EXHIBIT 10.1
EXECUTION COPY
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PURCHASE AGREEMENT
AMONG
LEUCADIA NATIONAL CORPORATION,
XXXXXXX ENTERPRISES, INC.,
XXXXX 0 XXXXXXXXXXXXXX, XXX
XXX
XXXXX 0 COMMUNICATIONS, INC.
Dated as of October 30, 2005
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TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.................................................................................1
SECTION 2. PURCHASE AND SALE OF MEMBERSHIP UNITS......................................................10
SECTION 2.1. Components of Purchase Price......................................................10
SECTION 2.2. Substitution Rights...............................................................11
SECTION 2.3. Closing Date Transactions.........................................................12
SECTION 2.4. Allocation of Purchase Price......................................................12
SECTION 2.5. Further Assurances................................................................12
SECTION 3. ADJUSTMENT TO PURCHASE PRICE...............................................................13
SECTION 3.1. Closing Date Adjustments..........................................................13
SECTION 3.2. Post-Closing Determination........................................................14
SECTION 3.3. Post-Closing Adjustment...........................................................15
SECTION 3.4. Estimate of Adjusted Net Working Capital..........................................15
SECTION 4. CLOSING....................................................................................15
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER...............................................15
SECTION 5.1. Corporate Organization............................................................16
SECTION 5.2. Qualification to Do Business......................................................16
SECTION 5.3. No Conflict or Violation..........................................................16
SECTION 5.4. Consents and Approvals............................................................16
SECTION 5.5. Authorization and Validity of Agreement...........................................17
SECTION 5.6. Capitalization and Related Matters................................................17
SECTION 5.7. Equity Investments................................................................18
SECTION 5.8. Financial Statements..............................................................18
SECTION 5.9. Absence of Certain Changes or Events..............................................19
SECTION 5.10. Tax Matters.......................................................................20
SECTION 5.11. Absence of Undisclosed Liabilities................................................22
SECTION 5.12. Company Real Property.............................................................22
SECTION 5.13. Assets of the Company and its Subsidiaries........................................24
SECTION 5.14. Intellectual Property.............................................................24
SECTION 5.15. Licenses and Permits..............................................................26
SECTION 5.16. Compliance with Law...............................................................27
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 5.17. Litigation........................................................................27
SECTION 5.18. Contracts.........................................................................27
SECTION 5.19. Employee Plans....................................................................30
SECTION 5.20. Insurance.........................................................................31
SECTION 5.21. Transactions with Directors, Officers, Managers, and Affiliates...................31
SECTION 5.22. Suppliers and Customers...........................................................32
SECTION 5.23. Labor Matters.....................................................................32
SECTION 5.24. Environmental Matters.............................................................33
SECTION 5.25. No Brokers........................................................................34
SECTION 5.26. Acquisition of the Shares.........................................................34
SECTION 5.27. SBC...............................................................................35
SECTION 5.28. No Other Representations or Warranties............................................35
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND LEVEL 3....................................35
SECTION 6.1. Corporate Organization............................................................36
SECTION 6.2. Qualification to Do Business......................................................36
SECTION 6.3. No Conflict or Violation..........................................................36
SECTION 6.4. Consents and Approvals............................................................36
SECTION 6.5. Authorization and Validity of Agreement...........................................36
SECTION 6.6. Capitalization and Related Matters................................................37
SECTION 6.7. SEC Filings.......................................................................37
SECTION 6.8. No Material Adverse Effect........................................................38
SECTION 6.9. Private Placement.................................................................38
SECTION 6.10. No Brokers........................................................................38
SECTION 6.11. Sufficiency of Funds..............................................................38
SECTION 6.12. No Other Representations or Warranties............................................38
SECTION 7. COVENANTS OF LEUCADIA AND THE SELLER.......................................................38
SECTION 7.1. Conduct of Business Before the Closing Date.......................................38
SECTION 7.2. Consents and Approvals............................................................41
SECTION 7.3. Access to Properties and Records..................................................41
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 7.4. Pre-Closing Transfers.............................................................42
SECTION 7.5. Registration Statement and Level 3 Commission Filing Requirements.................43
SECTION 7.6. Negotiations......................................................................43
SECTION 7.7. Certain Real Estate Matters.......................................................43
SECTION 7.8. Commercially Reasonable Efforts...................................................44
SECTION 7.9. Notice of Breach..................................................................44
SECTION 7.10. Stock Certificate Legend..........................................................44
SECTION 7.11. Non-Solicitation..................................................................44
SECTION 7.12. Employees and Employee Benefits...................................................45
SECTION 7.13. Tax Matters.......................................................................46
SECTION 7.14. Name..............................................................................49
SECTION 7.15. Reimbursements; Cash Balance......................................................49
SECTION 7.16. Transferred Benefit Plans.........................................................50
SECTION 8. COVENANTS OF LEVEL 3 AND THE BUYER.........................................................50
SECTION 8.1. Commercially Reasonably Efforts...................................................50
SECTION 8.2. Consents and Approvals............................................................50
SECTION 8.3. Notice of Breach..................................................................51
SECTION 8.4. Listing of Shares.................................................................51
SECTION 8.5. WilTel Benefits Plans.............................................................51
SECTION 8.6. Access to Properties and Records..................................................51
SECTION 8.7. Reimbursements; Cash Balance......................................................52
SECTION 8.8. Retention Payments................................................................52
SECTION 9. INDEMNIFICATION............................................................................52
SECTION 9.1. Survival..........................................................................52
SECTION 9.2. Indemnification by Leucadia and the Seller........................................53
SECTION 9.3. Indemnification by Xxxxx 0 and the Buyer..........................................55
SECTION 9.4. Procedures for Indemnification....................................................56
SECTION 9.5. Exclusive Remedy..................................................................57
SECTION 10. CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLER..........................................57
SECTION 10.1. Representations and Warranties of the Buyer and Level 3...........................57
SECTION 10.2. Performance of the Obligations of the Buyer and Level 3...........................58
SECTION 10.3. HSR Act...........................................................................58
SECTION 10.4. No Violation of Orders............................................................58
SECTION 10.5. No Material Adverse Change........................................................58
SECTION 10.6. Lease Agreement...................................................................58
SECTION 10.7. Registration Rights Agreement.....................................................58
SECTION 10.8. Securities Matters................................................................58
SECTION 10.9. Opinion of Counsel................................................................58
SECTION 10.10. Other Closing Documents...........................................................58
SECTION 10.11. SBC Consent to Assignment.........................................................58
SECTION 10.12. The Buyer Reimbursements; Cash Balance............................................59
SECTION 11. CONDITIONS PRECEDENT TO PERFORMANCE BY THE BUYER AND LEVEL 3...............................59
SECTION 11.1. Representations and Warranties of Leucadia and the Seller.........................59
SECTION 11.2. Performance of the Obligations of Leucadia and the Seller.........................59
SECTION 11.3. Approvals.........................................................................59
SECTION 11.4. HSR Act...........................................................................59
SECTION 11.5. No Violation of Orders............................................................59
SECTION 11.6. No Pension Plan Termination.......................................................60
SECTION 11.7. No Material Adverse Change........................................................60
SECTION 11.8. Pre-Closing Transfers.............................................................60
SECTION 11.9. The Company's Credit Documents....................................................60
SECTION 11.10. The Company's Real Estate Debt Documents..........................................60
SECTION 11.11. Lease Agreement...................................................................60
SECTION 11.12. Registration Rights Agreement.....................................................60
SECTION 11.13. Opinion of Counsel................................................................60
SECTION 11.14. Other Closing Documents...........................................................60
SECTION 11.15. Tax Related Documentation.........................................................61
SECTION 11.16. The Seller Pre-Closing Transfers, Reimbursements and Cash Balance.................61
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 12. TERMINATION................................................................................61
SECTION 12.1. Conditions of Termination.........................................................61
SECTION 12.2. Effect of Termination.............................................................62
SECTION 13. MISCELLANEOUS..............................................................................62
SECTION 13.1. Successors and Assigns............................................................62
SECTION 13.2. Governing Law, Jurisdiction.......................................................62
SECTION 13.3. Expenses..........................................................................62
SECTION 13.4. Severability......................................................................63
SECTION 13.5. Notices...........................................................................63
SECTION 13.6. Parent Guaranties.................................................................64
SECTION 13.7. Amendments; Waivers...............................................................64
SECTION 13.8. Public Announcements..............................................................64
SECTION 13.9. Entire Agreement..................................................................64
SECTION 13.10. Parties in Interest...............................................................64
SECTION 13.11. Scheduled Disclosures.............................................................64
SECTION 13.12. Section and Paragraph Headings....................................................65
SECTION 13.13. Counterparts......................................................................65
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INDEX TO SCHEDULES
1.1 Adjusted Net Working Capital Categories
1.2 Seller's Knowledge
1.5(a) Miscellaneous Retention Plans
1.5(b) Former Executive Retention Agreements
3.4 Estimate of Adjusted Net Working Capital
5.1 Subsidiaries
5.2 Qualification to do Business
5.3 No Conflict or Violation
5.4 Leucadia/Seller/Company Consents and Approvals
5.6(b) Capitalization and Related Matters
5.7 Equity Investments
5.8 Financial Statements
5.9 Absence of Certain Changes or Events
5.10 Tax Matters
5.11 Absence of Undisclosed Liabilities
5.12(a) Owned Real Property
5.12(b) Leased Real Property
5.12(c) Lease Amendments Adverse to the Businesses
5.12(d) Agreements Affecting Company Real Property
5.12(e) Material Improvements, Systems and Fixtures
5.13(a) Assets of the Company and the Retained Subsidiaries
5.14(a) Unlicensed IP/Non-Compliance
5.14(b) Listed Intellectual Property
5.14(c) Agreements relating to the Intellectual Property
5.14(d) Intellectual Property Claims and Indemnification Agreements
5.15 Licenses and Permits
5.16 Compliance with Law
5.17 Litigation
5.18(a) Contracts
5.18(f) Contracts with Beneficial Pricing Clauses
5.18(h) Maximum Liability - Leased Shared Network Circuits
5.18(i) Shared Network Circuits
5.19(a) Employee Benefit Plans
5.19(g) Claims/Actions against Employee Benefit Plans
5.19(h) ERISA Non-Compliance/Company Securities Included in Assets of Employee Benefit Plans
5.19(i) Employee Benefit Plan Payments
5.19(j) OPEB Plans Participants
5.20 Insurance
5.21 Transactions with Directors, Officers, Managers and Affiliates
5.22(a) Top Suppliers
5.22(b) Top Customers
5.23(a) Non-Terminable Employment Agreements/ Employment Agreements Requiring Payments/Consulting
Agreements
5.23(b) Labor Law Violations/Notices
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5.23(c)(i) Maximum Aggregate Severance
5.23(c)(ii) Maximum Aggregate Obligations Under Company Plans
5.24 Environmental Matters
5.27(a) SBC Credits, Refunds or Payments
5.27(b) Included Services Billed Amounts
5.27(c) SBC Material Disputes
6.4 Buyer/Level 3 Consents and Approvals
6.6 Capitalization and Related Matters
7.1(a) Conduct of Businesses Before Closing Date
7.1(a)(vii) New Employment Plans/Arrangements
7.1(b)(vi) Capital Expenditure Projects
7.4 Excluded Assets; Excluded Liabilities
Annex A to 7.4 WilTel Technology Center, LLC Assets
7.7(a) Leases to be Renewed
7.7(b) Leases to Expire
7.7(c) Leases to be Terminated
9.2(a) Leucadia Covered Matters
9.3(a)(iii) Level 3 Covered Matters
10.6 Form of Lease Agreement for Company's Tulsa, Oklahoma headquarters
10.9 Form of Opinion of Counsel to the Buyer
10.11 SBC Consent to Assignment
11.3 Required Consents and Approvals
11.13 Form of Opinion of Counsel to the Seller
INDEX TO EXHIBITS
Exhibit A Form of Registration Rights Agreement
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of October 30, 2005 (this "Agreement"),
by and among Leucadia National Corporation, a New York corporation ("Leucadia"),
Xxxxxxx Enterprises, Inc., a Colorado corporation and wholly owned Subsidiary of
Leucadia (the "Seller"), Level 3 Communications, LLC, a Delaware limited
liability company (the "Buyer"), and Level 3 Communications, Inc., a Delaware
corporation ("Level 3").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, WilTel Communications Group, LLC, a Nevada limited liability
company (the "Company"), is a telecommunications company that, together with its
Subsidiaries, conducts the Telecommunications Business and the Vyvx Business
(together, the "Businesses");
WHEREAS, Seller owns all of the issued and outstanding membership
units of the Company (the "Membership Units"); and
WHEREAS, the Buyer desires to purchase the Membership Units from the
Seller, and the Seller desires to sell the Membership Units to the Buyer, in
each case, upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
SECTION 1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the
following meanings:
"Action" -- See Section 5.17;
"Actual Adjusted Net Working Capital" -- See Section 3.2;
"Actual Adjusted Net Working Capital Report" -- See Section 3.2;
"Additional Cash Amount" -- See Section 2.1;
"Adjusted Net Working Capital" shall mean the amount equal to (i)
those current assets of the Company and the Retained Subsidiaries (other than
Excluded Assets) on a consolidated basis in the balance sheet categories
identified on Schedule 1.1 as being included in the calculation of Adjusted Net
Working Capital (it being understood that current assets will be deemed to be
increased by the remaining balance of any reserve as of the Measurement Date
that had been established on or prior to October 24, 2005 by the Company or the
Retained Subsidiaries in respect of SBC disputes as to which written claims have
been received by the Company or its Subsidiaries on or before October 24, 2005,
which increase shall not exceed the amount of reserves set forth on Schedule
5.27(c)) minus (ii) those current liabilities of the Company and the Retained
Subsidiaries (other than Excluded Liabilities) on a consolidated basis in the
balance sheet categories identified on Schedule 1.1 as being included in the
calculation of Adjusted Net Working Capital, in each case, as of the close of
business on the Measurement Date, and determined in accordance with GAAP applied
on a consistent basis consistent with, and following the accounting principles,
procedures, policies and methods employed in preparing, the August 31 Balance
Sheet;
"Affiliates" shall mean, with respect to a Person, any Person,
directly or indirectly, controlling, controlled by or under common control with
the Person specified;
"Agreement" -- See Preamble hereto;
"Aircraft Leases" shall mean (i) Sublease and Consent Agreement
between CXL Aviation, LLC (sublessor) and WilTel Aircraft Leasing, LLC
(subleasee), dated September 30, 2005 (regarding N359WC), (ii) Sublease and
Consent Agreement between CX Aviation, LLC (sublessor) and WilTel Aircraft
Leasing, LLC (subleasee), dated September 30, 2005 (regarding N358WC) and (iii)
Hangar Lease Agreement between Tulsair Beechcraft, Inc. and Xxxxxxxx
Communications, LLC, dated April 25, 2001;
"Allocation" -- See Section 2.4(a);
"August 31 Balance Sheet" -- See Section 3.1(b);
"August Financial Statements" -- See Section 5.8;
"Benefit Plan Substitution Right" -- See Section 2.2(b);
"Businesses" -- See Recitals hereto;
"Business Day" shall mean a day other than a Saturday, Sunday or
other day on which banks in the State of New York are required or authorized to
close;
"Buyer" -- See Preamble hereto;
"Buyer Indemnitees" -- See Section 9.2(a);
"Cash Purchase Price" -- See Section 2.1;
"Cash Substitution Right" -- See Section 2.2(a);
"Closing" -- See Section 4;
"Closing Balance Sheet" -- See Section 3.2;
"Closing Date" -- See Section 4;
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, including rules and regulations adopted thereunder;
"Code" shall mean the Internal Revenue Code of 1986, as amended;
2
"Commission" shall mean the Securities and Exchange Commission;
"Company" -- See Recitals hereto;
"Company's Credit Documents" shall mean the (i) Third Amended and
Restated Credit and Guaranty Agreement, dated as of September 24, 2004, among
the Company, WilTel Communications, LLC, certain of its domestic Subsidiaries,
as loan parties, the several banks and other financial institutions or entities
from time to time parties thereto as lenders, Credit Suisse First Boston, acting
through its Cayman Islands branch, as administrative agent, as first lien
administrative agent and as second lien administrative agent, and Xxxxx Fargo
Foothill, LLC, as syndication agent, and (ii) First Amendment to Third Amended
and Restated Credit and Guaranty Agreement, dated as of September 2, 2005, (iii)
Second Amended and Restated Security Agreement, dated as of September 24, 2004,
among the Company, WilTel Communications, LLC, and the additional grantors party
thereto in favor of Credit Suisse First Boston, acting through its Cayman
Islands branch, as administrative agent, as first lien administrative agent and
as second lien administrative agent and (iv) and any related UCC financing
statements filed by the lenders a party thereto;
"Company's Real Estate Debt Documents" shall mean the (i) Long Term
Note in the original principal amount of $100 million, made by WilTel Technology
Center, LLC (f/k/a Xxxxxxxx Technology Center, LLC), as borrower, WilTel
Communications Group, LLC (f/k/a Xxxxxxxx Communications Group, Inc.), as
guarantor, and WilTel Communications, LLC (f/k/a Xxxxxxxx Communications, LLC),
as guarantor, in favor of the Xxxxxxxx Headquarters Building Company, dated
October 15, 2002, (ii) Mortgage with Power of Sale, Security Agreement,
Assignment of Leases, Rents and Profits, Financing Statement and Fixture Filing,
dated as of October 15, 2002, made by WilTel Technology Center, LLC (f/k/a
Xxxxxxxx Technology Center, LLC), as mortgagor, to Xxxxxxxx Headquarters
Building Company, as mortgagee (the "Mortgage"), as amended by the First
Amendment to the Mortgage, dated September 24, 2004, by and between Xxxxxxxx
Headquarters Building Company and WilTel Technology Center, LLC (f/k/a Xxxxxxxx
Technology Center, LLC) and (iii) Second Mortgage, Assignment of Leases and
Rents, Security Agreement, Financing Statement and Fixture Filing dated as of
October 15, 2002 by Xxxxxxxx Technology Center, LLC to Bank of America, N.A., as
administrative agent, dated October 15, 2002, as amended and assigned by
Assignment of Beneficiary's Interest and Amendment to Mortgage, Assignment of
Leases and Rents, Security Agreement and Financing Statement of WilTel
Technology Center, LLC as Mortgagor in favor of Credit Suisse First Boston,
acting through its Cayman Islands Branch, as Administrative Agent, as First Lien
Administrative Agent and as Second Lien Administrative Agent, as Mortgagee,
dated as of September 23, 2004;
"Company Real Property" -- See Section 5.12(b);
"Confidentiality Agreement" shall mean that certain Non-Disclosure
Agreement by and among Leucadia, WilTel and Xxxxx 0, dated October 13, 2004, as
amended;
"Contracts" -- See Section 5.18;
3
"Covered Employee" shall mean any employee of the Company or the
Retained Subsidiaries having the title of director or above (other than the
Chief Executive Officer of the Company as of the date hereof);
"Covered Matter" -- See Section 9.2(a)(vii);
"Deferred Compensation Plan" -- See Section 7.12(b);
"Discharged Real Estate Debt Documents" shall mean the (i) Short Term
Note in the original principal amount of $74,360,295.29, made by WilTel
Technology Center, LLC (f/k/a Xxxxxxxx Technology Center, LLC), as borrower,
WilTel Communications Group, Inc. (f/k/a Xxxxxxxx Communications Group, Inc.),
as guarantor, and WilTel Communications, LLC (f/k/a Xxxxxxxx Communications,
LLC), as guarantor, in favor of the Xxxxxxxx Headquarters Building Company,
dated October 15, 2002, (ii) Pledge Agreement, dated as of October 15, 2002,
made by CG Austria, Inc. to Xxxxxxxx Headquarters Building Company and (iii)
Equitable Mortgage, dated as of October 15, 2002 made by CG Austria, Inc. to
Xxxxxxxx Headquarters Building Company;
"Employee Benefit Plans" -- See Section 5.19(a);
"Environmental Laws" shall mean any applicable laws, regulations or
other requirements of law relating to pollution or the protection of the
environment or natural resources;
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, including the rules and regulations adopted thereunder;
"ERISA Affiliate" shall mean any Person under common control, or
treated as a single employer, with the Company or any Retained Subsidiaries,
within the meaning of Section 414(b), (c), (m) or (o) of the Code;
"Estimated Adjusted Net Working Capital" -- See Section 3.1(b);
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended;
"Excluded Assets" shall mean (i) all cash and cash equivalents
(including checks payable to the Company or any of its Subsidiaries and
deposited into a bank account or lock box prior to the Measurement Date) of the
Company and its Subsidiaries as of the close of business on the Measurement Date
to the extent in excess of $100 million, (ii) marketable securities, (iii) all
payments to the Company or any of its Affiliates receivable from SBC pursuant to
the SBC Settlement Agreement, (iv) all right, title and interest in and to the
Transferred Subsidiaries, (v) all other rights and assets set forth on Schedule
