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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
January 6, 1998
-----------------------------------------
Date of Report (Date of earliest event reported)
Phoenix Network, Inc.
-----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17909 84-0881154
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
13952 Denver West Parkway, Building 53, Golden, Colorado 80402
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(Address of principal executive offices)
(303) 215-5500
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On January 6, 1998, Phoenix Network, Inc. (the "Company"),
Qwest Communications International Inc. ("Qwest") and Qwest 1997-5 Acquisition
Corp. ("Qwest Subsidiary") entered into a definitive Agreement and Plan of
Merger dated as of December 31, 1997 (the "Merger Agreement"), providing for a
merger (the "Merger") that will result in the Company becoming a wholly-owned
subsidiary of Qwest. The Company and Qwest intend that the Merger qualify for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Merger Agreement also provides for an amendment to the Certificate of
Incorporation of the Company (the "Certificate Amendment") that would effect
the conversion of all outstanding shares of Series I Preferred Stock, par value
$.001 per share, of the Company (the "Company Series I Preferred Stock") into
shares of common stock, par value $.001 per share, of the Company (the "Company
Common Stock") immediately prior to the time that the Merger becomes effective
under applicable laws (the "Effective Time").
Copies of the mutual press release dated January 6, 1998 of the
Company and Qwest (the "Press Release") and the Merger Agreement are filed
herewith as Exhibit 99.1 and 99.2. The following description of the Merger
Agreement is qualified by reference to the Merger Agreement.
The Merger Agreement provides for the merger of Qwest Subsidiary
with and into the Company, pursuant to which all outstanding shares of Company
Common Stock and all outstanding shares of Company Series I Preferred Stock will
be acquired for that number of shares of common stock, par value $.01 per share,
of Qwest (the "Qwest Common Stock") having an aggregate market value equal to
$28.5 million, subject to certain adjustments and limitations described below,
and up to $4 million in cash, in the aggregate, contingent upon the outcome of
certain litigation described below. The actual number of shares of Qwest Common
Stock to be issued in the Merger to the holders of shares of Company Common
Stock and holders of Company Series I Preferred Stock will be determined by
dividing
(i) the quotient obtained by dividing the Acquisition
Value by the Effective Time Adjusted Average Market
Price by
(ii) the sum of (a) the number of shares of Company Common
Stock outstanding immediately prior to the Effective
Time, (b) the number of shares of Company Common
Stock issuable upon conversion of all shares of
Company Series I Preferred Stock outstanding
immediately prior the Effective Time and (c) the
number of shares of Company Common Stock that would
be issued if all warrants that are not required by
the Merger Agreement to be canceled or otherwise
terminated were exercised in accordance with their
terms immediately prior to the Effective Time.
All options, warrants and other rights to acquire common and
preferred stock of the Company that are not exercised as of the effective time
of the Merger will be canceled or otherwise terminated, except that warrants to
purchase up to 378,333 shares of Company Common Stock in the aggregate may
remain outstanding at the Effective Time if (a) the Company shall have used
<PAGE> 3
commercially reasonable efforts to cause the cancellation or other termination
of such warrants and (b) only shares of Qwest Common Stock (and not equity
securities of the surviving corporation in the Merger or any other person)
shall be issuable upon exercise of such warrants after the Effective Time.
Qwest will, promptly following the Cash Consideration Date, pay
to each holder of Company Common Stock and Company Series I Preferred Stock
whose shares are converted into the right to receive, at the Effective Time,
the Qwest Common Stock, an amount equal to the sum of (1) the Cash
Consideration and (2) an amount equal to 7% per annum of the Cash Consideration
from the date of the closing of the Merger (the "Closing Date") to, but not
including, the date of such payment, for each such share of Company Common
Stock.
For the purposes of the Merger Agreement, the following terms
have the meanings assigned to them below:
"Acquisition Value" means the amount by which (1) $28,500,000
exceeds (2) the sum of the aggregate amount paid and payable by
the Company as of the Effective Date pursuant to (A) paragraph
A.14.1 of Attachment A to the Resale Solutions Switched
Services Agreement dated December 1996 between the Company and
Sprint Communications Company L.P. with respect to the
difference between the Company's Actual Net Usage (as defined
therein) and $12,000,000 during months 1-12 of the term of such
agreement and (B) Section 3 of the Carrier Agreement between
the Company and MCI Telecommunications Corporation with respect
to the difference between the Company's Usage Charges (as
defined therein) and its Annual Commitment (as defined therein)
during the term of such agreement.
"Aggregate Number" means the sum of (a) the number of shares of
Company Common Stock outstanding immediately prior to the
Effective Time, (b) the number of shares of Company Common
Stock issuable upon conversion of all shares of Company Series
I Preferred Stock outstanding immediately prior to the
Effective Time and (c) the number of shares of Company Common
Stock that would be issued if all warrants that are not
canceled or otherwise terminated in accordance with Section
7.1(j) of the Merger Agreement were exercised in accordance
with their terms immediately prior to the Effective Time.
"Average Market Price" per share of any class of stock on any
date means the average of the daily closing prices of the
shares of such stock for the fifteen (15) consecutive trading
days commencing twenty (20) trading days before such date.
"Cash Consideration" means an amount equal to the quotient
obtained by dividing (1) (A) $4,000,000 minus (B) the LDDS
Liability plus (C) any amounts recovered by any of Qwest and
its subsidiaries on or before the Cash Consideration Date under
the Van Essen Indemnification and Hold Harmless Agreement (as
defined in the Merger Agreement) (net of all out-of-pocket
costs, fees and expenses, including, without limitation, the
fees and disbursements of counsel and the expenses of
litigation, incurred in connection with collecting such
amounts, in each case to the extent not
<PAGE> 4
reimbursed pursuant to the Van Essen Indemnification and Hold
Harmless Agreement) by (2) the Aggregate Number; provided that,
if there has not occurred a settlement or other final,
nonappealable resolution of the litigation styled
LDDS/WorldCom, Inc. and Dial-Net, Inc. v. Automated
Communication, Inc. and Judy Van Essen Kenyon, C.A. No.
3:93-CV-463 (WS) (U.S.D.C. S.D. Miss) (the "LDDS LITIGATION"),
on or prior to the Cash Consideration Date, the Cash
Consideration shall be an amount equal to zero dollars ($0).
"Cash Consideration Date" means the date that is the earlier of
(1) the third anniversary of the Closing Date and (2) the date
as of which Qwest shall have determined, in the exercise of its
reasonable judgment and after having exercised commercially
reasonable efforts to obtain recovery under the Van Essen
Indemnification and Hold Harmless Agreement, that it is not
reasonably likely in the circumstances that Qwest and its
Subsidiaries shall recover substantial additional amounts under
such agreement on or before the third anniversary of the
Closing Date (net of all out-of-pocket costs, fees and
expenses, including, without limitation, the fees and
disbursements of counsel and the expenses of litigation,
incurred in connection with collecting such amounts, in each
case to the extent not reimbursed or likely to be reimbursed
pursuant to the Van Essen Indemnification and Hold Harmless
Agreement on or before the third anniversary of the Closing
Date); provided that in no event shall any of Qwest and its
Subsidiaries be required to exercise more than commercially
reasonable efforts with respect to such recovery.
"Effective Time Adjusted Average Market Price" means (i) the
Average Market Price per share of Qwest Common Stock at the
Effective Time if such Average Market Price is equal to or
greater than $52.50 and equal to or less than $67.50, (ii)
$52.50 if the Average Market Price per share of Qwest Common
Stock at the Effective Time is equal to or greater than $47.50
and less than $52.50, (iii) $67.50 if the Average Market Price
per share of Qwest Common Stock at the Effective Time is equal
to or less than $72.50 and greater than $67.50, (iv) the
Average Market Price per share of Qwest Common Stock at the
Effective Time plus fifty percent (50%) of the amount such
Average Market Price is less than $47.50 if such Average Market
Price at the Effective Time is less than $47.50, or (v) the
Average Market Price per share of Qwest Common Stock at the
Effective Time less fifty percent (50%) of the amount such
Average Market Price is greater than $72.50 if such Average
Market Price at the Effective Time is greater than $72.50.
"LDDS Liability" means the aggregate amount of any Loss (as
defined in the Merger Agreement) of any of Qwest and its
Subsidiaries in connection with, arising from or related to the
LDDS Litigation, including, without limitation, any damages or
any fees, expenses or other disbursements of counsel.
The Merger Agreement also provides for agreements by
stockholders (collectively, the "Principal Stockholders") beneficially owning
7,967,057 shares of Company Common Stock, or approximately 23.73% of the
outstanding shares of Company Common Stock as of December 31,
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1997, and all outstanding shares of Company Series I Preferred Stock to enter
into the Voting Agreements (as defined below), substantially on the terms set
forth below.
The Board of Directors of the Company has by resolution (the
"Board Approval") (a) determined that the Merger and the other Transactions
contemplated by the Merger Agreement (collectively, the "Transactions"), taken
as a whole, are in the best interests of the Company and its stockholders, (b)
approved the Certificate Amendment, the Merger Agreement and the Merger, (c)
approved the other agreements contemplated by the Merger Agreement and the
other Transactions and (d) recommended that the stockholders of the Company
approve the Certificate Amendment, the Merger Agreement and the Merger. J.C.
Bradford & Co., L.L.C. delivered to the Board of Directors of the Company its
written opinion to the effect that, as of January 6, 1998, the Merger
Consideration (as defined in the Merger Agreement) to be received by the
holders of Company Common Stock and Company Series I Preferred Stock in the
Merger is fair to such stockholders from a financial point of view.
The Merger Agreement contains customary representations,
warranties, covenants and agreements of the parties and (a) covenants of the
Company and Qwest to prepare a proxy statement and registration statement,
respectively, with respect to the approval of the Certificate Amendment, the
Merger Agreement and the Merger, and (b) covenants of the Company (1) to call
and convene the Company Stockholders Meeting (as defined in the Merger
Agreement) to consider the approval of the Certificate Amendment, the Merger
Agreement and the Merger and (2) not to solicit, negotiate, recommend or accept
proposals with respect to Business Combination Transactions (as defined in the
Merger Agreement) or enter into Business Combination Transactions.
The Merger Agreement contains customary conditions to the
obligations of the parties to effect the Merger, including (1) the approval of
the Certificate Amendment, the Merger Agreement and the Merger by holders of a
majority of the outstanding shares of Company Common Stock and holders of a
majority of the outstanding shares of Company Series I Preferred Stock, voting
together as a class, and by holders of a majority of the outstanding shares of
Company Series I Preferred Stock, voting separately as a class, (2) receipt of
all necessary regulatory approvals, including clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (3) the
delivery to the Company of an opinion of the independent auditors of the
Company to the effect that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and (4) the execution and delivery
of certain other documents relating to the Merger.
The Merger Agreement provides for the closing of the Merger to
occur on the later of (a) the first business day following the day on which the
last to be satisfied or waived of the conditions precedent to the obligations
of the parties under the Merger Agreement shall have been satisfied or waived,
as the case may be, and (b) such other time as the parties may agree. The
parties expect the closing of the Merger to occur in the second quarter of
1998.
The Merger Agreement permits each of the parties to terminate
the parties' respective obligations to effect the Merger at any time after May
31, 1998 and permits one party or both parties, as the case may be, to
terminate such obligations upon the occurrence of certain events, including (a)
the breach by a party of its representations, warranties, covenants and
agreements in the Merger
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Agreement, (b) the occurrence of a circumstance or event that constitutes
either (1) a Material Adverse Effect (as defined in the Merger Agreement)
(other than an Event of Default under the Credit Agreement) with respect to the
Company or (2) an Event of Default under the Credit Agreement (as each such
term is defined in the Merger Agreement) and the debt thereunder shall become
due and payable or the Lender thereunder shall have exercised any rights or
remedies in connection therewith, (c) the failure of the stockholders of the
Company to approve the Certificate Amendment, the Merger Agreement and the
Merger, (d) in general, the authorization, recommendation or proposal by the
Board of Directors of the Company of (or the public announcement of its
intention to authorize, recommend or propose) an agreement with respect to a
Business Combination Transaction with a person other than Qwest or Qwest
Subsidiary, the recommendation by the Board that the stockholders of the
Company accept or approve any such Business Combination Transaction or the
failure by the Board to timely publicly confirm the Board Approval in response
to a tender offer or exchange offer for the Company Common Stock and (e) the
occurrence of a Business Combination Transaction (other than the Transactions).
The Merger Agreement provides for the payment of liquidated
damages of $100,000 by a party to the other party or parties, as the case may
be, under certain circumstances upon or following the termination of the
parties' obligations to effect the Merger, and the payment of $3,000,000 under
certain circumstances by the Company to Qwest and Qwest Subsidiary if a
Business Combination Transaction (other than the Transactions) occurs on or
before January 5, 1999.
Contemporaneously with the execution of the Merger Agreement,
Qwest entered into voting agreements and proxies (each such agreement and proxy,
a "Voting Agreement") with certain Principal Stockholders beneficially owning
7,967,057 shares of Company Common Stock in the aggregate and, as of December
31, 1997, 39,500 shares of Company Series I Preferred Stock in the aggregate,
which shares constitute (a) approximately 22.22% of all outstanding shares of
Company Common Stock as of December 31, 1997, after giving effect to the
conversion of the shares of Company Series I Preferred Stock into shares of
Company Common Stock as contemplated by the Merger Agreement, (b) all
outstanding shares of Company Series I Preferred Stock as of December 31, 1997
and (c) a combined voting power equal to 23.82% of the voting power of the
outstanding shares of Company Common Stock and the outstanding shares of Company
Series I Preferred Stock, taken together as a single class, in each case as of
December 31, 1997. The form of the Voting Agreements is attached as Exhibit A
to the Merger Agreement filed herewith. The following description of the Voting
Agreements is qualified by reference to Exhibit A to the Merger Agreement.
The Voting Agreement with each Principal Stockholder provides
for, among other things, (a) the agreement of such Principal Stockholder to
cause all shares of Company Common Stock or Company Series I Preferred Stock,
as the case may be, beneficially owned by such Principal Stockholder as of the
date of the Merger Agreement to be counted for purposes of determining the
existence of a quorum at the Company Stockholders Meeting, to cause all such
shares to be voted against any action or agreement that (1) in the case of
Voting Agreements with Principal Stockholders only holding shares of Company
Common Stock, would result in a breach of the Merger Agreement, impede or delay
the conclusion of the Transactions or (2) in the case of each Voting Agreement,
materially reduce the benefits of the Transactions to Qwest or Qwest Subsidiary
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and to cause all such shares to be voted to approve the Certificate Amendment,
the Merger Agreement and the Merger and against any Business Combination
Transaction (other than the Transactions) and (b) grant to Qwest and Qwest
Subsidiary of an irrevocable proxy in connection therewith. Each Principal
Stockholder has agreed in its Voting Agreement not to transfer any shares of
Company Common Stock or Company Series I Preferred Stock, as the case may be,
subject to the Voting Agreement, except that the Principal Stockholder
beneficially owning all outstanding shares of Company Series I Preferred Stock
may convert such shares into shares of Company Common Stock, which shares of
Company Common Stock would not be subject to the related Voting Agreement.
Each Voting Agreement will terminate the day following the termination date
under the Merger Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 Press Release, released on January 6, 1998,
announcing the Merger.
99.2 Agreement and Plan of Merger dated as of
December 31, 1997 among Phoenix Network,
Inc., Qwest Communications International Inc.
and Qwest 1997-5 Acquisition Corp.
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 hereunto duly authorized.
Date: January 8, 1998 Phoenix Network, Inc.
By: /s/ WALLACE M. HAMMOND
----------------------------
Wallace M. Hammond, President
and Chief Executive Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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99.1 Press Release, released on January 6, 1998, announcing the Merger.
99.2 Agreement and Plan of Merger dated as of December 31, 1997 among Phoenix Network,
Inc., Qwest Communications International Inc. and Qwest 1997-5 Acquisition Corp.
</TABLE>
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EXHIBIT 99.1
Qwest Acquires 40,000 Business Customers Through Purchase of Phoenix
Network Inc.
Tuesday, January 6, 1998
DENVER--Qwest and Phoenix Network today announced Qwest has signed a definitive
merger agreement to acquire publicly-held Phoenix Network, Inc. of Golden,
Colorado.
Phoenix Network is a non-facilities-based reseller of long distance services.
Phoenix Network currently has approximately 40,000 customers, almost
exclusively in the business market, and has generated approximately $75 million
in revenues over the last twelve months.
Under the terms of the acquisition, $28.5 million of Qwest common stock and up
to $4 million of cash will be exchanged for the outstanding shares of Phoenix
Network as of the close of the acquisition. The cash portion of the
consideration is being withheld pending the outcome of litigation to which
Phoenix Network or its affiliates may have certain potential liability. It is
estimated that approximately 36 million shares of Phoenix Network common stock
will be outstanding at that time. The transaction is subject to the approval of
the Phoenix Network stockholders, the receipt of certain state and federal
regulatory approvals and the satisfaction of other customary closing conditions
and is expected to close in the second quarter of 1998.
