to (i) the
economy or securities markets in general or (ii) the industries in which
Qwest or LCI operate and not specifically relating to Qwest or LCI.
(e) "the other party" means, with respect to LCI, Qwest and
means, with respect to Qwest, LCI.
(f) "Person" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated
organization, other entity or group (as defined in the Exchange Act).
(g) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority of
the voting interests in such partnership) or (ii) at least a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the Board of Directors or others performing
similar functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(h) "Superior Proposal" means a bona fide written Acquisition
Proposal which the Board of Directors of LCI concludes in good faith (after
consultation with its financial advisors and legal counsel), taking into
account all legal, financial, regulatory and other aspects of the proposal
and the Person making the proposal, (i) would, if consummated, result in a
transaction that is more favorable to LCI's stockholders (in their capacities
as stockholders), from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is reasonably capable of being
completed (provided that for purposes of this definition the term Acquisition
Proposal shall have the meaning assigned to such term in Section 5.5 except
that the references to "15%" and "20%" in the definition of "Acquisition
Proposal" shall each be deemed to be a reference to "50%" and "Acquisition
Proposal" shall only be deemed to refer to a transaction involving LCI, or
with respect to assets (including the shares of any Subsidiary of LCI) of LCI
and its Subsidiaries, taken as a whole, and not any of its Subsidiaries
alone).
8.12 Other Agreements. The parties hereto acknowledge and
agree that, except as otherwise expressly set forth in this Agreement, the
rights and obligations of LCI and Qwest under any other agreement between the
parties shall not be affected by any provision of this Agreement.
-------------------------------
[Intentionally Left Blank]
IN WITNESS WHEREOF, Qwest, LCI and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of March 8, 1998.
QWEST COMMUNICATIONS
INTERNATONAL INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------
Name:Xxxxxx X. Xxxxxxx
Title:President
QWEST 1998-L ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------
Name:Xxxxxx X. Xxxxxxx
Title:President
LCI INTERNATIONAL, INC.
By: /s/ H. Xxxxx Xxxxxxxx
------------------------
Name:H. Xxxxx Xxxxxxxx
Title:Chairman of the Board and
Chief Executive Officer
Exhibit 5.6
Assumption of LCI Stock Options and LCI Warrant
(1) Each LCI Stock Option and LCI Warrant outstanding at
the Effective Time shall be assumed by Qwest and deemed to constitute
an option to acquire, and each LCI Warrant shall be deemed to
constitute a warrant to acquire, on the same terms and conditions,
mutatis mutandis, as were applicable under such LCI Stock Option or
such LCI Warrant prior to the Effective Time, the number of shares of
Qwest Common Stock as the holder of such LCI Stock Option or LCI
Warrant would have been entitled to receive pursuant to the Merger
had such holder exercised such LCI Stock Option or such LCI Warrant
in full immediately prior to the Effective Time (not taking into
account whether or not such option was in fact exercisable) at a
price per share equal to (a) the aggregate exercise price for LCI
Common Stock otherwise purchasable pursuant to such LCI Stock Option
divided by (b) the number of shares of Qwest Common Stock deemed
purchasable pursuant to such assumed LCI Stock Option or such LCI
Warrant; provided that the number of shares of Qwest Common Stock
that may be purchased upon exercise of any such LCI Stock Option or
such LCI Warrant shall not include any fractional share and, upon
exercise of such LCI Stock Option or such LCI Warrant, a cash payment
shall be made for any fractional share based upon the last sale price
per share of Qwest Common Stock on the trading day immediately
preceding the date of exercise. All such LCI Stock Options shall be
immediately exercisable by the holder thereof at or after the
Effective Time, notwithstanding any provision to the contrary set
forth in any option agreement (including, without limitation, any
provision restricting the acceleration of such options in respect of
any limit on deductibility under Section 280G of the Code). Within
three Business Days after the Effective Time, Qwest shall cause to be
delivered to each holder of an outstanding LCI Stock Option an
appropriate notice setting forth such holder's rights pursuant
thereto, and such assumed LCI Stock Option or such LCI Warrant (as
adjusted with respect to exercise price and the number of shares of
Qwest Common Stock purchasable) shall continue in effect on the same
terms and conditions. From and after the Effective Time, Qwest shall
comply with the terms of the warrant agreement pursuant to which the
LCI Warrant was issued (the "Warrant Agreements") and the LCI Stock
Option Plans pursuant to which the LCI Stock Options were granted.
The adjustments provided in this Exhibit 5.6 with respect to any
Stock Options that are "incentive stock options" (as defined in
Section 422 of the Code) shall be effected in a manner consistent
with Section 424(a) of the Code.
(2) Qwest shall cause to be taken all corporate action
necessary to reserve for issuance a sufficient number of shares of
Qwest Common Stock for delivery upon exercise of LCI Stock Options
and LCI Warrants in accordance with this Exhibit 5.6. Within three
Business Days after the Effective Time, Qwest shall cause the Qwest
Common Stock subject to LCI Stock Options and, to the extent required
by the respective Warrant Agreements, subject to the LCI Warrants to
be registered under the Securities Act pursuant to a registration
statement on Form S-8 (or any successor or other appropriate forms),
and shall use its best efforts to cause the effectiveness of such
registration statement (and the current status of the prospectus or
prospectuses contained therein) to be maintained for so long as the
LCI Stock Options remain outstanding.
(3) LCI shall take such action as is necessary to cause
the ending date of the then current offering period under each LCI
employee stock purchase plan (including any stock purchase plan of a
company acquired by LCI) to be prior to the Effective Time and on
such date as is determined in accordance with the terms of such plan
(the "Final Purchase Date"); provided that such change in the
offering period shall be conditioned upon the consummation of the
Merger. On the Final Purchase Date, the LCI shall apply the funds
credited as of such date under such LCI Employee Stock Purchase Plan
within each participant's payroll withholding account to the purchase
of whole shares of LCI Common Stock in accordance with the terms of
such LCI employee stock purchase plan.
(4) LCI shall use its best efforts to provide, on or
prior to the Closing Date, a written acknowledgment of each holder of
a LCI Stock Option or an LCI Warrant that such LCI Stock Option or
LCI Warrant from and after the Effective Time is exercisable for
shares of Qwest Common Stock as provided herein; provided that LCI
need not do so if Qwest determines to its reasonable satisfaction
that the terms of such LCI Stock Option or LCI Warrant provide that,
after giving effect to any permitted action by the Board of Directors
of LCI or any committee thereof, from and after the Effective Time,
such LCI Stock Option or LCI Warrant shall be exercisable only for
shares of Qwest Common Stock and not for shares for stock of the
Surviving Corporation or any other entity.