7.4 hereto and (vi) any cash received after the Measurement Date on account of
any of the assets set forth in (ii), (iii) or (v) above;
"Excluded Liabilities" shall mean (i) all liabilities of the Company
and its Subsidiaries set forth on Schedule 7.4 hereto (including, without
limitation, liabilities relating to the Company's Credit Documents, the
Company's Real Estate Debt Documents and the Retirement Plan) and (ii) those
liabilities and obligations of the Company and its Subsidiaries relating to or
arising from the Excluded Assets;
4
"FCC" -- See Section 5.4;
"Financial Statements" -- See Section 5.8;
"Former Executive Retention Agreements" shall mean those agreements
set forth on Schedule 1.5(b);
"GAAP" shall mean U.S. generally accepted accounting principles;
"Governmental Entity" shall mean any federal, state, local or foreign
court, governmental, regulatory or other public body, agency or authority
(including self-regulatory organizations), domestic or foreign;
"Hazardous Material" shall mean any hazardous substance, hazardous
waste, contaminant, pollutant, or toxic substance as defined under applicable
Environmental Laws, including petroleum and its fractions;
"HSR Act" -- See Section 5.4;
"Income Taxes" shall mean all Taxes based upon, measured by, or
calculated with respect to (i) gross or net income or gross or net receipts or
profits (including, but not limited to, any capital gains, alternative minimum
taxes, net worth and any taxes on items of tax preference, but not including
sales, use, goods and services, real or personal property transfer or other
similar taxes), (ii) multiple bases (including, but not limited to, corporate
franchise, doing business or occupation taxes) if one or more of the bases upon
which such tax may be based upon, measured by, or calculated with respect to, is
described in clause (i) above, or (iii) withholding taxes measured with
reference to or as a substitute for any tax described in clauses (i) or (ii)
above; and "Income Tax" shall mean any one of them;
"Indemnitee" -- See Section 9.4;
"Indemnitor" -- See Section 9.4;
"Independent Accounting Firm" -- See Section 3.2;
"Initial Restricted Period" -- See Section 7.11(a);
"Intellectual Property" shall mean U.S. and foreign rights under
patent, copyright, moral rights, trademark and service xxxx (including the
goodwill associated therewith), trade name, trade dress, industrial design,
database rights, domain name, trade secret law or any other similar statutory
provision or common law doctrine; all patents and patent applications in any
jurisdiction pertaining to the foregoing, including re-issues, continuations,
divisions, continuations-in-part, renewals or extensions; and all other
applications or registrations related to the foregoing;
5
"IRS" shall mean the Internal Revenue Service;
"IRUs" -- See Section 5.18(c)(i)(B);
"July 31 Balance Sheet" -- See Section 5.8;
"Lease Agreement" -- See Section 10.6;
"Leased Real Property" -- See Section 5.12(b);
"Leases" -- See Section 5.12(b);
"Leucadia" -- See Preamble hereto;
"Level 3" -- See Preamble hereto;
"Level 3 Common Stock" shall mean common stock, par value $0.01 per
share, of Level 3;
"Level 3 SEC Reports" -- See Section 5.26(b);
"Licenses and Permits" -- See Section 5.15;
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance or title defect, lease, lien (statutory or other), conditional sale
agreement, claim, charge, limitation or restriction;
"Listed Intellectual Property" -- See Section 5.14(b);
"Listed License Agreements" -- See Section 5.14(c);
"Losses" -- See Section 9.2(a);
"Material Adverse Effect" when used in connection with the Company
and the Retained Subsidiaries or Level 3 and its Subsidiaries, as the case may
be, shall mean any change, circumstance, effect or event that, individually or
when taken together, is or would reasonably be expected to be materially adverse
to (A) the business, assets, liabilities, condition (financial or other) or
results of operations of the Company and the Retained Subsidiaries or Level 3
and its Subsidiaries, as the case may be, in each case taken as a whole, except
in each case for any change, circumstance, effect or event (i) affecting the
industry in which the Company or Xxxxx 0, as the case may be, operate in general
and which does not disproportionately affect such entity in any material
respect, (ii) affecting general economic, regulatory or political conditions,
which does not disproportionately affect such entity in any material respect, or
(iii) clearly shown to be directly resulting from this Agreement and the
announcement or performance hereof and the transactions contemplated hereby,
including without limitation, the direct impact thereof on relationships with
customers, suppliers or employees, or (B) the ability of the Seller, Leucadia,
the Company, the Retained Subsidiaries or WilTel Technology Center, LLC or Level
3 or its Subsidiaries, as the case may be, to perform their obligations under
this Agreement, the Lease Agreement or the Registration Rights Agreement to
which they are a party or to consummate the transactions contemplated hereby or
thereby, including as a consequence of any material impediment, interference or
delay;
6
"Measurement Date" shall mean the earlier to occur of the Closing
Date and December 31, 2005;
"Membership Units" -- See Recitals hereto;
"Miscellaneous Retention Plans" shall mean those items set forth on
Schedule 1.5(a);
"Month End" -- See Section 3.1(b);
"Month End Balance Sheet" -- See Section 3.1(b);
"Multiemployer Plan" -- See Section 5.19(c);
"OPEB Plans" shall mean the WilTel Communications, LLC Health Plan
for Full-time Employees and the WilTel Communications, LLC Insurance Plan;
"Organizational Documents" shall mean certificates of incorporation,
by-laws, certificates of formation, limited liability company operating
agreements, limited liability partnership agreements, partnership or limited
partnership agreements or other formation or governing documents of a particular
entity;
"Owned Real Property" -- See Section 5.12(a);
"PBGC" shall mean the Pension Benefit Guaranty Corporation;
"Permitted Lien" shall mean (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance referred to in Section 5.12(a); (ii) statutory liens for current
Taxes, assessments or other governmental charges not yet delinquent or the
amount or validity of which is being contested in good faith by appropriate
proceedings; (iii) mechanics', carriers', workers', repairers' and similar Liens
arising or incurred in the ordinary course of business; (iv) zoning, entitlement
and other land use and environmental regulations by any Governmental Entity; (v)
title of a lessor under a capital or operating lease; (vi) purchase money
security interests granted to vendors with respect to trade payables recorded on
the Company's financial statements in accordance with GAAP and arising in the
ordinary course of business; and (vii) such other imperfections in title,
charges, easements, restrictions or encumbrances which do not interfere
materially with the use, operation or enjoyment, or materially detract from the
value of such property or asset;
"Person" shall mean any individual, corporation, company, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Entity or other entity;
7
"Post-Closing Tax Period" shall mean any taxable period beginning
after the Closing Date and the portion starting the day following the Closing
Date of any Straddle Period;
"Pre-Closing Taxes" shall mean all liability for Taxes of the Company
or any of its Subsidiaries but, in the case of Taxes other than Income Taxes,
only to the extent in excess of any Taxes reflected in the determination of the
Actual Adjusted Net Working Capital for Pre-Closing Tax Periods, except for any
such liability resulting from any transaction not in the ordinary course of
business occurring on the Closing Date after the Closing;
"Pre-Closing Tax Period" shall mean any taxable period ending on or
before the Closing Date and the portion ending on and including the Closing Date
of any Straddle Period;
"Pre-Closing Transfers" -- See Section 7.4;
"Property Taxes" shall mean all real, personal and intangible
property Taxes, and any similar Taxes;
"Purchase Price" -- See Section 2.1;
"Registration Rights Agreement" -- See Section 10.7;
"Registration Statement" -- See Section 7.5;
"Retained Subsidiaries" shall mean all Subsidiaries of the Company
other than the Transferred Subsidiaries;
"Retirement Plan" -- See Section 7.12(a);
"SBC" shall mean SBC Communications Inc.;
"SBC Agreement" shall mean the Master Services Agreement among WilTel
Communications, LLC, WilTel Local Network, LLC, SBC Services, Inc. and SBC
Communications Inc., dated as of June 15, 2005;
"SBC Settlement Agreement" shall mean the Termination, Mutual Release
and Settlement Agreement, dated June 15, 2005, among SBC, SBC Operations, Inc.,
SBC Long Distance, LLC, WilTel Communications Group, LLC, WilTel Communications
LLC and Leucadia;
"Securities Act" shall mean the Securities Act of 1933, as amended;
"Seller" -- See Preamble hereto;
"Seller's Knowledge," or "Knowledge of the Seller", and other similar
phrases shall mean the actual knowledge of the individuals listed on Schedule
1.2, after due inquiry of the senior employees of Leucadia, the Seller, the
Company and its Subsidiaries who have administrative or operational
responsibility for the particular subject matter in question;
8
"Severance Plan" shall mean the Company Severance Protection Plan
effective as of December 1, 2004;
"Shared Network Circuits" -- See Section 5.18(i);
"Shares" -- See Section 2.1;
"Software" shall mean computer programs, including but not limited to
source code, object code, executable code, programming tools, drawings,
specifications and data related thereto, in any form, together with all related
documentation;
"State PUC" shall mean a state public service and utility commission
or similar Governmental Entity;
"Straddle Period" shall mean any taxable period that commences prior
to and includes (but does not end on) the Closing Date;
"Straddle Period Tax Proceeding" -- See Section 7.13(f);
"Straddle Tax Return" shall mean any Tax Return required to be filed
by the Company or any of its Subsidiaries in respect of a Straddle Period;
"Subsequent Restricted Period" -- See Section 7.11(b);
"Subsidiaries" shall mean, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereto is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof;
"Substituted Shares" -- See Section 2.2;
"Substitution Rights" shall mean the Cash Substitution Right and the
Benefit Plan Substitution Right;
"Tax Proceeding" -- See Section 7.13(e);
"Taxes" shall mean (i) all federal, state, local or foreign taxes,
including, without limitation, income, gross income, gross receipts, production,
excise, employment, sales, use, transfer, ad valorem, value added, profits,
license, capital stock, franchise, severance, stamp, withholding, Social
Security, employment, unemployment, disability, worker's compensation, payroll,
utility, windfall profit, custom duties, personal property, real property,
registration, alternative or add-on minimum, estimated and other taxes,
governmental fees or like charges of any kind whatsoever, including any
interest, penalties or additions thereto, whether disputed or not; (ii) any
liability to pay amounts due pursuant to clause (i) on behalf of another Person,
including any predecessor, under any contract, reimbursement or indemnity
agreement, as transferee, successor or otherwise; and (iii) any liability of any
Person, including any predecessor, to pay amounts described in clause (i) by
reason of liability imposed under Treasury Regulations ss. 1.1502-6 or similar
provision imposing liability by reason of participation in a consolidated,
combined, unitary or similar Tax Return or similar filing; and "Tax" shall mean
any one of them;
9
"Tax Return" shall mean any report, return, information return,
filing, claim for refund or other information, including any schedules or
attachments thereto, and any amendments to any of the foregoing required to be
supplied to a taxing authority in connection with Taxes;
"Technology" shall mean, collectively, discoveries, designs,
formulas, algorithms, processes, procedures, models, methods (including but not
limited to business methods), techniques, ideas, know-how, Software, tools,
data, databases, confidential and proprietary information, inventions (whether
on not patentable), creations, improvements, writings, designs, mask works or
other works of authorship, and all recordings, graphs, drawings, reports,
analyses, other writings, Uniform Resource Locators, Internet Web sites, and any
other embodiment of the above, in any form whether or not specifically listed
herein;
"Telecommunications Business" shall mean the business, other than the
Vyvx Business of the Company and its Subsidiaries, consisting of an inter-city
and local fiber-optic network providing Internet, data and voice and other
telecommunications services;
"Transferee" -- See Section 7.4;
"Transferred Benefit Plans" shall mean the Retirement Plan and the
Deferred Compensation Plan;
"Transferred Subsidiaries" shall mean WilTel Aircraft Leasing, LLC, a
Delaware limited liability company, and WilTel Technology Center, LLC, a
Delaware limited liability company, each of which is a Subsidiary of the Company
on the date hereof and which shall cease to be a Subsidiary of the Company or
the Retained Subsidiaries upon completion of the Pre-Closing Transfers;
"Vendor Contracts" -- See Section 5.18(c)(ii);
"Vyvx Business" shall mean the business segment of the Company that
provides data services, transmits audio, video and multimedia content, and
distributes advertising media in physical and electronic form; and
"WARN" shall mean the Worker Adjustment and Retraining Notification
Act or any similar state or local "plant closing" law.
SECTION 2. PURCHASE AND SALE OF MEMBERSHIP UNITS.
-------------------------------------
SECTION 2.1. Components of Purchase Price. Subject to the terms and
conditions set forth in this Agreement and in reliance upon the representations
and warranties of the Seller set forth below, on the Closing Date the Buyer
shall purchase from the Seller and the Seller shall sell to the Buyer, the
Membership Units, free and clear of all Liens, for a total purchase price (the
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"Purchase Price") consisting of (a) $370 million in cash (as such amount may be
adjusted pursuant to either Section 2.2 or Section 3 hereof, the "Cash Purchase
Price"), (b) 115 million newly issued shares of Level 3 Common Stock (as such
number of shares may be adjusted (i) pursuant to Section 2.2 hereof and (ii) as
a result of any stock split, combination, subdivision or reclassification,
merger, exchange of shares or other similar business combination transaction, or
any dividends or distributions with respect to such shares of Level 3 Common
Stock, in each case, after the date hereof and prior to the Closing (the
"Shares")) and (c) an additional cash payment of $100 million with respect to
the cash balance to be retained by the Company as of the Measurement Date (the
"Additional Cash Amount").
SECTION 2.2. Substitution Rights.
(a) Cash Substitution Right. Not less than three nor more than five
Business Days prior to the Closing, the Buyer shall have the right, in its sole
discretion, upon written notice to the Seller, to elect to reduce the number of
Shares otherwise deliverable by the Buyer at the Closing and in lieu of such
number of Shares not being delivered (such number of shares not being delivered
hereunder referred to as the "Substituted Shares") pay cash to the Seller at the
Closing (the "Cash Substitution Right"). If the Buyer exercises its Cash
Substitution Right, (i) the Cash Purchase Price shall be increased by an amount
equal to the product of (A) the number of such Substituted Shares (as adjusted
as a result of any stock split, combination, subdivision or reclassification,
merger, exchange of shares or other similar business combination transaction, or
any dividends or distributions with respect to such shares of Level 3 Common
Stock, in each case, after the date hereof and prior to the Closing) and (B) the
greater of (1) the average of the volume weighted sales prices per share of
Level 3 Common Stock as reported by the NASDAQ Stock Market for the 10
trading-day period ending upon the trading day immediately preceding the date
the Buyer delivers written notice of its exercise of the Cash Substitution Right
and (2) $2.35, and (ii) the number of Shares deliverable at Closing shall be
reduced by the number of such Substituted Shares.
(b) Benefit Plan Substitution Right. Not less than three nor more
than five Business Days prior to the Closing, the Buyer shall have the right, in
its sole discretion, upon written notice to the Seller, to elect to have the
Company retain the sponsorship of the Transferred Benefit Plans and the related
liabilities and obligations thereunder in respect of the participants in the
Transferred Benefit Plans prior to the Closing Date (the "Benefit Plan
Substitution Right"). If the Buyer exercises its Benefit Plan Substitution
Right, (i) the number of Shares otherwise deliverable by the Buyer at the
Closing (as adjusted as a result of any stock split, combination, subdivision or
reclassification, merger, exchange of shares or other similar business
combination transaction, or any dividends or distributions with respect to such
shares of Level 3 Common Stock, in each case, after the date hereof and prior to
the Closing) shall be reduced by a number equal to the quotient obtained by
dividing $80 million by the greater of (A) the average of the volume weighted
sales prices per share of Level 3 Common Stock as reported by the NASDAQ Stock
Market for the 10 trading-day period ending upon the trading day immediately
preceding the date the Buyer delivers written notice of its exercise of the
Benefit Plan Substitution Right and (B) $2.35, (ii) the Transferred Benefit
Plans shall no longer be Excluded Liabilities for purposes of this Agreement and
shall be deemed removed from Schedule 7.4 for all purposes hereof and (iii) the
assets of the Retirement Plan held in trust shall no longer be Excluded Assets
and shall be deemed removed from Schedule 7.4 for all purposes hereof.
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SECTION 2.3. Closing Date Transactions. On the Closing Date, the
Buyer shall (i) pay the Cash Purchase Price and the Additional Cash Amount by
wire transfer of immediately available funds to such account (or accounts) as
the Seller shall, not less than two Business Days prior to the Closing Date,
designate in writing to the Buyer and (ii) issue the Shares to the Seller (with
any fractional shares that would otherwise result rounded to the nearest whole
number) free and clear of all Liens (other than Liens incurred by the Seller)
and deliver or cause to be delivered to the Seller one or more certificates
therefor registered in the name of the Seller. On the Closing Date, the Seller
shall (a) deliver to the Buyer evidence of the Membership Units being purchased
by the Buyer from the Seller against payment by the Buyer to the Seller of the
Purchase Price for such Membership Units and (b) duly amend the Organizational
Documents of the Company to reflect, effective as of the Closing Date, the
admission of the Buyer as the sole member of the Company and the withdrawal of
the Seller as a member of the Company.
SECTION 2.4. Allocation of Purchase Price.
(a) The Buyer and the Seller agree to treat the sale of the
Membership Units as a sale of the assets of the Company by the Company to the
Buyer for all federal, state and local Income Tax purposes (including treatment
as a sale of the assets of any of the Company's Subsidiaries that are
disregarded for tax purposes). As soon as reasonably practicable, but not later
than 75 days following the Closing Date, the Buyer shall prepare and deliver to
the Seller a schedule which shall set forth the allocation of the Purchase
Price, liabilities and other related items among the assets of the Company (the
"Allocation"). The Seller shall, within 40 days after the date on which the
Allocation is delivered to the Seller, provide the Buyer with a written notice
stating those items to which the Seller takes exception. If a change proposed by
the Seller is disputed by the Buyer, then the Seller and the Buyer shall
negotiate in good faith to resolve such dispute. If the Buyer and the Seller
agree to the Allocation, the parties further agree to act in accordance with the
Allocation in any federal, state and local income and franchise Tax Returns.
(b) If and to the extent the Buyer and the Seller agree to the
Allocation, promptly after the Closing Date (but not before a resolution of all
disputes, if any, with regard to the Closing Balance Sheet) the Buyer shall
prepare, in consultation with the Seller or the Seller's designee, those
statements or forms (including Form 8594) required by Section 1060 of the Code
and the Treasury regulations promulgated thereunder with respect to the
Allocation. Such statements or forms shall be prepared consistently with the
Allocation if and to the extent the Buyer and the Seller agree to the
Allocation. Such statements or forms shall be filed by the parties on their
respective federal income Tax Returns as required by Section 1060 of the Code
and the Treasury regulations promulgated thereunder and each party shall provide
the other party with a copy of such statement or form as filed.
SECTION 2.5. Further Assurances. Consistent with the terms and
conditions of this Agreement and to effectuate the purposes of this Agreement
and the other Pre-Closing Transactions, after the Closing Date, (i) the Buyer
and its Affiliates shall execute and deliver to the Seller such further
instruments of assignment, transfer, conveyance, endorsement, direction or
authorization and such other documents reasonably requested by the Seller in
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order to perfect title of the Seller to the Excluded Assets and shall transfer
to the Seller any proceeds (insurance, litigation or otherwise) of such assets
realized or received by the Buyer or its Affiliates after the Closing Date and
(ii) the Seller and its Affiliates shall execute and deliver to the Buyer such
further instruments of assignment, transfer, conveyance, endorsement, direction
or authorization and such other documents reasonably requested by the Buyer in
order to perfect title of the Buyer and its Affiliates to the assets, rights and
business conveyed hereunder and shall transfer to the Buyer the proceeds
(insurance, litigation or otherwise) of such assets realized or received by the
Seller or its Affiliates after the Closing Date.
SECTION 3. ADJUSTMENT TO PURCHASE PRICE.
----------------------------
In addition to any adjustment relating to the Buyer's exercise of the
Cash Substitution Right or the Benefit Plan Substitution Right, the Purchase
Price shall be subject to adjustment as follows:
SECTION 3.1. Closing Date Adjustments. At the Closing, the Purchase
Price shall be adjusted as set forth in this Section 3.1.
(a) If the Closing occurs after December 31, 2005, then the Cash
Purchase Price payable by the Buyer on the Closing Date shall be increased by an
amount equal to the interest on $370 million from January 1, 2006 to (but not
including) the Closing Date at a rate of 6.0% per annum.
(b) Prior to the Closing (but no less than two Business Days prior to
the Closing Date), the Seller shall deliver to the Buyer (i) the consolidated
balance sheet of the Company and the Retained Subsidiaries as of December 31,
2005 or (ii) if the balance sheet described in clause (i) is not available, the
then most recent regularly prepared month end consolidated balance sheet of the
Company and the Retained Subsidiaries (which shall be as of a date not more than
50 days prior to the Closing Date). The balance sheet delivered pursuant to the
foregoing sentence is referred to as the "Month End Balance Sheet" and the date
of such Month End Balance Sheet is referred to as the "Month End." The Month End
Balance Sheet shall be accompanied by a schedule setting forth an estimate of
the Adjusted Net Working Capital as of the close of business on the Month End
(the "Estimated Adjusted Net Working Capital"). The Month End Balance Sheet
shall be prepared in accordance with GAAP (except for the exclusion of the
Transferred Subsidiaries), applied on a basis consistent with (except for the
exclusion of the Transferred Subsidiaries), and following the accounting
principles, procedures, policies and methods employed in preparing, the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
August 31, 2005 (the "August 31 Balance Sheet"). If the Estimated Adjusted Net
Working Capital set forth on the schedule accompanying the Month End Balance
Sheet is less than $26 million, the Cash Purchase Price payable to the Seller at
the Closing shall be reduced by an amount equal to such deficiency. If the
Estimated Adjusted Net Working Capital set forth on the schedule accompanying
the Month End Balance Sheet exceeds $26 million, the Cash Purchase Price payable
to the Seller at the Closing shall be increased by an amount equal to such
surplus.
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SECTION 3.2. Post-Closing Determination. Within 60 calendar days
after the Closing Date, the Seller shall deliver to the Buyer the consolidated
balance sheet of the Company and the Retained Subsidiaries as of the close of
business on the Measurement Date (the "Closing Balance Sheet"). The Closing
Balance Sheet shall be prepared in accordance with GAAP (except for the
exclusion of the Transferred Subsidiaries), applied on a basis consistent with
(except for the exclusion of the Transferred Subsidiaries), and following the
accounting principles, procedures, policies and methods employed in preparing,
the August 31 Balance Sheet. The Closing Balance Sheet shall be accompanied by a
schedule setting forth the actual Adjusted Net Working Capital as of the close
of business on the Measurement Date (the "Actual Adjusted Net Working Capital").