"Qwest is aggressively pursuing the extremely profitable business market with
voice and data services," said Joseph P. Nacchio, president and CEO of Qwest.
"The acquisition of Phoenix Network propels us forward to accomplish these
goals by giving us a solid business customer base and supplementing our growing
nationwide sales channels."
"We are happy for our employees, customers and stockholders who will benefit
from integrating our resources with those of Qwest Communications," said
Wallace Hammond, president and CEO of Phoenix Network. "The combined resources
will be powerful in delivering world-class, next-generation voice and data
services to the business community."
The Qwest Macro Capacity(SM) Network
Qwest's planned domestic 16,000 mile network will serve over 125 cities, which
represent approximately 80 percent of the data and voice traffic originating in
the United States, upon its scheduled completion in the second quarter of 1999.
Currently, 3,350 miles are activated from Los Angeles to Indianapolis; and from
Dallas to Houston. Qwest is also extending its network 1,400 miles into Mexico
with completion slated for late third quarter 1998.
The Qwest Macro Capacity Fiber network is designed with a highly reliable and
secure bi-directional, line switching OC-192 SONET ring architecture. Upon
completion, the network will offer a self-healing system that provides the
ultimate security and reliability by allowing instantaneous rerouting in the
event of a fiber cut.
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About Phoenix Network
Phoenix Network, Inc. (AMEX:PHX) is an inter-exchange carrier (IXC) which, in
addition to core long distance, offers Internet access, enhanced fax broadcast
services, international call-back, conference calling, travel cards, debit
cards, custom invoices, management reports, and a variety of other products and
services. Phoenix Network's World Wide Web address is
http://www.phoenixnet.com.
About Qwest
Qwest Communications International Inc. (NASDAQ:QWST) is a multimedia
communications company building a high-capacity, fiber optic network for the
21st century. With its cutting-edge technology, Qwest will deliver high-quality
voice, data and video connectivity securely and reliably to businesses,
consumers and other communications service providers. Further information is
available at www.qwest.net.
This announcement is not an offer to sell or a solicitation to buy any
securities of Qwest. The offering with respect to the proposed acquisition of
Phoenix Network will be made only by the proxy statement/prospectus that will
be distributed to stockholders of Phoenix Network in connection with their
consideration of the transaction.
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 with the SEC,
specifically the most recent reports on Form 10-Q, 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, failure to complete the network on schedule, volatility of stock price,
financial risk management and future growth subject to risks.
CONTACT: Qwest Communications, Denver
Lisa Hempel, 303/291-1708 (Corporate Contact)
[email protected]
Lee Wolfe, 800/567-7296 (Investor Contact)
[email protected]
http://www.qwest.net
or
Alexander Communications (Media Contact)
Alison Schwartz, 303/615-5070
[email protected]
http://www.alexander-pr.com
or
Phoenix Network, Golden
Monica Williamson, 303/215-5510
http://www.phoenixnet.com
<PAGE> 1
EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
dated as of
December 31, 1997
among
PHOENIX NETWORK, INC.,
QWEST COMMUNICATIONS INTERNATIONAL INC.
and
QWEST 1997-5 ACQUISITION CORP.
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TABLE OF CONTENTS
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ARTICLE I
THE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Qwest/Principal Stockholders Transactions . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.1 Time of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.2 Location of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.1 Conditions Precedent to Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.1 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2 Authorization; Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.5 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.8 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.10 Compliance with Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.11 Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.12 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.13 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.15 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.16 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.17 Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.19 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.20 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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Section 4.21 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.22 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.23 Restrictions on Business Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.24 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.25 Certain Financial Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.26 Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.27 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.29 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.30 Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.31 Business Combination Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.32 Aggregate Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.33 Fees for Financial Advisors, Brokers and Finders . . . . . . . . . . . . . . . . . . . . 40
Section 4.34 Ownership of Qwest Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.35 Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.36 Continuing Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF QWEST AND QWEST SUBSIDIARY . . . . . . . . . . . . . . . . . . . . 41
Section 5.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.2 Authorization; Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.4 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.5 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.8 Compliance with Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.9 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.10 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.11 Proxy/Statement/Prospectus; Registration Statement;
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 5.12 Ownership of Company Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5.13 Misstatements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5.14 Continuing Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.1 Covenants of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.2 Proxy Statement/Prospectus; Registration Statement . . . . . . . . . . . . . . . . . . . 49
Section 6.3 Letters of Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE VII
ADDITIONAL COVENANTS OF
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.1 Affirmative Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.2 Negative Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII
ADDITIONAL COVENANTS OF QWEST . . . . . . . . . . . . . . . . . . . . 61
Section 8.1 Affirmative Covenants of Qwest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.2 Directors' and Officers' Insurance; Indemnification . . . . . . . . . . . . . . . . . . 61
Section 8.3 Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 8.4 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9.2 Fees; Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE X
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.2 No Waivers; Remedies; Specific Performance . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.3 Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.4 Successors and Assigns; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . 68
Section 10.5 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.7 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.8 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.9 Headings and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.11 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.12 Exclusive Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.14 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 10.15 Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
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ANNEX
<TABLE>
<S> <C>
Annex 1 - Definitions
EXHIBITS
Exhibit A - Form of Voting Agreement
Exhibit B - Amendment to Company Certificate of Incorporation
Exhibit 3.1(m)(7) - Form of U.S. Real Property Interest Certification
Exhibit 3.1(n)(2) - Form of Affiliate Letter for Affiliates of the Company
SCHEDULES
Company's Disclosure Schedule
Qwest and Qwest Subsidiary's Disclosure Schedule
</TABLE>
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<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 31, 1997
among PHOENIX NETWORK, INC., a Delaware corporation (together with its
successors and assigns, the "COMPANY"), QWEST COMMUNICATIONS INTERNATIONAL
INC., a Delaware corporation (together with its successors and assigns,
"QWEST"), and QWEST 1997-5 ACQUISITION CORP., a Delaware corporation (together
with its successors and assigns, "QWEST SUBSIDIARY").
Terms not otherwise defined in this Agreement have the
meanings stated in Annex 1 attached hereto.
RECITALS
A. The respective Boards of Directors of the Company,
Qwest and Qwest Subsidiary have:
(1) approved and declared advisable the merger of
Qwest Subsidiary with and into the Company (the "MERGER"), upon the
terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of Company Common Stock and
each issued and outstanding share of Company Series I Preferred Stock,
in each case not owned by the Company, Qwest, Qwest Subsidiary or their
respective Wholly-Owned Subsidiaries will be converted into the right
to receive shares of Qwest Common Stock, and
(2) determined that the Merger and the other
transactions contemplated by this Agreement are consistent with, and in
furtherance of, their respective business strategies and goals.
B. The parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
C. For federal income tax purposes, the parties intend
that the Merger qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE").
AGREEMENT
The parties agree as follows:
<PAGE> 7
ARTICLE I
THE TRANSACTIONS
SECTION 1.1 THE MERGER.
(a) Merger. Subject to the terms and conditions set forth
in this Agreement, on the Closing Date the Company and Qwest Subsidiary shall
file a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary
of State of the State of Delaware, and make all other filings or recordings
required by the DGCL to effect the Merger. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or at such later time as is specified in the
Certificate of Merger (the "EFFECTIVE TIME"). At the Effective Time:
(1) Qwest Subsidiary shall be merged with and
into the Company in accordance with the DGCL, whereupon (A) the
separate existence of Qwest Subsidiary shall cease, (B) the Company
shall be the surviving corporation (together with its successors and
assigns, the "SURVIVING CORPORATION"), having all the rights,
privileges and powers and being subject to all of the restrictions,
disabilities and duties of the Company and Qwest Subsidiary, all as
provided in the DGCL, (C) the certificate of incorporation and bylaws
of Qwest Subsidiary as in effect immediately prior to the Merger shall
be the certificate of incorporation and bylaws of the Surviving
Corporation and (D) the directors and officers of Qwest Subsidiary at
the Effective Time shall, from and after the Effective Time, be the
initial directors and initial officers, respectively, of the Surviving
Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or
removal in accordance with the certificate of incorporation and bylaws
of the Surviving Corporation;
(2) each outstanding share of common stock, par
value $.001 per share, of the Company (the "COMPANY COMMON STOCK"),
shall cease to be outstanding and, subject to the exceptions in Section
1.1(a)(5), shall be converted into the right to receive (A) the
Conversion Number of shares of common stock, par value $.01 per share,
of Qwest (the "QWEST COMMON STOCK") and (B) the Cash Consideration
(clause (A) and clause (B) together, the "COMMON STOCK MERGER
CONSIDERATION"). "CONVERSION NUMBER" means the number equal to the
quotient obtained by dividing (i) the quotient obtained by dividing the
Acquisition Value by the Effective Time Adjusted Average Market Price
by (ii) the sum (the "AGGREGATE NUMBER") of (a) the number of shares of
Company Common Stock outstanding immediately prior to the Effective
Time, (b) the number of shares of Company Common Stock issuable upon
conversion of all shares of Company Series I Preferred Stock
outstanding immediately prior to the Effective Time and (c) the number
of shares of Company Common Stock that would be issued if all Company
Series F Warrants and Company Sunrise Warrants that are not cancelled
or otherwise terminated in accordance with Section 7.1(j) were
exercised in accordance with their terms immediately prior to the
2
<PAGE> 8
Effective Time. "ACQUISITION VALUE" means the amount by which (1)
$28,500,000 exceeds (2) the sum of the aggregate amount paid and
payable by the Company as of the Effective Time pursuant to (A)
paragraph A.14.1 of Attachment A to the Resale Solutions Switched
Services Agreement dated December 1996 between the Company and Sprint
Communications Company L.P. with respect to the difference between the
Company's Actual Net Usage (as defined therein) and $12,000,000 during
months 1-12 of the term of such agreement (the "SPRINT PAYABLES
OBLIGATION") and (B) Section 3 of the Carrier Agreement between the
Company and MCI Telecommunications Corporation with respect to the
difference between the Company's Usage Charges (as defined therein) and
its Annual Commitment (as defined therein) during the term of such
agreement (the "MCI PAYABLES OBLIGATION"). "EFFECTIVE TIME ADJUSTED
AVERAGE MARKET PRICE" means (i) the Average Market Price per share of
Qwest Common Stock at the Effective Time if such Average Market Price
is equal to or greater than $52.50 and equal to or less than $67.50,
(ii) $52.50 if the Average Market Price per share of Qwest Common Stock
at the Effective Time is equal to or greater than $47.50 and less than
$52.50, (iii) $67.50 if the Average Market Price per share of Qwest
Common Stock at the Effective Time is equal to or less than $72.50 and
greater than $67.50, (iv) the Average Market Price per share of Qwest
Common Stock at the Effective Time plus fifty percent (50%) of the
amount such Average Market Price is less than $47.50 if such Average
Market Price at the Effective Time is less than $47.50, or (v) the
Average Market Price per share of Qwest Common Stock at the Effective
Time less fifty percent (50%) of the amount such Average Market Price
is greater than $72.50 if such Average Market Price at the Effective
Time is greater than $72.50. "CASH CONSIDERATION" means an amount
equal to the quotient obtained by dividing (1) (A) $4,000,000 minus (B)
the LDDS Liability plus (C) any amounts recovered by any of Qwest and
its Subsidiaries on or before the Cash Consideration Date under the Van
Essen Indemnification and Hold Harmless Agreement (net of all
out-of-pocket costs, fees and expenses, including, without limitation,
the fees and disbursements of counsel and the expenses of litigation,
incurred in connection with collecting such amounts, in each case to
the extent not reimbursed pursuant to the Van Essen Indemnification and
Hold Harmless Agreement) by (2) the Aggregate Number; provided that, if
there has not occurred a settlement or other final, nonappealable
resolution of the litigation styled LDDS/WorldCom, Inc. and Dial-Net,
Inc. v. Automated Communication, Inc. and Judy Van Essen Kenyon, C.A.
No. 3:93-CV-463 (WS) (U.S.D.C. S.D. Miss) (the "LDDS LITIGATION"), on
or prior to the Cash Consideration Date, the Cash Consideration shall
be an amount equal to zero dollars ($0). "LDDS LIABILITY" means the
aggregate amount of any Loss of any of Qwest and its Subsidiaries in
connection with, arising from or related to the LDDS Litigation,
including, without limitation, any damages or any fees, expenses or
other disbursements of counsel. "CASH CONSIDERATION DATE" means the
date that is the earlier of (1) the third anniversary of the Closing
Date and (2) the date as of which Qwest shall have determined, in the
exercise of its reasonable judgment and after having exercised
commercially reasonable efforts to obtain recovery under the Van Essen
Indemnification and Hold Harmless Agreement, that it is not reasonably
likely in the circumstances that Qwest
3
<PAGE> 9
and its Subsidiaries shall recover substantial additional amounts under
such agreement on or before the third anniversary of the Closing Date
(net of all out-of-pocket costs, fees and expenses, including, without
limitation, the fees and disbursements of counsel and the expenses of
litigation, incurred in connection with collecting such amounts, in
each case to the extent not reimbursed or likely to be reimbursed
pursuant to the Van Essen Indemnification and Hold Harmless Agreement
on or before the third anniversary of the Closing Date); provided that
in no event shall any of Qwest and its Subsidiaries be required to
exercise more than commercially reasonable efforts with respect to such
recovery;
(3) each outstanding share of Series I
Convertible Preferred Stock, par value $.001 per share, of the Company
(the "COMPANY SERIES I PREFERRED STOCK," and together with Company
Common Stock, the "COMPANY CAPITAL STOCK") shall cease to be
outstanding and, subject to the exceptions in Section 1.1(a)(5), shall
be converted into the right to receive (A) the number of shares of
Qwest Common Stock equal to the product of (i) the number of shares of
Company Common Stock issuable upon conversion of such share of Company
Series I Preferred Stock immediately prior to Effective Time times (ii)
the Conversion Number and (B) cash consideration equal to (i) the
number of shares of Company Common Stock issuable upon conversion of
such share of Company Series I Preferred Stock immediately prior to the
Effective Time times (ii) the Cash Consideration (clause (A) and clause
(B) together, the "PREFERRED STOCK MERGER CONSIDERATION" and, together
with the Common Stock Merger Consideration, the "MERGER
CONSIDERATION");
(4) the stock transfer books of the Company shall
be closed and there shall be no further registration of transfers of
shares of Company Capital Stock on the records of the Company;
(5) any shares of Company Capital Stock held by
the Company, Qwest, Qwest Subsidiary or their respective Wholly-Owned
Subsidiaries (other than shares held in trust) shall be cancelled and
no consideration shall be delivered in exchange therefor; and
(6) each outstanding share of common stock of
Qwest Subsidiary shall be converted into and exchangeable for one share
of common stock of the Surviving Corporation.
(b) No Further Ownership Rights in Company Capital Stock.
From and after the Effective Time, holders of a certificate or certificates
that immediately before the Effective Time represented shares of Company
Capital Stock (the "CERTIFICATES") shall have no right to vote or to receive
any dividends or other distributions with respect to any shares of Company
Capital Stock that were theretofore represented by such Certificates, other
than any dividends or other distributions payable to holders of record as of a
date prior to the Effective Time, and shall have no other rights in respect
thereof other than as provided herein or by law. If, after the Effective Time,
Certificates are presented to the Surviving
4
<PAGE> 10
Corporation, other than Certificates in respect of Dissenting Shares, the
rights to which have been perfected or not withdrawn or lost under the DGCL,
they shall be cancelled and exchanged for Merger Consideration as provided in
Section 1.1(d). Until surrendered in accordance with the provisions of Section
1.1(d), each Certificate (other than Certificates representing Dissenting
Shares or shares of Company Capital Stock held by any of the Company, Qwest,
Qwest Subsidiary and their respective Wholly-Owned Subsidiaries) shall
represent for all purposes the right to receive (1) certificates representing
the number of whole shares of Qwest Common Stock into which such shares shall
have been converted pursuant to Section 1.1(a) (the "QWEST CERTIFICATES"),
without interest, (2) certain dividends and other distributions in accordance
with Section 1.1(e), without interest, and (3) cash in lieu of fractional
shares of Qwest Common Stock in accordance with Section 1.1(g), without
interest.
