NON-COMPETITION AGREEMENT
Exhibit 10.9
THIS NON-COMPETITION AGREEMENT (this “Agreement”) is effective as of this
16th day of May, 2006, by and between X.X. Xxxxxxxxx Corporation, a Delaware corporation
(“Buyer”), X.X. Xxxxxxxxx Publishing & Advertising, Inc. (f/k/a Sprint Publishing &
Advertising, Inc.), a Kansas corporation (“RHDPA”), CenDon, L.L.C., a Delaware limited
liability company (“CenDon”), X.X. Xxxxxxxxx Directory Company (f/k/a Centel Directory
Company), a Delaware corporation (“RHDDC”) (RHDPA, CenDon and RHDDC are referred to
collectively in this Agreement as “Publisher”), Embarq Corporation, a Delaware corporation
(“Embarq Parent”) and Embarq Minnesota, Inc. (f/k/a Sprint Minnesota, Inc.), Embarq
Florida, Inc. (f/k/a Sprint — Florida, Incorporated), Carolina Telephone & Telegraph Co., United
Telephone — Southeast, Inc., United Telephone Company of the Carolinas, United Telephone Company of
Southcentral Kansas, United Telephone Company of Eastern Kansas, United Telephone Company of
Kansas, Embarq Missouri, Inc. (f/k/a Sprint Missouri, Inc.), United Telephone Company of Texas,
Inc., United Telephone Company of the West, The United Telephone Company of Pennsylvania, United
Telephone Company of New Jersey, Inc., United Telephone Company of the Northwest, United Telephone
Company of Ohio, United Telephone Company of Indiana, Inc., Central Telephone Company, Central
Telephone Company of Virginia and Central Telephone Company of Texas (collectively “Embarq
LEC”). Buyer, Publisher, Embarq Parent and Embarq LEC are sometimes referred to in this
Agreement as a “Party” and collectively as the “Parties.”
RECITALS:
A. On the date of this Agreement, Publisher and Embarq LEC are entering into a Directory
Services License Agreement (the “Directory Services License Agreement”) in order to provide
for the continued production, publication and distribution of the Embarq Directories by Publisher
following the completion of the Spin-off; and
B. Capitalized terms not otherwise defined in this Agreement shall have the meanings ascribed
thereto in the Directory Services License Agreement.
C. Embarq Parent and Embarq LEC acknowledge that the agreements and covenants contained in
this Agreement are essential to protect the benefits that Buyer expects to receive pursuant to the
transactions contemplated by the Stock Purchase Agreement; and
D. Embarq Parent and Embarq LEC acknowledge that the agreements and covenants contained in
this Agreement were a material inducement to Buyer’s agreement to enter into the Stock Purchase
Agreement and the other agreements contemplated by the Stock Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties,
covenants and agreements set forth in this Agreement, the Parties agree as follows:
ARTICLE 1
TERM AND TERMINATION
Section 1.1 Term. Except as otherwise provided in this Agreement or the Directory
Services License Agreement, this Agreement will become effective when and if the Effective Date
occurs and will be coterminous with the Directory Services License Agreement, and Embarq Parent’s
and Embarq LEC’s obligations will terminate immediately upon the termination or expiration of the
Directory Services License Agreement, except as required by Section 9.1(c) of the Directory
Services License Agreement; provided, however, that no termination or expiration of this Agreement
will release Embarq Parent or Embarq LEC from liability for prior breaches of any provision of this
Agreement; provided further that, if the Effective Date has not occurred prior to October 31, 2006,
this Agreement will terminate and become void and of no force and effect as if it had never been
entered into.
ARTICLE 2
NON-COMPETITION AND NON-SOLICITATION
Section 2.1 Embarq Obligations.
(a) Until the termination or expiration of the Directory Services License Agreement (or such
other time as specified by Section 8.6 of the Directory Services License Agreement, if applicable),
no Embarq Entity will directly or indirectly engage in, own, manage, operate, share any revenues of
or have any profit or other equity interest in (except pursuant to the Directory Services License
Agreement or by ownership of less than five (5) percent of the outstanding capital stock or equity
interest of an entity whose securities are publicly traded), any business or entity engaged in:
(i) the business of producing, publishing or distributing any physical media directory
containing Subscriber Listing Information or Directional Information that is primarily
distributed to or directed at Subscribers and businesses or organizations located or
providing services within the Service Areas;
(ii) the sale of any Local Advertising, subject to the provisions of Section 2.1(b)
below; and
(iii) advertising, promoting or using, or entering into an agreement with any third
party to advertise, promote or use, an affiliation with the Service Area ILEC or Service
Area ILEC brand in connection with any of the foregoing.
