SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 14, 1998
QWEST COMMUNICATIONS INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
000-22609 84-1339282
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(Commission File Number) (IRS Employer Identification No.)
700 QWEST TOWER, 555 SEVENTEENTH STREET DENVER, COLORADO 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-291-1400
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On December 14, 1998, the Registrant and Microsoft Corporation, a
Washington corporation ("Microsoft"), announced that they had agreed to enter
into a business relationship to offer communications network services, including
complex Web hosting, managed software services and virtual private networking.
In addition, Microsoft agreed to purchase from the Registrant 4,444,445 shares
of the Registrant's common stock (the "Shares"), at a price of $45.00 per Share,
for an aggregate purchase price of $200,000,025.
The Registrant expects that in 1999 and 2000, the services will generate
approximately $150 million in revenues, earnings before interest, taxes,
depreciation and amoritzation ("EBITDA") from the services will be positive by
$5 million to $10 million, and capital expenditures are expected to total
approximately $150 million. EBITDA from the services for 1999 will be slightly
negative. The Registrant further expects that in the first five years the
services will generate more than approximately $3 billion in revenues and $1
billion in EBITDA, and that capital expenditures will total approximately $300
million. In addition, the Registrant estimates the market opportunity to be $30
billion to $35 billion by 2003, and expects to capture between 5% and 10% of the
market share.
As described in the Common Stock Purchase Agreement that is filed as an
exhibit to this Current Report on Form 8-K, Microsoft has agreed not to transfer
the Shares for a period of two years except to persons approved by the
Registrant or to certain Microsoft controlled corporations. Further, unless
approved by the Registrant's board of directors, (i) Microsoft is prohibited
from acquiring more than 5% of the Registrant's common stock and (ii) Microsoft
may not take certain actions with respect to acquisition proposals or contested
proxy solicitations until the earlier of (A) such time as the officers,
directors and affiliates own less than 33% of the voting power of the
Registrant, (B) Microsoft otherwise disposes of the Shares, (C) the parties
terminate the business relationship or (D) December 14, 2003. Pursuant to the
terms of the Registration Rights Agreement that is filed as an exhibit to this
Report, Microsoft has one demand registration right at any time after ninety
days up to December 14, 2001 for all or any of the Shares.
A copy of the Registrant's press release announcing the business
relationship is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The Registrant separately announced that on December 11, 1998 its principal
stockholder, Anschutz Company, completed the previously announced transfer to a
nonaffiliated trust of approximately 9 million shares of the Registrant's common
stock, which has reduced Anschutz Company's beneficial ownership of the
Registrant's shares to below 50 percent. An over-allotment option has been
exercised that is expected to result in the transfer of an additional 0.6
million shares from Anschutz Company to the trust. The trust has issued its own
securities that will be exchanged in five years for all or a portion of the
shares transferred to the trust (or, in certain limited circumstances, the cash
equivalent). Investors in the trust's securities will earn quarterly cash
interest payments funded by U.S. treasury securities to be acquired by the
trust. The transaction has been structured so that Anschutz Company will
continue to share in future increases in the value of the the Registrant's stock
transferred to the trust.
Following the transaction (assuming completion of the over-allotment option
exercise), Anschutz Company continues to own approximately 160 million shares of
the Registrant's common stock (representing approximately 48 percent of the
Registrant's issued and outstanding shares).
By reducing Anschutz Company's beneficial ownership below 50 percent, the
Registrant should be able to use pooling accounting for business combinations
effected two or more years after the transfer of shares to the trust, assuming
other requirements for pooling are satisfied and there are no substantial
changes in current rules for its use.
This Current Report on Form 8-K may contain forward-looking statements that
involve risks and uncertainties. These statements may differ materially from
actual future events or results. Readers are referred to the documents filed by
the Registrant and Microsoft with the SEC, specifically the most recent reports
which identify important risk factors that could cause actual results to differ
from those contained in the forward-looking statements, including potential
fluctuations in quarterly results, dependence on new product development, rapid
technological and market change, financial risk management and future growth
subject to risks. Other risk factors include satisfactory negotiation of certain
licensing arrangements and satisfactory resolution of software delivery and
systems integration deliverables. These cautionary statements should be
considered in connection with any subsequent written or oral forward-looking
statements issued by the Registrant or persons acting on its behalf. The
Registrant undertakes no obligation to review or confirm analysts' expectations
or estimates or to release publicly any revisions to any forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit 10.1 Common Stock Purchase Agreement.
Exhibit 10.2 Registration Rights Agreement.
Exhibit 99.1 Press release of the Registrant dated December 14, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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QWEST COMMUNICATIONS INTERNATIONAL INC.
DATE: December 15, 1998 By: /s/ Robert S. Woodruff
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Robert S. Woodruff
Executive Vice President - Finance,
Chief Financial Officer and
Treasurer
COMMON STOCK PURCHASE AGREEMENT
Dated as of December 14, 1998
Between
QWEST COMMUNICATIONS INTERNATIONAL INC.
and
MICROSOFT COPORATION
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
this 14th day of December, 1998 between Qwest Communications International Inc.,
a Delaware corporation (the "Company"), and Microsoft Corporation, a Washington
corporation (the "Purchaser").
RECITALS
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock"), on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
Agreement to Purchase and Sell Common Stock
1.1 Agreement to Purchase and Sell Common Stock. Upon the terms and
subject to the conditions of this Agreement, the Company hereby agrees to sell
to the Purchaser at the Closing (as defined below), and the Purchaser agrees to
purchase from the Company at the Closing, 4,444,445 shares of Common Stock, (the
"Shares") at a price of $45.00 per share (the "Per Share Purchase Price") for an
aggregate purchase price of $200,000,025.
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The Closing of the purchase and sale of the Shares hereunder
(the "Closing") shall be held at the offices of the Company at 6:00 a.m. on
December 14, 1998, or at such other time and place as the Company and the
Purchaser mutually agree (the date of the Closing being hereinafter referred to
as the "Closing Date").
2.2 Delivery. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates representing the Shares against payment of the
aggregate purchase price of $200,000,025 by wire transfer of immediately
available funds to an account designated by the Company. The certificate or
certificates representing the Shares shall be subject to a legend restricting
transfer under the Securities Act of 1933, as amended (the "Securities Act") and
referring to restrictions on transfer herein, such legend to be substantially as
follows:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities Act of
1933, as amended. Such shares may not be sold or transferred in the
absence of such registration or an opinion of counsel reasonably
satisfactory to the Company as to the availability of an exemption from
registration.
The shares represented by this certificate are subject to
restrictions on transfer, including any sale, pledge or other
hypothecation, set forth in an agreement dated as of December 14, 1998
between the Company and Microsoft Corporation, a copy of which
agreement may be obtained at no cost by written request made by the
holder of record of this certificate to the secretary of the Company at
the Company's principal executive offices."
The Company agrees (i) to remove the legend set forth in the second
preceding paragraph upon receipt of an opinion of counsel in form and substance
reasonably satisfactory to the Company that the Shares or the shares of Common
Stock issuable upon conversion of the Shares are eligible for transfer without
registration under the Securities Act and (ii) to remove the legend set forth in
the immediately preceding paragraph at such time as the Shares may be
transferred upon the termination of the covenants of Section 7 as provided for
in Section 8.4.
SECTION 3
Representations and Warranties of the Company
The Company hereby represents and warrants to the Purchaser as follows:
3.1 Organization. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is in good standing
under such laws. The Company has the requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is qualified to do
business as a foreign corporation in each jurisdiction in which the ownership of
its property or the nature of its business requires such qualification, except
where the failure to be so qualified would not have a materially adverse effect
on the Company and its subsidiaries, taken as a whole.