(c) Exchange Agent. Prior to the Effective Time, Qwest
Subsidiary shall or, in the event Qwest Subsidiary shall fail to do so, Qwest
shall (1) designate a bank or trust company to act as exchange agent in the
Merger (the "EXCHANGE AGENT") and shall enter into a mutually acceptable
agreement with the Exchange Agent pursuant to which, after the Effective Time,
the Exchange Agent shall distribute the Merger Consideration on a timely basis
and (2) according to the terms of the agreement with the Exchange Agent,
deposit or cause to be deposited with the Exchange Agent as of the Effective
Time, for the benefit of the holders of shares of Company Capital Stock, for
exchange in accordance with this Section 1.1, through the Exchange Agent, Qwest
Certificates representing the number of whole shares of Qwest Common Stock
issuable pursuant to Section 1.1(a) in exchange for outstanding shares of
Company Capital Stock. Such shares of Qwest Common Stock, together with any
dividends or distributions with respect thereto with a record date after the
Effective Time, any Excess Shares and any cash (including cash proceeds from
the sale of the Excess Shares) payable in respect of any share of Company
Capital Stock or in lieu of any fractional shares of Qwest Common Stock are
referred to as the "EXCHANGE FUND".
(d) Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall be instructed to mail to each record
holder (other than any holder of Dissenting Shares or any of the Company,
Qwest, Qwest Subsidiary and their respective Wholly-Owned Subsidiaries) of a
Certificate or Certificates a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender to the Exchange Agent of a Certificate, together
with such letter of transmittal duly executed and completed in accordance with
the instructions thereon, the holder of such Certificate shall be entitled to
receive in exchange therefor a Qwest Certificate representing that number of
whole shares of Qwest Common Stock which such holder has the right to receive
pursuant to the provisions of Section 1.1(a), certain dividends or other
distributions in accordance with Section 1.1(e) and cash in lieu of any
fractional share in accordance with Section 1.1(g), and such Certificate shall
forthwith be cancelled. No interest shall be paid or accrued on the Merger
Consideration, on any such dividend or other distribution or on cash payable in
lieu of any fractional share of Qwest Common Stock. All distributions to
5
<PAGE> 11
holders of Certificates shall be subject to any applicable federal, state,
local and foreign tax withholding, and such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of
Certificates in respect of which such deduction and withholding was made. If
the Merger Consideration is to be distributed to a person other than the person
in whose name the Certificate surrendered is registered, it shall be a
condition of such distribution that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer (including signature
guarantees, if required by the Surviving Corporation in its sole discretion)
and that the person requesting such distribution shall pay any transfer or
other taxes required by reason of such distribution to a person other than the
registered holder of the Certificate surrendered or, in the alternative,
establish to the satisfaction of Qwest Subsidiary that such tax has been paid
or is not applicable. After the Effective Time, the Surviving Corporation
shall pay all charges and expenses, including those of the Exchange Agent, in
connection with the distribution of the Merger Consideration.
(e) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Qwest Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Qwest Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 1.1(g), and all such dividends,
other distributions and cash in lieu of fractional shares of Qwest Common Stock
shall be paid by Qwest to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such Certificate in
accordance with Section 1(d). Subject to the effect of applicable escheat or
similar laws following surrender of any such Certificate, there shall be paid
to the holder thereof (1) at the time of such surrender, a Qwest Certificate
representing whole shares of Qwest Common Stock issued in exchange therefor,
without interest, (2) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Qwest Common Stock and the amount of
any cash payable in lieu of a fractional share of Qwest Common Stock to which
such holder is entitled pursuant to Section 1.1(g), in each case without
interest, and (3) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable
with respect to such whole shares of Qwest Common Stock, without interest.
Qwest shall make available to the Exchange Agent cash for these purposes to the
extent sufficient amounts are not then available in the Exchange Fund.
(f) Payment of Cash Consideration. Notwithstanding
anything in this Agreement to the contrary, Qwest shall, promptly following the
Cash Consideration Date, pay to each holder of Company Capital Stock whose
shares shall be converted into the right to receive, at the Effective Time, the
Merger Consideration, an amount equal to the sum of (1) the Cash Consideration
and (2) an amount equal to 7% per annum of the Cash Consideration from the
Closing Date to, but not including, the date of such payment, for each such
share of Company Common Stock.
6
<PAGE> 12
(g) No Fractional Shares.
(1) No Qwest Certificates or scrip representing
fractional shares of Qwest Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of
Qwest shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of Qwest.
(2) As promptly as practicable following the
Effective Time, the Exchange Agent shall determine the excess (the
"EXCESS SHARES") of (A) the number of whole shares of Qwest Common
Stock delivered to the Exchange Agent by Qwest pursuant to Section
1.1(a) over (B) the aggregate number of whole shares of Qwest Common
Stock to be distributed to holders of Company Capital Stock pursuant to
Section 1.1(d). Following the Effective Time, the Exchange Agent
shall, on behalf of former stockholders of the Company, sell the Excess
Shares at then-prevailing prices on NASDAQ/NM, all in the manner
provided in Section 1.1(g)(3).
(3) The sale of the Excess Shares by the Exchange
Agent shall be executed on NASDAQ/NM through one or more member firms
of the NASD and shall be executed in round lots to the extent
practicable. The Exchange Agent shall use reasonable efforts to
complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such sales
in light of prevailing market conditions. Until the net proceeds of
such sale or sales have been distributed to the holders of Company
Capital Stock, the Exchange Agent shall hold such proceeds in trust for
the holders of the Company Capital Stock. The Surviving Corporation
shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of the Excess
Shares. The Exchange Agent shall determine the portion of such trust
to which such holder of Company Capital Stock is entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising such
trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of Company Capital Stock
is entitled (after taking into account all shares of Company Capital
Stock held at the Effective Time by such holder) and the denominator of
which is the aggregate amount of fractional share interests to which
all holders of Company Capital Stock are entitled.
(4) Notwithstanding the provisions of Section
1.1(g)(2) and (3), the Surviving Corporation may by written notice
delivered to the Company before the Effective Time, in lieu of the
issuance and sale of Excess Shares and the making of the payments
contemplated by Sections 1.1(g)(2) and (3), elect to pay each holder of
Company Capital Stock an amount in cash equal to the product obtained
by multiplying (A) the fractional share interest to which such holder
(after taking into account all shares of Company Capital Stock held at
the Effective Time by such holder) would otherwise be entitled by (B)
the Closing Price of Qwest Common
7
<PAGE> 13
Stock on the Closing Date, and, in such case, all references herein to
the cash proceeds of the sale of the Excess Shares and similar
references will be deemed to mean and refer to the payments calculated
as set forth in this Section 1.1(g)(4).
(5) As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of
Company Capital Stock with respect to any fractional share interests,
the Exchange Agent shall make available such amounts to such holders of
Company Capital Stock subject to and in accordance with the terms of
Section 1.1(e).
(h) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Capital Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
stockholder who has the right (to the extent such right is available by law) to
demand and receive payment of the fair value of such holder's stock pursuant to
Section 262 of the DGCL (the "DISSENTING SHARES") shall not be converted into
the right to receive the Merger Consideration provided for in Section 1.1(a)(2)
(unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost such right under the DGCL, as the case may be),
but the holder thereof shall only be entitled to such rights as are granted by
Delaware law. If such holder shall have so failed to perfect or shall have
effectively withdrawn or lost such right, such holder's shares of Company
Capital Stock shall thereupon be deemed to have been converted at the Effective
Time into the right to receive the Merger Consideration (without any interest
thereon). If the holder of any shares of Company Capital Stock shall become
entitled to receive payment for such shares pursuant to Section 262 of the
DGCL, then such payment shall be made by the Surviving Corporation.
(i) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the Certificates
for six months after the Effective Time shall be delivered to Qwest, upon
demand, and any holders of the Certificates who have not theretofore complied
with this Section 1.1 shall thereafter look only to Qwest as general creditors
thereof for payment of their claim for Merger Consideration or shares, any cash
in lieu of fractional shares of Qwest Common Stock and any dividends or
distributions with respect to Qwest Common Stock.
(j) No Liability. None of the Company, Qwest, Qwest
Subsidiary and the Exchange Agent shall be liable to any person in respect of
any shares of Qwest Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund in each case delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date of which any
Merger Consideration, any cash payable to the holder of such Certificate
pursuant to this Section 1.1 or any dividends or distributions payable to the
holder of such Certificate would otherwise escheat to or become the property of
any governmental body or authority) any such Merger Consideration or cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving
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Corporation, free and clear of the claims or interest of any person previously
entitled thereto.
(k) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Qwest, on any
daily basis. Any interest and other income arising from such investments shall
be paid to Qwest.
(l) Lost, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall deliver in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, the Merger
Consideration with respect to such Certificates as may be required pursuant to
Section 1.1(a); provided that the Surviving Corporation may, in its sole
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against any of Qwest, the Surviving Corporation and the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
(m) Tax Matters. The parties intend that the Merger
qualify as a reorganization under Section 368(a) of the Code. The parties
hereby accept this Agreement as a "plan of reorganization" within the meanings
of sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
SECTION 1.2 QWEST/PRINCIPAL STOCKHOLDERS TRANSACTIONS.
Concurrently with the execution and delivery of this Agreement, Qwest and each
of the Principal Stockholders are executing and delivering a Voting Agreement
and Proxy substantially in the form of Exhibit A attached hereto (the "VOTING
AGREEMENT"), pursuant to which, among other things, each of the Principal
Stockholders is (1) agreeing to vote all the shares of Company Common Stock or
shares of Company Series I Preferred Stock, as the case may be, beneficially
owned by such Principal Stockholder (collectively, the "RESTRICTED COMPANY
SHARES") to approve this Agreement and the Merger and against any Business
Combination Transaction (other than the Transactions), (2) granting to each of
Qwest and Qwest Subsidiary an irrevocable proxy in connection therewith and (3)
agreeing to restrict the transfer of such Restricted Company Shares.
ARTICLE II
CLOSING
SECTION 2.1 TIME OF CLOSING. The closing of the Merger
shall take place (the "CLOSING") on the later of (1) the first Business Day
following the day on which the last to be satisfied or waived of the conditions
precedent to the obligations of the parties under this Agreement shall have
been satisfied or waived, as the case may be, and (2) such other time as the
parties may agree (the "CLOSING DATE").
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SECTION 2.2 LOCATION OF CLOSING. The Closing shall take
place at the offices of Holme Roberts & Owen LLP at 1700 Lincoln Street, 41st
Floor, Denver, Colorado 80203, or at such other location as approved by the
parties.
ARTICLE III
CONDITIONS OF CLOSING
SECTION 3.1 CONDITIONS PRECEDENT TO CLOSING. The
respective obligations of each party under this Agreement with respect to the
Merger are subject to the satisfaction of each of the following conditions,
unless waived by each of the parties that is the beneficiary of the
satisfaction of such condition, at or before the Closing:
(a) holders of a majority of the outstanding shares of
Company Common Stock and holders of a majority of the outstanding shares of
Company Series I Preferred Stock, voting together as a class, shall have
approved the Certificate Amendment, this Agreement and the Merger, and holders
of a majority of the outstanding shares of Company Series I Preferred Stock,
voting separately as a class, shall have approved the Certificate Amendment,
this Agreement and the Merger, in each case in accordance with the DGCL and the
certificate of incorporation and bylaws of the Company;
(b) the Certificate Amendment shall have become effective
in accordance with the DGCL;
(c) the Registration Statement shall have become effective
in accordance with the provisions of the Securities Act and no stop order
suspending such effectiveness shall have been issued and remain in effect;
(d) the shares of Qwest Common Stock issuable in the
Merger shall have been approved for inclusion in NASDAQ/NM, if necessary,
subject only to official notice of issuance;
(e) each of the Company, its Subsidiaries, Qwest and Qwest
Subsidiary shall have obtained from each Governmental Body or other person each
Approval or taken all actions required to be taken in connection with each
Approval, and all waiting, review or appeal periods under the Hart-Scott-Rodino
Act or otherwise prescribed with respect to each Approval shall have terminated
or expired, as the case may be, in each case with respect to an Approval that
is required or advisable on the part of such person for (1) the due execution
and delivery by such person of each Transaction Document to which it is or may
become a party, (2) the conclusion of the Transactions, (3) the performance by
such person of its obligations with respect to the Transactions under each
Transaction Document to which it is or may become a party and (4) the exercise
by such person of its rights and remedies with respect to the Transactions
under each Transaction Document to which it is or may become a party or with
respect to which it is or may become an express beneficiary,
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except in each case referred to in the preceding clauses (1), (2), (3) and (4)
where the failure to obtain such Approval, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on such
person;
(f) except as disclosed in Section 4.9 of the Company's
Disclosure Schedule or Section 5.7 of Qwest and Qwest Subsidiary's Disclosure
Schedule, no Action shall be pending against the Company, its Subsidiaries,
Qwest and Qwest Subsidiary or, to their knowledge, threatened against any of
them or any other person that, individually or in the aggregate, if determined
adversely to any of them, could reasonably be expected to have a Material
Adverse Effect on any of the Company, its Subsidiaries, Qwest and Qwest
Subsidiary;
(g) except as disclosed in Section 4.3 of the Company's
Disclosure Schedule or Section 5.3 of Qwest and Qwest Subsidiary's Disclosure
Schedule, none of the Company, its Subsidiaries, Qwest and Qwest Subsidiary (1)
is in violation or breach of or default with respect to (A) any Regulation of
any Governmental Body or any decision, ruling, order or award of any arbitrator
applicable to it or its business, properties or operations or (B) any
agreement, indenture or other instrument to which it is a party or by which it
or its properties may be bound or affected, (2) would be in violation or breach
of or default with respect to any Regulation of any Governmental Body or any
decision, ruling, order or award of any arbitrator applicable to it or its
business, properties or operations in connection with or as a result of the
conclusion of any of the Transactions or (3) has received notice that, in
connection with or as a result of the conclusion of any of the Transactions, it
is or would be in violation or breach of or default with respect to any
Regulation of any Governmental Body or any decision, ruling, order or award of
any arbitrator applicable to it or its business, properties or operations,
except in each case referred to in the preceding clauses (1), (2) (3), and (4)
for violations, breaches or defaults that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on such
person;
(h) except as disclosed in Section 4.6 of the Company's
Disclosure Schedule, since December 31, 1996, no circumstance has existed and
no event has occurred that has had, will have or could reasonably be expected
to have a Material Adverse Effect on the Company and its Subsidiaries;
(i) each Transaction Document required to be executed and
delivered prior to the Effective Time shall have been so executed and delivered
by the respective parties thereto;
(j) the representations and warranties of each other party
contained in each Transaction Document to which such other party is a party
shall be true and correct in all material respects on and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date;
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(k) each other party shall have performed, in all material
respects, all of the covenants and other obligations required by each
Transaction Document required to be performed by such other party at or before
the Closing;
(l) the Company shall have received an opinion from Grant
Thornton LLP, in form and substance reasonably satisfactory to it, and dated
the date of the Proxy Statement/Prospectus, to the effect that the Merger will
qualify for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and that none of the Company, its Subsidiaries,
Qwest and Qwest Subsidiary shall recognize gain or loss for federal income tax
purposes as a result of the Merger, other than with respect to any cash paid as
a part of the Merger Consideration or paid in lieu of fractional shares of
Qwest Common Stock;
(m) each party shall have received from each other party
the following, each dated the Closing Date, in form and substance reasonably
satisfactory to the receiving party:
(1) a certificate of the Secretary or an
Assistant Secretary of such other party with respect to (A) the
certificate of incorporation or articles of incorporation, as the case
may be, of such other party, (B) the bylaws of such other party, (C)
the resolutions of the Board of Directors of such other party,
approving each Transaction Document to which such other party is a
party and the other documents to be delivered by it under the
Transaction Documents, and (D) the names and true signatures of the
officers of such other party who signed each Transaction Document to
which such other party is a party and the other documents to be
delivered by such other party under the Transaction Documents;
(2) a certificate of the President or a Vice
President of such other party to the effect that (A) the
representations and warranties of such other party contained in the
Transaction Documents to which it is a party are true and correct in
all material respects as of the Closing Date and (B) such other party
has performed, in all material respects, all covenants and other
obligations required by the Transaction Documents to which it is a
party to be performed by it on or before the Closing Date;
(3) with respect to the Company, certified
copies, or other evidence satisfactory to Qwest and Qwest Subsidiary,
of all Approvals of all Governmental Bodies and other persons with
respect to the Company referred to in Section 4.3;
(4) with respect to Qwest, certified copies, or
other evidence satisfactory to the Company, of all Approvals of all
Governmental Bodies and other persons with respect to Qwest referred to
in Section 5.3;
(5) with respect to Qwest Subsidiary, certified
copies, or other evidence satisfactory to the Company, of all Approvals
of all Governmental Bodies and other persons with respect to Qwest
Subsidiary referred to in Section 5.3;
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(6) a certificate of the Secretary of State of
the jurisdiction in which such other party is incorporated, dated as of
a recent date, as to the good standing of and payment of taxes by such
other party and as to the charter documents of such other party on file
in the office of such Secretary of State; and
(7) with respect to the Company, a certificate of
the President or a Vice President of the Company, substantially in the
form of Exhibit 3.1(m)(7) attached hereto; and
(n) Qwest and Qwest Subsidiary shall have received from
the Company evidence of the following, in each case in form and substance
reasonably satisfactory to Qwest and Qwest Subsidiary and, except as expressly
contemplated by this Agreement, without cost or other liability to any of the
Company, its Subsidiaries, Qwest and Qwest Subsidiary and any other person:
(1) the resignation and general release by, each
director and officer of any of the Company and its Subsidiaries and the
termination of any related employment agreements in connection
therewith, in each case effective at or immediately following the
Effective Time;
(2) a written agreement of each person who is
identified as an "affiliate" on the list furnished by the company
pursuant to Section 7.1(i), which is substantially in the form of
Exhibit 3.1(n)(2) attached hereto; and
(3) the cancellation or other termination of all
outstanding Stock Options and Warrants and all rights of participants
in any stock option, stock purchase, stock appreciation rights, phantom
stock, restricted stock or similar Company Employee Plan, in each case
on terms approved by Qwest and Qwest Subsidiary, other than such number
of Company Series F Warrants and Company Sunrise Warrants as shall not
be required by Section 7.1(j) to be cancelled or otherwise terminated.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Qwest and Qwest Subsidiary as follows:
SECTION 4.1 EXISTENCE AND POWER. Each of the Company and
its Subsidiaries (1) is a corporation duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or is
a limited liability company or limited partnership formed and validly existing
under the laws of the jurisdiction of its formation, (2) has all
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necessary power and authority (as a corporation, limited liability company or
limited partnership, as the case may be) and all material licenses,
authorizations, consents and approvals required to own, lease, license or use
its properties now owned, leased, licensed or used and proposed to be owned,
leased, licensed or used and to carry on its business as now conducted and
proposed to be conducted, (3) is duly qualified as a foreign corporation,
limited liability company or limited partnership, as the case may be, under the
laws of each jurisdiction in which qualification is required either to own,
lease, license or use its properties now owned, leased, licensed and used or to
carry on its business as now conducted, except where the failure to effect or
obtain such qualification, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and (4) has all
necessary power and authority (as a corporation, limited liability company or
limited partnership, as the case may be) to execute and deliver each
Transaction Document to which it is or may become a party and to perform its
obligations thereunder.