If an Embarq Entity acquires a party that is engaged in operations that cause such Embarq Entity to
be in breach of this Section 2.1(a), the Embarq Entities will not be deemed to be in breach of this
Section 2.1(a) if the acquiring Embarq Entity is in good faith attempting to divest or otherwise
terminate the competing directories or other activities, except that such Embarq Entity must divest
or otherwise terminate the production, publication and distribution of such
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competing directories or other activities within twelve (12) months of the closing of the
acquisition by such Embarq Entity.
(b) Notwithstanding any other provision of this Agreement or the Directory Services License
Agreement (including Section 2.1(a) of this Agreement), no Embarq Entity will be prohibited from
selling Local Advertising that is bundled with or otherwise comprises an integral part of the sale
of a telecommunications product or service in any Service Area into or as part of a non-physical
media directory if such Embarq Entity reasonably determines that it must sell such Local
Advertising in order to remain competitive with regards to the sale of such telecommunications
services or products in that particular Service Area, so long as such Embarq Entity complies with
this Section 2.1(b).
(i) In such circumstance, an Embarq Entity may only sell such Local Advertising through
a third party if it complies with this Section 2.1(b)(i).
(A) The Embarq Entity will submit a written proposal to Publisher outlining
specific terms and conditions under which Publisher would act as the exclusive
content provider and/or sales agent of the Embarq Entity for the sale of such Local
Advertising, including compensation terms whereby Publisher would be entitled to
receive and retain all revenues (or, if such Local Advertising is bundled with a
telecommunications service or product, the fair market value thereof) from the sale
of such Local Advertising.
(B) The Embarq Entity will negotiate in good faith with Publisher for a period
of thirty (30) days following the receipt by Publisher of such proposal to agree on
terms and conditions under which Publisher would act as its exclusive content
provider and/or sales agent for such Local Advertising. If no agreement has been
reached by the end of the thirty (30)-day period, the Embarq Entity will submit a
final written proposal to Publisher who will have five (5) business days to accept
such proposal.
(C) If the Embarq Entity and Publisher are unable to agree on terms for
Publisher to act as content provider and/or sales agent by the end of the five
business day period specified above or if Publisher is unable or unwilling to act as
such content provider and/or sales agent, the Embarq Entity may engage a third party
to act as content provider and/or sales agent for such Local Advertising but only on
terms which in the aggregate are no more favorable to the third party than last
offered in writing to Publisher. The term of any such third party agreement will
not exceed three (3) years. In such event, no Embarq Entity will have any further
obligation to Publisher with respect to the Local Advertising that was within the
scope of the proposal, except that the Embarq Entity will repeat the process under
this Section 2.1(b)(i) if it desires to continue to market such Local Advertising
through a third party at the end of the term of the third party agreement.
(ii) In those circumstances where an Embarq Entity is permitted to sell Local
Advertising pursuant to Section 2.1(b) and sells such Local Advertising through its
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internal sales force (which will only be permitted where it is not commercially
practicable to sell such Local Advertising using a third party sales agent), the applicable
Embarq Entity will be required to pay to Publisher the Net Profits of the Embarq Entity from
the sale of such Local Advertising (based on the fair market value of such Local
Advertising). For purposes of this Section 2.1(b)(ii), “Net Profits” means (A) the amount
(if any) separately billed by such Embarq Entity for the sale of such Local Advertising,
(or, if greater, the fair market value of such Local Advertising) multiplied by (B) the
profit margin typically recognized in the advertising industry for the sale of advertising
similar to such Local Advertising (taking into account bad debt experience); provided that
if no such standard is available, Net Profits will be determined based on an assumed profit
margin of 25%.
(iii) Nothing in this Section 2.1(b) shall give any Embarq Entity the right to sell
Local Advertising in any physical or non-physical directory operated by Publisher.