During the preparation of the Closing Balance Sheet by the Seller and the period
of any dispute with respect to the application of this Section 3.2, the Buyer
shall cooperate with the Seller to the extent reasonably requested by the Seller
to prepare the Closing Balance Sheet and the Actual Adjusted Net Working Capital
Report or to investigate the basis for any dispute. The calculation of the
Actual Adjusted Net Working Capital shall be examined by the Buyer who shall,
not later than 30 calendar days after receipt of the Closing Balance Sheet,
deliver a report thereon (the "Actual Adjusted Net Working Capital Report") to
the Seller. The Actual Adjusted Net Working Capital Report shall list those
items included in the Actual Adjusted Net Working Capital, if any, to which the
Buyer takes exception and the Buyer's proposed adjustment. If the Buyer fails to
deliver to the Seller the Actual Adjusted Net Working Capital Report within 30
calendar days following receipt of the Closing Balance Sheet, the Buyer shall be
deemed to have accepted the Actual Adjusted Net Working Capital for the purposes
of any adjustment to the Purchase Price under Section 3.3. If the Seller does
not give the Buyer notice of its objections to the Actual Adjusted Net Working
Capital Report within 30 calendar days following receipt of the Actual Adjusted
Net Working Capital Report, the Seller shall be deemed to have accepted the
Closing Balance Sheet as adjusted by the Buyer in the Actual Adjusted Net
Working Capital Report for the purposes of any adjustment to the Purchase Price
under Section 3.3. If the Seller gives the Buyer notice of its objections to the
Actual Adjusted Net Working Capital Report, and if the Seller and the Buyer are
unable, within 15 calendar days after receipt by the Buyer of the notice from
the Seller of objections, to resolve the disputed exceptions, such disputed
exceptions will be referred to Deloitte & Touche LLP or another firm of
independent certified public accountants (the "Independent Accounting Firm")
mutually acceptable to the Seller and the Buyer. The Independent Accounting Firm
shall, within 60 days following its selection, deliver to the Seller and the
Buyer a written report determining such disputed exceptions, and its
determinations will be conclusive and binding upon the parties thereto for the
purposes of any adjustment to the Purchase Price under Section 3.3. The fees and
disbursements of the Independent Accounting Firm acting under this Section 3.2
shall be apportioned between the Buyer and the Seller based on the total dollar
value of disputed exceptions resolved in favor of each such party, with each
such party bearing such percentage of the fees and disbursements of the
Independent Accounting Firm as the aggregate disputed exceptions resolved
against that party bears to the total dollar value of all disputed exceptions
considered by the Independent Accounting Firm. For the avoidance of doubt, the
delivery and timing of receipt of any document sent by the parties pursuant to
this Section 3 shall be governed by the provisions set forth in Section 13.5 -
"Notices."
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SECTION 3.3. Post-Closing Adjustment.
(a) If the Actual Adjusted Net Working Capital is less than the
Estimated Adjusted Net Working Capital, the Seller shall, within three calendar
days following the final determination of the Actual Adjusted Net Working
Capital pursuant to Section 3.2, and based upon such final determination, pay to
the Buyer the amount of such deficiency in cash, together with interest on such
amount from and including the Closing Date to but excluding the date of payment
at a rate of 6.0% per annum. Any payment by the Seller to the Buyer under this
Section 3.3(a) shall be made by wire transfer of immediately available funds to
such account as the Buyer shall designate in writing to the Seller.
(b) If the Actual Adjusted Net Working Capital is more than the
Estimated Adjusted Net Working Capital, the Buyer shall, within three calendar
days following the final determination of the Actual Adjusted Net Working
Capital pursuant to Section 3.2, and based upon such final determination, pay to
the Seller the amount of such excess in cash, together with interest on such
amount from and including the Closing Date to but excluding the date of payment
at a rate of 6.0% per annum. Any payment by the Buyer to the Seller under this
Section 3.3(b) shall be made by wire transfer of immediately available funds to
such account as the Seller shall designate in writing to the Buyer.
SECTION 3.4. Estimate of Adjusted Net Working Capital. Schedule 3.4
sets forth an estimate of the Adjusted Net Working Capital as of August 31,
2005, it being agreed that the August 31, 2005 Adjusted Net Working Capital is
provided for illustrative purposes only and is not intended to be a binding
expression of any Adjusted Net Working Capital calculation required under this
Agreement.
SECTION 4. CLOSING.
-------
The closing (the "Closing") for the consummation of the transactions
contemplated by this Agreement shall take place at the offices of Xxxxxxx Xxxx &
Xxxxxxxxx LLP at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on
the third Business Day after all the conditions to the obligations of the
parties hereunder set forth in Sections 10 and 11 hereof have been satisfied or
waived (other than those conditions that are not capable of being satisfied
until the Closing, but subject to the satisfaction or waiver of those
conditions), or at such other place and time as may be mutually agreed to by the
parties hereto (the "Closing Date").
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
--------------------------------------------
In this Section 5, (a) none of the representations and warranties
contained herein relate to the Transferred Subsidiaries, the Excluded Assets or
the Excluded Liabilities, in each case, unless expressly stated otherwise, and
(b) all of the representations and warranties relate solely to and include the
Businesses, the Company and the Retained Subsidiaries, in each case, unless
expressly stated otherwise.
The Seller hereby represents and warrants to the Buyer as follows:
15
SECTION 5.1. Corporate Organization. Each of the Seller, Leucadia,
the Company, the Retained Subsidiaries and WilTel Technology Center, LLC is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate, limited
liability company or limited partnership power (as the case may be) to own its
properties and assets and to conduct its business as now conducted. Copies of
the Organizational Documents of the Seller, the Company, each of the Retained
Subsidiaries and WilTel Technology Center, LLC, with all amendments thereto to
the date hereof, have been furnished or made available to the Buyer or its
representatives, and such copies are accurate and complete as of the date
hereof. A complete and correct chart showing the Company and all of its direct
and indirect Subsidiaries is set forth in Schedule 5.1.
SECTION 5.2. Qualification to Do Business. Each of the Seller,
Leucadia, the Company and the Retained Subsidiaries is duly qualified to do
business as a foreign corporation, limited liability company or partnership (as
the case may be) and is in good standing in every jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company and the
Retained Subsidiaries. Schedule 5.2 sets forth all jurisdictions in which each
of the Company and the Retained Subsidiaries are qualified to do business.
SECTION 5.3. No Conflict or Violation. The execution, delivery and
performance by Leucadia and the Seller of this Agreement and the Registration
Rights Agreement and by the Company and WilTel Technology Center, LLC of the
Lease Agreement do not and will not (i) violate or conflict with any provision
of any Organizational Document of Leucadia, the Seller, the Company or any of
its Subsidiaries, (ii) violate any provision of law, or any order, judgment or
decree of any Governmental Entity, (iii) except as set forth in Schedule 5.3,
violate or result in a breach of or constitute (with due notice or lapse of time
or both) a default under any Contract or result in the creation or imposition of
any Lien upon any of the assets, properties or rights of either of the Company
or any of its Subsidiaries or result in or give to others any rights of
cancellation, modification, amendment, acceleration, revocation or suspension of
any of the Contracts or obligations thereunder, or Licenses and Permits that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company and the Retained Subsidiaries or (iv)
violate or result in a breach of or constitute (with due notice or lapse of time
or both) a default under any material contract, agreement or instrument to which
the Seller or Leucadia is a party or by which it is bound or to which any of its
properties or assets is subject that, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the ability of the
Seller, Leucadia or WilTel Technology Center, LLC to perform their respective
obligations under this Agreement, the Lease Agreement and the Registration
Rights Agreement or to consummate the transactions contemplated hereby or
thereby, including as a consequence of any material impediment, interference or
delay.
SECTION 5.4. Consents and Approvals. Except as set forth in Schedule
5.4, no consent, waiver, authorization or approval of any Governmental Entity,
and no declaration or notice to or filing or registration with any Governmental
Entity, is required in connection with the execution and delivery by Leucadia or
the Seller of this Agreement, by Leucadia and the Seller of the Registration
Rights Agreement and by the Company and WilTel Technology Center, LLC of the
Lease Agreement or the performance by Leucadia, the Seller, the Company or
16
WilTel Technology Center, LLC of their respective obligations hereunder or
thereunder, except for (i) the filing of Notification and Report Form under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended (the "HSR Act"),
(ii) filings required under, and compliance with other applicable rules,
regulations and requirements of, the Federal Communications Commission (the
"FCC") and the relevant State PUC's set forth on Schedule 5.4, and (iii) such
other governmental consents, waivers, authorizations, approvals, declarations,
notices, filings or registrations that in the case of this clause (iii), if not
obtained, made or given, would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company and the Retained
Subsidiaries.
SECTION 5.5. Authorization and Validity of Agreement. Leucadia and
the Seller have all requisite corporate power and authority to enter into this
Agreement and the Registration Rights Agreement and to carry out their
respective obligations hereunder and thereunder. The Company and WilTel
Technology Center, LLC have all requisite limited liability company power to
enter into the Lease Agreement and to carry out their obligations thereunder.
The execution and delivery of this Agreement, the Lease Agreement and the
Registration Rights Agreement and the performance of the respective obligations
of Leucadia, the Seller, the Company, and WilTel Technology Center, LLC
hereunder and thereunder have been duly authorized by all necessary limited
liability company or corporate action (as the case may be) and no other limited
liability company or corporate proceedings (as the case may be) on the part of
Leucadia, the Seller, the Company or WilTel Technology Center, LLC are necessary
to authorize such execution, delivery and performance. This Agreement has been
duly executed by Leucadia and the Seller and, assuming due execution and
delivery by Xxxxx 0 and the Buyer, shall constitute their valid and binding
obligation, enforceable against them in accordance with its terms, subject to
(i) the effect of bankruptcy, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting the enforcement of creditors'
rights generally, (ii) general equitable principles (whether considered in a
proceeding in equity or at law) and (iii) an implied covenant of good faith and
fair dealing.
SECTION 5.6. Capitalization and Related Matters.
(a) All of the outstanding Membership Units are validly issued, fully
paid and nonassessable and are held solely of record and beneficially by the
Seller, a wholly owned indirect subsidiary of Leucadia. The Seller has, as of
the date hereof and shall have on the Closing Date, valid and marketable title
to all of the Membership Units, free and clear of any Liens, other than those
Liens under the Company's Credit Documents. The Membership Units are the sole
outstanding securities of the Company; the Company does not have outstanding any
securities convertible into or exchangeable for any Membership Units, any rights
to subscribe for or to purchase or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance of,
any Membership Units, or any stock or securities convertible into or
exchangeable for any Membership Units; and neither Leucadia, the Seller, any
Affiliate of the Seller nor the Company is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire, or to register under
the Securities Act, any Membership Units.
17
(b) Except as set forth on Schedule 5.6(b), all of the outstanding
shares of capital stock, or membership units or other ownership interests of,
each Retained Subsidiary, as applicable, is validly issued, fully paid and
nonassessable and is owned of record and beneficially by the Company or another
Retained Subsidiary. Except as set forth on Schedule 5.6(b), the Company has, as
of the date hereof and shall have on the Closing Date, valid and marketable
title, directly or indirectly, to all of the shares of capital stock of, or
membership units or other ownership interests in, each Retained Subsidiary, free
and clear of any Liens, other than those Liens under the Company's Credit
Documents. Such outstanding shares of capital stock of, or membership units or
other ownership interests in, the Retained Subsidiaries, as applicable, are the
sole outstanding securities of the Retained Subsidiaries; the Retained
Subsidiaries do not have outstanding any securities convertible into or
exchangeable for any capital stock of, or membership units or other ownership
interests in, the Retained Subsidiaries, any rights to subscribe for or to
purchase or any options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of
any other character relating to the issuance of, any capital stock of, or
membership units or other ownership interests in, the Retained Subsidiaries, or
any stock or securities convertible into or exchangeable for any capital stock
of, or membership units or other ownership interests in, the Retained
Subsidiaries; and neither Leucadia, the Seller, any Affiliate of the Seller, the
Company or any Retained Subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire, or to register under
the Securities Act, any capital stock of, or membership units or other ownership
interests in, any Retained Subsidiary.
SECTION 5.7. Equity Investments. Except as set forth in Schedule 5.7,
the Company and its Subsidiaries do not directly or indirectly own, or hold any
rights to acquire, any capital stock or any other securities, interests or
investments in any other Person other than the Subsidiaries and investments that
constitute cash, cash equivalents or marketable securities that constitute
Excluded Assets. Upon the Closing, neither the Company nor any Retained
Subsidiary will directly or indirectly own, or hold any rights to acquire, any
such capital stock, securities, interests or investments in the Transferred
Subsidiaries.
SECTION 5.8. Financial Statements. The Seller has heretofore
furnished to the Buyer (a) copies of the audited consolidated balance sheet of
the Company and its Subsidiaries as of November 5, 2003, together with the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the period from January 1, 2003 to November 5, 2003, the
period from November 1, 2002 to December 31, 2002, and the period from January
1, 2002 to October 31, 2002 and the notes thereto, accompanied by the reports
thereon of Ernst & Young LLP, (b) copies of the audited consolidated balance
sheets of the Company and its Subsidiaries at December 31, 2004 and December 31,
2003, together with the results of their operations and cash flows for the year
ended December 31, 2004 and the period from November 6, 2003 through December
31, 2003 and the notes thereto, accompanied by the reports thereon of
PricewaterhouseCoopers LLP and (c) copies of the unaudited August 31 Balance
Sheet, together with the related consolidated unaudited statements of operations
and statement of cash flows for the period then ended attached hereto as
Schedule 5.8 (the "August Financial Statements" and together with the financial
statements referred to in clauses (a) and (b) above being hereinafter
collectively referred to as the "Financial Statements"). The Financial
Statements (including with regard to clauses (a) and (b) above the notes
thereto) (i) were prepared in accordance with GAAP (other than the statement of
cash flows referred to in clause (c) above), applied on a consistent basis
18
throughout (x) the periods covered by the Financial Statements in clause (b)
above and (y) the periods covered by the Financial Statements in clause (c)
above, and (ii) present fairly in all material respects the financial position,
results of operations, cash flows and changes in financial position of the
Company and its Subsidiaries as of such dates and for the periods then ended
(subject, in the case of the August Financial Statements, to normal year-end
audit adjustments consistent with prior periods and except that such August
Financial Statements do not contain all footnote disclosures normally required
under GAAP). The August Financial Statements have been prepared on a basis
consistent with those Financial Statements set forth in clause (b) above and the
accounting methods employed in preparing the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of July 31, 2005 (the "July 31
Balance Sheet"), together with the related consolidated unaudited statement of
operations for the period then ended (copies of each of which the Seller has
heretofore furnished to the Buyer). Since December 31, 2004, there has not been
any change in any method of accounting of either of the Company or any of the
Retained Subsidiaries. The Company has recorded the adjustments set forth in the
column "Estimated Adjustments" on Schedule 5.8 in accordance with GAAP.
SECTION 5.9. Absence of Certain Changes or Events.
(a) Except as set forth in Schedule 5.9 or as reflected in the July
31 Balance Sheet, since July 31, 2005, there has not been:
(i) any Material Adverse Effect on the Company and the Retained
Subsidiaries;
(ii) any material loss, damage, destruction or other casualty to
the assets or properties of either of the Company or any of the
Retained Subsidiaries (other than any for which insurance awards have
been received or guaranteed); or
(iii) through the date hereof any loss of the employment,
services or benefits of any employee of the Company or any of its
Subsidiaries with the title of vice president or above.
(b) Since July 31, 2005, the Company and the Retained Subsidiaries
have operated in the ordinary course of their business consistent with past
practice and, except (1) as set forth in Schedule 5.9 hereto, (2) with respect
to any Excluded Assets or Excluded Liabilities, (3) Liens in connection with the
Company's Credit Documents, (4) as otherwise reflected in the July 31 Balance
Sheet or (5) as otherwise permitted or required under this Agreement, each of
the Company and the Retained Subsidiaries has not:
(i) failed to discharge or satisfy any Lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and
for which adequate reserves have been provided and Permitted Liens;
(ii) mortgaged, pledged or subjected to any Lien (other than
Permitted Liens) any of its assets, properties or rights material to
the operation of the Businesses as currently conducted;
19
(iii) sold or transferred any of its material assets or canceled
any material debts or claims or waived any material rights;
(iv) sold or transferred (other than to a Retained Subsidiary)
any patents, trademarks or copyrights or any patent, trademark or
copyright applications;
(v) defaulted on any material obligation;
(vi) entered into any transaction material to its business,
except in the ordinary course of business consistent with past
practice;
(vii) laid off any significant number of its employees;
(viii) discontinued the offering of any material services or
product of the Businesses;
(ix) incurred any material obligation or liability for the
payment of severance benefits;
(x) declared, paid, or set aside for payment any dividend or
other distribution in respect of shares of its capital stock,
membership units or other securities, or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of its capital
stock, membership units or other securities, or agreed to do so (other
than the Pre-Closing Transfers); or
(xi) entered into any agreement or made any commitment to do any
of the foregoing.
SECTION 5.10. Tax Matters. Except as set forth on Schedule 5.10,
(a) (i) the Company and each of its Subsidiaries and each of their
predecessors, if any, has filed (or has been included in the filing of) on or
prior to the due date (after giving effect to any extensions) all material Tax
Returns required by applicable law to be filed with respect to the Company and
each of its Subsidiaries and all Taxes shown to be due on such Tax Returns have
been timely paid; (ii) all such Tax Returns were true, correct and complete in
all material respects as of the time of such filing; (iii) all material amounts
of Taxes owed by the Company (whether or not shown on any Tax Return) and each
of its Subsidiaries and each of their predecessors, if required to have been
paid, have been paid (except for Taxes which are being contested in good faith,
with adequate reserves being established in accordance with GAAP); and (iv) any
liability of the Company or any of its Subsidiaries for Taxes not yet due and
payable, or which are being contested in good faith, have been provided for on
the financial statements of the Company in accordance with GAAP or the books and
records of the Company in accordance with GAAP;
(b) there is no action, suit, proceeding, investigation, audit or
claim now pending against the Company or any of its Subsidiaries in respect of
any Tax, nor, to the Seller's Knowledge, has any claim for additional Tax been
overtly threatened by any Tax authority;
20
(c) since January 1, 1995, no claim has been made by any Tax
authority in a jurisdiction where the Company or any of its Subsidiaries has not
filed a Tax Return that it is or may be subject to Tax by such jurisdiction, nor
to the Seller's Knowledge, is any such assertion overtly threatened;
(d) (i) there is no outstanding request for any extension of time for
the Company or any of its Subsidiaries to pay any Taxes or file any Tax Returns;
(ii) there has been no waiver or extension of any applicable statute of
limitations for the assessment or collection of any Taxes of the Company or any
of its Subsidiaries that is currently in force, and no power of attorney granted
by or with respect to the Company and its Subsidiaries for Taxes is currently in
force; (iii) the statute of limitation for tax years concerning any material tax
or any material amount of tax of the Company and its Subsidiaries has closed for
all years ending prior to January 1, 1995; and (iv) neither the Company nor any
of its Subsidiaries is a party to or bound by any agreement, whether written or
unwritten, providing for the payment of Taxes, payment for Tax losses,
entitlements to refunds or similar Tax matters;
(e) the Company and each of its Subsidiaries have withheld, collected
and paid all Taxes required to be withheld in connection with any amounts paid
or owing to any employee, creditor, independent contractor or other third party;
(f) the Seller is not a "foreign person" within the meaning of
Section 1445 of the Code;
(g) none of the Company's Subsidiaries that is or was treated as an
association taxable as a corporation for U.S. federal income tax purposes has
distributed stock of another Person, or has had its stock distributed by another
Person, in a transaction that was governed in whole or in part by Section 355 of
the Code (i) within the past 2 years or (ii) in a distribution that would
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transaction contemplated by this Agreement;
(h) each of the Subsidiaries that is or was treated as an association
taxable as a corporation for U.S. federal income tax purposes has disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code;
(i) (i) neither the Company nor any of its Subsidiaries is a party to
any Contract, arrangement or plan that would result, separately or in the
aggregate, in a payment by reason of the transactions contemplated by this
Agreement that would not be deductible under Section 280G of the Code (or any
corresponding provision of state, local or foreign Tax law); and (ii) the
disallowance of a deduction under Section 162(m) of the Code (or any
corresponding provision of state, local or foreign Tax law) for employee
remuneration will not apply to any amount paid or payable by the Company under
any Contract, benefit plan, program, arrangement or understanding currently in
effect;
21
(j) (i) none of the assets, properties or rights of the Company and
its Subsidiaries are "tax-exempt use property" within the meaning of Section
168(h) of the Code; (ii) none of the assets, properties or rights of the Company
and its Subsidiaries include any lease made pursuant to former Section 168(f)(8)
of the Internal Revenue Code of 1954; and (iii) there is no Lien other than a
Permitted Lien affecting any of the assets, properties or rights of the Company
and its Subsidiaries that arose in connection with any failure or alleged
failure to pay any Tax;
(k) neither the Company nor any of its Subsidiaries or any
predecessor thereof has been a member of an affiliated group (within the meaning
of Code ss. 1504(a)) filing a consolidated federal income Tax Return (other than
a group the common parent of which is Leucadia);
(l) the Company and its Subsidiaries have neither (i) made, changed
or revoked, or permitted to be made, changed or revoked, any material election
or method of accounting with respect to Taxes affecting or relating to the
Company and its Subsidiaries since the filing of the applicable Tax Return
relating to Tax periods ending on or before December 31, 2003, nor (ii) entered
into, or permitted to be entered into, any closing or other agreement or
settlement with respect to Taxes affecting or relating to the Company and its
Subsidiaries;
(m) the Company and each of its Subsidiaries is and has always been
classified as an entity disregarded as separate from its owner (within the
meaning of Treasury Regulations ss. 301.7701-2(c)(2)) for U.S. federal Tax
purposes and will continue to be so classified up to and including the Closing
Date; and
(n) neither the Company nor any of its Subsidiaries have a permanent
establishment in a jurisdiction outside the United States.
This Section 5.10 represents the sole and exclusive representations
and warranties of the Seller regarding Tax matters.
SECTION 5.11. Absence of Undisclosed Liabilities. Except as set forth
in Schedule 5.11, neither of the Company nor any of the Retained Subsidiaries
has any material indebtedness or liability, absolute or contingent, known or
unknown, which is not shown or provided for on the July 31 Balance Sheet other
than liabilities as shall have been incurred or accrued in the ordinary course
of business since July 31, 2005. Except as shown in the July 31 Balance Sheet or
in Schedule 5.11, neither of the Company nor any of the Retained Subsidiaries is
directly or indirectly liable upon or with respect to (by discount, repurchase
agreements or otherwise), or obliged in any other way to provide funds in
respect of, or to make guarantees or assume, any debt, obligation or dividend of
any Person other than the Company or any Retained Subsidiaries, except
endorsements in the ordinary course of business in connection with the deposit,
in banks or other financial institutions, of items for collection.
SECTION 5.12. Company Real Property.
(a) Schedule 5.12(a) contains a true and complete list of all real
property owned in fee simple by the Company or the Retained Subsidiaries (the
"Owned Real Property"). The Seller has made available to the Buyer copies of any
title insurance policies (together with copies of any documents of record listed
as exceptions to title on such policies) currently insuring each Owned Real
Property and copies of the most recent surveys of the same to the extent the
Seller, the Company or its Subsidiaries has such documents. The Company or the
Retained Subsidiaries have good and valid title to all of the Owned Real
Property free and clear of all Liens other than Permitted Liens.