SECTION 4.2 AUTHORIZATION; CONTRAVENTION. Subject to
obtaining the Approvals referred to in Section 4.3, the execution and delivery
by each of the Company and its Subsidiaries of each Transaction Document to
which it is or may become a party and the performance by it of its obligations
under each of those Transaction Documents have been duly authorized by all
necessary corporate action and do not and will not (1) contravene, violate,
result in a breach of or constitute a default under (A) its articles of
incorporation, certificate of incorporation, bylaws, operating agreement or
limited partnership agreement, as applicable, (B) any Regulation of any
Governmental Body or any decision, ruling, order or award of any arbitrator by
which any of the Company and its Subsidiaries or any of their properties may be
bound or affected, including, without limitation, the Exchange Act, the
Hart-Scott-Rodino Act and the DGCL, or (C) any agreement, indenture or other
instrument to which any of the Company and its Subsidiaries is a party or by
which any of the Company and its Subsidiaries or their properties may be bound
or affected, including, without limitation, the Credit Agreement, or (2) result
in or require the creation or imposition of any Lien on any of the properties
now owned or hereafter acquired by any of the Company and its Subsidiaries,
except in each case referred to in the preceding clauses (1) and (2) for
contraventions, violations, breaches, defaults or Liens that, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
SECTION 4.3 APPROVALS. Except as expressly referred to
in this Agreement or otherwise disclosed in Section 4.3 of the Company's
Disclosure Schedule, no Approval of any Governmental Body or other person that
has not been obtained as of the date of this Agreement is required or advisable
on the part of any of the Company and its Subsidiaries for (1) the due
execution and delivery by the Company or such Subsidiary, as the case may be,
of any Transaction Document to which it is or may become a party, (2) the
conclusion of the Transactions, (3) the performance by the Company or such
Subsidiary, as the case may be, of its obligations under each Transaction
Document to which it is or may become a party and (4) the exercise by Qwest or
Qwest Subsidiary, as the case may be, of its rights under each Transaction
Document to which Qwest or Qwest Subsidiary, as the case may be, is or may
become a party, except in each case referred to in the preceding clauses (1),
(2),
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(3) and (4) where the failure to obtain such Approval, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
SECTION 4.4 BINDING EFFECT. Each Transaction Document to
which any of the Company and its Subsidiaries is or may become a party is, or
when executed and delivered in accordance with this Agreement will be, the
legally valid and binding obligation of the Company or such Subsidiary, as the
case may be, enforceable against it in accordance with its terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally and general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether considered in
a proceeding in equity or at law.
SECTION 4.5 FINANCIAL INFORMATION.
(a) The consolidated balance sheet of the Company and its
consolidated Subsidiaries as of December 31, 1996 and the related consolidated
statements of income (loss) and stockholders' equity and cash flows for the
fiscal year then ended, reported on by Grant Thornton LLP, true and complete
copies of which have been delivered to Qwest and Qwest Subsidiary, fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of that date and their consolidated results of operations and
cash flows for the year then ended, in accordance with GAAP applied on a
consistent basis except as described in the footnotes to the financial
statements or as disclosed in Section 4.5 of the Company's Disclosure Schedule.
(b) The unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as of September 30, 1997 and the
related consolidated statements of income (loss) and stockholders' equity and
cash flows for the nine months then ended, true and complete copies of which
have been delivered to Qwest and Qwest Subsidiary, fairly present, subject to
normal year-end adjustments, the consolidated financial position of the Company
and its consolidated Subsidiaries as of that date and their consolidated
results of operations and cash flows for the nine months then ended.
(c) The unaudited consolidated balance sheet of the
Company and its consolidated Subsidiaries as of October 31, 1997 and the
related consolidated statements of income (loss) and stockholders' equity and
cash flows for the ten months then ended, true and complete copies of which
have been delivered to Qwest and Qwest Subsidiary, fairly present, subject to
normal year-end adjustments, the consolidated financial position of the Company
and its consolidated Subsidiaries as of that date and their consolidated
results of operations and cash flows for the ten months then ended.
(d) At the respective dates of the balance sheets referred
to in this Section 4.5, none of the Company and its Subsidiaries had any
material Liability that, in accordance with GAAP applied on a consistent basis,
should have been shown or reflected in the balance sheets but was not, except
for the omission of notes in unaudited balance sheets
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with respect to contingent liabilities that in the aggregate did not materially
exceed those so reported in the latest audited balance sheets previously
delivered and that were of substantially the same type as so reported.
(e) All receivables of the Company and its Subsidiaries
(including accounts receivable, loans receivable and advances) which are
reflected in the balance sheets referred to in this Section 4.5, and all such
receivables which have arisen thereafter and prior to the Effective Time, have
arisen or will have arisen only from bona fide transactions in the Ordinary
Course, the carrying value of such receivables approximate their fair market
values, subject to adequate reserves for the Company's receivables that have
been established on the balance sheets in accordance with prior practice and
GAAP.
(f) The Company has made available to Qwest and Qwest
Subsidiary copies of each management letter delivered to any of the Company and
its Subsidiaries by Grant Thornton LLP in connection with the financial
statements referred to in this Section 4.5 or relating to any review by them of
the internal controls of the Company and its Subsidiaries during the three
years ended December 31, 1996, or thereafter, and has made available for
inspection and, subject to the approval of Grant Thornton LLP, after the date
of this Agreement will make available for inspection all reports and working
papers produced or developed by them or management in connection with their
examination of those financial statements, as well as all such reports and
working papers for prior periods for which any liability of any of the Company
and its Subsidiaries for Taxes has not been finally determined or barred by
applicable statutes of limitation.
(g) Since December 31, 1993, there has been no material
disagreement (within the meaning of Item 304(a)(1)(iv) of Regulation S-K under
the Securities Act) between any of the Company and its Subsidiaries, on the one
part, and any of its independent accountants, on the other part, with respect
to any aspect of the manner in which the Company or such Subsidiary, as the
case may be, maintained or maintains its books and records or the manner in
which the Company or the Subsidiary, as the case may be, has reported upon the
financial condition and results of operations of any of the Company and its
Subsidiaries since such date, that has not been resolved to the satisfaction of
the relevant independent accountants.
SECTION 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as disclosed in Section 4.6 of the Company's
Disclosure Schedule, since December 31, 1996, no circumstance has existed and
no event has occurred that has had, will have or could reasonably be expected
to have a Material Adverse Effect on the Company and its Subsidiaries.
(b) Except as disclosed in Section 4.6 of the Company's
Disclosure Schedule, since December 31, 1996, or as otherwise contemplated by
this Agreement, none of the Company and its Subsidiaries has done the following
or entered into any agreement
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or other arrangement with respect to the following, except in each case with
respect or pursuant to each Transaction Document to which it is or may become a
party:
(1) acquired or transferred any material asset,
except in each case for fair value and in the Ordinary Course; or
(2) incurred, assumed or guaranteed any Liability
or paid, discharged or satisfied any Liability, except in each case in
the Ordinary Course; or
(3) created, assumed or suffered the existence of
any Lien (other than Permitted Liens), except in each case in the
Ordinary Course; or
(4) waived, released, cancelled, settled or
compromised any debt, claim or right of any material value, except in
each case in the Ordinary Course; or
(5) declared, made or set aside any amount for
the payment of any Restricted Payment to any person other than any of
the Company and its Wholly- Owned Subsidiaries; or
(6) transferred or waived any right under any
lease, license or agreement or any Proprietary Right or other
intangible asset, except in each case in the Ordinary Course; or
(7) paid or agreed to pay any bonus, extra
compensation, pension, continuation, severance or termination pay, or
otherwise increased the wage, salary, pension, continuation, severance
or termination pay or other compensation (of any nature) to its
stockholders, directors, officers or employees, except for increases
made in the Ordinary Course; or
(8) to the knowledge of the representing party,
suffered (A) any damage, destruction or casualty loss (whether or not
covered by insurance) of property the greater of cost or fair market
value of which exceeds $50,000 individually or $100,000 in the
aggregate for the Company and its Subsidiaries or (B) any taking by
condemnation or eminent domain of any of its property or assets the
greater of cost or fair market value of which exceeds $50,000
individually or $100,000 in the aggregate for the Company and its
Subsidiaries; or
(9) made any loan to or entered into any
transaction with any of its stockholders having beneficial ownership of
5.0% or more of the shares of Company Common Stock or the shares of
Company Preferred Stock, as the case may be, then issued and
outstanding, directors, officers or employees giving rise to any claim
or right of, by, or against any person in an amount or having a value
in excess of $10,000 individually or $50,000 in the aggregate for the
Company and its Subsidiaries, except for employment agreements entered
into in the Ordinary Course with employees each receiving an annual
base salary of less than $50,000; or
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(10) entered into any material agreement,
arrangement, commitment, contract or transaction, amended or terminated
any of the same (including, without limitation, any letter of intent or
other agreement with respect to a Business Combination Transaction) or
otherwise conducted any of its affairs, in any case not in the Ordinary
Course; or
(11) made any contribution to any Company Employee
Plan, other than regularly scheduled contributions and contributions
required to maintain the funding levels of any Company Employee Plan,
or made or incurred any commitment to establish or increase the
obligation of the Company or a Subsidiary to any Company Employee Plan;
or
(12) except as disclosed in the footnotes to the
financial statements referred to in Section 4.5 or in Section 4.6 of
the Company's Disclosure Schedule, changed any accounting methods or
principles used in recording transactions on the books of the Company
or a Subsidiary or in preparing the financial statements of the Company
or a Subsidiary.
(c) Except as disclosed in Section 4.6 of the Company's
Disclosure Schedule, the occurrence of any fire, explosion, accident, strike,
lockout, or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy, or other casualty (whether or not covered by
insurance), individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect on the Company and its
Subsidiaries.
SECTION 4.7 TAXES.
(a) Each of the Company and its Subsidiaries has (1) filed
(or has caused to be filed) all Tax Returns that are required to be filed with
any Governmental Body with respect to each of the Company and its Subsidiaries,
except for the filing of Tax Returns as to which the failure to file,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, and (2) paid (or has caused to be paid) all Taxes of
or with respect to each of the Company and its Subsidiaries required to be paid
when due whether or not shown on such Tax Returns and all assessments received
by it, except Taxes being contested in good faith by appropriate proceedings,
for which adequate reserves or other provisions are maintained and which are
specified in Section 4.7 of the Company's Disclosure Schedule.
(b) None of the Company and its Subsidiaries is or has
ever been a member of a "CONSOLIDATED GROUP" (as defined by Section 1504 of the
Code) other than the consolidated group comprising the Company and its
Subsidiaries. Federal income tax returns of the Company and its Subsidiaries
are closed through the year ended December 31, 1993, either by the expiration
of the applicable statute of limitations or closing agreement. The
representing party knows of no basis for the assessment of any material amount
of Taxes for any period covered by the Tax Returns that are referred to in
Section
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4.7(a) that is not reflected on those Tax Returns. None of the Company and its
Subsidiaries is a party to any Action by any Governmental Body with respect to
the payment of Taxes of or with respect to any of the Company and its
Subsidiaries, and no claim has been asserted or threatened against it for
assessment or collection of any Taxes. None of the Company and its
Subsidiaries has executed or filed with the Internal Revenue Service or any
other taxing authority any agreement extending the period of assessment or
collection of any Taxes or any consent to have the provisions of Section 341(f)
of the Code (or any similar provision of state, local or foreign law) applied
to it.
(c) All Taxes that the Company or a Subsidiary is required
to withhold or collect have been withheld or collected and, to the extent
required, have been paid over to the proper Governmental Body on a timely
basis, and each of the Company and its Subsidiaries has withheld proper amounts
from its employees, independent contractors, creditors, stockholders or other
third parties for all periods in full compliance with tax withholding
provisions of applicable Regulations, except for withholdings or collections as
to which the failure to withhold or collect, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(d) No portion of the real property or plant, structures,
fixtures or improvements of the Company or a Subsidiary is subject to any
special assessment, the liability with respect to which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. The
representing party has no knowledge or reason to know of any proposal for any
such assessment.
(e) Except as disclosed in Section 4.7 of the Company's
Disclosure Schedule, none of the Company or its Subsidiaries has made, is
obligated to make, or is a party to an agreement or arrangement that under any
circumstances may obligate it to make any payment that will not be deductible
for federal income tax purposes by virtue of Section 280G of the Code.
(f) None of the Company or its Subsidiaries has any
liability for the Taxes of any person other than the Company and its
Subsidiaries (1) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local or foreign law), (2) as a transferee or successor,
(3) by contract or (4) otherwise.
(g) None of the Company and its Subsidiaries has adopted a
plan of complete liquidation and none is a member of an entity required to file
a U.S. partnership return that is expected to have taxable income for any
taxable period beginning before the Closing Date and ending after the Closing
Date that is materially in excess of cash distributions of such income to be
made after the Closing Date.
(h) Except as disclosed in Section 4.7(h) of the Company's
Disclosure Schedule, (1) none of the Company and its Subsidiaries is obligated
under any agreement with respect to industrial development bonds or other
obligations with respect to which the excludability from gross income of the
holder for federal or state income tax purposes could
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be affected by the execution and delivery of the Transaction Documents or the
conclusion of any of the Transactions, (2) none of the Company and its
Subsidiaries is, or has been, a United States real property holding corporation
(as defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code, (3) none of the Company and
its Subsidiaries has filed or been included in a combined, consolidated or
unitary return (or substantial equivalent thereof) of any person other than the
Company and its Subsidiaries, (4) none of the Company and its Subsidiaries is
liable for Taxes of any Person other than the Company and its Subsidiaries, or
currently under any contractual obligation to indemnify any person with respect
to Taxes, or a party to any tax sharing agreement or any other agreement
providing for payments by the Company or any of its Subsidiaries with respect
to the Company and Taxes, (5) with respect to Wholly-Owned Subsidiaries, none
of the Company and its Subsidiaries is a party to any joint venture,
partnership or other arrangement or contract which could be treated as a
partnership for United States federal income tax purposes, (6) the prices for
any property or services (or for the use of property) provided by any of the
Company and its Subsidiaries to any other Subsidiary or to the Company have
been arm's length prices determined using a method permitted by the Treasury
Regulations under Section 482 of the Code, (7) none of the Company and its
Subsidiaries has made an election or is required to treat any of its assets as
owned by another person for federal income tax purposes or as tax-exempt bond
financed property or tax-exempt use property within the meaning of Section 168
of the Code (or any similar provision of state, local or foreign law) and (8)
the Company is not an investment company within the meaning of Section
368(a)(2) of the Code.