(c) For clarification purposes only, the Parties acknowledge that the noncompetition
restrictions in this Article 2 are not intended to restrict any activities by non-Affiliates of
Embarq Parent, such as (i) resellers or any other entities with which any Embarq Entity enters into
similar contractual arrangements intended to expand such Embarq Entity’s customer base, or (ii)
providers of content for delivery by any Embarq Entity network who are not agents of any Embarq
Entity for purposes of selling Local Advertising; provided that if and to the extent that an Embarq
Entity has the contractual or other right to prevent such activities, no Embarq Entity shall
solicit, consent to or approve any activities of such non-Affiliates that would be in breach of
this Article 2 if such activities were conducted by an Embarq Entity
(d) Notwithstanding any other provision of this Agreement, upon any direct or indirect sale or
transfer by Embarq Parent or Embarq LEC of all or any part of a Service Area(s) (whether by a sale
of assets or capital stock or by merger, including any change of control of Embarq Parent) in
accordance with Section 9.1 of the Directory Services License Agreement, neither the purchaser of
such Service Area(s) nor any of its Affiliates nor any Embarq Entity will be deemed to be in
violation of this Agreement as a result of any product or service and related activities by the
purchaser and its Affiliates that exist as of the closing of such sale; provided that (i) Publisher
continues to have for all purposes the exclusive right as set forth in the Directory Services
License Agreement and the other Commercial Agreements to (A) produce, publish and distribute Embarq
Directories on behalf of the ILEC in the affected Service Area(s) and (B) to use in the affected
Service Area(s) the brand and/or marks under which the ILEC provides local telephone exchange
service in the affected Service Area(s), and (ii) in the event the purchaser at any time changes
the brand and/or marks under which the ILEC provides local telephone exchange service in the
affected Service Area(s), any product or service and related activities that would otherwise
violate this Agreement (a “Competing Directory”) may not continue to be branded with any
trademark or tradename that had previously been used by the purchaser or its Affiliates in
connection with its physical or non-physical directories or ILEC business. (For example, if a
purchaser acquires Embarq Parent, the purchaser and its Affiliates could continue to distribute any
Competing Directory for as long as the Embarq brand is retained for the ILEC in the Service Areas;
if the purchaser causes the ILEC to change the ILEC brand from the Embarq brand to a different
brand, purchaser and its Affiliates would be required to rebrand, shut down or dispose of any
Competing Directory that previously operated under purchaser’s brand
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and the Publisher would have the exclusive right to use the new ILEC brand as contemplated by
the Directory Services License Agreement and the Trademark License Agreement.) If a purchaser
substitutes a different brand for the Licensed Marks pursuant to Section 9.1 of the Directory
Services License Agreement, the purchaser will not be permitted to rebrand a Competing Directory
with any of the Licensed Marks.
(e) In the event a Service Area is sold or transferred pursuant to Section 9.1 of the
Directory Services License Agreement, the Embarq Entities will remain bound by the obligations of
Sections 2.1(a) and 2.1(b) of this Agreement with respect to the then applicable Geographic
Coverage Areas relating to such sold or transferred Service Area.
(f) The provisions of this Section 2.1 are subject to the terms of Articles 8 and 9 of the
Directory Services License Agreement.
Section 2.2 Non-Solicitation. During the two (2) year-period following the
termination of this Agreement, no Embarq Entity will, directly or indirectly, through one or more
of its Affiliates, on behalf of itself or any other person, recruit or otherwise solicit or induce
any employee of Publisher, its Subsidiaries or any of their successors to terminate his or her
employment relationship with Publisher, its Subsidiaries or any of their successors. During (a)
the period between the Effective Date and January 3, 2008 and (b) the five (5) year-period
following the termination of this Agreement, no Embarq Entity will, directly or indirectly, through
one or more of its Affiliates, on behalf of itself or any other person, recruit or otherwise
solicit or induce the chief executive officer, chief financial officer, president, chief operating
officer, chief information officer, chief technology officer or general counsel of Publisher or any
sales employee of Publisher who is director level or above to terminate his or her employment
relationship with Publisher or its Subsidiaries. The foregoing will not, however, prohibit any
Embarq Entity from publishing any general public solicitation of employment opportunities.