3.2 Authorization. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of this
Agreement and the Registration Rights Agreement (attached as Exhibit A hereto)
by the Company, the authorization, sale, issuance and delivery of the Shares
hereunder. This Agreement and the Registration Rights Agreement constitute
legal, valid and binding obligations of the Company enforceable in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to Section 6 of the Registration
Rights Agreement. Upon their issuance and delivery pursuant to this Agreement,
the Shares will be validly issued, fully paid and nonassessable. The issuance
and sale of the Shares will not give rise to any preemptive rights or rights of
first refusal on behalf of any person in existence on the date hereof.
3.3 No Conflict. The execution and delivery of this Agreement and the
Registration Rights Agreement do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or to a loss of a material benefit under, any provision of the
Certificate of Incorporation or Bylaws of the Company or any mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets, the effect of
which would have a material adverse effect on the Company and its subsidiaries,
taken as a whole, or materially impair or restrict the Company's power to
perform its obligations as contemplated under said agreements.
3.4 SEC Documents. The Company has filed all required reports,
schedules, forms, statements and other documents required to be filed by the
Company with the Securities and Exchange Commission (the "SEC") since June 27,
1997 (the "SEC Documents"). As of their respective dates, the SEC Documents
complied in all material respects with requirements of the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as the case
may be and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents, except to the
extent that information contained in any SEC Document has been revised or
superseded by a later Filed SEC Document (as defined below), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company's Form 10-K for the
year ended December 31, 1997 and the Form 10-Q for the three months ended
September 30, 1998 comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or as
described in writing to the Purchaser prior to the date hereof) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operation and cashflows for the periods then ending in accordance with GAAP
(subject, in the case of the unaudited statements, to normal year end audit
adjustments). Except as set forth in the Filed SEC Documents (as defined below),
neither the Company nor any of its subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes thereto and which can
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole.
3.5 Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed and publicly available (either on the EDGAR system or by
delivery to Purchaser) prior to the date of this Agreement (the "Filed SEC
Documents"), since the date of the most recent audited financial statements
included in the Filed SEC Documents, there has not been (i) any declaration,
setting aside or payment of any dividend or distribution (whether in cash, stock
or property) with respect to any of the Company's capital stock, (ii) any split,
combination or reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, (iii) any damage,
destruction or loss of property, whether or not covered by insurance, that has
or is likely to have a material adverse effect on the Company and its
subsidiaries taken as a whole, or (iv) any change in accounting methods,
principles or practices by the Company materially affecting its assets,
liabilities, or business, except insofar as may have been required by a change
in GAAP.
3.6 Governmental Consent, etc. In reliance on the representations of
the Purchaser contained herein, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except such filings
as may be required to be made with the SEC and the National Association of
Securities Dealers, Inc.
3.7 Litigation. Except as is disclosed in the Filed SEC Documents,
there is no suit, action or proceeding pending against the Company or any of its
subsidiaries that, individually or in the aggregate, would (i) have a material
adverse effect on the Company and its subsidiaries taken as a whole, (ii) impair
the ability of the Company to perform its obligations under this Agreement and
the Registration Rights Agreement, or (iii) prevent the consummation of any of
the transactions contemplated by said agreements.
3.8 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of 600,000,000 shares of the Common Stock and 25,000,000
shares of preferred stock, par value $.01 per share, of the Company (the
"Company Preferred Stock").
(b) As of November 30, 1998, there are approximately (1) 336,869,859
shares of the Common Stock issued and outstanding, (2) no shares of the Common
Stock held in the treasury of the Company, (3) no shares of the Company
Preferred Stock issued and outstanding, (4) 406,640,087 shares of the Common
Stock reserved for issuance upon exercise of outstanding stock options issued by
the Company to current or former employees and directors of the Company and its
subsidiaries, (5) 506,643,587 shares of the Common Stock reserved for issuance
upon exercise of authorized but unissued stock options and (6) 8,600,000 shares
of the Common Stock reserved for issuance upon exercise of a warrant issued to
The Anshutz Family Investment Company, LLC.
(c) All outstanding shares of the Common Stock are duly authorized,
validly issued, fully paid and nonassessable, free from any liens created by the
Company with respect to the issuance and delivery thereof and not subject to
preemptive rights.
3.9 Registration Rights. No person has the right to register shares of
Common Stock on a Registration Statement filed by the Company pursuant to this
Agreement.
SECTION 4
Representations and Warranties of the Purchaser
The Purchaser hereby represents and warrants to the Company as follows:
4.1 Organization. The Purchaser is a corporation duly organized and
validly existing and in good standing under the laws of the State of Washington,
with all requisite corporate power and authority to own, lease and operate its
properties and to conduct its business as now being conducted.
4.2 Authority. All corporate action on the part of the Purchaser
necessary for the authorization, execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Purchaser has been taken.
This Agreement and the Registration Rights Agreement have been duly executed and
delivered by the Purchaser and constitute legal, valid and binding obligations
of the Purchaser, enforceable in accordance with their respective terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to Section 6 of the Registration Rights Agreement. The execution and delivery of
said agreements do not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with or result in any violation of any
obligation under any provision of the Articles of Incorporation or Bylaws of the
Purchaser or any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Purchaser.
4.3 Investment. The Purchaser is acquiring the Shares for investment
for its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof. The Purchaser understands
that the Shares have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations and warranties contained
herein.
4.4 Disclosure of Information. The Purchaser has had full access to all
information it considers necessary or appropriate to make an informed investment
decision with respect to the Shares to be purchased by the Purchaser under this
Agreement. The Purchaser further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Shares and to obtain additional information necessary to verify
any information furnished to the Purchaser or to which the Purchaser had access.
4.5 Investment Experience. The Purchaser understands that the purchase
of the Shares involves substantial risk. The Purchaser has experience as an
investor in securities of companies and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment in the Shares and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of this investment in the Shares and protecting
its own interests in connection with this investment.
4.6 Accredited Investor Status. The Purchaser is an "accredited
investor" within the meaning of Regulation D promulgated under the Securities
Act.
4.7 Restricted Securities. The Purchaser understands that the Shares to
be purchased by the Purchaser hereunder are characterized as "restricted
securities" under the Securities Act inasmuch as they are being acquired from
the Company in a transaction not involving a public offering and that under the
Securities Act and applicable regulations thereunder such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. The Purchaser is familiar with Rule 144 of the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act. The Purchaser understands that the Company is under no
obligation to register any of the Shares sold hereunder except as provided in
the Registration Rights Agreement.
4.8 Governmental Consent, etc. In reliance on the representations of
the Company contained herein, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Purchaser is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except such filings
as may be required to be made with the SEC and the National Association of
Securities Dealers, Inc.
4.9 Passive Investor. The Purchaser is acquiring the Shares "solely for
the purpose of investment" as such phrase is defined in 16 C.F.R. ss.
801.1(i)(1) and the Purchaser has no intention of participating in the
formulation, determination or direction of the basic business decisions of the
Company.
SECTION 5
Conditions to Obligation of the Purchaser
The Purchaser's obligation to purchase the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
5.1 Representations and Warranties. Each of the representations and
warranties of the Company contained in Section 3 will be true and correct on and
as of the date hereof and on and as of the Closing Date with the same effect as
though such representations and warranties had been made as of the Closing Date.
The Purchaser shall have received a certificate signed by an officer of the
Company to such effect on the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects. The
Purchaser shall have received a certificate signed by an officer of the Company
to such effect on the Closing Date.
5.3 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
5.4 No Law Prohibiting or Restricting Sale of the Shares. There shall
not be in effect any law, rule or regulation prohibiting or restricting the sale
of the Shares, or requiring any consent or approval of any Person which shall
not have been obtained to issue the Shares with full benefits afforded the
Preferred Stock or the Common Stock into which the Preferred Stock is
convertible (except as otherwise provided in this Agreement).