22
(b) Schedule 5.12(b) sets forth a list of all leases, licenses,
subleases and occupancy agreements, together with all amendments thereto, with
respect to all properties which are material to the operation of the Businesses
(other than with respect to any IRUs, cross-connection, interconnection,
co-location or entrance facility arrangements) in which either of the Company or
the Retained Subsidiaries has a leasehold interest, license or similar occupancy
rights (each, a "Lease" and collectively, the "Leases"; the property covered by
Leases under which either of the Company or the Retained Subsidiaries is a
lessee is referred to herein as the "Leased Real Property"; the Leased Real
Property, together with the Owned Real Property, collectively being the "Company
Real Property"). Neither the Company nor any of the Retained Subsidiaries is a
party to any Contract (other than a Lease) with the lessor of any of the Leased
Real Properties, which gives such lessor any right to terminate or adversely
alter the terms of the Lease to which such lessor is a party. Except as set
forth in Schedule 5.11 and Schedule 5.17, the Company or the Retained
Subsidiaries enjoys peaceful and undisturbed possession of the Leased Real
Property pursuant to the Leases in all material respects except for Leases
expiring in accordance with their terms after the date hereof and prior to the
Closing Date. No option has been exercised under any of such Leases, except
options whose exercise has been evidenced by a written document, a true and
complete copy of which has been delivered or made available to the Buyer with
the corresponding Lease.
(c) Except as set forth on Schedule 5.12(c), since July 31, 2005, no
Lease has been modified or amended in writing in any way materially adverse to
the operation of the Businesses and no party to any Lease has given either of
the Company or the Retained Subsidiaries written notice of or, to the Seller's
Knowledge, made a claim with respect to any breach or default.
(d) Except as set forth in Schedule 5.12(d) and other than with
respect to IRUs, co-location, cross-connection, interconnection, entrance
facilities or other rights incidental to the provision of services established
in the ordinary course of business, none of the Company Real Property is subject
to any option, lease, sublease, license or other agreement granting to any
Person or entity any right to the use, occupancy or enjoyment of such property
or any portion thereof or to obtain title to all or any portion of such
property.
(e) Except as set forth on Schedule 5.12(e), all material
improvements, systems and fixtures on the Company Real Property are in good
operating condition and repair, and generally are adequate and suitable in all
material respects for the present and continued use, operation and maintenance
thereof as now used, operated or maintained. All improvements on the Company
Real Property constructed by or on behalf of the Company or any Retained
Subsidiary, to the Seller's Knowledge, were constructed in compliance in all
material respects with applicable laws, ordinances and regulations affecting
such Company Real Property, except for possible nonconforming uses or violations
that do not and will not interfere with the present use, operation or
maintenance thereof by either of the Company or the Retained Subsidiaries as now
used, operated or maintained or access thereto, and neither of the Company or
the Retained Subsidiaries has received any written notice, or to the Seller's
Knowledge, any verbal notice, to the contrary.
23
SECTION 5.13. Assets of the Company and its Subsidiaries.
(a) The Company and the Retained Subsidiaries own, license under
valid and enforceable licenses or lease under valid and enforceable leases and
will own, license or lease after the Closing all of the assets, properties and
rights material to the operation of the Businesses as currently conducted.
Except as set forth on Schedule 5.13(a), neither the Company nor the Retained
Subsidiaries have any material assets, properties, rights or interests of any
kind or nature that either they are presently or have been since July 31, 2005,
using, holding or operating in the Businesses prior to the Closing that will not
continue to be used, held or owned by them immediately following the Closing.
(b) Except as set forth on Schedule 5.13(a), the Transferred
Subsidiaries do not own any assets or properties which are material to the
operation of the Businesses as currently conducted, and such Transferred
Subsidiaries do not have any rights with respect thereto.
(c) The assets and rights of the Transferred Subsidiaries consist
exclusively of (i) the ownership of the Company's Tulsa, Oklahoma headquarters,
including all owned or leased furniture, equipment and fixtures located therein
set forth on Annex A to Schedule 7.4 and (ii) rights under the Aircraft Leases.
(d) Each of the Company and the Retained Subsidiaries has good and
valid fee simple title, free and clear of any Liens, to, or a valid leasehold
interest under enforceable leases in, all of its assets, properties and rights,
other than pursuant to (i) the Company's Credit Documents, (ii) the Company's
Real Estate Debt Documents and (iii) Permitted Liens. The Discharged Real Estate
Debt Documents have been discharged in full, all Liens under the Discharged Real
Estate Debt Documents have been released and all obligations of the Company and
the Retained Subsidiaries under the Discharged Real Estate Debt Documents or
related to the debt evidenced or secured by same have been satisfied.
SECTION 5.14. Intellectual Property.
(a) Except as listed in Schedule 5.14(a): (i) each of the Company and
the Retained Subsidiaries owns or has a valid and enforceable license to use,
(and as applied to Software owned by the Company or the Retained Subsidiaries,
to reproduce, modify, distribute and sublicense copies of) all Intellectual
Property and Technology used in and material to the operation of the Businesses
as presently conducted; (ii) the Intellectual Property and Technology owned by
or licensed to each of the Company and the Retained Subsidiaries includes all of
the Intellectual Property and Technology material to the operation of the
Businesses as presently conducted; (iii) each of the Company and the Retained
Subsidiaries is in compliance with all material contractual obligations relating
to the protection of Intellectual Property and Technology licensed to them; (iv)
to the Seller's Knowledge, no third party is infringing any Intellectual
24
Property of the Company or any of its Retained Subsidiaries in any material
respect; (v) no claims are pending or, to the Seller's Knowledge, threatened
that the Company or any of its Retained Subsidiaries has infringed or
misappropriated Intellectual Property of a third party, and to the Seller's
Knowledge the conduct of the Businesses does not infringe or misappropriate any
Intellectual Property of a third party in any material respect; and (vi) no
claims are pending or, to the Seller's Knowledge, threatened challenging the
ownership, validity or enforceability of the Intellectual Property owned by the
Company or any of its Retained Subsidiaries or the possession or use of the
Technology owned by the Company or any of its Retained Subsidiaries.
(b) Schedule 5.14(b) sets forth a complete and current list of
patents and applications therefor, copyright registrations and applications
therefor, registered trademarks, registered service marks and applications
therefor and domain names owned by, filed in the name of, or applied for, by the
Company anywhere in the world (the "Listed Intellectual Property"), including
the owner of record, date of application or issuance and relevant jurisdiction
as to each. Except as listed in Schedule 5.14(b), all Listed Intellectual
Property is owned by the Company and/or the Retained Subsidiaries, free and
clear of all Liens. Except as listed in Schedule 5.14(b), there are no actions
that must be taken or payments that must be made by the Company or the Retained
Subsidiaries within ninety (90) days of the Closing that, if not taken or paid,
will adversely affect the Listed Intellectual Property or the right of the Buyer
to use the same as and where used as of the effective date hereof. To the
Seller's Knowledge, all Listed Intellectual Property is valid, subsisting,
unexpired, in proper form and enforceable. Except as listed in Schedule 5.14(b),
no Listed Intellectual Property is the subject of any proceeding before any
governmental, registration or other authority in any jurisdiction, other than
any office action or other form of preliminary or final refusal of registration.
The consummation of the transactions contemplated by this Agreement will not
alter or impair any Listed Intellectual Property owned by the Company or the
Retained Subsidiaries.
(c) Except with respect to licenses by which the Company or the
Retained Subsidiaries authorize customers to use Software owned by the Company
or the Retained Subsidiaries and licenses for Software integrated with or
embedded in products sold by them in the ordinary course of business, Schedule
5.14(c) sets forth a complete list of agreements by which Intellectual Property
and Technology owned by the Company or the Retained Subsidiaries have been
licensed to a third party. Except with respect to (i) licenses by which the
Company or the Retained Subsidiaries are authorized to use or sublicense to
their customers Software owned by third parties and integrated with or embedded
in products purchased by the Company or the Retained Subsidiaries for use or
resale in the ordinary course of business and (ii) licenses of generally
available Software with an annual maintenance fee of no more than $25,000,
Schedule 5.14(c) further sets forth a complete list of agreements by which the
Company and the Retained Subsidiaries are authorized to use Intellectual
Property and Technology owned by third parties that are material to the conduct
of the Businesses as presently conducted ("Listed License Agreements"). Except
as set forth in Schedule 5.14(c), the Company and the Retained Subsidiaries are
in material compliance with all the Listed License Agreements and neither the
Company nor the Retained Subsidiaries will be, as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any Listed License Agreement. Neither Company nor the
Retained Subsidiaries has received written notice of a material default of any
Listed License Agreement which remains uncured as of the Closing.
25
(d) Except as set forth in Schedule 5.14(d), neither the Company nor
the Retained Subsidiaries has made any claim of a violation, infringement,
misuse or misappropriation by any third party (including any employee or former
employee of the Company or the Retained Subsidiaries) of any Intellectual
Property owned by the Company or the Retained Subsidiaries, which claim is
pending. Except as set forth in Schedule 5.14(d), neither the Company nor the
Retained Subsidiaries have entered into any agreement to indemnify any other
Person against any charge of infringement of any Intellectual Property, other
than indemnification provisions contained in employment policies and agreements,
customer agreements, agreements for the purchase of capacity, equipment
procurement agreements, software license agreements and maintenance agreements
related to the foregoing arising in the ordinary course of business.
(e) The Company and Retained Subsidiaries have taken reasonable
steps, including, without limitation, the execution of appropriate
confidentiality agreements, to protect and preserve the confidentiality of all
the Company's and Retained Subsidiaries' trade secrets, including customer data,
owned and licensed Software, owned and licensed databases and customer lists,
and all disclosures of such information to, and use by, any third party (other
than (i) to competent regulators, accountants and counsel, in each instance
acting in their professional capacities, or (ii) pursuant to an applicable court
order) have been pursuant to the terms of written confidentiality undertakings
between such third party and the Company or Retained Subsidiaries.
(f) To the Knowledge of the Seller and except in connection with
occasional sales of excess equipment or inventory, neither the Company nor the
Retained Subsidiaries have purchased or sold any material telecommunications
equipment without procuring or having the transferee procure a software license
for the imbedded software in such equipment.
(g) This Section 5.14 shall constitute the sole and exclusive
representations and warranties regarding Intellectual Property of the Seller
other than as set forth in Sections 5.13(a) and (b) hereof.
SECTION 5.15. Licenses and Permits. Exclusive of any zoning or
construction permits, contractor licenses or local government licenses and
permits to do business, variances, orders, exceptions or similar licenses issued
by Governmental Entities, which the parties hereto agree are not material either
individually or in the aggregate, Schedule 5.15 sets forth a true and complete
list of all material licenses, permits, franchises, registrations,
authorizations and approvals issued or granted to any of the Company or the
Retained Subsidiaries by any Governmental Entity (the "Licenses and Permits,"
which such term shall not include the Listed License Agreements), applicable to
the Company and the Retained Subsidiaries, any of their respective properties or
other assets or the Businesses. The Company and the Retained Subsidiaries are
(and since January 1, 2004 have been) in compliance in all material respects
with the Licenses and Permits. The Company and the Retained Subsidiaries hold
all Licenses and Permits necessary for the lawful conduct of their respective
businesses and for them to operate the Businesses as currently conducted. Except
as set forth on Schedule 5.15, the Company and the Retained Subsidiaries are
(and since January 1, 2004 have been) in compliance in all material respects
with the terms of all Licenses and Permits and no administrative or judicial
proceeding is pending or, to the Seller's Knowledge, overtly threatened to
amend, terminate, revoke, limit, suspend or cancel any such License or Permit.
Since January 1, 2004, except as set forth on Schedule 5.15, neither the Company
nor any of the Retained Subsidiaries has received written notice to the effect
26
that (a) any Governmental Entity claimed or alleged that the Company or any
Retained Subsidiary was not in compliance with all Licenses and Permits
applicable to the Company or the Retained Subsidiaries, any of their properties
or other assets or the Businesses or (b) any Governmental Entity was considering
the amendment, termination, suspension, revocation or cancellation of any
License or Permit. Copies of the Licenses and Permits and all pending
applications therefor have been made available to the Buyer.
SECTION 5.16. Compliance with Law. Except as set forth in Schedule
5.16, the operations of the business of the Company and the Retained
Subsidiaries have been conducted in accordance in all material respects with all
applicable laws, regulations and orders of all courts and other Governmental
Entity having jurisdiction over such entity and its assets, properties and
operations. Except as set forth in Schedule 5.16, since January 1, 2004, none of
the Company or the Retained Subsidiaries has received notice of any violation
(or any investigation with respect thereto) of any such law, regulation or
order, and none of the Company or the Retained Subsidiaries is in default with
respect to any material order, writ, judgment, award, injunction or decree of
any national, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to any of its assets, properties or
operations.
SECTION 5.17. Litigation. Except as set forth in Schedule 5.17, there
are no material claims, actions, suits, proceedings, subpoenas or, to the
Seller's Knowledge, investigations (each, an "Action") pending or, to the
Seller's Knowledge, overtly threatened, before any Governmental Entity, or
before any arbitrator of any nature, brought by or against any of the Company or
its Subsidiaries or involving, affecting or relating to their respective assets,
properties or rights or the transactions contemplated by this Agreement. There
is no material judgment, decree, injunction, rule or order of any Governmental
Entity, or before any arbitrator of any nature outstanding, or to the Seller's
Knowledge, overtly threatened to be imposed, against either of the Company or
the Retained Subsidiaries.
SECTION 5.18. Contracts.
(a) Schedule 5.18(a) sets forth a complete and correct list of all
Contracts.
(b) Each Contract is valid, binding and enforceable against the
Company or the Retained Subsidiaries party thereto and, to the Seller's
Knowledge, against the other parties thereto in accordance with its terms, and
is in full force and effect, subject to (i) the effect of bankruptcy, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law) and (iii) an
implied covenant of good faith and fair dealing. Each of the Company and the
Retained Subsidiaries has performed all obligations required to be performed by
it to date under, and is not in default or delinquent in performance, status or
any other respect (claimed or actual) in connection with, any Contract, and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default and, to the Seller's Knowledge, no other party to any
Contract is in default in respect thereof, and no event has occurred which, with
due notice or lapse of time or both, would constitute such a default, in each
case, except for those defaults or delinquencies that would not, individually or
in the aggregate, reasonably be expected to materially adversely affect the
ability of the Company and the Retained Subsidiaries to conduct the Businesses
as currently conducted. The Seller has delivered to the Buyer or its
representatives true and complete copies of all the Contracts.
27
(c) A "Contract" means any agreement, contract or commitment, oral or
written, to which either of the Company or any Retained Subsidiary is a party or
by which it or any of its assets are bound (other than the Listed License
Agreements) constituting:
(i) (A) one of the 50 largest (by revenue generated for the
Company and the Retained Subsidiaries in 2005 through July 31st)
Telecommunications Business contracts or agreements for the sale,
license (as licensor) or lease (as lessor) by the Company or any of
the Retained Subsidiaries of services, products, Intellectual Property
or other assets to any third party; (B) one of the 20 largest (by
revenue generated for the Company and the Retained Subsidiaries in
2005 through August 31st) Vyvx Business contracts or agreements for
the sale, license (as licensor) or lease (as lessor) by the Company or
any of the Retained Subsidiaries of services, products, Intellectual
Property or other assets to any third party; or (C) a contract or
agreement relating to the sale, license or lease by the Company or any
of the Retained Subsidiaries of any indefeasible rights of use of
capacity or infrastructure ("IRUs");
(ii) (A) a Telecommunications Business contract, agreement or
purchase under a tariff for the purchase, license (as licensee) or
lease (as lessee) by the Company or any of the Retained Subsidiaries
of services, materials, products, personal property, supplies,
Intellectual Property or other assets from any supplier or vendor or
for the furnishing of services to the Company or any of the Retained
Subsidiaries involving total payments in excess of $250,000 from
January 1, 2005 through July 31, 2005 or (B) a Vyvx Business contract,
agreement or purchase under a tariff for the purchase, license (as
licensee) or lease (as lessee) by the Company or any of the Retained
Subsidiaries of services, materials, products, personal property,
supplies, Intellectual Property or other assets from any supplier or
vendor or for the furnishing of services to the Company or any of the
Retained Subsidiaries involving total payments in excess of $300,000
from January 1, 2005 through July 31, 2005 (the foregoing in clauses
(A) and (B) are collectively, the "Vendor Contracts");
(iii) a peering agreement of the Company or a Retained Subsidiary
used by the Company or its Retained Subsidiaries since January 1,
2005;
(iv) a mortgage, indenture, security agreement, guaranty or other
agreement or instrument relating to the borrowing of money or
extension of credit (other than accounts receivable and accounts
payable in the ordinary course of business);
(v) an employment, employment change of control, retention,
severance or material consulting agreement with individuals (other
than a sales commission plan entered into in the ordinary course of
business or any Employee Benefit Plans set forth on Schedule 5.19(a));
(vi) a joint venture, partnership or limited liability company
agreement with third parties;
28
(vii) a non-competition agreement or any other agreement or
obligation which purports to limit in any material respect (i) the
manner in which, or the localities in which, the Businesses may be
conducted or (ii) the ability of either of the Company or the Retained
Subsidiaries to provide any type of service;
(viii) a Lease set forth on Schedule 5.12(b) hereto;
(ix) an agreement requiring capital expenditures by the Company
or its Retained Subsidiaries in excess of $500,000 following the
Measurement Date (exclusive of the items set forth on Schedule
7.1(b)(vi) hereto); or
(x) any other material agreement not in the ordinary course of
business of the Company and its Subsidiaries.
(d) [Intentionally Omitted]
(e) [Intentionally Omitted]
(f) Except as set forth on Schedule 5.18(f), none of the contracts or
agreements for the sale, license (as licensor) or lease (as lessor) by the
Company or any of its Subsidiaries of services, products, Intellectual Property
rights or other assets to any third party contain any exclusivity clause,
most-favored-nations clause, benchmarking clause or marked-to-market pricing
provision. Each of the Company and its Subsidiaries (as applicable) is not in
material default in any respect (claimed or actual) in connection with any
exclusivity clause, most favored nations clause, benchmarking clause or
marked-to-market pricing provision contained in any contract listed on Schedule
5.18(f), and no event has occurred which, with due notice or lapse of time or
both, would constitute such a default.
(g) All of the peering agreements of the Company and its Retained
Subsidiaries that will be in effect as of the Closing are terminable by the
Company or the Retained Subsidiaries on 90 days' prior notice without liability
or obligation to the Company or the Retained Subsidiaries.
(h) Schedule 5.18(h) sets forth the estimated aggregate maximum
liability of the Company and the Retained Subsidiaries as of January 1, 2006,
(i) to SBC and its Affiliates in the event of the termination of agreements and
tariffs with SBC and its Affiliates relating to leased Shared Network Circuits
and (ii) to all other leased Shared Network Circuit vendors in the event of the
termination of agreements and tariffs with such vendors relating to the leased
Shared Network Circuits.
(i) Schedule 5.18(i) sets forth a list of all leased entrance
facility and DS-3 muxed circuits of the Company and the Retained Subsidiaries
other than those that are terminable by the Company or the Retained Subsidiaries
on less than 60 days' prior notice without liability to the Company or the
Retained Subsidiaries (collectively, the "Shared Network Circuits") that is
correct in all material respects as of September 30, 2005 and is the basis for
the estimate provided pursuant to Section 5.18(h), together with the vendor
name, speed, monthly recurring charge, and termination date for each circuit.
29
SECTION 5.19. Employee Plans.
(a) Schedule 5.19(a) sets forth all "employee benefit plans," as
defined in Section 3(3) of ERISA, and all other plans, policies and agreements
providing severance pay, sick leave, vacation pay, salary continuation,
retirement benefits, deferred compensation, bonus pay, incentive pay, stock
options, hospitalization insurance, medical insurance, life insurance, cafeteria
benefits, dependent care reimbursements, prepaid legal benefits, scholarships or
tuition reimbursements, maintained by the Company or any of the Retained
Subsidiaries or to which the Company or any of the Retained Subsidiaries is
obligated to contribute thereunder for current or former employees the Company
and the Retained Subsidiaries (excluding the Transferred Benefit Plans, the
"Employee Benefit Plans").
(b) True, correct and complete copies of the following documents,
with respect to each of the Employee Benefit Plans, have been delivered to the
Buyer, to the extent applicable: (i) all plans and related trust documents, and
amendments thereto; (ii) Forms 5500 filed for the three most recent plan years;
(iii) the most recent IRS determination letter; and (iv) the most recent summary
plan descriptions, annual reports and material modifications.
(c) None of the Employee Benefit Plans is a multiemployer plan, as
defined in Section 3(37) of ERISA ("Multiemployer Plan"). Neither the Company
nor any ERISA Affiliate has withdrawn in a complete or partial withdrawal,
within the meaning of Section 4201 of ERISA, from any Multiemployer Plan, nor
has any of them incurred any liability due to the termination or reorganization
of a Multiemployer Plan which has not been satisfied in full.
(d) Each Employee Benefit Plan that is intended to qualify under
Section 401 of the Code and the trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code, and nothing has occurred
with respect to the operation of any such Employee Benefit Plan that would
reasonably be expected to cause the loss of such qualification or exemption or
the imposition of any material liability, penalty or tax under ERISA or the
Code.
(e) All contributions (including all employer contributions and
employee salary reduction contributions) and all premiums required to have been
paid under any of the Employee Benefit Plans or by law (without regard to any
waivers granted under Section 412 of the Code) to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension). No accumulated funding deficiencies
exist in any of the Employee Benefit Plans subject to Section 412 of the Code.
(f) Neither the Company nor any ERISA Affiliate has terminated any
Employee Benefit Plan subject to Title IV, or incurred any outstanding liability
under Section 4062 of ERISA, to the PBGC or to a trustee appointed under Section
4042 of ERISA. Neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 of ERISA.
(g) Except as set forth on Schedule 5.19(g) hereto, there are no
pending material actions, claims or lawsuits which have been asserted or
instituted against the Employee Benefit Plans, the assets of any of the trusts
under such plans or the plan sponsor or the plan administrator, or against any
30
fiduciary of the Employee Benefit Plans with respect to the operation or
administration of such plans or the investment of plan assets (other than
routine benefit claims), nor does the Seller have Knowledge of facts which could
form the basis for any such claim or lawsuit. Except as set forth on Schedule
5.19(g) hereto, no Employee Benefit Plan has been the subject of an audit,
investigation or examination by any Governmental Entity within the three
preceding years.
(h) Except as set forth on Schedule 5.19(h), the Employee Benefit
Plans have been maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA, the Code and other applicable federal
and state laws. None of the Company, the Retained Subsidiaries, or, to the
Seller's Knowledge, any "party in interest" or "disqualified person" with
respect to the Employee Benefit Plans has engaged in a "prohibited transaction"
within the meaning of Section 406 of ERISA or 4975 of the Code. Except as set
forth on Schedule 5.19(h), no stock or other security issued by the Company or
any Affiliate forms or has formed a part of the assets of any Employee Benefit
Plan.