SECTION 4.8 UNDISCLOSED LIABILITIES. Except as disclosed
in Section 4.8 of the Company's Disclosure Schedule, none of the Company and
its Subsidiaries has any material Liabilities, except Liabilities (1) shown or
reflected in the unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries dated as of September 30, 1997 referred to in Section
4.5, or the notes thereto, (2) incurred in the Ordinary Course, (3) expressly
contemplated by the Transaction Documents or (4) in an aggregate amount not
greater than $100,000.
SECTION 4.9 LITIGATION.
(a) Except as disclosed in Section 4.9 of the Company's
Disclosure Schedule, there is no Action pending or, to the knowledge of the
representing party, threatened against the Company or a Subsidiary, nor, to the
knowledge of the representing party, is there any reasonable basis for any
Action, that (1) involves any of the Transactions or (2) individually or in the
aggregate, if determined adversely to any of them, could reasonably be expected
to result in a liability to any of them in an amount that exceeds $50,000
individually or $100,000 in the aggregate.
(b) There is no Action pending against any of the Company
and its Subsidiaries or, to the knowledge of the representing party, threatened
against any of the Company and its Subsidiaries or any other person that
involves any of the Transactions or any property owned, leased, licensed or
used by the Company or the Subsidiary, as the case
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<PAGE> 26
may be, that, individually or in the aggregate, if determined adversely to any
of them, could reasonably be expected to have a Material Adverse Effect on any
of the Company and its Subsidiaries.
SECTION 4.10 COMPLIANCE WITH REGULATIONS.
(a) None of the Company and its Subsidiaries is in, and
none of them has received written notice of, a violation of or default with
respect to, any Regulation of any Governmental Body or any decision, ruling,
order or award of any arbitrator applicable to it or its business, properties
or operations, including individual products or services sold or provided by
it, except for violations or defaults that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(b) Each of the Company and its Subsidiaries has filed or
caused to be filed with each applicable Governmental Body all reports,
applications, documents, instruments and information required to be filed by it
pursuant to all applicable Regulations, other than those as to which the
failure to file, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
SECTION 4.11 LICENSES.
(a) To the knowledge of the representing party, one or
more of the Company and its Subsidiaries are the registered holders of each
License that is required to be held by the Company or such Subsidiary, as the
case may be, so that it may carry on its business as now conducted and proposed
to be conducted, the failure to hold which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect (each such
License, a "MATERIAL LICENSE").
(b) To the knowledge of the representing party, each
Material License is validly issued, in good standing and in full force and
effect, unimpaired by any act or omission by the Company or such Subsidiary, as
the case may be. The Company or such Subsidiary, as the case may be, is in
material compliance with each Material License. None of the Company and its
Subsidiaries has suffered a revocation, termination, suspension or material and
adverse modification of a License that was, at the time of such event, a
Material License. There is no Action pending or, to the knowledge of the
representing party, threatened against the Company or a Subsidiary, and no
other circumstance exists or event has occurred (whether or not with the giving
of notice or the passage of time or both), that could reasonably be expected to
result in the revocation, termination, suspension or material and adverse
modification of any Material License; and, to the knowledge of the representing
party, there is no reasonable basis for any such Action or for the
disqualification of any of the Company and its Subsidiaries from obtaining, or
obtaining the renewal of, any Material License and none of the Company and its
Subsidiaries has received written notice or, to the knowledge of the
representing party, oral notice from any Governmental Body asserting that any
Material License should be revoked, terminated, suspended or materially and
adversely modified. If a Material License is subject to
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<PAGE> 27
termination upon the expiration of a term, the existence of another
circumstance or the occurrence of another event, the representing party does
not have any reason to believe that any Material License will not be renewed in
the ordinary course. No Material License is subject to renegotiation by any
Governmental Body. The execution and delivery of the Transaction Documents and
the conclusion of any of the Transactions will not (and will not give any
Governmental Body a right to) terminate or modify any rights of, or accelerate
or increase any obligation of, the Company or any Subsidiary under any Material
License.
SECTION 4.12 EMPLOYEE MATTERS.
(a) Employment and Labor Relations.
(1) Except as disclosed in Section 4.12 of the
Company's Disclosure Schedule:
(A) there is no unfair labor practice
charge or complaint against any of the Company and its
Subsidiaries pending or, to the knowledge of the representing
party, threatened before the National Labor Relations Board or
any similar Governmental Body;
(B) there has not occurred nor has there
been threatened since December 31, 1993, a labor strike, labor
dispute, request for representation, work stoppage, work
slowdown or lockout of or by employees of any of the Company
and its Subsidiaries;
(C) there is no representation claim or
petition pending before the National Labor Relations Board
respecting the employees of any of the Company and its
Subsidiaries;
(D) no grievance nor any arbitration
proceeding arising out of any collective bargaining agreement
to which any of the Company and its Subsidiaries is a party is
pending;
(E) no charge with respect to or relating
to any of the Company and its Subsidiaries is pending before
the Equal Employment Opportunity Commission or any state,
local or foreign agency responsible for the prevention of
unlawful employment practices;
(F) no claim relating to employment or
loss of employment with any of the Company and its
Subsidiaries is pending in any federal, state or local court
or in any other adjudicatory body and, to the knowledge of the
representing party, no such claim against any of the Company
and its Subsidiaries has been threatened;
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(G) none of the Company and its
Subsidiaries has received notice of the intent of any federal,
state, local or foreign agency responsible for the enforcement
of labor or employment Regulations to conduct an investigation
of or relating to any of the Company and its Subsidiaries, and
no such investigation is in progress;
(H) since the enactment of the Worker
Adjustment and Retraining Notification Act of 1988 (the "WARN
ACT"), none of the Company and its Subsidiaries has
effectuated (1) a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of
the Company or any of its Subsidiaries or (2) a "mass layoff"
(as defined in the WARN Act) affecting any site of employment
or facility of the Company or any of its Subsidiaries; and
none of the Company and its Subsidiaries has been affected by
any transaction or engaged in layoffs or employment
terminations sufficient in any number to trigger application
of any similar Regulation;
(I) none of the Company and its
Subsidiaries is delinquent in any material respect in payments
to any of its current or former officers, directors,
employees, consultants or agents for any wages, salaries,
commissions or other direct compensation for any services
performed by them or amounts required to be reimbursed to such
officers, directors, employees, consultants, or agents; and
(J) in the event of termination of the
employment or service of any of its current or former
officers, directors, employees, consultants or agents, none of
the Company, its Subsidiaries, Qwest and Qwest Subsidiary will
be liable to any such persons for severance, continuation or
termination pay pursuant to any agreement or by reason of any
action taken or not taken by any of the Company and its
Subsidiaries prior to the Effective Time.
(K) since December 31, 1996, there has
not been any termination of employment of any officer,
director or employee of any of the Company and its
Subsidiaries receiving annual base salary in excess of
$50,000.
(2) Section 4.12 of the Company's Disclosure
Schedule sets forth a correct and complete list of (A) all employment,
consulting, severance pay, continuation pay, termination pay or
indemnification agreements or other agreements of any nature whatsoever
between any of the Company and its Subsidiaries, on the one part, and
any current or former officer, director, employee, consultant or agent
thereof, on the other part, in each case whether written or oral, to
which any of the Company and its Subsidiaries is a party or by which
any of them is bound and (B) all collective bargaining, labor and
similar agreements (other than any Employee Plans), in each case
whether written or oral, to which any of the Company and its
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<PAGE> 29
Subsidiaries is a party or by which any of them is bound. The Company
has provided to Qwest and Qwest Subsidiary true and complete copies of
all such agreements. Each of the Company and its Subsidiaries has
complied with its obligations related to, and is not in default under,
any of such agreements, except where the failure to comply with or a
default under such agreements, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(3) Except as disclosed in Section 4.12 of the
Company's Disclosure Schedule, the execution and delivery of the
Transaction Documents and the conclusion of the Transactions (A) will
not require any of the Company and its Subsidiaries to make a payment
to, or obtain any consent or waiver from, any current or former
officer, director, employee, consultant or agent of any of the Company
and its Subsidiaries and (B) will not result in any change in the
nature of any rights of any current or former officer, director,
employee, consultant or agent of any of the Company and its
Subsidiaries under any agreement referred to in Section 4.12(a)(2),
including any acceleration or change in the award, grant, vesting or
determination of stock options, stock purchase, stock appreciation
rights, phantom stock, restricted stock or other stock-based rights,
severance pay, continuation pay, termination pay or other contingent
obligations of any nature whatsoever of any of the Company and its
Subsidiaries, or a change in the term of any such agreement.
(4) Except as disclosed in Section 4.12 of the
Company's Disclosure Schedule, each of the Company and its Subsidiaries
is, and at all times since December 31, 1996 has been, in compliance
with all applicable Regulations respecting employment and employment
practices, terms and conditions of employment, wages and hours, and
occupational safety and health, and is not, and since December 31, 1993
has not, engaged in any unfair labor practices, except where the
failure to so comply or such engagement, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(b) Company Employee Plans.
(1) Section 4.12 of the Company's Disclosure
Schedule sets forth a correct and complete list of all Company Employee
Plans. The Company has made available to Qwest Subsidiary true and
complete copies of the Company Employee Plans and all related summary
descriptions, including, without limitation, copies of any employee
handbooks listing or describing any Company Employee Plans and summary
descriptions of any Company Employee Plan not otherwise in writing.
(2) Except for any failure or default that could
not reasonably be expected to have a Material Adverse Effect, each of
the Company and its Subsidiaries has fulfilled or has taken all actions
necessary to enable it to fulfill when due all of its obligations under
each Company Employee Plan, and there is no existing default or event
of default or any event which, with or without the giving of notice or
the passage of time, would constitute a default by it under any Company
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Employee Plan. No Regulation currently in effect or, to the knowledge
of the representing party, proposed to be in effect materially or
adversely affects, or if adopted would materially or adversely affect,
the rights or obligations of any of the Company and its Subsidiaries
under any Company Employee Plan. There are no negotiations, demands or
proposals which are pending or which have been made to any of the
Company and its Subsidiaries which concern matters now covered, or that
would be covered, by any Company Employee Plan.
(3) Each of the Company and its Subsidiaries is
in full compliance with all Regulations applicable to each Company
Employee Plan, except where noncompliance could not reasonably be
expected to have a Material Adverse Effect. There has been no Employee
Plan Event which is continuing or in respect of which there is any
outstanding liability of any of the Company or its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect, and no such Employee Plan Event is
reasonably expected to occur, with respect to any Company Employee
Plan.
(4) Except as disclosed in Section 4.12 of the
Company's Disclosure Schedule, the execution and delivery of the
Transaction Documents and the conclusion of the Transactions will not
cause the acceleration of vesting in, or payment of, any benefits under
any Company Employee Plan.
(5) None of the Company and its Subsidiaries has
any formal plan or commitment, whether legally binding or not, to
create any additional Employee Plan or to modify or change any existing
Employee Plan that would affect any current or former employee of any
of the Company and its Subsidiaries.
(6) All employment, consulting, deferred
compensation, bonus, stock option, stock appreciation rights, phantom
stock, severance, termination or indemnification agreements,
arrangements or understandings, or other Employee Plans, between any of
the Company and its Subsidiaries, on the one part, and any current or
former officer or director of any of the Company and its Subsidiaries,
on the other part, which are required to be disclosed under the
Securities Act or the Exchange Act have been disclosed.
(c) Health Plans. Each Company Employee Plan that is a
group health plan within the meaning of Section 5000(b) of the Code has been
operated in substantial compliance with the group health plan continuation
coverage requirements of Sections 601 through 608 of ERISA and Section 4980B of
the Code, and except to the extent required under those provisions or as
disclosed in Section 4.12 of the Company's Disclosure Schedule, no Company
Employee Plan provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employee of the Company or
any of its Subsidiaries. Each Company Health Plan that is a group health plan
within the meaning of Section 5000(b) of the Code has been operated in
substantial compliance with the
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creditable coverage and portability requirements of Sections 701 through 707 of
ERISA and Sections 9801 through 9806 of the Code.
(d) Employee Plans of the Company's ERISA Affiliates.
Section 4.12 of the Company's Disclosure Schedule sets forth a correct and
complete list of all ERISA Plans and Multiemployer Plans of any person that is
an ERISA Affiliate of the Company or its Subsidiaries, other than any such
ERISA Plans or Multiemployer Plans disclosed pursuant to Section 4.12(b).
There has been no Employee Plan Event with respect to any ERISA Plan or
Multiemployer Plan of any person that is an ERISA Affiliate of the Company or
its Subsidiaries or who was an ERISA Affiliate of the Company or its
Subsidiaries at any time since January 31, 1992, other than any ERISA Plan or
Multiemployer Plan disclosed in Section 4.12 of the Company's Disclosure
Schedule, in respect of which there is any outstanding liability, or, to the
knowledge of the Company, in respect of which any liability could be expected
to be incurred by any of the Company and its Subsidiaries.
(e) Company Qualified Plans.
(1) Each Company Qualified Plan satisfies the
requirements of Section 401(a) of the Code, and each trust under each
such plan is exempt from Tax under Section 501(a) of the Code. To the
knowledge of the Company, no event has occurred that will or could give
rise to disqualification or loss of tax-exempt status of any such plan
or trust under such sections.
(2) The Company has made available to Qwest and
Qwest Subsidiary for each Company Qualified Plan copies of the
following documents: (A) the Form 5500 filed for each of the three
most recent plan years, including all schedules thereto and financial
statements with attached opinions of independent accountants; (B) the
most recent determination letter from the IRS; (C) the consolidated
statement of assets and liabilities of such plan as of its most recent
valuation date; and (D) the statement of changes in fund balance and in
financial position or the statement of changes in net assets available
for benefits under such plan for the most recently ended plan year.
Such financial statements fairly present the financial condition and
the results of operations of each Company Qualified Plan as of such
dates, in accordance with GAAP.
(f) Company ERISA Plans.
(1) Section 4.12 of the Company's Disclosure
Schedule sets forth, for each Company ERISA Plan, as of the effective
date of its most recently prepared actuarial report, the amount by
which the fair market value of the assets of the plan exceeded (or was
less than) the actuarial present value (determined on the basis of the
actuarial assumptions set forth in such report) of the "BENEFIT
LIABILITIES" (within the meaning of Section 4001(a)(16) of ERISA),
whether or not vested, of the plan. Since the effective date of the
most recently prepared actuarial report for each Company ERISA Plan,
there has been no amendment or change to the plan that
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<PAGE> 32
would increase the amount of benefits accrued thereunder and, to the
knowledge of the Company, there has been no event or occurrence (other
than the normal fluctuation in the value of such plan's assets) that
would cause the excess of assets over benefit liabilities referred to
in this Section 4.12(f) to be reduced or the amount by which benefit
liabilities exceed assets referred to in this Section 4.12(f) to be
increased.
(2) The Company has made available to Qwest
Subsidiary for each Company ERISA Plan true and complete copies of the
following documents: (A) the Form PBGC Form 1 filed for each of the
most recent three plan years; and (B) the most recently prepared
actuarial report, which fairly presents the financial condition and the
results of operations of each such plan as of the effective date of
such report, and which sets forth the minimum required contributions
under Section 412 of the Code (and their due dates) and maximum
deductible contributions under Section 404 of the Code for the plan
year following the effective date of such report.
(g) Multiemployer Plans. Section 4.12 of the Company's
Disclosure Schedule sets forth, for each Company Multiemployer Plan, as of the
effective date of its most recently prepared actuarial report, the amount of
potential withdrawal liability of the Company, its Subsidiaries and its ERISA
Affiliates, calculated according to the information made available pursuant to
Section 4221(e) of ERISA, and identifies the specific potential obligors. To
the knowledge of the representing party, nothing has occurred or is expected to
occur that would materially increase the amount of the potential withdrawal
liability of a specified obligor for any such plan over the amount disclosed
pursuant to this Section 4.12(g). None of the Company, its Subsidiaries and
its ERISA Affiliates (1) has failed to make any required contributions when due
to a Multiemployer Plan or (2) has (and will not have as a result of the
transactions contemplated by the Transaction Documents) any contingent
liability for withdrawal liability by reason of a sale of assets pursuant to
Section 4204 of ERISA. None of the Company, its Subsidiaries and its ERISA
Affiliates has any unpaid claims for withdrawal liability.
SECTION 4.13 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized
capital stock of the Company consists of 50,000,000 shares of Company Common
Stock and 5,000,000 shares of preferred stock, par value $.001 per share, of
the Company (the "COMPANY PREFERRED STOCK").