5.5 Registration Rights Agreement. The Company shall have executed and
delivered the Registration Rights Agreement substantially in the form attached
hereto as Exhibit A.
5.6 Opinion of Counsel. The Purchaser shall have received an opinion
dated as of the Closing Date of O'Melveny & Myers LLP, counsel to the Company,
substantially in the form attached as Exhibit 5.6.
SECTION 6
Conditions to Obligation of the Company
The Company's obligation to sell and issue the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions:
6.1 Representations and Warranties. The representations and warranties
of the Purchaser contained in Section 4 will be true and correct on and as of
the date hereof and on and as of the Closing Date with the same effect as though
such representations and warranties had been made as of the Closing Date. The
Company shall have received a certificate signed on behalf of the Purchaser by
an officer of the Purchaser to such effect on the Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects. The Company
shall have received a certificate signed on behalf of the Purchaser by an
officer of the Purchaser to such effect on the Closing Date.
6.3 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.
6.4 No Law Prohibiting or Restricting the Sale of the Shares. There
shall not be in effect any law, rule or regulation prohibiting or restricting
the sale of the Shares, or requiring any consent or approval of any Person which
shall not have been obtained to issue the Shares with full benefits afforded the
Common Stock (except as otherwise provided in this Agreement).
6.5 Registration Rights Agreement. The Purchaser shall have executed
and delivered the Registration Rights Agreement substantially in the form
attached hereto as Exhibit A.
6.6 Opinion of Counsel. The Company shall have received an opinion
dated as of the Closing Date of Preston Gates & Ellis, counsel to the Purchaser,
substantially in the form attached as Exhibit 6.6.
SECTION 7
Covenants of the Purchaser
7.1 Purchase Restrictions.
(a) Other than pursuant to the transactions contemplated by this
Agreement, the Purchaser shall not, and shall not cause or permit its affiliates
or any Group (as defined below) including the Purchaser or any of its affiliates
to, acquire shares of the Common Stock, which when combined with shares of the
Common Stock then owned by the Purchaser and its subsidiaries would result in
the Purchaser Beneficially Owning (as defined below) more than 5% of the shares
of the Common Stock then issued and outstanding, except pursuant to a
transaction or series of transactions at prices and on terms approved by the
Board of Directors of the Company.
(b) Nothing in this Section 7.1 shall require the Purchaser or its
subsidiaries to transfer any shares of Common Stock if the aggregate percentage
ownership of the Purchaser and its subsidiaries is increased as a result of any
action taken by the Company or its subsidiaries including, without limitation,
by reason of any reclassification, recapitalization, stock split, reverse stock
split, combination or exchange of shares, redemption, repurchase or cancellation
of shares or any other similar transaction.
7.2 Other Restrictions. Neither the Purchaser nor any of its
subsidiaries shall, without the approval of the Board of Directors of the
Company, (1) take any action with respect to an acquisition proposal that would
require the Company to make a public announcement, (2) solicit proxies or
initiate, or become an active participant in, a solicitation (as such terms are
defined in Regulation 14A under the Exchange Act) with respect to the Company in
opposition to any matter which has been recommended by the Board of Directors of
the Company or in favor of any matter which has not been approved by the Board
of Directors of the Company, (3) become a member of a Group (other than a Group
comprised solely of the Purchaser and its subsidiaries), or (4) enter into any
discussions, negotiations, arrangements or understandings with any third party
with respect to any of the foregoing.
7.3 Restrictions on Transfer of Shares. For a period of two years from
the date of this Agreement, the Purchaser shall not, directly or indirectly,
offer, sell, transfer, assign, exchange, encumber, pledge, hypothecate or
otherwise dispose of the Beneficial Ownership of any Shares acquired pursuant to
this Agreement except (i) to the Company or any persons or Groups approved in
writing by the Company, or (ii) to a corporation of which the Purchaser owns
more than 50% of the voting power entitled to be cast in the election of
directors (a "Controlled Corporation"), so long as such Controlled Corporation
agrees to hold such Shares subject to all the provisions of this Agreement,
including this Section 7.3, and agrees to transfer such Shares to the Purchaser
or another Controlled Corporation of the Purchaser if it ceases to be a
Controlled Corporation of the Purchaser. The restrictions in this Section shall
terminate in the event of a "Change or Control" or "Insolvency Proceeding."
SECTION 8Miscellaneous
8.1 Certain Definitions. As used in this Agreement:
(a) The term "Beneficial Ownership" shall have the meaning
comprehended by Section 13(d)(3) of the Exchange Act and the rules and
regulations promulgated thereunder.
(b) The term "Change of Control" shall mean (i) an acquisition
of Voting Stock by a Person or Group (other than the Company or its affiliates)
in a purchase or transaction or series of related purchases or transactions if
immediately thereafter such Person or Group has Beneficial Ownership of more
than fifty percent (50%) of the combined voting power of the Company's then
outstanding Voting Stock; (ii) the execution of an agreement providing for a
tender offer, merger, consolidation or reorganization, or series of such related
transactions involving the Company, unless the stockholders of the Company,
immediately after such transaction or transactions are the Beneficial Owners of
at least fifty percent (50%) of the Voting Stock; (iii) a change or changes in
the membership of the Company's Board of Directors which represent a change of a
majority or more of such membership during any twelve month period (unless such
change or changes in membership are caused by the actions of the then existing
Board of Directors and do not occur within twelve months of the commencement,
threat or proposal of an Election Contest (as such term is defined in Rule
14a-11 of Regulation 14A under the Exchange Act), tender offer or other
transaction which would constitute a Change of Control under (i) or (ii) of this
Section 8.1(a)); or (iv) a sale of all or substantially all of the Company's
assets.
(c) The term "Group" shall have the meaning comprehended by
Section13(d)(3) of the Exchange Act and the rules and regulations promulgated
thereunder.
(d) The term "Insolvency Proceeding" shall mean (i) an
assignment for the benefit of creditors, (ii) the filing by the Company of a
petition to have the Company adjudged insolvent, bankrupt or seeking a
reorganization or liquidation under any law relating to bankruptcy, insolvency
or receivership, (iii) an appointment of a receiver or trustee for all or
substantially all of the assets of the Company unless appointed without the
Company's consent, in which case if after sixty (60) days such appointment has
not been vacated or stayed, (iv) a public admission in writing of the Company's
inability to pay its debts as they come due, or (v) the adoption of a plan of
liquidation or dissolution by the Board of Directors of the Company.
(e) The term "Person" shall mean any person, individual,
corporation, partnership, trust or other non-governmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).
(f) The term "Voting Stock" means the Common Stock and any
other securities issued by the Company having the ordinary power to vote in the
election of directors of the Company (other than securities having such power
only upon the happening of a contingency).
8.2 Best Efforts. Each of the Company and the Purchaser shall use its
best efforts to take all actions required under any law, rule or regulation
adopted subsequent to the date hereto to ensure that the conditions to the
Closing set forth herein are satisfied on or before the Closing Date.
8.3 Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of New York as applied to contracts entered into
solely between residents of, and to be performed entirely within, such state,
and without reference to principles of conflicts of laws or choice of laws.
8.4 Survival; Termination of Covenants. The representations and
warranties in Sections 3 and 4 of this Agreement shall not survive the Closing
except for the representations and warranties in Sections 4.3, 4.7 and 4.9
hereof, which shall continue to survive. The covenants of the Purchaser under
Sections 7.1 and 7.2 hereof shall terminate on the earlier of (A) such time as
officers, directors and affiliates of the Company have Beneficial Ownership of
less than thirty-three percent (33%) of the voting power of the outstanding
Voting Stock, (B) the disposal by Purchaser of all of the Shares, (C)
termination of that certain Master Agreement between Qwest Communications
Corporation and Purchaser dated as of the date of this Agreement, or (D) the
fifth anniversary of this Agreement. Section 7.3 shall terminate on the second
anniversary of this Agreement.