ARTICLE 3
MISCELLANEOUS
Section 3.1 Assignment. Except as provided in Section 9.1 of the Directory Services
License Agreement, no Party may assign all or any of its rights or obligations under the Agreement
without the prior written consent of the other Parties, except that any Party may assign all of its
rights and obligations under the Agreement (a) in connection with a sale of all or substantially
all of its assets or by merger if the purchaser assumes in writing all of the assigning Party’s
rights and obligations under this Agreement in a form reasonably acceptable to the other Party and
(b) to (i) any of its Affiliates or (ii) any lender or any other party as collateral in connection
with any financing; provided that no such assignment permitted by this clause (b) will relieve such
Party of any of its obligations under this Agreement.
Section 3.2 Notices. Any notice required or permitted under this Agreement will be in
writing and will be hand-delivered, sent by confirmed facsimile or mailed by overnight express
mail. Notice will be deemed to have been given when such notice is received. Addresses for
notices are as follows:
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If to an Embarq Entity:
Embarq Corporation
0000 X. 000xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Senior Vice President, Corporate Strategy & Development
Facsimile: 000-000-0000
0000 X. 000xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Senior Vice President, Corporate Strategy & Development
Facsimile: 000-000-0000
With a copy to:
Embarq Corporation
0000 X. 000xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Legal — Corporate Secretary
Facsimile: 000-000-0000
0000 X. 000xx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxx 00000
Attention: Legal — Corporate Secretary
Facsimile: 000-000-0000
If to Buyer or Publisher:
X.X. Xxxxxxxxx Corporation
0000 Xxxxxxxx Xxxxx
Xxxx, Xxxxx Xxxxxxxx 00000
Facsimile: 000-000-0000
Attention: General Counsel
0000 Xxxxxxxx Xxxxx
Xxxx, Xxxxx Xxxxxxxx 00000
Facsimile: 000-000-0000
Attention: General Counsel
or at such other address as any Party may provide to the others by written notice.
Section 3.3 Entire Agreement. This Agreement constitutes the entire understanding and
agreement of the Parties concerning the subject matter of this Agreement, and on the Effective Date
will supersede any prior agreements, representations, statements, understandings, proposals,
undertakings or negotiations, among the Parties, whether written or oral, with respect to the
subject matter expressly set forth in this Agreement; provided that this Agreement does not
supersede the Original Non-Competition Agreement.
Section 3.4 Severability. If any term, condition or provision of this Agreement is
held to be invalid or unenforceable for any reason, such invalidity will not invalidate the entire
Agreement, unless such construction would be unreasonable. This Agreement will be construed as if
it did not contain the invalid or unenforceable provision or provisions, and the rights and
obligations of each Party will be construed and enforced accordingly, except that in the event such
invalid or unenforceable provision or provisions are essential elements of this Agreement and
substantially impair the rights or obligations of a Party, the Parties will promptly negotiate in
good faith a replacement provision or provisions.
Section 3.5 No Third Party Beneficiaries. This Agreement is intended solely for the
benefit of the Parties, and no third-party beneficiaries are created by this Agreement. This
Agreement does not provide and should not be construed to provide third parties with any remedy,
claim, liability, reimbursement, cause of action or other privilege.
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Section 3.6 Binding Effect. This Agreement will be binding on and inure to the
benefit of the Parties, and their respective successors and permitted assigns.
Section 3.7 Waivers. No waiver of any provision of this Agreement, and no consent to
any default under this Agreement, will be effective unless the same is in writing and signed by an
officer of the Party against whom such waiver or consent is claimed. In addition, no course of
dealing or failure of a Party strictly to enforce any term, right or condition of this Agreement
will be construed as a waiver of such term, right or condition. Waiver by a Party of any default
by any other Party will not be deemed a waiver of any subsequent or other default.
Section 3.8 Headings. The headings and numbering of sections and paragraphs in this
Agreement are for convenience only and will not be construed to define or limit any of the terms in
this Agreement or affect the meaning or interpretation of this Agreement.
Section 3.9 Survival. Any liabilities or obligations of a Party for acts or omissions
occurring prior to the cancellation or termination of this Agreement and any obligations of a Party
under any other provisions of this Agreement which, by their terms, are contemplated to survive (or
be performed after) termination of this Agreement (subject to any time limitations specified
therein) will survive the cancellation or termination of this Agreement.
Section 3.10 Modifications. No amendments, deletions, additions or other
modifications to this Agreement will be binding unless evidenced in writing and signed by an
officer of each of the respective parties hereto.