(b) As of December 31, 1997, there are (i) 33,572,615
shares of Company Common Stock issued and outstanding, of which 7,967,057
shares are registered in the names of the Principal Stockholders (in each case,
including 101,489 shares of Company Common Stock to be issued and outstanding
within 3 Business Days after December 31, 1997, all of which shall be
registered in the name of one of the Principal Stockholders), (ii) 1,300 shares
of Company Common Stock held in the treasury of the Company, (iii) 39,500
shares of Company Series I Preferred Stock issued and outstanding (after giving
effect to the conversion of 1,750 shares of Company Series I Preferred Stock on
December
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31, 1997), all of which are registered in the names of the Principal
Stockholders, (iv) 2,290,762 shares of Company Common Stock reserved for
issuance upon the conversion of outstanding shares of Company Series I
Preferred Stock, (v) 2,230,033 shares of Company 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,
(vi) 1,164,995 shares of Company Common Stock reserved for issuance upon
exercise of authorized but unissued Stock Options and (vii) 1,244,557 shares of
Company Common Stock reserved for issuance upon exercise of outstanding
Warrants issued by the Company.
(c) Except as disclosed in Section 4.13 of the Company's
Disclosure Schedule, the execution and delivery of the Transaction Documents
and the conclusion of any of the Transactions will not (and will not give any
person a right to) terminate or modify any rights of, or accelerate or increase
any obligation of, the Company with respect to any Equity Securities of the
Company, including, without limitation, the Company Series I Preferred Stock.
(d) All outstanding shares of Company Capital 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.
(e) Except with respect to the outstanding shares of
Company Capital Stock, there are no outstanding bonds, debentures, notes or
other indebtedness or other securities of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote.
(f) Except with respect to the Company Series I Preferred
Stock, the Stock Options, the Warrants and as disclosed in Section 4.13 of the
Company's Disclosure Schedule, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company is a party or by which the Company is bound
obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other Equity
Securities of the Company or obligating the Company to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Without limiting the generality of the
foregoing, no shares of Company Capital Stock or other Equity Securities of the
Company, the Surviving Corporation or any other person are issuable in
connection with any acquisitions made by the Company. Section 4.13 of the
Company's Disclosure Schedule sets forth a correct and complete list of the
outstanding Stock Options and Warrants.
(g) Except with respect to the Transaction Documents, to
the knowledge of the representing party, there is no agreement or arrangement
restricting the voting or transfer of the Equity Securities of the Company.
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<PAGE> 34
(h) Except with respect to the Company Series I Preferred
Stock, the Stock Options and the Warrants, there are no outstanding contractual
obligations, commitments, understandings or arrangements of any of the Company
and its Subsidiaries to repurchase, redeem or otherwise acquire, or make any
payment in respect of, any shares of Equity Securities of the Company.
(i) Except with respect to the Credit Agreement, the
Company Series I Preferred Stock and statutory restrictions of general
application, there are no legal, contractual or other restrictions on the
payment of dividends or other distributions or amounts on or in respect of any
of the Equity Securities of the Company.
(j) Section 4.13 of the Company's Disclosure Schedule sets
forth a correct and complete list of all agreements or arrangements to which
the Company or any of its Subsidiaries is a party pursuant to which the Company
is or could be required to register shares of Company Capital Stock or other
securities under the Securities Act.
(k) All outstanding Equity Securities of the Company were
issued in compliance with all applicable Regulations, including, without
limitation, the registration provisions of applicable federal and state
securities laws. Equity Securities of the Company that were issued and
reacquired by the Company were so reacquired (and, if reissued, so reissued) in
compliance with all applicable Regulations, and the Company has no liability
with respect to the reacquisition or reissuance of such Equity Securities.
SECTION 4.14 SUBSIDIARIES.
(a) Section 4.14 of the Company's Disclosure Schedule sets
forth a correct and complete list of each of its Subsidiaries and the directors
and officers of the Subsidiary as of the date of this Agreement. All
outstanding shares of capital stock or other equity interests of each
Subsidiary are duly authorized, validly issued, fully paid and nonassessable
or, with respect to partnership interests, limited liability company membership
interests or their equivalent, are validly issued, the consideration therefor
has been paid and no unmet calls for capital contributions or similar payments
are outstanding.
(b) All shares of capital stock or other equity interests
of each Subsidiary, are owned beneficially and of record by the Company, free
and clear of all Liens other than Permitted Liens. No other Equity Securities
of any Subsidiary are outstanding.
(c) Except with respect to the outstanding shares of
capital stock or other equity interests of each Subsidiary, there are no
outstanding bonds, debentures, notes or other indebtedness or other securities
of such Subsidiary having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of such Subsidiary may vote.
(d) There are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which any of the
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Company and its Subsidiaries is a party or by which any of them is bound
obligating any of the Company and its Subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or
other Equity Securities of any of the Subsidiaries or obligating the Company or
any of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking.
(e) There is no agreement or arrangement restricting the
voting or transfer of any of the Equity Securities of any of the Subsidiaries.
(f) There are no outstanding contractual obligations,
commitments, understandings or arrangements of any of the Company and its
Subsidiaries to repurchase, redeem or otherwise acquire, require or make any
payment in respect of any shares of Equity Securities of any of the
Subsidiaries.
(g) Except with respect to statutory restrictions of
general application, there are no legal, contractual or other restrictions on
the payment of dividends or other distributions or amounts on or in respect of
any of the Equity Securities of any of the Subsidiaries.
(h) All outstanding Equity Securities of each of the
Subsidiaries were issued in compliance with all applicable Regulations,
including, without limitation, the registration provisions of applicable
federal and state securities laws. Equity Securities of any of the
Subsidiaries that were issued and reacquired by such Subsidiary were so
reacquired (and, if reissued, so reissued) in compliance with all applicable
Regulations, and none of the Company and its Subsidiaries has any liability
with respect to the reacquisition or reissuance of such Equity Securities.
SECTION 4.15 PROPERTY.
(a) Each of the Company and its Subsidiaries owns, leases
or licenses all real property and personal property, tangible or intangible,
that are used or useful in its business and operations as now conducted and
proposed to be conducted, the failure to own, lease or license which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect (collectively, the "MATERIAL PROPERTIES").
(b) All Material Properties are reflected in the financial
statements referred to in Section 4.5 in the manner and to the extent required
to be reflected therein by GAAP (other than any Material Properties disposed of
in the Ordinary Course).
(c) All Material Properties are in such condition and
repair, and are suitable, sufficient in amount, size and type and so situated,
as is appropriate and adequate for the uses for which they are used and
intended and to carry on the business of the Company or such Subsidiary, as the
case may be, as now conducted and as proposed to be conducted.
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(d) To the knowledge of the representing party, all
Material Properties comply in all material respects with the terms and
conditions of all agreements relating to such real property and personal
property and are in conformity in all material respects with all Regulations of
any Governmental Body currently in effect, scheduled to come into effect or
proposed to be adopted, entered or issued, as the case may be, and all
decisions, rulings, orders and awards of any arbitrator applicable to it or its
business, properties or operations. Except as disclosed in Section 4.15 of the
Company's Disclosure Schedule, there exists no default by any of the Company
and its Subsidiaries or, to the knowledge of the representing party, any other
party under any lease agreement with respect to any Material Property, which
default, individually or together with other defaults under the same lease
agreement or other lease agreements, could reasonably be expected to have a
Material Adverse Effect.
(e) The interest of any of the Company and its
Subsidiaries in each Material Property is free and clear of all Liens other
than Permitted Liens, except where the absence of such title, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
SECTION 4.16 SECURITIES.
(a) Section 4.16 of the Company's Disclosure Schedule sets
forth a correct and complete description and list of the Equity Securities and
Debt Securities issued by any person other than the Company or a Subsidiary,
other than the shares of capital stock of the Subsidiaries referred to in
Section 4.14 in which the Company or a Subsidiary has an interest as of the
date of this Agreement. Except as contemplated by the Transaction Documents,
the right, title and interest of the Company or a Subsidiary in, to and under
each of such Equity Securities and Debt Securities is free and clear of all
Liens other than Permitted Liens.
(b) To the knowledge of the representing party, each of
such Equity Securities is duly authorized, validly issued, fully paid and
non-assessable.
(c) To the knowledge of the representing party, each of
such Debt Securities is duly authorized and validly issued and constitutes the
legally valid and binding obligation of the issuer thereof and each guarantor
thereof except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
(d) All of such Equity Securities and Debt Securities are
owned, beneficially and of record, by the Company or a Subsidiary. Except as
disclosed in Section 4.16 of the Company's Disclosure Schedule or as
contemplated by the Transaction Documents:
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(1) there are no legal, contractual or other
restrictions on (A) the voting or transfer of any of the Equity
Securities or Debt Securities or (B) the payment of principal,
interest, dividends or other distributions or amounts on or in respect
of any of the Equity Securities or Debt Securities; and
(2) the Company or the Subsidiary, as the case
may be, is not subject to any obligation, whether legal, contractual or
otherwise, to sell or otherwise transfer any of the Equity Securities
or Debt Securities.
SECTION 4.17 PROPRIETARY RIGHTS.
(a) Section 4.17 of the Company's Disclosure Schedule sets
forth a correct and complete description and list of all Proprietary Rights in
which any of the Company and its Subsidiaries has an interest, the failure to
hold which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect (collectively, the "MATERIAL PROPRIETARY
RIGHTS"). No Proprietary Rights other than the Material Proprietary Rights are
necessary for the unimpaired conduct of the business and operations of any of
the Company and its Subsidiaries substantially in the manner that such business
and operations are now conducted and are proposed to be conducted.
(b) One or more of the Company and its Subsidiaries has
good title to each of the interests created by, or an implied license to use,
the Material Proprietary Rights. None of the Company and its Subsidiaries has
received notice that the validity of any such Material Proprietary Right or its
title to or use of any Material Proprietary Right is being questioned in any
Action. The right, title and interest of the Company or such Subsidiary in and
to each such Material Proprietary Right and the authority to use the same are
free and clear of all Liens other than Permitted Liens. The representing party
does not believe, and has no reason to believe, that any use has been or is
being made of any Material Proprietary Right by any person other than the
Company, the Subsidiary or a person duly authorized to make that use. All
Material Proprietary Rights used by any of the Company and its Subsidiaries but
previously owned or held by any of its directors, officers, employees or agents
have been duly transferred to the Company or the Subsidiary, as the case may
be. There is no liability or obligation of the Company or a Subsidiary with
respect to any Material Proprietary Right that is required to have been paid or
otherwise performed, as of the date of this Agreement, that has not been paid
or otherwise performed in full.
(c) The representing party has no knowledge of any valid
grounds for any bona fide claims (1) to the effect that the sale, licensing or
use of any product or service as now sold, licensed or used, or proposed for
sale, license or use, by any of the Company and its Subsidiaries infringes on
any Material Proprietary Right, which claims, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect, or (2) against
the use by any of the Company and its Subsidiaries of any Material Proprietary
Rights used in the business and operations of any of the Company and its
Subsidiaries as now conducted or as proposed to be conducted.
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(d) The execution and delivery of the Transaction
Documents and the conclusion of any of the Transactions will not (and will not
give any person a right to) terminate or modify any rights of, or accelerate or
increase any obligation of, any of the Company and its Subsidiaries under any
Material Proprietary Right.
SECTION 4.18 INSURANCE. One or more of the Company and
its Subsidiaries maintain insurance with reputable insurance companies in such
amounts and covering such risks as are usually carried by companies engaged in
the same or similar business and similarly situated. There are no currently
outstanding material losses for which the Company or a Subsidiary, as the case
may be, has failed to give or present notice or claim under any policy. There
are no requirements by any insurance company or by any board of fire
underwriters or other body exercising similar functions or by any Governmental
Body of which the representing party has knowledge requiring any repairs or
other work to be done to any of the properties owned, leased, licensed or used
by any of the Company and its Subsidiaries or requiring any equipment or
facilities to be installed on or in connection with any of the properties, the
failure to complete which could result in the cancellation of the policy of
insurance. Policies for all the insurance are in full force and effect and
none of the Company and its Subsidiaries is in default in any material respect
under any of the policies. The representing party has no knowledge of the
cancellation or proposed cancellation of any of the insurance or of any
proposed increase in the contributions for workers' compensation or
unemployment insurance or of any conditions or circumstances applicable to the
business of the Company or the Subsidiary, as the case may be, which might
result in a material increase in those contributions. The Company has made
available to Qwest and Qwest Subsidiary true and complete copies of policies
for all material fire and casualty, general liability, business interruption,
product liability and other insurance maintained by any of the Company and its
Subsidiaries.
SECTION 4.19 DEBT.
(a) Section 4.19 of the Company's Disclosure Schedule sets
forth a correct and complete list of the following:
(1) the Credit Agreement and all other
agreements, indentures, purchase agreements, Guarantees, conditional
sale contracts, capitalized leases and other Investments, agreements
and other arrangements presently in effect providing for or relating to
Debt in any amount greater than $50,000 in respect of which the Company
or a Subsidiary is in any manner directly or contingently obligated
(collectively, the "MATERIAL DEBT");
(2) the principal or face amount of each Material
Debt outstanding under each of those agreements and other arrangements;
(3) the maximum principal or face amounts of each
Material Debt outstanding or which may be outstanding under each of
those agreements and other arrangements;
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(4) the maturity date or dates of each Material
Debt; and
(5) restrictions or other conditions (including,
without limitation, any prepayment fee or yield maintenance provision)
with respect to the voluntary prepayment by the Company of any amount
of any Material Debt.
(b) Except as disclosed in Section 4.19 of the Company's
Disclosure Schedule, none of the Company and its Subsidiaries is in default in
respect of any Material Debt and, based upon the business, properties,
operations, prospects and condition, financial or otherwise of the Company and
its Subsidiaries and assuming that the Merger shall be completed on or before
May 31, 1998, none of the Company and its Subsidiaries could reasonably be
expected to be in default in respect of any Material Debt on or before May 31,
1998, which default either alone or together with any other default, entitles
another party thereto, with the giving of notice or the passage of time or
both, to terminate the rights and obligations of the parties thereunder or with
respect thereto or to accelerate or increase any obligation of the Company or
any of its Subsidiaries thereunder.
(c) Except as disclosed in Section 4.19 of the Company's
Disclosure Schedule, the execution and delivery of the Transaction Documents
and the conclusion of any of the Transactions will not (and will not give any
person a right to) terminate or modify any rights of, or accelerate or increase
any obligation of, any of the Company and its Subsidiaries with respect to any
Material Debt.
SECTION 4.20 ENVIRONMENTAL MATTERS. None of the Company
and its Subsidiaries has generated, used, transported, treated, stored,
released or disposed of, or has permitted anyone else to generate, use,
transport, treat, store, release or dispose of, any Hazardous Substance in a
manner which has created or might reasonably be expected to create any
liability or which would require reporting or giving notice to any Governmental
Body, except for such events or occurrences for which the Company or its
Subsidiaries would not reasonably be expected to incur liability, individually
or in the aggregate, in excess of $50,000 (exclusive of any amount with respect
to which a reserve has been taken by the Company or a Subsidiary on or before
December 31, 1996).
SECTION 4.21 BOOKS AND RECORDS.
(a) The records and books of account of each of the
Company and its Subsidiaries are correct and complete in all material respects,
have been maintained in accordance with good business practices and are
reflected accurately in the financial statements referred to in Section 4.5.
Each of the Company and its Subsidiaries has accounting controls sufficient to
insure that its transactions are (1) executed in accordance with management's
general or specific authorization and (2) recorded in conformity with GAAP so
as to maintain accountability for assets.
(b) The minute books of each of the Company and its
Subsidiaries contain accurate records of all meetings and accurately reflect
all corporate action of the
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stockholders and the board of directors (including committees) of the Company
or the Subsidiary, as the case may be.
(c) The stock books and ledgers of each of the Company and
its Subsidiaries correctly record all transfer and issuances of all capital
stock of the Company or the Subsidiary, as the case may be, and contain all
cancelled and unused stock certificates of the Company or the Subsidiary, as
the case may be.
SECTION 4.22 MATERIAL CONTRACTS.