8.5 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
8.6 Entire Agreement; Amendment. This Agreement and the Registration
Rights Agreement constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede all prior agreements and understandings among the parties relating to
the subject matter hereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
8.7 Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Agreement shall
be in writing and shall be deemed to have been duly given: (i) on the date of
delivery if personally delivered by hand, (ii) upon the third day after such
notice is (a) deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, or (b) sent by a
nationally recognized overnight express courier, or (iii) by facsimile upon
written confirmation (other than the automatic confirmation that is received
from the recipient's facsimile machine) of receipt by the recipient of such
notice:
(a) if to the Company, to it at:
Qwest Communications International Inc.
700 Qwest Tower
555 Seventeenth Street
Denver, CO 80202
Facsimile Number: (303) 992-1772
Attention: Chief Financial Officer
with a copy addressed as set forth above but to the attention
of General Counsel Facsimile Number: (303) 992-1044
and with an additional copy to:
Steven L. Grossman
O'Melveny & Myers LLP
1999 Avenue of the Stars
Los Angeles, California 90067-6035
Facsimile Number: (310) 246-6779
(b) if to the Purchaser, to it at:
Microsoft Corporation
One Microsoft Way
Building 8 North Office 2211
Redmond, WA 98052
Attention: Chief Financial Officer
Facsimile Number: (425) 936-7369
with a copy addressed as set forth above but to the attention of
General Counsel, Finance and Administration, Facsimile Number: (425) 869-1327
with a copy to:
Richard B. Dodd
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Facimile Number: (206) 623-7022
8.8 Brokers. (a) The Company has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement. The Company hereby agrees to
indemnify and hold harmless the Purchaser from and against all fees, commissions
or other payments owing to any party acting on behalf of the Company hereunder.
(b) The Purchaser has not engaged, consented to or authorized
any broker, finder or intermediary to act on its behalf, directly or indirectly,
as a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. The Purchaser hereby agrees to indemnify and
hold harmless the Company from and against all fees, commissions or other
payments owing to any party acting on behalf of the Purchaser hereunder.
8.9 Fees, Costs and Expenses. All fees, costs and expenses (including
attorneys' fees and expenses) incurred by either party hereto in connection with
the preparation, negotiation and execution of this Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby, shall be the sole and exclusive responsibility
of such party.
8.10 Severability. If any term, provision, covenant or restriction of
this Agreement or the Registration Rights Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restriction of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
8.11 Counterparts. This Agreement may be executed in two or more
partially or fully executed counterparts and by facsimile signatures each of
which shall be deemed an original and shall bind the signatory, but all of which
together shall constitute but one and the same instrument. The execution and
delivery of a Signature Page - Common Stock Purchase Agreement in the form
attached to this Agreement by any party hereto who shall have been furnished the
final form of this Agreement shall constitute the execution and delivery of this
Agreement by such party.
8.12 Initial Public Announcement. The Company and the Purchaser shall
agree on the form and content of the initial public announcement which shall be
made concerning this Agreement and the Registration Rights Agreement and the
transactions contemplated hereby and thereby, and neither the Company nor the
Purchaser shall make such public announcement without the consent of the other,
except as required by law.
<PAGE>
SIGNATURE PAGE--COMMON STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date set forth above.
MICROSOFT CORPORATION,
a Washington corporation
By: /s/ Gregory B. Maffei
Name: Gregory B. Maffei
Title: Vice President and Chief Financial
Officer
QWEST COMMUNICATIONS INTERNATIONAL INC.,
a Delaware corporation
By: /s/ Robert S. Woodruff
Name: Robert S. Woodruff
Title: Executive Vice President - Finance and
Chief Financial Officer
REGISTRATION RIGHTS AGREEMENT
Dated as of December 14, 1998
Between
Qwest Communications International Inc.
and
Microsoft Corporation
-i-
TABLE OF CONTENTS
Page
1. Demand Registration.................................................1
2. Obligations of the Company..........................................1
5. Obligations of the Purchaser........................................6
4. Termination Provisions..............................................7
5. Expenses............................................................7
6. Indemnification and Contribution....................................7
(a) Indemnification by the Company.............................7
(b) Indemnification by the Purchaser...........................8
(c) Notice of Claims...........................................8
7. Notices............................................................10
8. Governing Law......................................................10
9. Entire Agreement; Amendments.......................................11
10. Successors and Assigns.............................................11
11. Severability.......................................................11
12. Termination of Company Obligation..................................11
13. Counterparts.......................................................11
14. No Transfer or Assignment of Registration Rights...................11
15. Interpretation.....................................................11
16. Non-Recourse.......................................................11
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into
as of this 14th day of December, 1998, between Qwest Communications
International Inc., a Delaware corporation (the "Company"), and Microsoft
Corporation, a Washington corporation (the "Purchaser").
WHEREAS, the Purchaser intends to purchase shares of Common Stock, par
value, $0.01 per share (the "Common Stock") of the Company pursuant to the terms
and conditions of a Stock Purchase Agreement dated as of December 14, 1998 (the
"Purchase Agreement"); and
WHEREAS, the Purchase Agreement requires that the Company enter into
this Agreement with the Purchaser;
NOW, THEREFORE, in consideration of the foregoing, the parties to this
Agreement hereby agree as follows:
1. Demand Registration. If, at any time ninety days after the date of
this Agreement the Purchaser shall request the Company in writing to register
under the Securities Act of 1933, as amended (the "Securities Act"), any or all
of the shares of the Common Stock acquired by Purchaser pursuant to the Purchase
Agreement (the shares of such Common Stock so registrable are referred to as the
"Subject Stock"), the Company shall use its reasonable best efforts to cause the
Subject Stock to be registered as soon as reasonably practicable so as to permit
the sale thereof, and in connection therewith shall prepare and file a Form S-3
registration statement with the Securities and Exchange Commission (the "SEC")
under the Securities Act to effect such registration; provided, however, that
the Purchaser shall be entitled to one such request, and such request shall (i)
express the intention of the Purchaser to offer or cause the offering of the
Subject Stock for distribution, (ii) describe the nature or method of the
proposed offer and sale thereof, and (iii) contain the undertaking of the
Purchaser to provide all such information and materials and take all such action
as may be required in order to permit the Company to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the effective
date of such registration statement. In the event that Form S-3 is not then
available, the registration statement shall be filed on the successor to Form
S-3 or if there is no clear successor form, or if the Company is not eligible to
use Form S-3 or a successor form, then the registration statement shall be filed
using such form as may be available for the proposed distribution by the
Purchaser with which it is least burdensome for the Company to comply. The
Company agrees not to grant to any other person registration rights pursuant to
which such person would have the right to register shares of Common Stock on a
registration statement filed by the Company pursuant to the exercise of
Purchaser's rights under this Agreement.
2. Obligations of the Company.
(a) Whenever the Company is required by the provisions of this
Agreement to use its reasonable best efforts to effect the registration of any
Subject Stock under the Securities Act, the Company shall (i) prepare and, as
soon as reasonably practicable, file with the SEC a registration statement with
respect to the shares of Subject Stock, and shall use its reasonable best
efforts to cause such registration statement to become effective and to remain
effective until the earlier of (A) the sale of the shares of Subject Stock so
registered, (B) the withdrawal at the request of Purchaser of such shares from
such registration statement or (C) six months after the registration statement
becomes effective but in no event shall such effective period specified in
sub-clause (C) end without Purchaser's written consent (x) sooner than two years
and six months from the date of this Agreement nor (y) later than three years
from the date of this Agreement; (ii) subject to paragraph (b) below, prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be reasonably
necessary to make and to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities proposed to be registered pursuant to such
registration statement until the earlier of (A), (B) or (C) in (i) above; and
(iii) take all such other action reasonably necessary to permit the shares of
Subject Stock held by the Purchaser to be registered and disposed of in
accordance with the method of disposition described herein.