(i) Except as set forth on Schedule 5.19(i) hereto, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, either alone or as a prerequisite to the
occurrence of any subsequent event: (i) result in any payment becoming due to
any employee (current, former or retired) of the Company or the Retained
Subsidiaries; (ii) increase any benefits otherwise payable under any Employee
Benefit Plan; (iii) result in the acceleration of the time of payment or vesting
of any benefits under any Employee Benefit Plan; or (iv) constitute a "change in
control" or similar event under any Employee Benefit Plan.
(j) Schedule 5.19(j) sets forth the names of the persons eligible to
participate in the OPEB Plans, their ages and years of service credited under
the OPEB Plans on the date hereof, date of retirement (if applicable), and
whether they are union employees.
SECTION 5.20. Insurance. Schedule 5.20 lists the material surety
bonds, fidelity bonds as well as the insurance companies, policy numbers,
aggregate coverage amount and type, and deductibles of all material policies of
title, liability, fire, casualty, business interruption, workers' compensation
and other forms of insurance insuring each of the Company and the Retained
Subsidiaries and their assets, properties and operations. The Seller has made
available to the Buyer a true and complete copy of all such bonds and policies.
Except as set forth in Schedule 5.20, all such policies and bonds are in full
force and effect and none of the Company or the Retained Subsidiaries is in
material default under any provisions of any such bond or policy of insurance
nor has any of the Company or the Retained Subsidiaries received notice of
cancellation of or cancelled any such insurance without replacement thereof. For
all claims made under such bonds or policies, the Company and its Subsidiaries
have timely complied with any applicable notice provisions, except where the
failure to so comply would not materially adversely affect the operation of the
Businesses as currently conducted.
SECTION 5.21. Transactions with Directors, Officers, Managers, and
Affiliates. Except as set forth in Schedule 5.21 and with respect to any
Excluded Liabilities or Excluded Assets, none of the Company or the Retained
Subsidiaries is a party to any agreement or arrangement (other than employment
agreements or arrangements) with any of the directors, officers, managers,
31
members, partners or stockholders of the Company or the Retained Subsidiaries or
to the Seller's knowledge, any Affiliate (other than the Company or any Retained
Subsidiary) or immediate family member of any of the foregoing under which it:
(i) leases any real or personal property (either to or from such Person); (ii)
licenses technology (either to or from such Person); (iii) is obligated to
purchase any tangible or intangible asset from or sell such asset to such
Person; (iv) purchases products or services from such Person; (v) pays or
receives commissions, rebates or other payments; or (vi) provides or receives
any other material benefit. Except as set forth on Schedule 5.21, to the
Seller's Knowledge, during the period from and including November 6, 2003 to and
including September 30, 2005, none of the directors, officers, managers, members
or stockholders of the Company or the Retained Subsidiaries, or any immediate
family member of any of such Persons, has been a director, officer, manager or
member of, or has had any direct or indirect interest in (other than beneficial
ownership of less than 5% of the outstanding capital stock of any publicly
traded company or any passive investment) any customer identified on Schedule
5.22(b). No Affiliate of the Company and the Retained Subsidiaries (other than
the Company and the Retained Subsidiaries) owns or has any rights in or to any
of the assets, properties or rights used by either of the Company or the
Retained Subsidiaries in the ordinary course of its businesses except as set
forth on Schedule 5.21.
SECTION 5.22. Suppliers and Customers.
(a) Schedule 5.22(a) sets forth a list of the top 25 suppliers of the
Telecommunications Business and the top 20 suppliers of the Vyvx Business by
dollar amount paid by the Company and the Retained Subsidiaries (taken together)
during the seven-month period ended July 31, 2005 (with respect to the
Telecommunications Business) and the seven-month period ended July 31, 2005
(with respect to the Vyvx Business), from whom the Company or any Retained
Subsidiary has purchased goods and/or services. As of the date hereof, no such
supplier has expressed in writing, and to the Seller's Knowledge no such
supplier has expressed verbally, to the Company or any Retained Subsidiary its
intention to cancel or otherwise terminate or materially reduce or modify its
relationship with the Company or any Retained Subsidiary.
(b) Schedule 5.22(b) sets forth a list of the top 25 customers of the
Telecommunications Business and the top 20 customers of the Vyvx Business by
revenue derived by the Company and the Retained Subsidiaries (taken together)
during the seven-month period ended July 31, 2005 (with respect to the
Telecommunications Business) and the eight-month period ended August 31, 2005
(with respect to the Vyvx Business), to whom the Company or any Retained
Subsidiary has sold goods and/or services. As of the date hereof, other than SBC
prior to June 15, 2005, no such customer has expressed in writing, and to the
Seller's Knowledge no such customer has expressed verbally, to the Company or
any Retained Subsidiary its intention to cancel or otherwise terminate or
materially reduce or modify its relationship with the Company or any Retained
Subsidiary.
SECTION 5.23. Labor Matters.
(a) Except as set forth in Schedule 5.23(a): (i) neither of the
Company or the Retained Subsidiaries is a party to any outstanding employment
agreements or contracts with officers, managers or employees of either of the
Company or the Retained Subsidiaries that are not terminable at will, or that
provide for the payment of any bonus or commission; (ii) neither of the Company
32
or the Retained Subsidiaries is a party to any agreement, policy or practice
that requires it to pay termination, change of control or severance pay to
salaried, non-exempt or hourly employees of such Company (other than as required
by law); (iii) neither of the Company or the Retained Subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable to
its employees nor does the Seller know of any activities or proceedings of any
labor union within the preceding three years to organize any such employees; and
(iv) neither of the Company or the Retained Subsidiaries is a party to any
consulting agreements with any individual providing services to the Company or
any of the Retained Subsidiaries.
(b) Except as set forth in Schedule 5.23(b): (i) each of the Company
and the Retained Subsidiaries is in compliance in all material respects with all
applicable laws relating to employment and employment practices, the
classification of employees, wages, hours, collective bargaining, unlawful
discrimination, civil rights, safety and health, workers' compensation, the
collection and payment of withholding and/or social security Taxes and terms and
conditions of employment; (ii) there are no charges with respect to or relating
to either of the Company or the Retained Subsidiaries pending or, to the
Seller's Knowledge, threatened before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices; and (iii) neither of the Company or the
Retained Subsidiaries has received any notice from any national, state, local or
foreign agency responsible for the enforcement of labor or employment laws of an
intention to conduct an investigation of either of the Company or the Retained
Subsidiaries and no such investigation is in progress.
(c) The maximum aggregate severance obligations of the Company and
the Retained Subsidiaries under all programs, policies, arrangements (including
under the Severance Plan) or otherwise, assuming the requisite conditions for
the payment of severance were triggered and the Closing and all payments occur
on January 1, 2006, would not be more than the amount set forth on Schedule
5.23(c)(i) based upon the assumptions set forth on Schedule 5.23(c)(i). Assuming
the Closing and all payments occur on January 1, 2006, the maximum aggregate
obligations payable under the following plans would not exceed the amount set
forth on Schedule 5.23(c)(ii) based upon the assumptions set forth on Schedule
5.23(c)(ii): (i) the WilTel Communications, LLC Employee Retention Plan, as
adopted effective April 11, 2004; and (ii) the Miscellaneous Retention Plans.
There are no non-current liabilities of the Company or the Retained Subsidiaries
in respect of the Former Executive Retention Agreements.
SECTION 5.24. Environmental Matters. Except as disclosed on Schedule
5.24 and except for conditions that would not reasonably be expected to result
in the Company and its Subsidiaries incurring material liability under
Environmental Laws:
(a) each of the Company and the Retained Subsidiaries is, and to the
Knowledge of the Seller has been, in compliance in all material respects with
all applicable Environmental Laws, which compliance includes obtaining,
maintaining and complying in material respects with all material licenses,
permits and other authorizations required under all Environmental Laws;
33
(b) to the Seller's Knowledge, each of the Company and the Retained
Subsidiaries has not received any notice of violation or potential liability
under any Environmental Laws from any Person or any governmental agency inquiry,
request for information, or demand letter under any Environmental Law relating
to operations or properties, whether currently or formerly owned or operated, of
the Company or the Retained Subsidiaries or their predecessors as of the Closing
Date, which is outstanding and would reasonably be expected to result in the
Company or any Retained Subsidiary incurring material liability under
Environmental Laws;
(c) each of the Company and the Retained Subsidiaries is not subject
to any outstanding orders arising under Environmental Laws nor are there any
administrative, civil or criminal actions, suits or proceedings pending or, to
the Seller's Knowledge, threatened, against the Company or the Retained
Subsidiaries, or to Seller's Knowledge, their predecessors under any
Environmental Law;
(d) to the Seller's Knowledge, there has been no release of Hazardous
Materials by the Company or any Retained Subsidiary at, on or under any of the
Company Real Property or other properties currently or formerly owned or leased
by the Company or the Retained Subsidiaries or their predecessors, which would
reasonably be expected to result in the Company or any Retained Subsidiary or
their predecessors incurring any material liability or damages under
Environmental Laws;
(e) the Seller has made available to the Buyer copies of all material
environmental studies, investigations, reports or assessments prepared by or for
the Seller, or in the Seller's possession, concerning the Company, its Retained
Subsidiaries, the Company Real Property and any real property previously owned,
operated or used for disposal by the Company or the Retained Subsidiaries or
their predecessors, which are in the possession, custody or control of the
Seller.
(f) This Section 5.24 shall constitute the sole and exclusive
representations and warranties regarding environmental matters, Environmental
Laws or Hazardous Materials.
SECTION 5.25. No Brokers. No broker, finder or similar intermediary
has acted for or on behalf of, or is entitled to any broker's, finder's or
similar fee or other commission from either of Leucadia, the Seller, the Company
or its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
SECTION 5.26. Acquisition of the Shares. (a) The Seller is acquiring
the Shares to be issued by Level 3 hereunder for its own account for investment
and not with a view towards the resale, transfer or distribution thereof, nor
with any present intention of distributing such shares in violation of
applicable federal securities laws.
(b) The Seller has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investment in the Company as contemplated by this Agreement, and is able to bear
the economic risk of such investment for an indefinite period of time. The
Seller has been afforded access to Level 3's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004 and the Level 3's Quarterly Report on Form
10-Q for fiscal quarters ended March 31, 2005 and June 30, 2005 ("Level 3 SEC
Reports") and has been afforded an opportunity to ask questions of and receive
answers from representatives of Level 3 and the Buyer concerning the terms and
conditions of this Agreement and the acquisition of such Shares.
34
(c) The Seller is an "accredited investor" as such term is defined in
Rule 501(a) promulgated under the Securities Act.
(d) The Seller understands that the Shares have not been registered
under the Securities Act or any state securities law, by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act and such state securities laws, which exemption depends upon,
among other things, the bona fide nature of the Seller's investment intent as
expressed herein. The Seller understands that such securities must be held
indefinitely unless they are subsequently registered under the Securities Act
and such state securities laws or a subsequent disposition thereof is exempt
from registration. The Seller understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Seller)
promulgated under the Securities Act depends upon the satisfaction of various
conditions and that, if applicable, Rule 144 may afford the basis for sales only
in limited amounts.
SECTION 5.27. SBC.
(a) Except as set forth in Schedule 5.27(a), as of the date hereof,
no credits, refunds or payments of any kind are due or owing to SBC. The Company
and its Subsidiaries have billed SBC pursuant to the SBC Agreement in a manner
that is consistent, accurate and in accordance with the terms of such agreement
in all material respects.
(b) Schedule 5.27(b) sets forth the amounts billed to SBC and its
Affiliates for Included Services pursuant to, and as that term is defined in,
the SBC Agreement as of October 15, 2005 and for each of the calendar months of
July, August and September 2005.
(c) SBC has never made an indemnification claim or other claim for
Losses against the Company or any of its Affiliates. Except as set forth in
Schedule 5.27(c), to the Seller's Knowledge, there are no material disputes
pending with or overtly threatened by SBC.
(d) The Company and its Affiliates have not requested, and SBC and
its Affiliates have not paid for, any reimbursements contemplated by Section
3.3(B) of the SBC Agreement.
SECTION 5.28. No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 5, neither the Seller
nor Leucadia nor any other Person makes any other express or implied
representation or warranty on behalf of the Seller or Leucadia with respect to
the Company and the Retained Subsidiaries.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND LEVEL 3.
-------------------------------------------------------
The Buyer and Level 3 hereby jointly and severally represent and
warrant to Leucadia and the Seller as follows:
35
SECTION 6.1. Corporate Organization. The Buyer is a limited liability
company and Level 3 is a corporation, each of which has been duly organized,
validly existing and is in good standing under the laws of the State of
Delaware, and has all requisite limited liability company or corporate power (as
the case may be) and authority to own its properties and assets and to conduct
its businesses as now conducted.
SECTION 6.2. Qualification to Do Business. The Buyer and Level 3 are
duly qualified to do business as a foreign limited liability company or
corporation (as the case may be) and is in good standing in every jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Buyer or Level 3.
SECTION 6.3. No Conflict or Violation. The execution, delivery and
performance by the Buyer and Level 3 of this Agreement and by Xxxxx 0 of the
Registration Rights Agreement do not and will not (i) violate or conflict with
any provision of any Organizational Documents of the Buyer and Xxxxx 0, (xx)
violate any provision of law, or any order, judgment or decree of any
Governmental Entity or (iii) violate or result in a breach of or constitute
(with due notice or lapse of time or both) a default under any material
contract, agreement or instrument to which the Buyer or Level 3 is a party or by
which it is bound or to which any of its properties or assets is subject that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Buyer or Level 3.
SECTION 6.4. Consents and Approvals. Except as set forth in Schedule
6.4, no consent, waiver, authorization or approval of any Governmental Entity,
and no declaration or notice to or filing or registration with any Governmental
Entity, is required in connection with the execution and delivery by Xxxxx 0 and
the Buyer of this Agreement and the execution and delivery by Xxxxx 0 of the
Registration Rights Agreement or the performance by Xxxxx 0 and the Buyer of
their obligations hereunder or thereunder, except for (i) the filing of
Notification and Report Form under the HSR Act, (ii) filings with the Commission
and the NASDAQ Stock Market, including without limitation, the filing of the
registration statement covering the resale of the Shares to be issued hereunder
(the "Registration Statement") and a Notification Form for Listing Additional
Shares with respect to the Shares to be issued hereunder, respectively, and
(iii) such other consents, waivers, authorizations, approvals, declarations,
notices, filings or registrations that, if not obtained, made or given, would
not, individually or in the aggregate, reasonably be expected to impair in any
material respect the ability of Level 3 or the Buyer to perform its obligations
hereunder, or prevent or materially impede, interfere with, hinder or delay the
consummation of the transactions contemplated hereby.
SECTION 6.5. Authorization and Validity of Agreement. The Buyer and
Level 3 have all requisite limited liability company or corporate power (as the
case may be) and authority to enter into this Agreement and the Registration
Rights Agreement to which they are a party and to carry out their respective
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Registration Rights Agreement and the performance of the
Buyer's and Level 3's respective obligations hereunder and thereunder have been
duly authorized by all necessary limited liability company or corporate action
(as the case may be) of the Buyer and Xxxxx 0, and no other limited liability
36
company or corporate proceedings (as the case may be) on the part of the Buyer
and Level 3 are necessary to authorize such execution, delivery and performance.
This Agreement has been duly executed by the Buyer and Level 3 and, assuming due
execution and delivery by Leucadia and the Seller, shall constitute their valid
and binding obligation, enforceable against them in accordance with its terms,
subject to (i) the effect of bankruptcy, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and (iii) an implied covenant of
good faith and fair dealing.
SECTION 6.6. Capitalization and Related Matters.
(a) As of the date hereof, Level 3's capital stock consists of (a)
1.5 billion authorized shares of Level 3 Common Stock and (b) 10,000,000
authorized shares of preferred stock, par value $0.01 per share, of which no
shares of preferred stock are outstanding. As of October 27, 2005, there were
701,076,214 shares of Level 3 Common Stock outstanding. Except as set forth on
Schedule 6.6 hereto as of June 30, 2005, (i) neither Level 3 nor any of its
Subsidiaries has outstanding any stock or other securities convertible into or
exchangeable for any shares of capital stock of Xxxxx 0, any rights to subscribe
for or to purchase or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any other character relating to the issuance of, any
capital stock of Level 3, or any stock or securities convertible into or
exchangeable for any capital stock of Level 3 other than those issued under
employee benefit plans of Level 3; and (ii) neither Level 3 nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of capital stock of Level
3. All of the outstanding shares of Level 3 Common Stock have been duly and
validly issued and are fully paid and non-assessable. As of the Closing, the
Shares will be duly authorized and, upon issuance, sale and delivery as
contemplated by this Agreement, the Shares will be validly issued, fully paid
and non-assessable securities of Level 3.
(b) All of the outstanding membership units of the Buyer are owned of
record and beneficially by Xxxxx 0, directly or indirectly.
SECTION 6.7. SEC Filings.
(a) The Buyer has delivered or made available to Leucadia and the
Seller a correct and complete copy of the Xxxxx 0 XXX Xxxxxxx. Xxx Xxxxx 0 XXX
Reports have been timely filed pursuant to the Exchange Act.
(b) The Xxxxx 0 XXX Xxxxxxx complied as to form in all material
respects with the requirements of the Exchange Act in effect on the date of
filing. The Xxxxx 0 XXX Xxxxxxx, when filed pursuant to the Exchange Act, did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
37
(c) Each of Level 3's financial statements (including the related
notes) included in the Xxxxx 0 XXX Xxxxxxx present fairly in all material
respects the consolidated financial position and consolidated results of
operations and cash flows of Level 3 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 period involved except as otherwise noted
therein, and subject, in the case of any unaudited interim financial statements
included therein, to normal year-end adjustments and to the absence of complete
footnotes.
SECTION 6.8. No Material Adverse Effect. Since June 30, 2005, there
has not been any Material Adverse Effect on Xxxxx 0 and its Subsidiaries.
SECTION 6.9. Private Placement. The issuance of the Shares to
Leucadia pursuant to this Agreement will not require registration under the
Securities Act, assuming that (i) the representations and warranties of the
Seller made to Level 3 and the Buyer in connection with this Agreement and the
transactions contemplated by this Agreement are true, complete and accurate
(upon which assumption Level 3 and the Buyer have relied without independent
investigation); and (ii) the Seller complies with its representations and
warranties set forth in Section 5.26 of this Agreement.
SECTION 6.10. No Brokers. No broker, finder or similar intermediary
has acted for or on behalf of, or is entitled to any broker's, finder's or
similar fee or other commission from the Buyer in connection with this Agreement
or the transactions contemplated hereby, other than XX Xxxxxx Securities Inc.
and Evercore Partners.
SECTION 6.11. Sufficiency of Funds. The Buyer has, and at the Closing
will have, sufficient funds available to pay the Cash Purchase Price and the
Additional Cash Amount at the Closing.
SECTION 6.12. No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 6, neither the Buyer
nor Level 3 nor any other Person makes any other express or implied
representation or warranty on behalf of the Buyer nor Level 3.
SECTION 7. COVENANTS OF LEUCADIA AND THE SELLER.
------------------------------------
Leucadia and the Seller hereby jointly and severally covenant as
follows:
SECTION 7.1. Conduct of Business Before the Closing Date. (a) Without
the prior written consent of the Buyer, between the date hereof and the Closing
Date, Leucadia and the Seller shall not permit either the Company or its
Retained Subsidiaries to, except (W) as contemplated by this Agreement, (X) as
set forth in Schedule 7.1(a), (Y) as it relates exclusively to the Excluded
Assets or the Excluded Liabilities or (Z) in connection with the Pre-Closing
Transfers:
(i) make any material change in the conduct of its businesses or
enter into any transaction, other than in the ordinary course of
business consistent with past practices;
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(ii) make any change in any Organizational Document; issue any
additional shares of capital stock, membership units or partnership
interests or other equity securities or grant any option, warrant or
right to acquire any capital stock, membership units or partnership
interests or other equity securities or issue any security convertible
into or exchangeable for such securities or alter in any way any its
outstanding securities or make any change in outstanding shares of
capital stock, membership units or partnership interests or other
ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, stock dividend or otherwise.