(a) Section 4.22 of the Company's Disclosure Schedule sets
forth a correct and complete description and list of the following agreements
to which any of the Company and its Subsidiaries is a party (collectively, the
"MATERIAL CONTRACTS"), true and correct copies of which have been made
available to Qwest and Qwest Subsidiary:
(1) agreements with investment bankers, brokers,
finders, consultants and advisers engaged by the Company or a
Subsidiary with respect to the Transactions, other Business Combination
Transactions, the purchase or sale by the Company or a Subsidiary of
assets not in the ordinary course of business or the issuance and sale
by the Company or a Subsidiary of any Equity Securities;
(2) Affiliate Agreements;
(3) agreements made by any of the Company and its
Subsidiaries not in the Ordinary Course that may require the payment or
provision by or to any of the Company and its Subsidiaries of money in
an aggregate amount, or goods or services having an aggregate value, in
each case in excess of $50,000;
(4) agreements made by any of the Company and its
Subsidiaries, whether or not in the Ordinary Course, contemplating the
acquisition by the Company or the Subsidiary, as the case may be, of
any Equity Securities of any person or all or substantially all of the
assets of any person;
(5) agreements that may be cancelled, terminated,
amended or modified, or pursuant to which payments might be required or
acceleration of benefits may be required, in connection with or as the
result of the execution and delivery of the Transaction Documents or
the conclusion of any of the Transactions;
(6) agreements that provide for the acceleration
or payment of benefits upon the occurrence of a change of control
(however defined), whether or not resulting from the execution and
delivery of the Transaction Documents or the conclusion of any of the
Transactions;
(7) agreements that provide for the
indemnification by any of the Company and its Subsidiaries of any
director, officer, employee or agent of any of the
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Company and its Subsidiaries, other than agreements referred to in the
preceding clause (1);
(8) agreements that grant a power of attorney,
agency or similar authority to another person;
(9) joint venture and partnership agreements;
(10) agreements giving any person the right to
renegotiate or require an increase or reduction in the price of goods
or services provided by or to any of the Company and its Subsidiaries,
an increase in amounts previously paid by any of the Company and its
Subsidiaries with respect to any goods or services or the repayment by
any of the Company and the Subsidiaries of amounts previously paid to
any of them with respect to any goods or services;
(11) agreements with any Governmental Body; and
(12) agreements that may require the payment or
provision by or to any of the Company and its Subsidiaries of money in
an aggregate amount, or goods or services having an aggregate value, in
each case in excess of $100,000.
(b) Each agreement referred to in Section 4.22(a)(12) has,
to the knowledge of the representing party with respect to parties other than
the Company or the Subsidiary, as the case may be, been duly authorized,
executed and delivered by the parties to such agreement, is in full force and
effect and constitutes the legally valid and binding obligation of the parties
to such agreement or their respective successors or assigns, enforceable
against them in accordance with the terms of such agreement. There is no
liability or obligation of the Company or a Subsidiary with respect to any such
agreement that, under the terms of such agreement, is required to be paid or
otherwise performed or is required to have been paid or otherwise performed, in
each case as of the date of this Agreement, but that has not been paid or
otherwise performed in full. The right, title and interest of the Company or a
Subsidiary in, to and under each such agreement is free and clear of all Liens
other than Permitted Liens. Except as disclosed in Section 4.22 of the
Company's Disclosure Schedule, there exists no default under any such agreement
by any party, which default, individually or together with other defaults under
the same agreement or other agreements, could reasonably be expected to have a
Material Adverse Effect. The execution and delivery of the Transaction
Documents and the conclusion of any of the Transactions will not (and will not
give any person a right to) terminate or modify any rights of, or accelerate or
increase any obligation of, any of the Company and its Subsidiaries under any
such agreement.
SECTION 4.23 RESTRICTIONS ON BUSINESS ACTIVITIES. Except
as disclosed in Section 4.23 of the Company's Disclosure Schedule, there is no
agreement, judgment, order or decree binding upon any of the Company and its
Subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing any material business
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practice of any of the Company and its Subsidiaries, any acquisition of any
property by any of the Company and its Subsidiaries, the conduct of business by
any of the Company and its Subsidiaries as currently conducted or as proposed
to be conducted by the Company or the Subsidiary, as the case may be, except
for any prohibition or impairment that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
SECTION 4.24 TRANSACTIONS WITH AFFILIATES. Except as
disclosed in Section 4.24 of the Company's Disclosure Schedule, at no time
since December 31, 1996 has any of the Company and its Subsidiaries entered
into any transaction (including, but not limited to, the purchase, sale or
exchange of property or the rendering of any service) with any Affiliate except
as contemplated by the Transaction Documents.
SECTION 4.25 CERTAIN FINANCIAL MATTERS.
(a) Except as disclosed in Section 4.25(a) of the Company's
Disclosure Schedule, since December 31, 1996, none of the Company and its
Subsidiaries has provided any material special promotions, discounts or other
incentives to its employees, agents, distributors or customers in connection
with the solicitation of new orders for service provided by the Company or any
Subsidiary, nor has any customer pre-paid any material amount for services to
be provided by the Company or any Subsidiary in the future.
(b) The Company and its Subsidiaries have paid or fully
provided for all access charges properly payable to local exchange carriers for
access facilities and have properly reported their respective percentages of
interstate use ("PIU") to such carriers, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. As of the date of this Agreement, to the knowledge
of the representing party, the Company and its Subsidiaries do not have, and on
the Closing Date the Company and its Subsidiaries will not have, any material
liability on account of PIU.
(c) Section 4.25(c) of the Company's Disclosure Schedule
sets forth a correct and complete list of product and service warranties and
guaranties extended by any of the Company and the Subsidiaries that are
currently in effect. Except as disclosed in Section 4.25(c) of the Company's
Disclosure Schedule, (1) there have not been any material deviations from such
warranties and guaranties, and salesmen, employees and agents of any of the
Company and the Subsidiaries are not authorized to undertake obligations to any
customer or other persons in excess of such written warranties or guaranties
and (2) no claims have been asserted or threatened in writing or, to the
knowledge of the representing party, asserted or threatened orally against any
of the Company and the Subsidiaries with respect to product and service
warranties and guaranties currently or formerly extended by any of the Company
and the Subsidiaries, except in each case referred to in the preceding clauses
(1) and (2) for such deviations or claims which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
or for which the
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Company has established appropriate reserves on the balance sheets referred to
in Section 4.5 as of their respective dates in accordance with past practice
and GAAP.
SECTION 4.26 MISSTATEMENTS. Except to the extent revised
or superseded by a subsequent schedule furnished to Qwest and Qwest Subsidiary
pursuant to any Transaction Document, no schedule furnished to Qwest or Qwest
Subsidiary by or with respect to any of the Company or its Subsidiaries
pursuant to any Transaction Document contained as of the date thereof any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statement contained therein, in the light of the
circumstances under which it was made, not misleading.
SECTION 4.27 SEC DOCUMENTS. The Company has filed with
the Securities and Exchange Commission all reports, schedules, forms,
statements and other documents required by the Securities Act or the Exchange
Act to be filed by the Company since December 31, 1993 (collectively, and in
each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "COMPANY SEC DOCUMENTS"). Section 4.27
of the Company's Disclosure Schedule sets forth a list of the Company SEC
Documents. As of their respective dates, except to the extent revised or
superseded by a subsequent filing with the Securities and Exchange Commission
on or before the date of this Agreement, the Company SEC Documents filed by the
Company complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the Company
SEC Documents (including any and all financial statements included therein)
filed by the Company as of such dates 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 consolidated
financial statements of the Company and its consolidated Subsidiaries included
in the Company SEC Documents, including any amendments thereto, comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Securities and Exchange Commission with
respect thereto. The Company has filed with the Securities and Exchange
Commission as exhibits to the Company SEC Documents all agreements, contracts
and other documents or instruments required to be so filed, and such exhibits
are true and complete copies of such agreements, contracts and other documents
or instruments, as the case may be. None of the Subsidiaries of the Company is
required to file any reports, schedules, statements or other documents with the
Securities and Exchange Commission.
SECTION 4.28 PROXY STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT; OTHER INFORMATION. None of the information with respect to any of
the Company and its Subsidiaries to be included in the Proxy
Statement/Prospectus or the Registration Statement will, in the case of the
Proxy Statement/Prospectus or any amendments thereof or supplements thereto, at
the time of the mailing of the Proxy Statement/Prospectus or any amendments
thereof or supplements thereto, and at the same time of the Company
Stockholders Meeting, or, in the case of the Registration Statement, at the
time it becomes effective, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light
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of the circumstances under which they were made, not misleading, except that no
representation is made by the representing party with respect to information
supplied in writing by Qwest, Qwest Subsidiary or any Affiliate thereof
specifically for inclusion in the Proxy Statement/Prospectus. The Proxy
Statement/Prospectus will comply in all material respects with the provisions
of the Exchange Act and the DGCL. The letters to stockholders, notices of
meeting, proxy statement and forms of proxies to be distributed to stockholders
in connection with this Agreement and the Merger and any schedules required to
be filed with the Securities and Exchange Commission in connection therewith
are collectively referred to as the "PROXY STATEMENT/PROSPECTUS".
SECTION 4.29 BOARD APPROVAL.
(a) The Board of Directors of the Company, by resolutions
duly adopted at a meeting duly called and held and not subsequently rescinded
or modified in any way (the "BOARD APPROVAL"), but subject to clause (2) of the
proviso to Section 7.2(z), has duly (1) determined that the Transactions, taken
as a whole, are in the best interests of the Company and its stockholders, (2)
approved the Certificate Amendment, this Agreement and the Merger, (3) approved
the other Transaction Documents and the other Transactions and (4) recommended
that the stockholders of the Company approve the Certificate Amendment, this
Agreement and the Merger.
(b) The Board Approval constitutes approval of (1) the
Certificate Amendment for purposes of Section 242(b)(1) of the DGCL, (2) this
Agreement and the Merger for purposes of Section 251 of the DGCL and (3) each
of the Transaction Documents and each of the Transactions (including, without
limitation, the Qwest/Principal Stockholders Transactions) for purposes of
Section 203 of the DGCL if the provisions thereof were to apply to any of the
Transaction Documents or any of the Transactions.
(c) J.C. Bradford & Co., L.L.C. has delivered to the Board
of Directors of the Company its written opinion to the effect that, as of
January 6, 1998, the Merger Consideration to be received by the holders of
Company Common Stock and Company Series I Preferred Stock in the Merger is fair
to such stockholders from a financial point of view.
SECTION 4.30 REQUIRED VOTE. The affirmative votes at a
duly convened meeting of the holders of the Company Capital Stock of (1) a
majority of the outstanding shares of the Company Common Stock and of the
outstanding shares of the Company Series I Preferred Stock, voting together as
a single class, and (2) a majority of the outstanding shares of Company Series
I Preferred Stock, voting separately as a class, are the only votes or consents
of the holders of any class or series of the Equity Securities of the Company
necessary to approve the Certificate Amendment, this Agreement and the Merger.
The other Transaction Documents and the other Transactions are not required to
be approved by the holders of shares of any class or series of Equity
Securities of the Company.
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SECTION 4.31 BUSINESS COMBINATION TRANSACTIONS. None of
the Company and its Subsidiaries has entered into any agreement with any person
which has not been terminated as of the date of this Agreement and under which
there remains any liability or obligation of any of the Company and its
Subsidiaries with respect to a Business Combination Transaction (other than the
Transactions).
SECTION 4.32 AGGREGATE MATERIAL ADVERSE EFFECT. There is
no circumstance or event that satisfies all of the following conditions: (1)
such circumstance or event, whether considered individually or in the aggregate
with all other such circumstances and events, constitutes a breach of one or
more representations, warranties, covenants or other agreements of the Company
or any of its Subsidiaries in any Transaction Document or that would constitute
such a breach if such representation, warranty, covenant or agreement did not
include a reference therein to the possible occurrence of a Material Adverse
Effect, (2) such circumstance or event, considered in the aggregate with all
other such circumstances and events, negatively affects, or could reasonably be
expected to negatively affect, the value of the Company and the Subsidiaries,
taken as a whole, in the amount of $350,000 or more and (3) such circumstance
or event, considered in the aggregate with all other such circumstances and
events, could reasonably be expected to constitute a Material Adverse Effect on
the Company and its Subsidiaries.
SECTION 4.33 FEES FOR FINANCIAL ADVISORS, BROKERS AND
FINDERS. None of the Company and its Subsidiaries has authorized any person
other than the Financial Advisors to act as financial advisor, broker, finder
or other intermediary that might be entitled to any fee, commission, expense
reimbursement or other payment of any kind from any of the Company and its
Subsidiaries upon the conclusion of or in connection with any of the
Transactions.
SECTION 4.34 OWNERSHIP OF QWEST COMMON STOCK. None of the
Company and its Subsidiaries owns any shares of Qwest Common Stock or other
Equity Securities of Qwest (exclusive of any shares of Qwest Common Stock owned
by any Company Employee Plan).
SECTION 4.35 ANTI-TAKEOVER PROVISIONS. The Company has
taken all steps necessary to irrevocably exempt the Transactions from each
applicable state takeover law and from any applicable charter or contractual
provision containing anti-takeover provisions. No provision of the certificate
of incorporation or bylaws of the Company would, directly or indirectly,
restrict or impair the right or ability of Qwest, Qwest Subsidiary or any
Affiliate of Qwest to vote, or otherwise to exercise the rights and receive the
benefits of a stockholder with respect to, Equity Securities of the Company the
beneficial ownership of which may be acquired or controlled by Qwest, Qwest
Subsidiary or such Affiliate or permit any other stockholder to acquire
securities of the Company on a basis not available to Qwest, Qwest Subsidiary
or such Affiliate if Qwest, Qwest Subsidiary or such Affiliate were to acquire
the beneficial ownership of Equity Securities of the Company.
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SECTION 4.36 CONTINUING REPRESENTATIONS AND WARRANTIES.
(a) Each of the representations and warranties made with
respect to the Company or a Subsidiary in this Agreement or in any other
Transaction Document as of any date other than the Closing Date shall be true
and correct in all material respects on and as of the Closing Date, except as
otherwise contemplated by such Transaction Document.
(b) Not less than three Business Days prior to the Closing
Date, the Company shall prepare and deliver to Qwest and Qwest Subsidiary such
updates or other revisions of the written disclosures referred to in this
Article IV as have been delivered by the Company to Qwest and Qwest Subsidiary
as shall be necessary in order to make each of such written disclosures correct
and complete in all material respects on and as of the Closing Date. The
requirement to prepare and deliver updates or other revisions of the written
disclosures, and the receipt by Qwest and Qwest Subsidiary of information
pursuant to Sections 6.1(d) and 7.1 or otherwise on or before the Closing Date,
shall not limit the right of Qwest and Qwest Subsidiary under Article III to
require as a condition precedent to the performance of its obligations under
this Agreement on such Closing Date the accuracy in all material respects of
the representations and warranties made by the representing party in any
Transaction Document and the performance in all material respects of the
covenants of the Company made in any Transaction Document (without regard to
such updates or other revisions) and to receive an unqualified certificate with
respect to the same.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF QWEST AND QWEST SUBSIDIARY
Each of Qwest and Qwest Subsidiary, jointly and severally,
represents and warrants to the Company as follows:
SECTION 5.1 CORPORATE EXISTENCE AND POWER. Each of Qwest
and Qwest Subsidiary (1) is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
(2) has all necessary corporate power and authority and all material licenses,
authorizations, consents and approvals required to own, lease, license or use
its properties now owned, leased, licensed or used and proposed to be owned,
leased, licensed or used and to carry on its business as now conducted and
proposed to be conducted, (3) is duly qualified as a foreign corporation under
the laws of each jurisdiction in which qualification is required either to own,
lease, license or use its properties now owned, leased, licensed or used or to
carry on its business as now conducted, except where the failure to effect or
obtain such qualification, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, and (4) has all
necessary corporate power and authority to execute and deliver each Transaction
Document to which it is or may become a party and to perform its obligations
thereunder.
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SECTION 5.2 AUTHORIZATION; CONTRAVENTION. Subject to
obtaining the Approvals referred to in Section 5.3, the execution and delivery
by each of Qwest and Qwest Subsidiary of each Transaction Document to which it
is or may become a party and the performance by it of its obligations under
each of those Transaction Documents have been duly authorized by all necessary
corporate action and do not and will not (1) contravene, violate, result in a
breach of or constitute a default under, (A) its certificate of incorporation
or bylaws, (B) any Regulation of any Governmental Body or any decision, ruling,
order or award of any arbitrator by which it or any of its properties may be
bound or affected, including, but not limited to, the Hart-Scott-Rodino Act or
(C) any agreement, indenture or other instrument to which it is a party or by
which it or its properties may be bound or affected or (2) result in or require
the creation or imposition of any Lien on any property now owned or hereafter
acquired by it, except in each case referred to in the preceding clauses (1)
and (2) for contraventions, violations, breaches, defaults or Liens that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.3 APPROVALS. Except as disclosed in Section
5.3 of Qwest and Qwest Subsidiary's Disclosure Schedule, no Approval of any
Governmental Body or other person is required or advisable on the part of Qwest
or Qwest Subsidiary for (1) the due execution and delivery by Qwest or Qwest
Subsidiary, as the case may be, of any Transaction Document, (2) the conclusion
of the Transactions, (3) the performance by Qwest or Qwest Subsidiary, as the
case may be, of its obligations under each Transaction Document to which it is
or may become a party and (4) the exercise by the Company of its rights under
each Transaction Document to which the Company is or may become a party, except
in each case referred to in the preceding clauses (1), (2), (3) and (4) where
the failure to obtain such Approval, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
SECTION 5.4 BINDING EFFECT. Each Transaction Document to
which Qwest or Qwest Subsidiary is or may become a party is, or when executed
and delivered in accordance with this Agreement will be, the legally valid and
binding obligation of Qwest or Qwest Subsidiary, as the case may be,
enforceable against it in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
SECTION 5.5 FINANCIAL INFORMATION.