(b) Notwithstanding anything in this Agreement to the
contrary, by delivery of written notice to the Purchaser (a "Suspension
Notice"), stating which one or more of the following limitations shall apply to
the Purchaser, the Company may (1) postpone effecting the registration under
this Agreement or (2) require the Purchaser to refrain from disposing of Subject
Stock under the registration, in each case for a reasonable time specified in
the notice but not exceeding an aggregate of 90 days in any one year period
(which period may not be extended or renewed). The Company may postpone
effecting a registration or require the Purchaser to refrain from disposing of
Subject Stock under the registration, if (1) the Company in good faith
determines that such registration or disposition would materially impede, delay
or interfere with any material financing, offer or sale of equity securities or
debt securities of the Company, acquisition, disposition or other material
transaction by the Company or any of its material subsidiaries, (2) an
investment banking firm of recognized national standing shall advise the Company
in writing that effecting the disposition by such person of Subject Stock would
materially and adversely affect an offering of equity securities of the Company,
by the Company for its own account the preparation of which had then been
commenced, or (3) the Company in good faith determines that the Company is in
possession of material non-public information the disclosure of which during the
period specified in such notice the Company reasonably believes would not be in
the best interests of the Company; provided that the Company may not take any
action pursuant to this Section with respect to any of the limitations on
dispositions specified in clause (2) for a period of time in excess of 90 days
in any one year period.
(c) In connection with any registration statement, the
following provisions shall apply:
(1) The Company shall furnish to the Purchaser, prior to the
filing thereof with the SEC, a copy of any registration statement, and
each amendment thereof and each amendment or supplement, if any, to the
prospectus included therein and shall use its reasonable efforts to
reflect in each such document, when so filed with the SEC, such
comments as the Purchaser and its counsel reasonably may propose.
(2) The Company shall take such action as may be necessary so
that: (i) any registration statement and any amendment thereto and any
prospectus forming part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference)
complies in all material respects with the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the respective rules and regulations thereunder, and (ii) any
registration statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(3) (A) The Company shall advise the Purchaser and, if
requested by the Purchaser, confirm such advice in writing:
(i) when a registration statement and any amendment
thereto has been filed with the SEC and when the registration
statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the SEC for amendments or
supplements to the registration statement or the prospectus
included therein or for additional information.
(B) The Company shall advise the Purchaser and, if
requested by Purchaser, confirm such advice in writing of:
(i) the issuance by the SEC of any stop order
suspending effectiveness of the registration statement or the
initiation of any proceedings for that purpose; and
(ii) the receipt by the Company of any notification
with respect to the suspension of the qualification of the
securities included therein for sale in any jurisdiction or
the initiation of any proceeding for such purpose.
(4) The Company shall notify the Purchaser at any time when a
Prospectus with respect to the Subject Stock is required to be
delivered under the Securities Act, when the Company becomes aware of
the happening of any event as a result of which the Registration
Statement or the Prospectus (as then in effect) contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein (in the case of the Prospectus
or any preliminary Prospectus, in light of the circumstances under
which they were made) not misleading; and, as promptly as practicable
thereafter, but subject to Sections 2(b) and 4, the Company shall use
its reasonable best efforts to prepare and file with the SEC an
amendment or supplement to the Registration Statement or the Prospectus
so that, as thereafter delivered to the purchasers of the Subject
Stock, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. As promptly as practicable after the issuance by
the SEC of an order suspending the effectiveness of the Registration
Statement, but subject to Sections 2(b) and 4, the Company shall use
its best efforts to obtain the withdrawal of such order at the earliest
possible moment.
(5) The Company shall furnish to the Purchaser with respect to
the registration statement relating to the Subject Stock, without
charge, such number of copies of such registration statement and any
post-effective amendment thereto, including financial statements and
schedules, and all reports, other documents and exhibits (including
those incorporated by reference) as the Purchaser shall reasonably
request.
(6) The Company shall furnish to the Purchaser such number of
copies of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) relating to the Subject Stock as
the Purchaser may reasonably request in order to effect the offering
and sale of the shares of Subject Stock to be offered and sold, but
only while the Company shall be required under the provisions hereof to
cause the registration statement to remain current, and the Company
consents (except during the continuance of any event described in
Sections 2(b) or 4 to the use of the Prospectus or any amendment or
supplement thereto by the Purchaser in connection with the offering and
sale of the Subject Stock covered by the Prospectus or any amendment or
supplement thereto.
(7) Prior to any offering of Subject Stock pursuant to any
registration statement, the Company shall use its reasonable best
efforts to register or qualify the shares of Subject Stock covered by
such registration statement under the securities or blue sky laws of
such states as the Purchaser shall reasonably request, maintain any
such registration or qualification current until the earlier of (i) the
sale of the shares of Subject Stock so registered, (ii) termination
pursuant to Section 4 or (iii) the withdrawal of Subject Stock from the
registration statement, and do any and all other acts and things either
reasonably necessary or advisable to enable the Purchaser to consummate
the public sale or other disposition of the shares of Subject Stock in
domestic jurisdictions where the Purchaser desires to effect such sales
or other disposition; provided, however, that the Company shall not be
required to take any action that would subject it to the general
jurisdiction of the courts of any jurisdiction in which it is not so
subject or to qualify as a foreign corporation in any jurisdiction
where the Company is not so qualified.
(8) In connection with any offering of shares of Subject Stock
registered pursuant to this Agreement, the Company shall (x) furnish
the Purchaser, at the Company's expense, on a timely basis with
certificates free of any restrictive legends representing ownership of
the shares of Subject Stock being sold in such denominations and
registered in such names as the Purchaser shall request and (y)
instruct the transfer agent and registrar of the Subject Stock to
release any stop transfer orders with respect to the shares of Subject
Stock.
(9) The Company shall make generally available to its security
holders or otherwise provide in accordance with Section 11(a) of the
Securities Act as soon as reasonably practicable after the effective
date of the registration statement an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act.
(10) The Company shall, if requested, promptly include or
incorporate in a prospectus supplement or post-effective amendment to a
registration statement, such information as the Purchaser or any
underwriters reasonably request to be included therein in accordance
with Section 3(b) and to which the Company does not reasonably object
and shall make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after they are notified
of the matters to be included or incorporated in such prospectus
supplement or post-effective amendment.