Leucadia and the Seller shall advise Level 3 of the aggregate amount
of cash, cash equivalents and marketable securities transferred or to
be transferred to Leucadia or an Affiliate (other than the Company and
its Retained Subsidiaries) pursuant to this Agreement;
(iii) make any sale, assignment, transfer, abandonment, sublease,
assignment or other conveyance of its assets, Company Real Property or
rights or any part thereof, other than pursuant to IRUs that are
entered into in the ordinary course of business and on customary terms
and which IRUs result in payments to the Company and its Subsidiaries
of an aggregate amount not to exceed the greater of (i) $65,000 per
day for each day between the date hereof and the Closing Date and (ii)
$4.0 million;
(iv) subject any of its assets, properties or rights or any part
thereof, to any Lien or suffer such to exist other than such Liens as
may arise in the ordinary course of business consistent with past
practice by operation of law, Permitted Liens and Liens pursuant to
the Company's Credit Documents or the Company's Real Estate Debt
Documents;
(v) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of the capital stock, membership units or
partnership interests or other ownership interests of the Company and
its Subsidiaries or declare, set aside or pay any dividends or other
distribution in respect of such shares or interests (other than to
issue a dividend to the Seller of Excluded Assets and to satisfy
intercompany indebtedness balances);
(vi) acquire, lease or sublease any material assets, raw
materials or properties (including any real property), or enter into
any other transaction, other than in the ordinary course of business
consistent with past practice;
(vii) enter into any new (or amend any existing) employee benefit
plan, program or arrangement or any new (or amend any existing)
employment, severance, retention, change of control or consulting
agreement, grant any general increase in the compensation of officers
or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or grant any
increase in the compensation payable or to become payable to any
employee, except in accordance with pre-existing contractual
provisions or consistent with past practice;
(viii) make or commit to make capital expenditures that are not
otherwise in the ordinary course of business, and (x) that require
aggregate payments in excess of $500,000 per week for each week
between the Measurement Date and the Closing Date or (y) that require
aggregate payments after the Closing in excess of $2,000,000;
39
(ix) pay, lend or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates other than among the Company
and the Retained Subsidiaries;
(x) fail to keep in full force and effect insurance comparable in
amount and scope to coverage maintained at the date hereof;
(xi) make any change in any method of accounting or accounting
principle or method except for any such change required by reason of a
concurrent change in GAAP, or write off as uncollectible any accounts
receivable except in the ordinary course of business consistent with
past practice;
(xii) make or change any material Tax election, change an annual
accounting period or adopt or change any material accounting method,
file any amended Tax Return, enter into any closing agreement, settle
any material Tax claim or assessment relating to the Company or any of
its Subsidiaries, surrender any material right to claim a refund of
Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to the Company or
any of its Subsidiaries, or take any other similar action relating to
the filing of any Tax Return or the payment of any Tax;
(xiii) (A) modify, amend in any material respect or terminate any
contract in any manner that would reasonably be expected to have an
adverse effect on the Company and the Retained Subsidiaries or (B)
make or enter into supplier contracts (including any purchases under
tariffs) having a term of more than 12 months that (x) would have
payment obligations over the course of such contracts in excess of
$1.0 million in the aggregate or (y) are not otherwise in the ordinary
course of business consistent with past practice;
(xiv) settle, release or forgive any material litigation; or
(xv) commit to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date,
Leucadia and the Seller shall cause each of the Company and its Subsidiaries to:
(i) continue to maintain, in all material respects, its assets,
properties, rights and operations in accordance with present practice
in a condition suitable for their current use;
(ii) file, when due or required, all Tax Returns and other
reports required to be filed and pay when due all Taxes lawfully
levied or assessed against it, unless the validity thereof is
contested in good faith and by appropriate proceedings diligently
conducted;
40
(iii) continue to conduct its business in the ordinary course
consistent with past practice;
(iv) keep its books of account, files and records in the ordinary
course and in accordance with existing practice;
(v) use commercially reasonable efforts in light of the
transactions contemplated herein consistent with the operation of the
Company's business in the ordinary course and consistent with past
practice to preserve intact its operations, organization and
reputation;
(vi) pay or accrue by the Measurement Date for the capital
expenditure projects listed on Schedule 7.1(b)(vi) hereto and make
commercially reasonable efforts to complete such projects; and
(vii) use commercially reasonably efforts to continue to spend
the amounts under the Vendor Contracts at rates consistent with past
practice and in a manner that is reasonably likely to avoid
assessments against the Company or its Retained Subsidiaries during
the 12 months after the Closing.
(c) Nothing contained in this Agreement shall give to Level 3 or
Buyer, directly or indirectly, rights to control or direct the operations of the
Company or the Retained Subsidiaries prior to the Closing Date. Prior to the
Closing Date, the Company and the Retained Subsidiaries shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision of its and its Subsidiaries' operations.
SECTION 7.2. Consents and Approvals. Leucadia and the Seller shall,
and shall cause each of the Company and its Subsidiaries to (a) use their
commercially reasonable efforts to obtain all consents, waivers, authorizations
and approvals of all Governmental Entities, and of all other Persons, required
in connection with the execution, delivery and performance by the Seller and
Leucadia of this Agreement, and the Buyer and Level 3 shall cooperate with the
Seller and Leucadia in obtaining such consents and (b) cooperate with the Buyer
and Level 3 in preparing and filing all documents required to be submitted by
the Buyer or Level 3 to any Governmental Entity, in connection with such
transactions and in obtaining any governmental consents, waivers, authorizations
or approvals which may be required to be obtained by the Buyer or Level 3 in
connection with such transactions (which assistance and cooperation shall
include, without limitation, timely furnishing to the Buyer and Level 3 all
information concerning Leucadia, the Seller and the Company and its Subsidiaries
that counsel to the Buyer determines is required to be included in such
documents).
SECTION 7.3. Access to Properties and Records. Leucadia and the
Seller shall cause each of the Company and the Retained Subsidiaries to afford
to the Buyer and Xxxxx 0, and to the accountants, counsel and representatives of
the Buyer and Xxxxx 0, reasonable access during normal business hours throughout
the period prior to the Closing Date (or the earlier termination of this
Agreement pursuant to Section 12) to all properties, books, contracts,
commitments and files and records (but limited with respect to Tax Returns and
41
correspondence with accountants to these portions of Tax Returns and
correspondence with accountants that relate to the Company and its Retained
Subsidiaries and to the extent reasonably necessary to evaluate the purchase of
the Membership Units) of the Company and its Subsidiaries and, during such
period, shall furnish promptly to the Buyer and Level 3 all other information
concerning the Company and the Retained Subsidiaries, properties and personnel
as the Buyer and Level 3 may reasonably request to evaluate the transactions
contemplated hereby; provided that neither Leucadia nor the Seller shall be
required to provide access to any such properties, personnel or information to
the extent relating exclusively to the Excluded Assets or Excluded Liabilities.
Leucadia and the Seller also shall cause each of the Company and the Retained
Subsidiaries to afford to the Buyer and Level 3 reasonable access to its assets
and operations throughout the period prior to the Closing Date to evaluate the
transactions contemplated hereby. Unless otherwise agreed to by Leucadia and the
Seller, all information provided to Buyer and Level 3 and their advisors and
representatives shall be kept confidential in accordance with the terms of the
Confidentiality Agreement; provided, however, that such obligation will
terminate upon the Closing with respect to information relating to the Company
and the Retained Subsidiaries (except, if the Buyer has not exercised the
Benefit Plan Substitution Right pursuant to Section 2.2(b), in connection with
Level 3's and the Buyer's investigation of the Transferred Benefit Plans in
accordance with Section 7.16). No investigation or receipt of information
pursuant to this Section 7.3 shall qualify any representation or warranty of
Leucadia or the Seller or the conditions to the obligations of the Buyer or
Level 3.
SECTION 7.4. Pre-Closing Transfers. On or prior to the Closing,
Leucadia and the Seller shall cause the Company and the Retained Subsidiaries to
transfer to one or more entities directly or indirectly wholly owned by Leucadia
(other than the Company or the Retained Subsidiaries) (the "Transferee") all of
the right, title and interest of the Company and the Retained Subsidiaries in
and to the Excluded Assets. Such transfer shall be on an "as is, where is"
basis, and the Company and the Retained Subsidiaries will make no
representations or warranties, either express or implied, to the Transferee with
respect to the Excluded Assets and the Transferee will have no recourse against
the Company and the Retained Subsidiaries with respect to the Excluded Assets or
the Excluded Liabilities. In addition, Leucadia and the Seller shall cause the
Transferee to assume and to pay, perform, settle and discharge when due all
obligations with respect to the Excluded Liabilities. Furthermore, to the extent
that any of the Excluded Assets or the Excluded Liabilities require the Company
and the Retained Subsidiaries to perform obligations thereunder (including any
guarantees), Leucadia and the Seller shall, prior to the Closing, obtain from
the other parties thereto the written unconditional release of the Company and
the Retained Subsidiaries from all obligations (including any guarantees) and
liabilities under such contracts and provide any required notices to any Person
or shall otherwise indemnify the Buyer and Level 3 with respect thereto without
limitation pursuant to the provisions of Section 9.3(b)(ii) and (iii) hereof. In
connection with obtaining the release of the Company and the Retained
Subsidiaries from the Company's Credit Documents, the Company may borrow funds
from Leucadia or an Affiliate of Leucadia and, subject to Section 7.15(a), such
inter-company loans will be repaid by the Company at or prior to the Closing.
For purposes of this Agreement, such transfer of the Excluded Assets and
assumption of the Excluded Liabilities and release or indemnification of the
Company's and the Retained Subsidiaries' obligations thereunder (including any
guarantees) are collectively referred to as the "Pre-Closing Transfers."
Notwithstanding the foregoing, prior to transferring the capital stock,
membership units or other ownership interests of the Transferred Subsidiaries to
the Transferee, Leucadia and the Seller shall cause the Company and the Retained
Subsidiaries to transfer to the Company or a Retained Subsidiary all of the
right, title and interests of the Transferred Subsidiaries in and to any of the
assets and rights primarily used in the Businesses. Leucadia and the Seller
shall assume full liability for any and all Taxes that result from the
Pre-Closing Transfers to the extent in excess of any Tax (except liability for
any Income Tax) reflected in the determination of the Actual Adjusted Net
Working Capital.
42
SECTION 7.5. Registration Statement and Level 3 Commission Filing
Requirements. Leucadia and the Seller shall and shall use their commercially
reasonable efforts to cause the Company and its Subsidiaries to (i) prepare and
timely deliver to the Buyer, such that the Buyer can meet any Commission filing
deadlines with respect to the transactions contemplated by this Agreement,
audited GAAP financial statements of the Company and its consolidated
Subsidiaries for the year ended December 31, 2004 and, upon the completion
thereof, the year ended December 31, 2005, as well as unaudited quarterly
financials of the Company and its consolidated subsidiaries for the nine months
ended September 30, 2005 and the financial statements for 2006 quarterly periods
ending prior to the Closing, for inclusion in the Registration Statement or to
meet Level 3's Commission filing requirements with respect to the transactions
contemplated by this Agreement, (ii) cause Leucadia's independent public
accountants to perform the procedures specified by the American Institute of
Certified Public Accountants for a review of financial information as described
in SAS 100, Interim Financial Information with respect to the unaudited
financial statements of the Company and its consolidated Subsidiaries for the
nine months ended September 30, 2005 and the financial statements for 2006
quarterly periods ending prior to the Closing and (iii) to the extent required
by the Company's independent public accountants, cooperate with Level 3 and the
Company to obtain the consent of the Company's independent public accountants,
when required, with respect to the 2004 and 2005 audited financial statements so
that such audited financial statements can, if required, be included in the
Registration Statement or other Commission reports required to filed with or
furnished to the Commission by Level 3 with respect to the transactions
contemplated by this Agreement. Level 3 and the Buyer acknowledge that if the
Closing has occurred, timely delivery of certain items required under this
Section 7.5 will require the cooperation and efforts of Level 3 and the Buyer to
the same extent as Leucadia and the Seller.
SECTION 7.6. Negotiations. From and after the date hereof and until
the earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Section 12 hereof, Leucadia and the Seller shall not, and shall
cause any Persons acting on behalf of Leucadia, the Seller, the Company and its
Subsidiaries not to encourage, solicit, engage in discussions or negotiations
with, or provide any information to, any Person or group (other than the Buyer
or its representatives) concerning any merger, sale of substantial assets, sale
of shares of capital stock, membership units or partnership interests or similar
transaction involving the Company and the Retained Subsidiaries (other than with
respect to the Excluded Assets and Excluded Liabilities).
SECTION 7.7. Certain Real Estate Matters. Prior to the Closing,
Leucadia and the Seller shall cause the Company and its Subsidiaries to (i)
renew the Leases set forth on Schedule 7.7(a), (ii) allow the Leases set forth
on Schedule 7.7(b) to expire in accordance with their terms and (iii) terminate
the intercompany leases set forth on Schedule 7.7(c), in the case of clauses
(ii) and (iii), with no liability or obligation on the part of the Company, the
Retained Subsidiaries, the Buyer or Xxxxx 0, except as therein provided.
43
SECTION 7.8. Commercially Reasonable Efforts. Upon the terms and
subject to the conditions of this Agreement, Leucadia and the Seller will use
and shall cause each of the Company and its Subsidiaries to use, their
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable consistent
with applicable law to consummate and make effective in the most expeditious
manner practicable the transactions contemplated hereby. Upon the terms and
subject to the conditions of this Agreement, Leucadia and the Seller shall
execute the Registration Rights Agreement on the Closing Date and Leucadia and
the Seller shall cause the Company and WilTel Technology Center, LLC to execute
the Lease Agreement on the Closing Date.
SECTION 7.9. Notice of Breach. Through the Closing Date, Leucadia and
the Seller shall (a) promptly give written notice with particularity upon having
knowledge of any matter that constitutes or is reasonably likely to constitute a
breach of any representation, warranty, agreement or covenant of Leucadia or the
Seller contained in this Agreement and (b) promptly notify Level 3 upon having
knowledge of the announced intention of any of the suppliers or customers listed
on Schedule 5.22(a) and Schedule 5.22(b), respectively, to cancel, terminate or
materially reduce its relationship with the Company or any Retained Subsidiary
as such relationship exists on the date hereof. No notification pursuant to this
Section 7.9 shall qualify any representation or warranty of Leucadia or the
Seller or the conditions to the obligations of the Buyer or Level 3.
SECTION 7.10. Stock Certificate Legend. The certificates evidencing
the Shares will bear substantially the following legend reflecting the foregoing
restrictions on the transfer of such Shares:
"The securities evidenced hereby have not been registered under the
Securities Act, and may not be transferred except pursuant to an effective
registration under the Act or in a transaction which, in the opinion of
counsel reasonably satisfactory to Level 3 Communications, Inc. qualifies
as an exempt transaction under the Act and the rules and regulations
promulgated thereunder. Such securities are also subject to the agreements,
covenants and restrictions in regard to the transfer of such securities as
provided in that certain Registration Rights and Transfer Restriction
Agreement, dated as of [the Closing Date], among Xxxxx 0 Xxxxxxxxxxxxxx,
Xxx., Xxxxxxxx National Corporation and Xxxxxxx Enterprises, Inc., a copy
of which Registration Rights and Transfer Restriction Agreement is on file
at the office of the Secretary of Xxxxx 0 Xxxxxxxxxxxxxx, Xxx."
SECTION 7.11. Non-Solicitation.
(a) During the period commencing on the date of this Agreement and
ending on the 12-month anniversary of the Closing Date (the "Initial Restricted
Period"), each of the Seller and Leucadia shall not and shall cause their
Affiliates not to, directly or indirectly, without the prior written consent of
the Buyer, induce or solicit for employment or engagement as a consultant, or
44
hire or engage as a consultant, any Covered Employee of the Company and the
Retained Subsidiaries, provided, that neither (i) generalized searches through
media advertisement, employment firms or otherwise that are not directed to such
personnel nor (ii) soliciting or hiring such individuals following their
termination of employment or notification of termination by the Company or the
Retained Subsidiaries shall constitute a violation of the foregoing; provided,
such hiring occurs after the actual date of termination.
(b) During the period commencing on the day after the 12-month
anniversary of this Agreement and ending on the 18-month anniversary of the
Closing Date (the "Subsequent Restricted Period"), each of the Seller and
Leucadia shall not and shall cause their Affiliates not to, directly or
indirectly, without the prior written consent of the Buyer, induce or solicit
for employment or engagement as a consultant, any Covered Employee of the
Company and the Retained Subsidiaries, provided, that neither (i) generalized
searches through media advertisement, employment firms or otherwise that are not
directed to such personnel nor (ii) soliciting such individuals following their
termination of employment or notification of termination by the Company or the
Retained Subsidiaries shall constitute a violation of the foregoing.
(c) The parties agree that a monetary remedy for a breach of the
agreements set forth in Sections 7.11(a) and (b) hereof will be inadequate and
impracticable and further agree that such a breach would cause Level 3 and the
Buyer irreparable harm, and that Level 3 and the Buyer shall be entitled to
temporary and permanent injunctive relief without the necessity of proving
actual damages. In the event of such a breach, Leucadia and the Seller agree
that Level 3 and the Buyer shall be entitled to such injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions as a court of competent jurisdiction shall determine.
(d) If any provision of this Section 7.11 is invalid in part, it
shall be curtailed, as to time, location or scope, to the minimum extent
required for its validity under the laws of the United States and shall be
binding and enforceable with respect to the Seller and Leucadia as so curtailed.
SECTION 7.12. Employees and Employee Benefits.
(a) Certain current and former employees of the Company and its
Subsidiaries (including certain predecessor companies) participate in a
qualified defined benefit pension plan known as the WilTel Communications, LLC
Pension Plan (the "Retirement Plan"). Prior to the Closing Date, Leucadia and
the Seller shall take all necessary and appropriate action to: (i) cause the
Company and its Subsidiaries to amend or revise the Retirement Plan so that no
further benefits will be accrued by their employees under such plan on or after
the Closing Date, (ii) assume the sponsorship of the Retirement Plan and the
related obligations and liabilities thereunder accrued in respect of the
eligible employees prior to the Closing Date, and (iii) cause the Company and
its Subsidiaries to cease to sponsor and maintain the Retirement Plan as of the
date such sponsorship is assumed by Leucadia and the Seller; provided, however,
that the covenants of the Seller set forth in clauses (i) through (iii) of this
Section 7.12(a) shall be of no further force and effect upon the exercise by the
Buyer of its Benefit Plan Substitution Right in accordance with Section 2.2(b).
The Company and its Subsidiaries shall have no obligation to implement a
qualified defined benefit pension plan for their employees on or after the
Closing Date.
45
(b) Certain current and former employees of the Company and its
Subsidiaries participate in a nonqualified deferred compensation plan known as
the WilTel Communications, LLC Supplemental Executive Retirement Plan (the
"Deferred Compensation Plan"). Prior to the Closing Date, Leucadia and the
Seller shall take all necessary and appropriate action to: (i) cause the Company
and its Subsidiaries to amend or revise the Deferred Compensation Plan so that
no further benefits will be accrued by their employees under such plan on or
after the Closing Date, (ii) assume the sponsorship of the Deferred Compensation
Plan and the related obligations and liabilities thereunder accrued in respect
of the eligible employees prior to the Closing Date, and (iii) cause the Company
and its Subsidiaries to cease to sponsor and maintain the Deferred Compensation
Plan as of the date such sponsorship is assumed by Leucadia and the Seller;
provided, however, that the covenants of the Seller set forth in clauses (i)
through (iii) of this Section 7.12(b) shall be of no further force and effect
upon the exercise by the Buyer of its Benefit Plan Substitution Right in
accordance with Section 2.2(b). The Company and its Subsidiaries shall have no
obligation to implement a nonqualified deferred compensation plan for their
employees on or after the Closing Date.
(c) Within three days after the date hereof, the Seller shall deliver
to the Buyer a list dated as of October 28, 2005 containing the name, position,
starting employment date, current annual salary, bonus and commissions in 2004
of each current employee of either of the Company or its Retained Subsidiaries.
(d) No provision of this Section 7.12 shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of the Company or of any of its Subsidiaries
in respect of continued employment (or resumed employment) and no provision of
this Section 7.12 shall create any such rights in any such Persons in respect of
any benefits that may be provided, directly or indirectly, under any employee
plan or arrangement which may be established or maintained by the Buyer or any
of its Affiliates after the Closing Date. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after the
Closing Date any such plans or arrangements of the Buyer or any of its
Affiliates.
SECTION 7.13. Tax Matters.
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes, and all recording charges (including any penalties and
interest) incurred in connection with consummation of the transactions
contemplated by this Agreement shall be paid by the Buyer and the parties shall
cooperate in the filing of all necessary Tax Returns and other documentation
with respect to such Taxes and charges.
(b) (i) The Seller shall prepare and file, or cause to be prepared
and filed, when due all Tax Returns that are required to be filed by or with
respect to the Company and its Subsidiaries for all Pre-Closing Tax Periods to
the extent that such Tax Returns are required to be filed on or prior to the
Closing Date, taking into account all valid extensions of time to file such
returns. The Seller shall also prepare and file or cause to be prepared and
46
filed when due all Tax Returns that are required to be filed by or with respect
to the Company and its Subsidiaries for all Pre-Closing Tax Periods to the
extent such Tax Returns relate to Income Taxes, irrespective of when due. (ii)
The Buyer shall prepare and file or cause to be prepared and filed when due all
Tax Returns that are required to be filed by or with respect to the Company and
its Subsidiaries for all Pre-Closing Tax Periods to the extent that such Tax
Returns relate to Taxes other than Income Taxes and are required to be filed
after the Closing Date, taking into account all valid extensions of time to file
such returns. (iii) The Seller shall pay, or cause to be paid, any Taxes due in
respect of any such Tax Returns in excess of any Taxes reflected in the
determination of the Actual Adjusted Net Working Capital, which shall be paid by
the Company, but such limitation shall have no application to Income Taxes. In
the case of Tax Returns prepared by the Buyer pursuant to clause (ii), the Buyer
shall cooperate with and shall follow the direction of the Seller in the
preparation of such Tax Returns and the Seller shall pay over to the Buyer the
amount of any Tax owing under such Tax Return to be paid by the Seller under
this Section 7.13(b) within three days of receiving notice from the Buyer of
such amount, which notice shall be delivered not be less than seven days prior
to the due date of such return; provided, however, that there is at least
substantial authority for the positions required to be taken on such Tax
Returns. The Tax Returns prepared pursuant to the first sentence of clause (i)
and clause (ii) shall be prepared consistent with past practice unless there
shall be no reasonable basis therefor and unless the failure to prepare such
returns in such a manner would not reasonably be expected to have a material and
adverse effect on the Company, the Retained Subsidiaries or the Buyer after the
Closing.
(c) The Buyer shall prepare and file, or cause to be prepared and
filed, when due all Straddle Tax Returns and shall cause the Company to pay the
Taxes shown to be due thereon; provided, however, that the Seller shall pay over
to the Buyer within three days of receiving notice from the Buyer of such
amount, which notice shall be delivered not less than seven days prior to the
due date of such Straddle Tax Return for the portion of any such Tax that
relates to the portion of the Straddle Period ending on the Closing Date, but
only to the extent in excess of any Taxes reflected in the determination of the
Actual Adjusted Net Working Capital, which shall be paid by the Company. The
Seller will furnish to the Buyer all information and records reasonably
requested by the Buyer for use in preparation of any Straddle Tax Return. The
Buyer shall furnish the Seller with a completed draft of any Straddle Tax Return
for the Seller to review and comment upon no later that 20 days before the Buyer
files any such return or such shorter period that may be practical in the
circumstances, provided that reasonably adequate time under the circumstances is
provided to the Seller for such review. The Buyer shall not file any such
Straddle Tax Return without the Seller's consent, which consent may not be
unreasonably withheld, conditioned or delayed.
(d) In the case of any Straddle Period, (i) Property Taxes of the
Company and its Subsidiaries for the Pre-Closing Tax Period shall be equal to
the amount of such Property Taxes for the entire Straddle Period multiplied by a
fraction, the numerator of which is the number of days during the Straddle
Period that are in the Pre-Closing Tax Period and the denominator of which is
the number of days in the Straddle Period; and (ii) the Taxes of the Company and
its Subsidiaries (other than Property Taxes) for the portion of the Straddle
Period that constitutes a Pre-Closing Tax Period shall be computed as if such
taxable period ended as of the close of business on the Closing Date. If
necessary because the assets were reported to the tax authorities on a combined
basis (i.e., Closing occurs on or before December 31, 2005), the Property Taxes
shall be allocated by the Buyer between the assets acquired in this transaction
and the Buyer's remaining assets in accordance with the Buyer's reasonable asset
allocation practice. If the Buyer's allocation is disputed by the Seller, then
the Seller and the Buyer shall negotiate in good faith to resolve such dispute.