Section 3.11 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will be deemed to be an original instrument, but all such
counterparts together will constitute but one agreement. This Agreement will become effective when
one or more counterparts have been signed by each and delivered to the other Parties, it being
understood that the Parties need not sign the same counterpart.
Section 3.12 Remedies. The Parties agree that all disputes or controversies arising
out of or relating to this Agreement shall be resolved using the procedures set forth in the
Directory Services License Agreement, including Sections 17.1, 17.3, 17.4, 17.5 and 17.6, which are
incorporated herein by this reference.
Section 3.13 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES IS GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ITS CONFLICT OF LAWS
PRINCIPLES.
Section 3.14 Embarq Obligations. Each individual entity comprising Embarq LEC under
this Agreement will be severally responsible for the obligations of Embarq LEC under this Agreement
with respect to the specific Service Areas operated by such entity. Subject to any novation that
occurs pursuant to Section 9.1(b) of the Directory Services License Agreement, Embarq Parent will
be jointly and severally responsible with each entity comprising Embarq LEC for the obligations of
such entity under this Agreement.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the day
and year first above written.
BUYER:
X.X. XXXXXXXXX CORPORATION
By: /s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Senior Vice President and General Counsel
PUBLISHER: |
||
X.X. XXXXXXXXX PUBLISHING &
|
||
ADVERTISING, INC. |
||
(f/k/a Sprint Publishing & Advertising, Inc.) |
CENDON, L.L.C. | |
By: /s/ Xxxxxx X. Xxxx
|
By: /s/ Xxxxxx X. Xxxx | |
Name: Xxxxxx X. Xxxx
|
Name: Xxxxxx X. Xxxx | |
Title: Vice President
|
Title: Manager |
X.X. XXXXXXXXX DIRECTORY
COMPANY,
(f/k/a Centel Directory Company)
COMPANY,
(f/k/a Centel Directory Company)
By: /s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Vice President
EMBARQ PARENT:
EMBARQ CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chief Operating Officer
EMBARQ LEC:
EMBARQ MINNESOTA, INC.
EMBARQ FLORIDA, INC.
CAROLINA TELEPHONE & TELEGRAPH CO.
UNITED TELEPHONE — SOUTHEAST, INC.
UNITED TELEPHONE COMPANY OF THE CAROLINAS
UNITED TELEPHONE COMPANY OF SOUTHCENTRAL KANSAS
UNITED TELEPHONE COMPANY OF EASTERN KANSAS
UNITED TELEPHONE COMPANY OF KANSAS
EMBARQ MISSOURI, INC.
UNITED TELEPHONE COMPANY OF TEXAS, INC.
UNITED TELEPHONE COMPANY OF THE WEST
THE UNITED TELEPHONE COMPANY OF PENNSYLVANIA
UNITED TELEPHONE COMPANY OF NEW JERSEY, INC.
UNITED TELEPHONE COMPANY OF THE NORTHWEST
UNITED TELEPHONE COMPANY OF OHIO
UNITED TELEPHONE COMPANY OF INDIANA, INC.
CENTRAL TELEPHONE COMPANY
CENTRAL TELEPHONE COMPANY OF VIRGINIA
CENTRAL TELEPHONE COMPANY OF TEXAS
EMBARQ FLORIDA, INC.
CAROLINA TELEPHONE & TELEGRAPH CO.
UNITED TELEPHONE — SOUTHEAST, INC.
UNITED TELEPHONE COMPANY OF THE CAROLINAS
UNITED TELEPHONE COMPANY OF SOUTHCENTRAL KANSAS
UNITED TELEPHONE COMPANY OF EASTERN KANSAS
UNITED TELEPHONE COMPANY OF KANSAS
EMBARQ MISSOURI, INC.
UNITED TELEPHONE COMPANY OF TEXAS, INC.
UNITED TELEPHONE COMPANY OF THE WEST
THE UNITED TELEPHONE COMPANY OF PENNSYLVANIA
UNITED TELEPHONE COMPANY OF NEW JERSEY, INC.
UNITED TELEPHONE COMPANY OF THE NORTHWEST
UNITED TELEPHONE COMPANY OF OHIO
UNITED TELEPHONE COMPANY OF INDIANA, INC.
CENTRAL TELEPHONE COMPANY
CENTRAL TELEPHONE COMPANY OF VIRGINIA
CENTRAL TELEPHONE COMPANY OF TEXAS
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President