(11) In the event Purchaser proposes to conduct an
underwritten public offering, then the Company shall: (i) enter into an
underwriting agreement containing representations, warranties,
indemnities and agreements then customarily included by an issuer in
underwriting agreements with respect to secondary underwritten
distributions, and in connection therewith cause the same to contain
indemnification provisions and procedures substantially identical to
those set forth in Section 6 (or such other provisions and procedures
acceptable to the managing underwriters, if any) with respect to all
parties to be indemnified pursuant to Section 6; (ii) make reasonably
available for inspection by Purchaser and its counsel, any underwriter
participating in any distribution pursuant to such registration
statement, and any attorney, accountant or other agent retained by
Purchaser or any such underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Company
and its subsidiaries; and cause the Company's officers, directors and
employees to make reasonably available for inspection all relevant
information reasonably requested by Purchaser or any such underwriter,
attorney, accountant or agent in connection with any such registration
statement, in each case, as is customary for similar due diligence
examinations; provided, however, that any records or documents that the
Company determines, in good faith, after consultation with counsel to
the Company and counsel to the Purchaser, to be confidential and which
it notifies such persons are confidential shall not be disclosed to
them, except in each case to the extent that (A) the disclosure of such
records or documents is necessary to avoid or correct a misstatement or
omission in the registration statement or (B) the release of such
records or documents is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, (the Purchaser shall, upon
learning that disclosure of any such records or documents is sought in
a court of competent jurisdiction, give notice to the Company, and
allow the Company, at the Company's expense, to undertake appropriate
action and to prevent disclosure of any such records or documents
deemed confidential); (iii) obtain opinions of counsel to the Company
and updates thereof (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing
underwriters, if any) addressed to Purchaser and the underwriters, if
any, covering such matters as are customarily covered in opinions
requested in underwritten offerings (it being agreed that the matters
to be covered by such opinion or written statement by such counsel
delivered in connection with such opinions shall include a negative
assurance statement as to the absence of material misstatements or
omissions of material facts required to be stated in the registration
statement in order to make the statements therein not misleading in
such form as such counsel customarily provides in underwritten
offerings); (iv) obtain "cold comfort" letters and updates thereof from
the independent public accountants of the Company (and, if necessary,
any other independent public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Registration statement), addressed to Purchaser and the
underwriters, if any, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection with
primary underwritten offerings; (v) deliver such documents and
certificates as may be reasonably requested by Purchaser and the
managing underwriters. The foregoing actions set forth in clauses
(iii), (iv), and (v) of this Section 2(c)(11) shall be performed at
each closing under any underwritten offering to the extent required
thereunder, but, in any event, need not be performed by the Company
more than twice. The managing underwriter for the offering and any
additional investment bankers and managers to be used in connection
with the offering shall be selected by the Company subject in each case
to the consent of the Purchaser which consent shall not be unreasonably
withheld, conditioned or delayed.
(12) The Company will use its best efforts to cause the
Subject Stock to be admitted for quotation on the Nasdaq National
Market or other stock exchange or trading system on which the Common
Stock primarily trades on or prior to the effective date of any
registration statement hereunder.
(13) Any obligation of the Company under this Agreement,
including any obligation to use its "best efforts," "reasonable best
efforts" or take such actions as are reasonably required, shall not
preclude the Company from taking any action or omitting to take any
action (other than omitting to file necessary amendments,
post-effective amendments and supplements if a Suspension Notice or
Termination Notice is not then in effect pursuant to Section 2(b) or 4,
respectively) that would result in the Company issuing a Suspension
Notice or Termination Notice pursuant to Section 2(b) or 4,
respectively.
(d) With a view to making available the benefits of certain
rules and regulations of the SEC which may at any time permit the sale of the
Subject Stock to the public without registration, the Company agrees to:
(1) make all filings with the SEC required by Rule 144(c) (or
any similar provision then in force) under the Securities Act to permit the sale
of the Subject Stock by any holder thereof to satisfy the conditions of Rule 144
(or any similar provision then in force).
(2) during the term of this Agreement, to furnish to the
Purchaser upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company, and (iii) such other reports
and documents of the Company as the Purchaser may reasonably request in availing
itself of any rule or regulation of the SEC allowing the Purchaser to sell any
such securities without registration.
3. Obligations of the Purchaser.
(a) The Purchaser shall, (i) offer to sell or otherwise
distribute the Subject Stock in reliance upon a registration contemplated by
this Agreement only after a registration statement shall have been filed with
the SEC, (ii) sell or otherwise distribute the Subject Stock in reliance upon
such registration only if a registration statement is then effective under the
Securities Act, (iii) not sell or otherwise distribute any of the Subject Stock
during any period specified in a Suspension Notice delivered to the Purchaser
pursuant to Section 2(b) or after receiving a Termination Notice pursuant to
Section 4 (until the Purchaser shall have received written notice from the
Company that the registration is again effective), (iv) distribute the Subject
Stock only in accordance with the manner of distribution contemplated by the
prospectus and (v) report to the Company distributions made by the Purchaser of
shares of the Subject Stock pursuant to the prospectus. The Purchaser, by
participating in a registration pursuant to this Agreement, acknowledges that
the remedies of the Company at law for failure by the Purchaser to comply with
the undertaking contained in this paragraph (a) would be inadequate and that the
failure would not be adequately compensable in damages and would cause
irreparable harm to the Company, and therefore agrees that undertakings made by
the Purchaser in this paragraph (a) may be specifically enforced.
(b) The Purchaser shall furnish, and shall cause each
underwriter of the Subject Stock to be distributed pursuant to the registration
to furnish, to the Company in writing promptly upon the request of the Company
the information regarding the Purchaser or the underwriter, the contemplated
distribution of the Subject Stock and the other information regarding the
proposed distribution by the Purchaser and the underwriter that shall be
required in connection with the proposed distribution by the applicable
securities laws of the United States of America and the states thereof in which
the Subject Stock are contemplated to be distributed. The information furnished
by the Purchaser or any underwriter shall be certified by the Purchaser or the
underwriter, as the case may be, and shall be stated to be specifically for use
in connection with the registration.
(c) The obligations of the Company to maintain a registration
statement are conditioned upon (i) the Purchaser or any underwriter of the
Subject Stock furnishing to the Company the information in respect of the
distribution of the Subject Stock that may be required under this Agreement to
be furnished by the Purchaser or the underwriter to the Company and (ii) if such
registration involves an underwritten offering, the Purchaser entering into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwritten offering.
(d) If the Purchaser intends to distribute the Subject Stock
by means of an underwritten offering, the Purchaser shall cause the underwriter
or underwriters selected for such underwriting to enter into an underwriting
agreement in customary form and shall enter into such underwriting agreement
with such underwriter or underwriters.
4. Termination Provisions. Notwithstanding anything in this Agreement
to the contrary, if, in the opinion of counsel for the Company (which opinion
shall be reasonably acceptable to counsel for the Purchaser), there shall have
arisen any legal impediment to the offering of the Subject Stock pursuant to
this Agreement or if any legal action or administrative proceeding shall have
been instituted or threatened or any other claim shall have been made relating
to the registration or the offer made by the related prospectus or against any
of the parties involved in the offering, the Company may at any time upon
written notice to the Purchaser (a "Termination Notice") terminate the
effectiveness of the related Registration Statement; provided that, promptly
after those matters shall be resolved to the satisfaction of counsel for the
Company, then, the Company shall cause the registration of the Subject Stock
formerly covered by the Registration Statement that were removed from
registration by the action of the Company.
5. Expenses. The Company shall pay all fees and expenses incurred in
connection with the performance of its obligations under Sections 1 and 2
hereof, including, without limitation, all SEC and blue sky registration and
filing fees, printing expenses, transfer agents' and registrars' fees, and the
reasonable fees and disbursements of the Company's outside counsel and
independent accountants incurred in connection with the preparation, filing and
amendment of any registration statement authorized by this Agreement (but
excluding underwriters' and brokers' discounts and commissions).