47
(e) If a Tax authority commences any audit, examination, litigation
or otherwise makes any claim or proposes any adjustment that relates to a
Pre-Closing Tax Period (other than an Straddle Period) (collectively, a "Tax
Proceeding"), then the Buyer shall promptly furnish written notice to the Seller
of such Tax Proceeding. Failure to give such notice shall not relieve the Seller
from any liability which it may have on account of this indemnification or
otherwise, except to the extent that the Seller is prejudiced thereby. The
Seller shall have the shorter of (i) 45 days after receipt of such notice or
(ii) 15 days less than the number of days before a response to the relevant Tax
authority is required, but in no event shall the Seller have less than 15 days,
to decide whether to undertake, conduct and control (through counsel of its own
choosing and at its own expense) the response to such Tax Proceeding and the
settlement or defense thereof, and the Buyer shall fully cooperate with Seller
in connection therewith including, but not limited to, providing powers of
attorney authorizing Leucadia (or its designee) to control and take action in
connection with any such Taxes. The Seller shall permit the Buyer to participate
in such response, settlement or defense through counsel chosen by the Buyer (but
the fees and expenses of such counsel shall be paid by Buyer). If any settlement
materially adversely affects any Subsidiary in a Post-Closing Tax Period, the
Seller shall not pay or settle any such claim without the prior written consent
of Buyer (which consent shall not be unreasonably withheld, conditioned or
delayed). If within the shorter of (x) 45 days after the receipt of the Buyer's
notice of a Tax Proceeding or (y) 20 days less than the number of days before a
response to the relevant Tax authority is required (but in no event less than 20
days), the Seller does not notify the Buyer that the Seller elects (at its cost
and expense) to undertake the defense thereof, or gives such notice and
thereafter fails to contest such claim in good faith, then the Buyer shall have
the right to contest, settle or compromise such Tax Proceeding and the Buyer
shall not thereby waive any right to indemnity for such Tax Proceeding under
this Agreement and, for the avoidance of doubt, the Buyer shall be indemnified
by the Seller for the Buyer's reasonable costs, including attorneys' and
consultants' fees in defending and settling such proceedings; provided, however,
the Buyer shall not, and shall cause the Subsidiaries not to, pay or settle any
such Tax Proceedings without the prior written consent of Seller (which consent
shall not be unreasonably withheld, conditioned or delayed).
(f) If a Tax authority commences any audit, examination, litigation,
or otherwise makes any claim or proposes any adjustment that relates to a
Straddle Period (collectively, a "Straddle Period Tax Proceeding"), then the
Buyer shall promptly furnish written notice to the Seller of such Straddle
Period Tax Proceeding. Failure to give such notice shall not relieve the Seller
from any liability which it may have on account of this indemnification or
otherwise, except to the extent that the Seller is prejudiced thereby. The Buyer
shall undertake, conduct and control (through counsel of its own choosing and at
its own expense) the response to such Straddle Period Tax Proceeding and the
settlement or defense thereof. The Seller shall cooperate with the Buyer in
connection therewith, and the Buyer shall permit the Seller to participate in
such response, settlement or defense through counsel chosen by the Seller (but
the fees and expenses of such counsel shall be paid by Seller). To the extent
any settlement adversely affects the Seller in a Pre-Closing Tax Period, the
48
Buyer shall not pay or settle any such claim without the prior written consent
of the Seller (which consent shall not be unreasonably withheld, conditioned or
delayed). If within the shorter of (i) 45 days after the receipt of the Buyer's
notice of a Straddle Period Tax Proceeding or (ii) 15 days less than the number
of days before a response to the relevant Tax authority is required (but in no
event less than 15 days), the Buyer fails to contest such claim in good faith or
to prevent action to foreclose a lien against or attachment of the Buyer's
property, then the Seller shall have the right to contest, settle or compromise
such Straddle Period Tax Proceeding and the Seller shall not thereby waive any
right to indemnity for such Straddle Period Tax Proceeding under this Agreement;
provided, however, the Seller shall not pay or settle any such Straddle Period
Tax Proceeding without the prior written consent of the Buyer (which consent
shall not be unreasonably withheld, conditioned or delayed).
(g) The Buyer shall not, and shall not permit any of its Affiliates
to, carry back any loss, credit or other Tax attribute of the Company or any of
its Subsidiaries to a Pre-Closing Tax Period without the prior written consent
of the Seller, which consent may not be unreasonably withheld, conditioned or
delayed.
(h) All tax sharing, indemnity or allocation agreements or
arrangements among the Company and its Subsidiaries on the one hand and Seller,
Leucadia or their Affiliates on the other hand shall terminate at or prior to
the Closing and the parties thereto shall have no further obligation thereunder.
(i) Xxxxx 0 and the Buyer, on the one hand, and Leucadia and the
Seller, on the other hand, will cooperate with each other in connection with the
preparation and filing of Tax Returns required under this Agreement and will
provide to each other access, at any reasonable time and from time to time, at
the business location at which the books and records are maintained, after the
Closing Date, to such Tax data relating to the Company and the Retained
Subsidiaries as Leucadia and the Seller or Xxxxx 0 and the Buyer, as the case
may be, may from time to time reasonably request.
SECTION 7.14. Name. Promptly after the Closing, Leucadia and the
Seller shall cause WilTel Aircraft Leasing, LLC, a Delaware limited liability
company, and WilTel Technology Center, LLC, a Delaware limited liability
company, to change their names to such names that do not include "WilTel" and to
otherwise cease using such name in its operations.
SECTION 7.15. Reimbursements; Cash Balance.
(a) If the Closing occurs after December 31, 2005, the Seller shall
pay to the Company at the Closing an amount equal to all cash used by the
Company, the Retained Subsidiaries or the Business on and after January 1, 2006
with respect to Excluded Liabilities (including, without limitation, (i)
payments of interest or principal under the Company's Credit Documents or the
Company's Real Estate Debt Documents and (ii) payments of operating and
maintenance expenses or capital expenditures with respect to the Company's
Tulsa, Oklahoma headquarters) or Excluded Assets (including, without limitation,
payments to acquire marketable securities).
49
(b) If on the Measurement Date, the Company and the Retained
Subsidiaries have an aggregate cash balance of less than $100 million (after
giving effect to the Pre-Closing Transfers), the Seller shall make a
contribution to the capital of the Company on the Measurement Date to the extent
necessary to cause the Company and the Retained Subsidiaries to have a $100
million aggregate cash balance immediately following the Measurement Date.
(c) The Seller shall on the Closing deliver to the Buyer a
certificate signed by an officer of the Seller setting forth in detail all of
the amounts to be reimbursed pursuant to Section 7.15(a).
(d) All payments referred to in Section 7.15(a) and (b) shall be made
on the respective due date for such payments by wire transfer of immediately
available funds.
SECTION 7.16. Transferred Benefit Plans. In connection with the
Buyer's ability to exercise the Benefit Plan Substitution Right, the Seller
shall provide to the Buyer and Level 3 complete and unrestricted access, during
normal business hours, to all information concerning the Transferred Benefit
Plans within the possession of the Company, its Subsidiaries, the Seller and
Leucadia, together with complete and unrestricted access, during normal business
hours, to the employees of the Company and the advisors and consultants to the
Company with respect to the Transferred Benefit Plans, in each case solely for
the purpose of conducting its investigation of the Transferred Benefit Plans. If
the Buyer exercises its Benefit Plan Substitution Right, the Seller and Leucadia
will represent and warrant the foregoing to the Buyer and Level 3 and will agree
to indemnify the Buyer and Level 3 for any breach of such representation,
subject to the provisions of Section 9.2(b). Unless otherwise agreed to by
Leucadia and the Seller, all information provided to the Buyer and Level 3 and
their advisors and representatives pursuant to this Section 7.16 shall be kept
confidential in accordance with the terms of the Confidentiality Agreement,
provided, however, that such obligations will expire on the Closing if the Buyer
exercises its Benefit Plan Substitution Right in accordance with Section 2.2(b).
All requests for information under this Section 7.16 shall be made in writing to
Mardi xx Xxxxxx, Senior Vice President of the Company.
SECTION 8. COVENANTS OF LEVEL 3 AND THE BUYER.
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SECTION 8.1. Commercially Reasonably Efforts. Upon the terms and
subject to the conditions of this Agreement, the Buyer and Level 3 will use
their commercially reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable
consistent with applicable law to consummate and make effective in the most
expeditious manner practicable the transactions contemplated hereby. Upon the
terms and subject to the conditions of this Agreement, Level 3 shall execute on
the Closing Date the Registration Rights Agreement.
SECTION 8.2. Consents and Approvals. The Buyer and Level 3 shall use
commercially reasonable efforts (which in no event shall (a) require the Buyer
or any Affiliate of the Buyer to divest assets owned by Xxxxx 0 and its
Subsidiaries as of the date hereof other than assets that in the aggregate are
not material to their respective operations taken as a whole or (b) require the
Company or the Retained Subsidiaries to divest assets owned by them as of the
date hereof other than assets that in the aggregate are not material to their
respective operations taken as a whole), (i) to obtain all consents and
50
approvals of third parties and Governmental Entities required to be obtained by
them to effect the transactions contemplated by this Agreement and (ii) to not
allow any other transaction, as to which they or their Affiliates are a party,
to impede, interfere with or delay in any material way with obtaining such
consents. The Buyer and Level 3 shall cooperate with the Seller and Level 3 in
obtaining all consents required hereunder.
SECTION 8.3. Notice of Breach. Through the Closing Date, the Buyer
and Level 3 shall promptly give written notice with particularity upon having
knowledge of any matter that constitutes or is reasonably likely to constitute a
breach of any representation, warranty, agreement or covenant of the Buyer or
Level 3 contained in this Agreement. No notification pursuant to this Section
8.3 shall qualify any representation or warranty of the Buyer or Level 3 or the
conditions to the obligations of the Seller or Leucadia.
SECTION 8.4. Listing of Shares. Level 3 shall file a Notification
Form for Listing of Additional Shares with the NASDAQ Stock Market for the
Shares to be issued hereunder.
SECTION 8.5. WilTel Benefits Plans. From and after the Closing Date
until the second anniversary thereof, Level 3 shall not, and shall cause the
Company not to terminate, modify or amend the Severance Plan in any manner that
would adversely affect the rights, benefits and privileges of the participants
in the Severance Plan. Following the Closing, Level 3 shall, and shall cause the
Company (a) to comply with all obligations and make all payments under the
Severance Plan, the WilTel Communications, LLC Employee Retention Plan and the
Miscellaneous Retention Plans in accordance with their respective terms and (b)
if not previously paid, to pay to the participants in the WilTel Communications,
LLC Long-Term Cash Incentive Plan in accordance with the terms of such plan
equal to the amounts set forth on Schedule 7.1(a)(vii) and to pay to the
participants in the Company's 2005 bonus plan in accordance with the terms of
such plan the amounts accrued on the Closing Balance Sheet with respect to such
bonus plan; provided, however, that in the event the Closing occurs before
December 31, 2005, then solely for purposes of the foregoing calculations, the
Closing shall be deemed to have occurred on January 2, 2006.
SECTION 8.6. Access to Properties and Records. Following the Closing,
Level 3 and Buyer shall cause each of the Company and the Retained Subsidiaries
to afford to Leucadia and the Seller, and to the accountants, counsel and
representatives of Leucadia and the Seller, reasonable access to all properties,
books, contracts, commitments and files and records of the Company and the
Retained Subsidiaries and shall make available to Leucadia and the Seller, and
to the accountants, counsel and representatives of Leucadia and the Seller, such
of the officers and employees of the Company and its Retained Subsidiaries as
Leucadia and the Seller may reasonably request solely for the purpose of the
timely (i) preparation of the Company's 2005 consolidated financial statements,
(ii) preparation of internal reporting packages, supplemental schedules and
responses to review questions normally requested as part of Leucadia's 2005
annual closing process, (iii) completion of management's 2005 assessment of the
effectiveness of the Company's internal control over financial reporting, (iv)
completion of the report of Leucadia's independent registered public accountants
with respect to their 2005 audit of the Company's financial statements, their
2005 audit of management's assessment of the Company's internal control over
financial reporting and their 2005 audit of the effectiveness of the Company's
51
internal control over financial reporting and (v) for the period from January 1,
2006 to the Closing, preparation of the Company's consolidated financial
statements, internal reporting packages, supplemental schedules and responses to
review questions normally requested as part of Leucadia's normal quarterly
closing process. Level 3 acknowledges that it has received Leucadia's reporting
requirements and reporting timetable for the 2005 calendar year. Leucadia and
the Seller shall treat all information provided by Xxxxx 0 and the Buyer with
the same level of care and confidentiality as each maintains with respect to its
own information.
SECTION 8.7. Reimbursements; Cash Balance.
(a) If the Closing occurs after December 31, 2005, the Buyer shall
pay to the Seller at the Closing an amount in cash equal to the product of (i)
$11,500 and (ii) the number of days from January 1, 2006 to but excluding the
Closing Date.
(b) If (i) the Closing occurs after December 31, 2005, (ii) the
Seller has complied in all respects with its obligations under Section 7.15(a)
and (b), and (iii) after giving effect to the Pre-Closing Transfers and the
payments contemplated by Section 7.15(a), the Company and the Retained
Subsidiaries would have an aggregate cash balance immediately following the
Closing of less than $100 million, Level 3 or the Buyer shall make a
contribution to the capital of the Company immediately after the Closing to the
extent necessary to cause the Company and the Retained Subsidiaries to have a
$100 million aggregate cash balance immediately following the Closing.
(c) All payments referred to in Section 8.7(a) and (b) shall be made
on the respective due date for such payments by wire transfer of immediately
available funds.
SECTION 8.8. Retention Payments. To the extent that the aggregate
amount set forth on Schedule 5.23(c)(ii) is greater than the aggregate of all
payments actually made by the Company pursuant to the WilTel Communications, LLC
Employee Retention Plan, as adopted effective April 11, 2004 and the
Miscellaneous Retention Plans referred to in clauses (i) and (ii) of Section
5.23(c), Level 3 shall promptly pay to the Seller the amount of such excess
after the Closing and within two months after the payments are due in accordance
with the applicable agreements.
SECTION 9. INDEMNIFICATION.
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SECTION 9.1. Survival. Each of the representations, warranties and
covenants set forth in this Agreement shall survive the Closing except that
Section 5.10(c) and (n) shall not apply to any Post-Closing Tax Periods;
provided, however, that no claim, lawsuit, or other proceeding arising out of or
related to the breach of any representation or warranty contained in this
Agreement may be made by any Indemnitee unless notice of such claim, lawsuit or
other proceeding, is given to the Indemnitor in accordance with Section 9.4, (i)
for all representations and warranties (other than those contained in Sections
5.6, 5.10 (but with respect to Section 5.10, this exception shall only apply to
the extent such representations and warranties relate to Income Taxes), 5.19 (to
the extent such representations and warranties do not relate to the Excluded
Assets or the Excluded Liabilities), 5.24 and 6.6) prior to the 18-month
anniversary of the Closing Date; (ii) for representation and warranties
contained in Sections 5.10 (to the extent those representations and warranties
relate to Income Taxes) and 5.19 (to the extent such representations and
warranties do not relate to the Excluded Assets or the Excluded Liabilities),
within 45 days after the expiration of the applicable statute of limitations;
and (iii) for the representations and warranties contained in Section 5.24,
prior to the 24-month anniversary of the Closing Date.
52
SECTION 9.2. Indemnification by Leucadia and the Seller.
(a) Notwithstanding the Closing and regardless of any investigation
at any time made by or on behalf of the Buyer or Level 3 or of any knowledge or
information that the Buyer or Level 3 may have, Leucadia and the Seller shall
jointly and severally indemnify and fully defend, save and hold the Buyer, Xxxxx
0 and their Subsidiaries, including following the Closing, the Company and the
Retained Subsidiaries (the "Buyer Indemnitees") harmless if any Buyer Indemnitee
shall at any time or from time to time suffer any damage, liability, loss, cost,
expense (including all reasonable attorneys' fees), deficiency, interest,
penalty, impositions, assessments or fines (collectively, "Losses") arising out
of or resulting from, or shall pay or become obliged to pay any sum on account
of, one or more of the following:
(i) any breach of any representation or warranty of the Seller or
Leucadia contained in this Agreement or in any certificate delivered
to the Buyer or Level 3 in connection with the Closing (but with
respect to the representations and warranties contained in Section
5.10, only to the extent any such representation or warranty relates
to Income Taxes);
(ii) any failure of the Seller or Leucadia duly to perform or
observe any covenant or agreement contained in this Agreement on the
part of the Seller or Leucadia to be performed or observed;
(iii) any Excluded Asset, Excluded Liability or the Pre-Closing
Transfers (including the failure to obtain the written unconditional
releases of the Company and the Retained Subsidiaries from obligations
or liabilities relating to the Excluded Assets or the Excluded
Liabilities);
(iv) any Pre-Closing Taxes excluding any Tax or liability
described in clause (v);
(v) any liability in respect of any Tax not attributable to the
Company, any of its Subsidiaries, any of their assets or any of their
operations, which liability is imposed on the Company or any of its
Subsidiaries pursuant to Treasury Regulations ss. 1.1502-6 or any
analogous state, local or foreign law or regulation by reason of the
Company or any of its Subsidiaries having been a member of any
consolidated, combined or unitary group on or prior to the Closing,
but only to the extent in excess of any Taxes (other than Income Taxes
as to which this limitation does not apply) reflected in the
determination of the Actual Adjusted Net Working Capital;
53
(vi) (A) the Retirement Plan and all other pension plans
maintained or sponsored by or to which contributions are required of
any ERISA Affiliate and that are subject to Title IV of ERISA or
Section 412 of the Code, including, but not limited to (1) claims of
the PBGC, the IRS and any other Governmental Agency relating to the
funding of such plans, (2) claims of participants and beneficiaries
relating to benefit payments under such plans and (3) claims relating
to fiduciary violations under ERISA, and (B) the Deferred Compensation
Plan; provided, however, that if the Buyer exercises its Benefit Plan
Substitution Right in accordance with Section 2.2(b), neither Leucadia
nor the Seller shall have any liability with respect to the Retirement
Plan or the Deferred Compensation Plan hereunder;
(vii) any "Covered Matter" listed on Schedule 9.2(a) in
accordance with such Schedule; or
(viii) the Buyer's and Level 3's enforcement of their rights
under this Section 9.2.
(b) Notwithstanding anything herein to the contrary:
(i) Leucadia and the Seller shall not have any liability under
Section 9.2(a)(i) (other than with respect to (x) Section 5.6, (y)
Section 5.10 (limited however to Income Taxes) and (z) the second and
third sentences of Section 5.23(c)) or Section 9.2(a)(iv) unless the
aggregate of all Losses relating thereto for which the Seller and
Leucadia would, but for this Section 9.2(b)(i), be liable exceeds on a
cumulative basis an amount equal to $10 million and then only to the
extent of any such excess;
(ii) the maximum amount for which Leucadia and the Seller shall
be liable with respect to matters covered by Section 9.2(a)(i) (other
than with respect to (x) Section 5.6, (y) Section 5.10 (limited
however to Income Taxes) and (z) the second and third sentences of
Section 5.23(c)) or Section 9.2(a)(iv) shall not exceed in the
aggregate $100 million;
(iii) neither Leucadia nor the Seller shall have a right to
contribution against either of the Company or its Subsidiaries or any
similar right in respect of any amounts paid by the Seller to the
Buyer Indemnities pursuant to the provisions of this Section 9.2;
(iv) in all cases determining whether there has been a breach of
a representation or warranty by Leucadia or the Seller for purposes of
this Section 9.2, or in determining the amount of any Losses with
respect to such breach, such representations and warranties shall be
read without regard to any materiality qualifier (including, without
limitation, any reference to Material Adverse Effect) contained
therein;
(v) the parties agree that any amount payable to the Buyer or
Level 3 made pursuant to this Section 9.2 shall be treated for tax
purposes as an adjustment to the Purchase Price, unless otherwise
required by applicable law;
(vi) the parties agree that any amount payable to the Buyer or
Level 3 made pursuant to this Section 9.2 shall be calculated net of
any tax benefits realized in cash (or as an offset to an obligation
payable currently) within a period of five years following the Closing
Date by the Indemnitee or its Affiliates as a result of the Loss. In
54
the case of any Tax benefits realized after the indemnity amount has
been paid by the Seller (but within the five-year period following the
Closing Date), the Buyer shall make a further payment to the Seller
when such benefits are received. Tax benefits shall be considered
realized when there is a reduction in the Buyer's liability for Taxes,
determined by comparing the amount of such liability without the Tax
benefits to the amount of such liability when such Tax benefits are
taken into account;
(vii) the parties agree that, if the liabilities pursuant to
Section 9.2 exceed $50 million in the aggregate, Leucadia and the
Seller shall be entitled to satisfy 50% of such liabilities in excess
of $50 million by delivery of Shares, with stock powers duly endorsed,
with the value of each Share at the time of such payment being deemed
to be the average of the volume weighted sales prices per share of
Level 3 Common Stock as reported by the NASDAQ Stock Market (or such
other nationally recognized trading market on which the Level 3 Common
Stock is then principally traded) for the 10 trading-day period ending
upon the trading day immediately preceding the date that Leucadia
and/or the Seller makes the payment pursuant to this Section 9.2;
(viii) neither Leucadia nor the Seller shall have any liability
under this Section 9.2 for a Loss to the extent such Loss has been
reflected in the Actual Adjusted Net Working Capital as finally
determined pursuant to Section 3.2 hereof; and
(ix) neither Leucadia nor the Seller shall have any liability
with respect to the Transferred Benefit Plans in the event the Buyer
exercises the Benefit Plan Substitution Right in accordance with
Section 2.2(b).
SECTION 9.3. Indemnification by Level 3 and the Buyer.
(a) Notwithstanding the Closing and regardless of any investigation
at any time made by or on behalf of the Seller or Leucadia or of any knowledge
or information that the Seller or Leucadia may have, the Buyer and Level 3 shall
jointly and severally indemnify and fully defend, save and hold Leucadia and the
Seller harmless if Leucadia or the Seller shall at any time or from time to time
suffer any Losses arising out of or resulting from, or shall pay or become
obligated to pay any sum on account of any one or more of the following:
(i) any breach of any representation or warranty of Level 3 or
the Buyer contained in this Agreement or in any certificate delivered
to Leucadia or the Seller in connection with the Closing;
(ii) any failure of Level 3 or the Buyer duly to perform or
observe any covenant or agreement contained in this Agreement on the
part of Level 3 or the Buyer to be performed or observed;
(iii) the matters addressed in the letter set forth as Schedule
9.3(a)(iii) to the extent and subject to the limitations and
procedures set forth therein; or
(iv) any Taxes for any Straddle Period of the Company or its
Subsidiaries not payable or indemnifiable by Leucadia or Seller
pursuant to Section 7.13 and Section 9.2(a).
55
(b) Notwithstanding anything herein to the contrary:
(i) The Buyer and Level 3 shall not have any liability under
Section 9.3(a)(i) (other than with respect to Section 6.6) unless the
aggregate of all Losses relating thereto for which the Buyer and Level
3 would, but for this Section 9.3(b)(i), be liable exceeds on a
cumulative basis an amount equal to $10 million and then only to the
extent of any such excess;
(ii) the maximum amount for which the Buyer and the Seller shall
be liable with respect to matters covered by Section 9.3(a)(i) (other
than with respect to Section 6.6) shall not exceed in the aggregate
$100 million;
(iii) in all cases determining whether there has been a breach of
a representation or warranty by the Buyer or Xxxxx 0 for purposes of
this Section 9.3, or in determining the amount of any Losses with
respect to such breach, such representations and warranties shall be
read without regard to any materiality qualifier contained therein;
(iv) the parties agree that any amount payable to the Seller or
Leucadia made pursuant to this Section 9.3 shall be treated for tax
purposes as an adjustment to the Purchase Price, unless otherwise
required by applicable law;
(v) the parties agree that any amount payable to the Seller or
Leucadia made pursuant to this Section 9.3 shall be calculated net of
any tax benefits realized in cash (or as an offset to an obligation
payable currently) within a period of five years following the Closing
Date by the Indemnitee or its Affiliates as a result of the Loss. In
the case of any Tax benefits realized after the indemnity amount has
been paid by the Buyer (but within the five-year period following the
Closing Date), the Seller promptly shall make a further payment to the
Buyer when such benefits are received. Tax benefits shall be
considered realized when there is a reduction in the Seller's
liability for Taxes, determined by comparing the amount of such
liability without the Tax benefits to the amount of such liability
when such Tax benefits are taken into account; and
(vi) if the Buyer exercises the Benefit Plan Substitution Right,
the Buyer and Level 3 shall indemnify Leucadia and the Seller for any
Losses arising out of or resulting from, or shall pay or become
obligated to pay any sum on account of, the Retirement Plan and the
Deferred Compensation Plan.
SECTION 9.4. Procedures for Indemnification. Other than as set forth
in Section 7.13(e) and (f), if a party entitled to indemnification under this
Section 9 (an "Indemnitee") asserts that a party obligated to indemnify it under
this Section 9 (an "Indemnitor") has become obligated to such Indemnitee
pursuant to Section 9.2 or 9.3, or if any suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which the Indemnitor may
become obligated to an Indemnitee hereunder, such Indemnitee shall give written
notice to the Indemnitor; provided, however, that the failure of the Indemnitee
to give prompt notice to the Indemnitor shall not release the Indemnitor of its
indemnification obligations hereunder, except to the extent the Indemnitor shall
have been materially prejudiced by such failure. The Indemnitor agrees to
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defend, contest or otherwise protect the Indemnitee against any such suit,
action, investigation, claim or proceeding at its sole cost and expense subject
to the provisions of this Section 9. The Indemnitor shall have the sole power to
direct and control the defense of any such suit, action, investigation, claim or
proceeding. The Indemnitee shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of the
Indemnitee's choice. The Indemnitee shall make available all information and
assistance that the Indemnitor may reasonably request and shall fully cooperate
with the Indemnitor in such defense, including with respect to indemnification
with respect to Taxes, providing powers of attorney authorizing Leucadia or its
designee to control and take action in connection with any such Taxes. In the
event of a failure of the Indemnitee to provide cooperation as required under
this Section 9.4, the Indemnitor's obligation to indemnify the Indemnitee shall
be reduced to the extent of the Losses with respect to which the Indemnitor's
ability to defend against the action, investigation, claim or proceeding
underlying such indemnification obligation has been prejudiced by such failure.
The Indemnitor shall not compromise or settle any such suit, action,
investigation, claim or proceeding unless (x) such compromise or settlement is
on exclusively monetary terms and shall be paid entirely by the Indemnitor
(subject to the provisions of Section 9.2(b)(i) and (ii) and 9.3(b)(i) and (ii),
which shall be controlling) and the Indemnitee receives an unconditional release
in such compromise or settlement or (y) the Indemnitee shall have consented in
writing to the terms of such compromise or settlement, which consent shall not
unreasonably withheld; provided, however, that if the Indemnitee fails to
consent thereto, the Indemnitor's liability with respect to such matter shall
not exceed the proposed settlement amount. If the Indemnitor fails timely to
defend, contest or otherwise protect against such suit, action, investigation,
claim or proceeding, the Indemnitee shall have the right to do so, including,
without limitation, the right to make any compromise or settlement thereof, and
the Indemnitee shall be entitled to recover the entire cost thereof from the
Indemnitor subject to the provisions of this Section 9, including, without
limitation, reasonable attorneys' fees, disbursements and amounts paid as the
result of such suit, action, investigation, claim or proceeding.
SECTION 9.5. Exclusive Remedy. From and after the Closing Date, the
sole and exclusive remedy for any breach or failure to be true and correct, or
alleged breach or failure to be true and correct, of any representation or
warranty or any covenant or agreement in this Agreement, except for claims
relating to fraud or for injunctive relief, shall be indemnification in
accordance with this Section 9.
SECTION 10. CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLER.
-------------------------------------------------
The obligations of the Seller to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by the Seller in its sole discretion:
SECTION 10.1. Representations and Warranties of the Buyer and Level
3. Each of the representations and warranties of the Buyer and Level 3 contained
in this Agreement (read without any materiality qualifications) shall be true
and correct as of the date of this Agreement and as of the Closing Date (except
to the extent such representations and warranties speak as of an earlier date),
other than such failures to be true and correct that, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect with respect to Xxxxx 0 and its Subsidiaries. Notwithstanding the
foregoing, Section 6.8 shall be disregarded for purposes of the prior sentence
if the Buyer exercises its Cash Substitution Right in full in accordance with
Section 2.2 within the time periods set forth in Section 12.1(d).
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SECTION 10.2. Performance of the Obligations of the Buyer and Level
3. Level 3 and the Buyer shall have performed in all material respects all
obligations required under this Agreement to be performed by it on or before the
Closing Date. The Seller shall have received a certificate as to the
satisfaction of the conditions set forth in Sections 10.1 and 10.2 dated the
Closing Date and signed by any officer of Level 3 and the Buyer.
SECTION 10.3. HSR Act. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
SECTION 10.4. No Violation of Orders. No temporary restraining order,
preliminary or permanent injunction or other order issued by a court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect;
provided that any party invoking this condition shall have used commercially
reasonable efforts to have any such order, injunction or restraint vacated or
removed.
SECTION 10.5. No Material Adverse Change. During the period from the
date hereof to the Closing Date, there shall not have been any Material Adverse
Effect with respect to Xxxxx 0 and its Subsidiaries; provided, however, that
this closing condition shall be void and be of no further force and effect if
the Buyer exercises its Cash Substitution Right in full in accordance with the
time periods set forth in Section 2.2 or Section 12.1(d).
SECTION 10.6. Lease Agreement. The Company shall have executed the
lease agreement, in the form attached hereto as Schedule 10.6 (the "Lease
Agreement"), for a portion of the Tulsa, Oklahoma headquarters, all as set forth
more particularly therein.
SECTION 10.7. Registration Rights Agreement. Level 3 shall have
executed the registration rights and transfer restriction agreement in the form
attached hereto as Exhibit A (the "Registration Rights Agreement").
SECTION 10.8. Securities Matters. The Shares issued hereunder, if
any, shall have been admitted for listing on the NASDAQ Stock Market.
SECTION 10.9. Opinion of Counsel. The Seller and Leucadia shall have
received an opinion, dated as of the Closing Date, from Xxxxxxx Xxxx & Xxxxxxxxx
LLP, counsel to the Buyer, covering the matters set forth on Schedule 10.9,
subject to customary limitations and qualifications for opinions given in
transactions of the kind contemplated hereby.
SECTION 10.10. Other Closing Documents. The Seller and Leucadia shall
have received such other certificates, instruments and documents in confirmation
of the representations and warranties of the Buyer and Level 3 or in furtherance
of the transactions contemplated by this Agreement as the Seller or its counsel
may reasonably request.
SECTION 10.11. SBC Consent to Assignment. The Consent to Assignment,
dated October 28, 2005, among SBC and its Affiliates party to the SBC Settlement
Agreement, Leucadia, the Company and WilTel Communications, LLC, attached hereto
as Schedule 10.11, shall be in full force and effect.
58
SECTION 10.12. The Buyer Reimbursements; Cash Balance. The Buyer or
Level 3 (as applicable) shall have complied in all respects with the covenants
set forth in Section 8.7(a) and (b) and shall have paid all amounts due
thereunder.
SECTION 11. CONDITIONS PRECEDENT TO PERFORMANCE BY THE BUYER AND
----------------------------------------------------
LEVEL 3.
-------
The obligations of Level 3 and the Buyer to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, at
or before the Closing Date, of the following conditions, any one or more of
which may be waived by Xxxxx 0 and the Buyer in their sole discretion:
SECTION 11.1. Representations and Warranties of Leucadia and the
Seller. Each of the representations and warranties of the Seller contained in
this Agreement (read without any materiality qualifications) shall be true and
correct as of the date of this Agreement and as of the Closing Date (except to
the extent such representation and warranties speak as of an earlier date),
other than such failures to be true and correct that, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect with respect to the Company and its Retained Subsidiaries.
SECTION 11.2. Performance of the Obligations of Leucadia and the
Seller. Each of Leucadia and the Seller shall have performed in all material
respects all obligations required under this Agreement to be performed by it on
or before the Closing Date; provided, however, that the obligation of Level 3
and the Buyer to consummate the transactions contemplated hereby shall not be
affected by the failure by Leucadia and the Seller to perform their respective
obligations under Section 7.1 of this Agreement, unless such failure to perform
such obligations was not in good faith or would reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect with
respect to the Company and its Retained Subsidiaries. Xxxxx 0 and the Buyer
shall have received a certificate as to the satisfaction of the conditions in
Section 11.1, 11.2, 11.6 and 11.8 dated the Closing Date and signed by any
officer of each of Leucadia and the Seller.
SECTION 11.3. Approvals. All consents, waivers, authorizations and
approvals of any Governmental Entity set forth on Schedule 11.3 required in
connection with the execution, delivery and performance of this Agreement shall
have been duly obtained and shall be in full force and effect on the Closing
Date.
SECTION 11.4. HSR Act. Any applicable waiting period under the HSR
Act shall have expired or been terminated.
SECTION 11.5. No Violation of Orders. No temporary restraining order,
preliminary or permanent injunction or other order issued by a court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect;
provided that any party invoking this condition shall have used commercially
reasonable efforts to have any such order, injunction or restraint vacated or
removed.
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SECTION 11.6. No Pension Plan Termination. The Retirement Plan shall
not, at the initiation of the PBGC or otherwise, have been terminated pursuant
to Title IV of ERISA, no actions or proceedings for the termination of such
pension plan shall have been initiated or be pending and none of the Company,
any of its Subsidiaries or any ERISA Affiliate shall have authorized or agreed
to any such termination.
SECTION 11.7. No Material Adverse Change. During the period from the
date hereof to the Closing Date, there shall not have been any Material Adverse
Effect with respect to the Company and the Retained Subsidiaries.
SECTION 11.8. Pre-Closing Transfers. The Company and its Subsidiaries
shall have completed the Pre-Closing Transfers in accordance with the terms of
Section 7.4.
SECTION 11.9. The Company's Credit Documents. Leucadia or the Seller
shall have on the Closing Date paid in full all obligations of the Company and
the Retained Subsidiaries under the Company's Credit Documents and the Seller
shall have delivered to the Buyer a written payoff letter of the lenders a party
thereto, in a form reasonably satisfactory to the Buyer, stating that upon the
lenders' receipt of such payment on the Closing Date, all obligations of the
Company and the Retained Subsidiaries under the Company's Credit Documents shall
be discharged and any Lien held by them with respect to the assets and
properties of the Company and the Retained Subsidiaries under the Company's
Credit Documents shall be released in full.
SECTION 11.10. The Company's Real Estate Debt Documents. Leucadia
shall have delivered to the Buyer executed releases of the obligations of the
Company and WilTel Communications, LLC with respect to the Company's Real Estate
Debt Documents.
SECTION 11.11. Lease Agreement. WilTel Technology Center, LLC and the
Company shall have executed the Lease Agreement.
SECTION 11.12. Registration Rights Agreement. Leucadia and the Seller
shall have executed the Registration Rights Agreement.
SECTION 11.13. Opinion of Counsel. The Buyer and Level 3 shall have
received an opinion, dated as of the Closing Date, from Weil, Gotshal & Xxxxxx
LLP, counsel to Leucadia and the Seller, and such other local counsel to the
Seller covering the matters set forth on Schedule 11.13, subject to customary
limitations and qualifications for opinions given in transactions of the kind
contemplated hereby.
SECTION 11.14. Other Closing Documents. The Buyer and Level 3 shall
have received such other certificates, instruments and documents in confirmation
of the representations and warranties of the Seller and Leucadia or in
furtherance of the transactions contemplated by this Agreement as the Buyer or
its counsel may reasonably request.
60
SECTION 11.15. Tax Related Documentation. The Seller shall deliver to
Buyer a non-foreign affidavit dated as of the Closing Date, in form and
substance required under Treasury Regulation Section 1.1445-2(b)(2)(iv)(B)
issued pursuant to Section 1445 of the Code stating that the Seller is not a
"Foreign Person" as defined in Section 1445 of the Code.
SECTION 11.16. The Seller Pre-Closing Transfers, Reimbursements and
Cash Balance. The Seller shall have complied in all respects with the covenants
set forth in Section 7.4 and Section 7.15(a) and (b) and shall have paid all
amounts due to the Company thereunder. SECTION 12. TERMINATION.
SECTION 12.1. Conditions of Termination. Notwithstanding anything to
the contrary contained herein, this Agreement may be terminated at any time
before the Closing:
(a) By mutual consent of the Seller and the Buyer;
(b) By the Buyer, if Leucadia or the Seller has breached any
representation, warranty, covenant or agreement contained in this Agreement and
has not, in the case of a breach of a covenant or agreement, cured such breach
within 15 Business Days after written notice to the Seller of its intent to
terminate this Agreement pursuant to this Section 12.1(b) (provided, that the
Buyer and Level 3 are not then in material breach of the terms of this
Agreement, and provided further, that no cure period shall be required for a
breach which by its nature cannot be cured) such that the conditions set forth
in Section 11.1 or the first sentence of 11.2 hereof, as the case may be, will
not be satisfied;
(c) By the Seller, if Level 3 or the Buyer has breached any
representation, warranty, covenant or agreement contained in this Agreement
(other than Section 6.8) and has not, in the case of a breach of a covenant or
agreement, cured such breach within 15 Business Days after written notice to the
Buyer of its intent to terminate this Agreement pursuant to this Section 12.1(c)
(provided, that the Seller and Leucadia are not then in material breach of the
terms of this Agreement, and provided further, that no cure period shall be
required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 10.1 or the first sentence Section 10.2 hereof,
as the case may be, will not be satisfied;
(d) By the Seller, if Level 3 or the Buyer has breached Section 6.8
of this Agreement such that the condition set forth in Section 10.1 would not be
satisfied and has not given written notice to the Seller of the Buyer's
irrevocable election to exercise the Cash Substitution Right in full in
accordance with Section 2.2 of this Agreement within 10 Business Days after the
Seller has given written notice to the Buyer of its intent to terminate this
Agreement pursuant to this Section 12.1(d) (provided, that the Seller and
Leucadia are not then in material breach of the terms of this Agreement);
(e) By the Seller or the Buyer if: (i) there shall be a final,
non-appealable order of a federal or state court in effect preventing
consummation of the transactions contemplated hereby; or (ii) there shall be
enacted any federal or state statute which would make consummation of the
transactions contemplated hereby illegal; or
61
(f) By the Seller or the Buyer if the Closing shall not have been
consummated by May 1, 2006; provided that the Buyer or the Seller may extend
such date by one (1) additional month if the condition set forth in Section 11.3
is the only condition remaining to be satisfied on such date (other than those
conditions that are only capable of being satisfied on the Closing) and such
party reasonably believes in good faith that such condition is likely to be
satisfied within such additional one-month period; and provided further that the
right to terminate this Agreement under this Section 12.1(f) shall not be
available to any party whose failure to fulfill any material obligation under
this Agreement has been both willful and the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
SECTION 12.2. Effect of Termination. In the event of the termination
of this Agreement as provided in Section 12.1 hereof, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of the Seller or the Buyer, or their respective officers, directors,
stockholders, members or other Persons under their control, except to the extent
that such termination results from the willful breach by a party hereto of any
of its representations, warranties, covenants or agreements set forth in this
Agreement, and provided that the provisions of Sections 9.2(b)(ii), Section
9.3(b)(ii), 12 and 13, hereof and the second to last sentence in Section 7.3
hereof shall remain in full force and effect and survive any termination of this
Agreement.
SECTION 13. MISCELLANEOUS.
-------------
SECTION 13.1. Successors and Assigns. Except as otherwise provided in
this Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect; provided, however, that the Buyer may
assign its rights hereunder to an Affiliate which is a Subsidiary of Level 3;
provided, further that such Affiliate enters into a written agreement with the
other parties hereto to be bound by the provisions of this Agreement in all
respects and to the same extent as the assigning party is bound and provided
that the assigning party shall continue to be bound by all of the obligations
hereunder as if such assignment had not occurred and to perform such obligations
to the extent such Affiliate fails to do so. Notwithstanding the foregoing,
Level 3 shall not be relieved of its obligation to issue the Shares or to
guarantee the obligations of Buyer hereunder following any permitted assignment
hereunder and Leucadia shall not be relieved of its obligation to guarantee the
obligations of Seller hereunder following any permitted assignment hereunder.
This Agreement shall inure to the benefit of and shall be binding upon the
successors and permitted assigns of the parties hereto.
SECTION 13.2. Governing Law, Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York. The parties hereto irrevocably elect as the sole
judicial forum for the adjudication of any matters arising under or in
connection with this Agreement, and consent to the jurisdiction of, the courts
of the County of New York, State of New York or the United States of America for
the Southern District of New York.
SECTION 13.3. Expenses. Except as otherwise provided herein,
regardless of whether or not the transactions contemplated hereby are
consummated, (i) each of the Seller and Leucadia, on the one hand, and the Buyer
and Level 3, on the other hand, will pay its own costs and expenses incident to,
preparing for, entering into and carrying out this Agreement and the
62
consummation of the transactions contemplated hereby and (ii) the Seller and
Leucadia shall pay such costs and expenses of the Company and its Subsidiaries
to the extent not paid prior to the Closing or not reflected in the final
determination of Actual Adjusted Net Working Capital.
SECTION 13.4. Severability. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the extent it is
not so declared, and all of the other provisions of this Agreement shall remain
in full force and effect.
SECTION 13.5. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given or (ii) on the day after delivery (or if
delivered on a Saturday, the next following Business Day) to Federal Express or
similar overnight courier or the Express Mail service maintained by the United
States Postal Service (in all cases mailed for next day delivery), to the party
as follows:
If to Leucadia or the Seller:
Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, President
With a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
If to the Buyer or Level 3:
Xxxxx 0 Communications, Inc.
0000 Xxxxxxxx Xxxx.
Xxxxxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
With a copy (which shall not constitute notice) to:
Xxxxxxx Xxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Boston, Esq.
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Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set forth
above.
SECTION 13.6. Parent Guaranties.
(a) Leucadia shall perform, or cause to performed, when due all the
covenants and agreements to be performed under this Agreement by the Seller.
(b) Level 3 shall perform, or cause to performed, when due all the
covenants and agreements to be performed under this Agreement by the Buyer.
SECTION 13.7. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as a further or
continuing waiver of any such condition, or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
SECTION 13.8. Public Announcements. The parties agree that after the
signing of this Agreement, no party shall, or shall permit any of its Affiliates
to, make any press release or public announcement concerning this transaction
without the prior approval of the other parties, unless a press release or
public announcement is required by law, judicial or administrative process or by
obligations pursuant to any listing agreement with any national securities
exchange or the NASDAQ Stock Market. Before a party makes any such announcement
or other disclosure, it agrees to give the other parties prior notice and an
opportunity to comment on the proposed disclosure.
SECTION 13.9. Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the transactions
contemplated hereby and supersedes and replaces all prior agreements and
understandings, oral or written, with regard to such transactions, unless
otherwise provided herein. The Confidentiality Agreement and all Exhibits and
Schedules hereto and any documents and instruments delivered pursuant to any
provision hereof, including the Lease Agreement and the Registration Rights
Agreement, are expressly made a part of this Agreement as fully as though
completely set forth herein.
SECTION 13.10. Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any Persons other than parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement is intended to relieve or discharge
the obligations or liability of any third Persons to the Seller, Leucadia, Level
3 or the Buyer. No provision of this Agreement shall give any third parties any
right of subrogation or action over or against the Seller, Leucadia, the Buyer
or Level 3.
SECTION 13.11. Scheduled Disclosures. Disclosure of any matter, fact
or circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto (unless reasonably
apparent from a reading of the Schedules).
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SECTION 13.12. Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
SECTION 13.13. Counterparts. This Agreement may be executed in
counterparts (including by facsimile), each of which shall be deemed an
original, but all of which shall constitute the same instrument.
[Remainder of Page Intentionally Left Blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
LEUCADIA NATIONAL CORPORATION,
a New York corporation
By: /s/ Xxxxxx X. Orlando
------------------------------------
Name: Xxxxxx X. Orlando
Title: Vice President
XXXXXXX ENTERPRISES, INC.,
a Colorado corporation
By: /s/ Xxxxxx X. Orlando
------------------------------------
Name: Xxxxxx X. Orlando
Title: Vice President
LEVEL 3 COMMUNICATIONS, LLC,
a Delaware limited liability company
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
LEVEL 3 COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
65