6. Indemnification and Contribution.
(a) Indemnification by the Company. In the case of any
offering registered pursuant to this Agreement, the Company agrees to indemnify
and hold the Purchaser, each underwriter (if any) of shares of Subject Stock
under such registration statements and each person who controls any of the
foregoing within the meaning of Section 15 of the Securities Act harmless
against any and all losses, claims, damages or liabilities to which they or any
of them may become subject under the Securities Act or any other statute or
common law or otherwise, and to reimburse them, from time to time upon request,
for any legal or other expenses reasonably incurred by them in connection with
investigating any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities or actions shall arise out of or shall be based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement (or any amendment thereto) relating to
the sale of such shares of Subject Stock, including all documents incorporated
therein by reference, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus (as amended or
supplemented if the Company shall have filed with the SEC any amendment thereof
or supplement thereto), if used prior to the effective date of such registration
statement or contained in the prospectus (as amended or supplemented if the
Company shall have filed with the SEC any amendment thereof or supplement
thereto), if used within the period during which the Company shall be required
to keep the registration statement to which such prospectus relates current
pursuant to the terms of this Agreement, or the omission or alleged omission to
state therein (if so used) a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the indemnification agreement
contained in this Section 6(a) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise out of or shall be based upon any such
untrue statement or alleged untrue statement, or any such omission or alleged
omission, if such statement or omission shall have been (x) made in reliance
upon and in conformity with information furnished in writing to the Company by
the Purchaser or any such underwriter specifically for use in connection with
the preparation of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any such amendment thereof
or supplement thereto, or (y) made in any preliminary prospectus, and the
prospectus shall have corrected such statement or omission and a copy of such
prospectus shall have been delivered to the Purchaser or any such underwriter
prior to the time such prospectus is required to be delivered by the Purchaser
or the underwriter under applicable law.
(b) Indemnification by the Purchaser. In the case of each
offering registered pursuant to this Agreement, the Purchaser agrees, in the
same manner and to the same extent as set forth in Section 6(a) of this
Agreement to indemnify and hold harmless the Company and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act,
its directors and those officers of the Company who shall have signed any such
registration statement with respect to any statement in or omission from such
registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or prospectus contained
in such registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid), if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Company by the Purchaser specifically for use in connection with the preparation
of such registration statement or any preliminary prospectus or prospectus
contained in such registration statement or any such amendment thereof or
supplement thereto.
(c) Notice of Claims. Each party indemnified under Section
6(a) or Section 6(b) of this Agreement shall, promptly after receipt of notice
of the commencement of any action against such indemnified party in respect of
which indemnity may be sought, notify the indemnifying party in writing of the
commencement thereof, enclosing a copy of all papers served on such indemnified
party. The omission of any indemnified party so to notify an indemnifying party
of any such action shall not relieve the indemnifying party from any liability
in respect of such action which it may have to such indemnified party on account
of the indemnity agreement contained in Section 6(a) or Section 6(b) of this
Agreement, unless the indemnifying party was prejudiced by such omission, and in
no event shall relieve the indemnifying party from any other liability which it
may have to such indemnified party. In case any such action shall be brought
against any indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, that if any indemnified party
or parties reasonably determine that there may be legal defenses available to
such indemnified party that are different from or in addition to those available
to such indemnifying party or that representation of such indemnifying party and
any indemnified party by the same counsel would present a conflict of interest,
then such indemnifying party shall not be entitled to assume such defense. If an
indemnifying party is not entitled to assume the defense of such action as a
result of the proviso to the preceding sentence, counsel for such indemnifying
party shall be entitled to conduct the defense of such indemnifying party and
counsel for the indemnified party shall be entitled to conduct the defense of
such indemnified party or parties. If an indemnifying party assumes the defense
of an action in accordance with and as permitted by the provisions of this
paragraph, such indemnifying party shall not be liable to such indemnified party
under Section 6(a) or Section 6(b) of this Agreement for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. In no event shall
the indemnifying party be liable for the fees and expenses of more than one
counsel (in addition to local counsel) separate from its own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. The indemnifying party shall not be liable for any
settlement of any action or proceeding effected without its written consent, but
if settled with its written consent, or if there be a final judgment for the
plaintiff in any such action or proceeding, the indemnifying party shall
indemnify and hold harmless the indemnified persons from and against any loss or
liability by reason of the settlement or judgment.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity provided for in this Section 6 is for any
reason held to be unavailable to the indemnified parties although applicable in
accordance with its terms, the Company and Purchaser shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity incurred by the Company and Purchaser, as
incurred; provided that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person that was not guilty of such fraudulent
misrepresentation. As between the Company, on the one hand, and Purchaser, on
the other hand, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Company, on the one hand, and the Purchaser, on the other
hand, with respect to the statements or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect thereof, as well as
any other relevant equitable considerations. The relative fault of the Company,
on the one hand, and of the Purchaser, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, on the one hand, or by or on
behalf of the Purchaser, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Purchaser agree that it would not be
just and equitable if contribution pursuant to this Section 6 were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the relevant equitable considerations. For purposes of
this Section 6(d), each person who controls the Company or the Purchaser within
the meaning of Section 15 of the Securities Act shall have the same rights to
contribution as Purchaser or the Company, as the case may be. No party shall be
liable for contribution with respect to any action, suit, proceeding or claim
settled without its written consent.
(e) The Company may require, as a condition to entering into
any underwriting agreement with respect to the registration of Subject Stock,
that the Company shall have received an undertaking reasonably satisfactory to
it from each underwriter named in any such underwriting agreement, severally and
not jointly, to comply with the provisions of paragraphs (a) through (d) of this
Section 6.
(f) The obligations of the Company and Purchaser under this
Section 6 shall survive the completion of any offering of Subject Stock in a
registration statement.
7. Notices. Any notice or other communication given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail, return receipt requested, postage prepaid, to a party at its address set
forth below (or at such other address as shall be designated for such purpose by
such party in a written notice to the other party hereto):
(a) if to the Company, to it at:
Qwest Communications International Inc.
700 Qwest Tower
555 Seventeenth Street
Denver, CO 80202
Facsimile Number: (303) 992-1772
Attn: Chief Financial Officer
with a copy addressed as set forth above but to the attention
of General Counsel, facsimile number: (303) 992-1044
and with an additional copy to:
Steven L. Grossman
O'Melveny & Myers LLP
1999 Avenue of the Stars
Los Angeles, California 90067-6035
Facsimile Number: (310) 246-6779
(b) if to the Purchaser, to it at:
Microsoft Corporation
One Microsoft Way
Building 8
North Office 2211
Redmond, WA 98052-6399
Attention: Chief Financial Officer
Facsimile Number: (425) 936-7369
with a copy addressed as set forth above but to the attention of
General Counsel, Finance and Administration, facsimile number: (425) 869-1327
with a copy to:
Richard B. Dodd
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Facsimile Number: (206) 623-7022
All such notices and communications shall be effective when received by the
addressee.
8. Governing Law. This Agreement shall be governed in all respects by
the internal laws of the State of New York as applied to contracts entered into
solely between residents of, and to be performed entirely within, such state,
and without reference to principles of conflicts of laws or choice of laws.
9. Entire Agreement; Amendments. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
10. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
11. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restriction of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
12. Termination of Company Obligation. All registration rights provided
hereunder shall terminate upon the earlier to occur of the third anniversary of
the date of this Agreement.
13. Counterparts This Agreement may be executed in two or more
partially or fully executed counterparts and by facsimile signatures each of
which shall be deemed an original and shall bind the signatory, but all of which
together shall constitute but one and the same instrument. The execution and
delivery of a Signature Page - Registration Rights Agreement in the form
attached to this Agreement by any party hereto who shall have been furnished the
final form of this Agreement shall constitute the execution and delivery of this
Agreement by such party.
14. No Transfer or Assignment of Registration Rights. The registration
rights set forth in this Agreement shall not be transferable or assignable by
the Purchaser, except to (i) any person or group approved in writing by the
Company; or (ii) a corporation of which the Purchaser owns more than 50% of the
voting power entitled to be cast in the election of directors; provided,
however, that each transferee agrees in writing to be subject to all the terms
and conditions of this Agreement and the Purchase Agreement.
15. Interpretation. The words "include," "includes," and "including"
when used therein shall be deemed in each case to be followed by the words
"without limitation." The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
16. Non-Recourse. No recourse under this Agreement shall be had against
any "controlling person" (within the meaning of Section 20 of the Exchange Act)
of the Company or the stockholders, directors, officers, employees, agents and
affiliates of the Company or such controlling persons, whether by the
enforcement of any assessment or by any legal or equitable proceeding, or by
virtue of any law, rule, regulation, order or decree, it being expressly agreed
and acknowledged that no personal liability whatsoever shall attach to, be
imposed on or otherwise be incurred by such controlling person, stockholder,
director, officer, employee, agent or affiliate, as such, for any obligations of
the Company under this Agreement or for any claim based on, in respect of or by
reason of such obligations or their creation; provided, however, that nothing
contained in this Section 16 shall be deemed to be a waiver by the Company or
any such controlling person, stockholder, director, officer, employee, agent or
affiliate of the Company of their respective liabilities under applicable
federal or state securities laws, rules or regulations.
[The balance of this page intentionally left blank.]
<PAGE>
SIGNATURE PAGE--REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date set forth above.
QWEST COMMUNICATIONS INTERNATIONAL INC.,
a Delaware corporation
By: /s/ Robert S. Woodruff
Name: Robert S. Woodruff
Title: Executive Vice President - Finance and
Chief Financial Officer
MICROSOFT CORPORATION,
a Washington corporation
By: /s/ Gregory B. Maffei
Name: Gregory B. Maffei
Title: Vice President and Chief Financial
Officer
<PAGE>
Exhibit 99.1 Press release of the Registrant dated December 14, 1998.
Microsoft Invests $200 Million in Qwest; Qwest to Deliver Complete Line of
Electronic Commerce, Enterprise Network and Managed Software
Solutions Based on Windows NT Server
REDMOND, Wash. -- Dec. 14, 1998 -- Microsoft Corp. and Qwest Communications
International Inc. today announced a strategic relationship that will redefine
the boundaries for electronic commerce, Web hosting and other mission-critical
business software applications and services. This relationship will enable
businesses to have high-speed network services that maximize network resources,
reduce costs, generate new sources of revenue and optimize management of
computing operations. The Qwest service, built on the Microsoft(R) Windows NT(R)
Server operating system and Qwest's Internet Protocol (IP)-based fiber optic
network, is designed for businesses of all sizes.
To accelerate Qwest's time-to-market with business services, Microsoft will
license a broad range of its software to Qwest. In addition, Microsoft will
become a shareholder in Qwest by purchasing $200 million of Qwest's common stock
at $45 per share.
Beginning in the second quarter of 1999, Qwest will offer businesses a complete,
single-source high-speed service that is scalable and secure. Qwest's high-speed
network will also support the development, integration and maintenance of
advanced hosting services, including dedicated electronic commerce, Web
application hosting, streaming media, managed software services and virtual
private networking built on Microsoft platforms. Qwest will create a new
business unit focused on the new markets starting in January 1999.
Qwest expects the new service to generate approximately $150 million in revenues
during the first two years, most of it in 2000. Qwest also expects the earnings
before income taxes plus depreciation and amortization (EBITDA) for this
business to be slightly negative in 1999 and slightly positive in 2000, and
capital expenditures to total approximately $150 million in the first two years.
"Qwest is confident that, by working with Microsoft, we will further the
development of broadband applications and accelerate growth in the adoption of
complete Web-enabled solutions. We will help drive the availability of
applications at performance and pricing levels that will significantly enhance
the productivity of businesses," said Joseph P. Nacchio, president and CEO of
Qwest Communications. "By working with Microsoft and its distribution channels,
we believe that we will be able to accelerate by as much as 12 months our own
plans for the delivery of Web-enabled applications."
"Microsoft is pleased to have this opportunity to work closely with Qwest in
shaping this new end-to-end network service. We are investing in the company and
its approach because we think this innovative broadband solution has the
potential to bring enormous benefit to customers," said Steve Ballmer, president
of Microsoft. "We believe this strategic relationship demonstrates that Windows
NT Server meets communications companies' needs for a stable, secure and
scalable solution to deliver a wide range of new network services."
The network service will offer businesses new ways to acquire advanced
communications services. For example, Qwest will deliver new services, such as
instant technology upgrades and usage-sensitive billing, which will help
businesses realize a quick return on their investment. The spectrum of advanced
services offered will include the following:
Dedicated electronic commerce, offering businesses an easy-to-use, customized
system that will allow business partners to purchase goods and services and
monitor order status in a secure, high-speed network environment. Qwest's
service offering will help companies more rapidly deploy electronic commerce
solutions and begin realizing the cost-efficiencies associated with Web-enabling
sales, transactions, business supply chains and inventory management. Web
application hosting, allowing companies to migrate mission-critical business
applications such as electronic mail, human resources, finance and other
operations to secure off-site servers with high-speed access and a single point
of contact for around-the-clock customer support. Aside from the Microsoft
product line, businesses will also have the flexibility to deploy Windows NT
Server-based industry applications with increased functionality and reliability.
Streaming media, providing businesses with a scalable, on-demand delivery
capability that will enable distribution of images to single and multiple
locations to support videoconferencing, PC-to-PC conferencing and video
distribution services. Managed software services, providing a complete
outsourced solution of platforms, tools and utilities to enable the enterprise
IT organization to effectively and efficiently provide for asset management,
software distribution and management, network management, network performance
tuning and desktop management. Virtual Private Networking (VPN) and Virtual
Private Dial-up Networking, offering businesses an end-to-end solution to
connect their LANs, hosting sites, business partners, branch offices,
telecommuters and mobile employees in an integrated, secure and simple manner.
###
About Qwest
Qwest Communications International Inc. (Nasdaq: QWST) is a leader in reliable
and secure broadband Internet-based data, voice and image communications for
businesses and consumers. Headquartered in Denver, Qwest has more than 8,000
employees and 80 sales offices in North America, Europe and Mexico. The Qwest
Macro Capacity (SM) Fiber Network, designed with the newest optical networking,
will span more than 18,500 route miles in the United States when it is completed
in mid-1999.
About Microsoft
Founded in 1975, Microsoft (Nasdaq: MSFT) is the worldwide leader in software
for personal computers. The company offers a wide range of products and services
for business and personal use, each designed with the mission of making it
easier and more enjoyable for people to take advantage of the full power of
personal computing every day.
#########
This release may contain forward-looking statements that involve risks and
uncertainties. These statements may differ materially from actual future events
or results. Readers are referred to the documents filed by Qwest and Microsoft
with the SEC, specifically the most recent reports which identify important risk
factors that could cause actual results to differ from those contained in the
forward-looking statements, including potential fluctuations in quarterly
results, dependence on new product development, rapid technological and market
change, financial risk management and future growth subject to risks. Other risk
factors include satisfactory negotiation of certain licensing arrangements and
satisfactory resolution of software delivery and systems integration
deliverables. These cautionary statements should be considered in connection
with any subsequent written or oral forward-looking statements issued by Qwest
or persons acting on its behalf. Qwest undertakes no obligation to review or
confirm analysts' expectations or estimates or to release publicly any revisions
to any forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Microsoft and Windows NT are either registered trademarks or trademarks of
Microsoft Corp. in the United States and/or other countries.
The Qwest logo is a registered trademark of Qwest Communications International
Inc. in the U.S. and certain other countries.
Other product and company names herein may be trademarks of their respective
owners.
<TABLE>
<CAPTION>
Contact Information:
<S> <C> <C>
Media Contact: Investor Relation Contact: Waggener Edstrum for Microsoft Contact:
Qwest Communications Qwest Communications Waggener Edstrum for Microsoft
Tyler Gronbach Lee Wolfe Judi Meinhalt
(303) 886-0814 (800) 567-7296 (408) 986-1140
</TABLE>