(a) The consolidated balance sheet of Qwest and its
consolidated Subsidiaries as of December 31, 1996 and the related consolidated
statements of income (loss) and stockholders' equity and cash flows for the
fiscal year then ended, reported on by KPMG Peat Marwick LLP, true and complete
copies of which have been delivered to the Company, fairly present the
consolidated financial position of Qwest and its consolidated
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Subsidiaries as of that date and their consolidated results of operations and
cash flows for the year then ended, in accordance with GAAP applied on a
consistent basis except as described in the footnotes to the financial
statements or as disclosed in Section 5.5 of Qwest and Qwest Subsidiary's
Disclosure Schedule.
(b) The unaudited consolidated balance sheet of Qwest and
its consolidated Subsidiaries as of September 30, 1997 and the related
consolidated statements of income (loss) and stockholders' equity and cash
flows for the nine months then ended, true and complete copies of which have
been delivered to Qwest and Qwest Subsidiary, fairly present, subject to normal
year-end adjustments, the consolidated financial position of the Company and
its consolidated Subsidiaries as of that date and their consolidated results of
operations and cash flows for the nine months then ended.
(c) At the respective dates of the balance sheets referred
to in this Section 5.5, none of Qwest and its Subsidiaries had any material
Liability that, in accordance with GAAP applied on a consistent basis, should
have been shown or reflected in the balance sheets but was not, except for the
omission of notes in unaudited balance sheets with respect to contingent
liabilities that in the aggregate did not materially exceed those so reported
in the latest audited balance sheets previously delivered and that were of
substantially the same type as so reported.
(d) Since January 1, 1997, there has been no material
disagreement (within the meaning of Item 304(a)(1)(iv) of Regulation S-K under
the Securities Act) between any of Qwest and its Subsidiaries, on the one part,
and any of its independent accountants, on the other part, with respect to any
aspect of the manner in which the Company or such Subsidiary, as the case may
be, maintained or maintains its books and records or the manner in which the
Company or the Subsidiary, as the case may be, has reported upon the financial
condition and results of operations of any of the Company and its Subsidiaries
since such date, that has not been resolved to the satisfaction of the relevant
independent accountants.
SECTION 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as disclosed in Section 5.6 of Qwest and Qwest Subsidiary's Disclosure
Schedule, since December 31, 1996, no circumstance has existed and no event has
occurred that has had, will have or could reasonably be expected to have a
Material Adverse Effect on Qwest and its Subsidiaries.
SECTION 5.7 LITIGATION.
(a) There is no Action pending against Qwest or Qwest
Subsidiary or, to the knowledge of the representing party, threatened against
Qwest, Qwest Subsidiary or any other person that restricts in any material
respect or prohibits (or, if successful, would restrict or prohibit) the
conclusion of any of the Transactions.
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(b) There is no Action pending against any of Qwest and
its Subsidiaries or, to the knowledge of the representing party, threatened
against any of Qwest and its Subsidiaries or any other person that involves any
of the Transactions or any property owned, leased, licensed or used by any of
Qwest and its Subsidiaries, as the case may be, that, individually or in the
aggregate, if determined adversely to any of them, could reasonably be expected
to have a Material Adverse Effect on Qwest.
SECTION 5.8 COMPLIANCE WITH REGULATIONS.
(a) None of Qwest and its Subsidiaries is in, and none of
them has received written notice of, a violation of or default with respect to,
any Regulation of any Governmental Body or any decision, ruling, order or award
of any arbitrator applicable to it or its business, properties or operations,
including individual products or services sold or provided by it, except for
violations or defaults that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(b) Each of Qwest and its Subsidiaries has filed or caused
to be filed with each applicable Governmental Body all reports, applications,
documents, instruments and information required to be filed by it pursuant to
all applicable Regulations, other than those as to which the failure to file,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.9 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized
capital stock of Qwest consists of 400,000,000 shares of Qwest Common Stock and
25,000,000 shares of preferred stock, par value $.01 per share, of Qwest (the
"QWEST PREFERRED STOCK").
(b) As of December 31, 1997, there are (i) 103,334,937
shares of Qwest Common Stock issued and outstanding, (ii) no shares of Qwest
Common Stock held in the treasury of Qwest, (iii) no shares of Qwest Preferred
Stock issued and outstanding, (iv) 6,941,500 shares of Qwest Common Stock
reserved for issuance upon exercise of outstanding stock options issued by
Qwest to current or former employees and directors of Qwest and its
Subsidiaries, (v) 3,058,500 shares of Qwest Common Stock reserved for issuance
upon exercise of authorized but unissued stock options and (vi) 4,300,000
shares of Qwest Common Stock reserved for issuance upon exercise of a warrant
issued to Anschutz Family Investment Company LLC.
(c) All outstanding shares of Qwest Common Stock are duly
authorized, validly issued, fully paid and nonassessable, free from any Liens
created by Qwest with respect to the issuance and delivery thereof and not
subject to preemptive rights.
(d) Except with respect to the outstanding shares of Qwest
Common Stock, there are no outstanding bonds, debentures, notes or other
indebtedness or other securities
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of Qwest having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Qwest may vote.
(e) All outstanding Equity Securities of Qwest were issued
in compliance with all applicable Regulations, including, without limitation,
the registration provisions of applicable federal and state securities laws.
Equity Securities of Qwest that were issued and reacquired by Qwest were so
reacquired (and, if reissued, so reissued) in compliance with all applicable
Regulations, and Qwest has no liability with respect to the reacquisition or
reissuance of such Equity Securities.
SECTION 5.10 SEC DOCUMENTS. Qwest has filed with the
Securities and Exchange Commission all reports, schedules, forms, statements
and other documents required by the Securities Act or the Exchange Act to be
filed by Qwest since April 18, 1997 (collectively, and in each case including
all exhibits and schedules thereto and documents incorporated by reference
therein, the "QWEST SEC DOCUMENTS"). Section 5.10 of the Qwest and Qwest
Subsidiary's Disclosure Schedule sets forth a list of all Qwest SEC Documents.
As of their respective dates, except to the extent revised or superseded by a
subsequent filing with the Securities and Exchange Commission on or before the
date of this Agreement, the Qwest SEC Documents filed by Qwest complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and none of the Qwest SEC Documents (including any and
all financial statements included therein) filed by Qwest as of such dates
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 consolidated financial statements of Qwest and its
consolidated Subsidiaries included in the Qwest SEC Documents, including any
amendments thereto, comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Securities and Exchange Commission with respect thereto. Qwest has filed with
the Securities and Exchange Commission as exhibits to the Qwest SEC Documents
all agreements, contracts and other documents or instruments required to be so
filed, and such exhibits are true and complete copies of such agreements,
contracts and other documents or instruments, as the case may be. None of the
Subsidiaries of Qwest is required to file any reports, schedules, statements or
other documents with the Securities and Exchange Commission.
SECTION 5.11 PROXY/STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT; OTHER INFORMATION. None of the information with respect to any of
Qwest and its Subsidiaries to be included in the Proxy Statement/Prospectus or
the Registration Statement will in the case of the Proxy Statement/Prospectus
or any amendments thereof or supplements thereto, at the time of the mailing of
the Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, and at the time of the Company Stockholders Meeting, or, in the case
of the Registration Statement, at the time it becomes effective, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the
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representing party with respect to information supplied in writing by the
Company or any Affiliate of the Company specifically for inclusion in the Proxy
Statement/Prospectus or the Registration Statement. The Registration Statement
will comply in all material respects with the provisions of the Securities Act.
The registration statement on Form S- 4, in which the Proxy
Statement/Prospectus will be included, and all exhibits thereto, required to be
filed with the Securities and Exchange Commission in connection with this
Agreement and the Merger are collectively referred to as the "REGISTRATION
STATEMENT".
SECTION 5.12 OWNERSHIP OF COMPANY CAPITAL STOCK. None of
Qwest and its Subsidiaries owns any shares of Company Capital Stock or other
Equity Securities of the Company (exclusive of any shares of Company Capital
Stock owned by any Employee Plan of Qwest and its Subsidiaries).
SECTION 5.13 MISSTATEMENTS. Except to the extent revised
or superseded by a subsequent schedule furnished to the Company pursuant to
this Agreement, no schedule furnished to the Company by or with respect to any
of Qwest or its Subsidiaries pursuant to this Agreement contained as of the
date thereof any untrue statement of a material fact or omitted to state a
material fact necessary to make the statement contained therein, in the light
of the circumstances under which it was made, not misleading.
SECTION 5.14 CONTINUING REPRESENTATIONS AND WARRANTIES.
(a) Each of the representations and warranties made by
Qwest or Qwest Subsidiary in this Agreement as of any date other than the
Closing Date shall be true and correct in all material respects on and as of
the Closing Date, except as otherwise contemplated by this Agreement.
(b) Not less than three Business Days prior to the Closing
Date, Qwest and Qwest Subsidiary shall prepare and deliver to the Company such
updates or other revisions of the written disclosures referred to in this
Article V as have been delivered by Qwest and Qwest Subsidiary to the Company
as shall be necessary in order to make each of such written disclosures correct
and complete in all material respects on and as of the Closing Date. The
requirement to prepare and deliver updates or other revisions of the written
disclosures, and the receipt by the Company of information pursuant to Sections
6.1(d) and 8.4 or otherwise on or before the Closing Date, shall not limit the
right of the Company under Article III to require as a condition precedent to
the performance of its obligations under this Agreement on such Closing Date
the accuracy in all material respects of the representations and warranties
made by the representing party in this Agreement and the performance in all
material respects of the covenants of Qwest or Qwest Subsidiary made in this
Agreement (without regard to such updates or other revisions) and to receive an
unqualified certificate with respect to the same.
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ARTICLE VI
COVENANTS OF THE PARTIES
SECTION 6.1 COVENANTS OF THE PARTIES. The Company
covenants and agrees for the benefit of Qwest and Qwest Subsidiary with respect
to the Company, and (1) Qwest and Qwest Subsidiary, jointly and severally,
covenant and agree with respect to subsections (a), (b), (c), (d), (e), (f),
(g) and (i) of this Section 6.1, and (2) Qwest covenants and agrees with
respect to subsection (h) of this Section 6.1, for the benefit of the Company,
in each case that the party with respect to which the covenant and agreement is
made shall (and, with respect to the Company, that the Company shall cause its
Subsidiaries to) do the following until the Effective Time and, with respect to
Section 6.1(e), indefinitely after the date of this Agreement:
(a) Maintenance of Existence. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which qualification is required either (1) to own, lease, license or use its
properties now owned, leased, licensed or used and proposed to be owned,
leased, licensed or used or (2) to carry on its business as now conducted or
proposed to be conducted, except where the failure to effect or obtain such
qualification, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(b) Compliance With Regulations. Comply in all respects
with all Regulations of each Governmental Body and all decisions, rulings,
orders and awards of each arbitrator applicable to it or its business,
properties or operations in connection with the Transactions if a failure to
comply with any of the foregoing, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, including, without
limitation, use its best efforts to comply (and exchange information with other
parties to enable them to comply) with any applicable requirements under the
Hart-Scott-Rodino Act relating to filing and furnishing information to the
Department of Justice and the Federal Trade Commission, including, without
limitation, the following:
(1) assisting in the preparation and filing of each
applicable "Antitrust Improvements Act Notification and Report Form for
Certain Mergers and Acquisitions" and taking all other action required
by 16 C.F.R. Parts 801-803 (or any successor form or Regulation);
(2) complying with any additional request for documents or
information made by the Department of Justice or the Federal Trade
Commission or by a court; and
(3) causing all affiliated persons of the "ultimate parent
entity" of the party within the meaning of the Hart-Scott-Rodino Act to
cooperate and assist in such filing and compliance.
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(c) Best Efforts. Upon the terms and subject to the
conditions provided in this Agreement or the other Transaction Documents, use
its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties to this
Agreement or any other Transaction Document in doing all things necessary,
proper or advisable to cause the satisfaction of the conditions to the
conclusion of the Transactions contemplated hereby or thereby including,
without limitation, using its best efforts to obtain all Approvals that are
required or advisable on the part of any party with respect to the
Transactions.
(d) Notification. Give prompt notice to the other parties
to this Agreement or any other Transaction Document, as the case may be, of (1)
the occurrence, or failure to occur, of any event that would be likely to cause
any representation or warranty of the party contained herein or therein to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Closing Date, any failure of the party to perform or otherwise
comply with, in any material respect, any covenant, condition or agreement to
be performed or complied with by it hereunder or thereunder and (2) the receipt
by the party of written or oral notice from any Governmental Body or other
person stating, or causing such party to believe, that there is a reasonable
likelihood that an Approval required by this Agreement to be obtained from such
Governmental Body or other person will not be obtained timely or at all; which
covenant of notification shall not limit the right of any other party hereunder
or thereunder to require as a condition precedent to the performance of its
obligations hereunder or thereunder the continuing accuracy and performance of
the representations and warranties and covenants of the notifying party made
herein or therein and to receive an unqualified certificate with respect to the
same.
(e) Publicity and Reports. Except as may be required by
applicable laws, court process or by obligations pursuant to any listing
agreement with the NASD or the American Stock Exchange, refrain from issuing
any press release or make any public filings with respect to the Transactions,
without affording the other parties the opportunity to review and comment upon
such release or filing.
(f) Tax-Free Reorganization. Use, and cause its
Affiliates to use, all reasonable efforts to cause the Merger to qualify as a
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code; not
take, and cause its Affiliates not to take, any action what would cause the
Merger not to qualify as a reorganization under those Sections; and take the
position for all purposes that the Merger qualifies as a reorganization under
those Sections.
(g) Confidentiality. Keep confidential any information
disclosed by any other party or its representatives to the covenanting party or
its representatives, whether before or after the date of this Agreement, in
connection with the Transactions or the discussions and negotiations preceding
the execution of the Transaction Documents, and do not use such information
other than as contemplated by the Transaction Documents, in each case on the
terms and conditions set forth in the letter agreement dated November 12, 1997
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between the Company and Qwest Communications Corporation (the "CONFIDENTIALITY
AGREEMENT"), as though the agreements and obligations of the parties thereunder
were also the agreements and obligations of each party to this Agreement owed
to the other parties to this Agreement, mutatis mutandis.
(h) Accuracy of Information. Cause all reports,
schedules, forms, statements and other documents required by the Securities Act
or the Exchange Act to be filed by the Company or Qwest, as the case may be
(collectively, and in each case including all exhibits and schedules thereto
and documents incorporated by reference therein, such party's "SEC DOCUMENTS"),
as of their respective dates, except to the extent revised or superseded by a
subsequent filing with the Securities and Exchange Commission on or before the
Effective Time, to comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and cause all of such
party's SEC Documents (including any and all financial statements included
therein) filed by it as of such dates not to contain any untrue statement of a
material fact or omit 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, except to the extent
revised or superseded by a subsequent filing with the Securities and Exchange
Commission on or before the Closing Date that corrects any such untrue
statement or omission.
(i) Further Assurances. Promptly upon request by any
other party, (1) correct any defect or error that may be discovered in any
Transaction Document or in the execution or acknowledgement of any Transaction
Document and execute, acknowledge, deliver, file, re-file, register and
re-register, any and all such further acts, certificates, assurances and other
instruments as the requesting party may reasonably require from time to time in
order (a) to carry out more effectively the purposes of each Transaction
Document, (b) to enable the requesting party to exercise and enforce its rights
and remedies and collect any payments and proceeds under each Transaction
Document and (c) to better transfer, preserve, protect and confirm to the
requesting party the rights granted or now or hereafter intended to be granted
to the requesting party under each Transaction Document or under each other
instrument executed in connection with any Transaction Document, or (2) if the
parties agree to permit the Closing to occur prior to the receipt of all
Approvals required by Section 3.1(e) (without giving effect to the reference
therein to the possible occurrence of a Material Adverse Effect), enter into
such other transactions, agreements and arrangements with the other parties or
their Affiliates so as to give Qwest and Qwest Subsidiary the benefit of the
bargain, all without cost, expense or any other liability whatsoever to any of
the Company, Qwest, Qwest Subsidiary and their Affiliates. Notwithstanding the
foregoing but subject to Sections 8.2 and 8.3, none of Qwest, Qwest Subsidiary
or any Affiliate of Qwest shall have any obligation to provide financial
assistance of any sort whatsoever to any of the Company or its Subsidiaries.
SECTION 6.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION
STATEMENT. As soon as practicable following the execution of this Agreement,
the Company shall prepare and file with the Securities and Exchange Commission
the Proxy Statement/Prospectus and each of the Company and Qwest shall use its
best efforts to have the Proxy Statement/Prospectus
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cleared by the Securities and Exchange Commission as promptly as practicable.
As soon as practicable following such clearance, Qwest shall prepare and file
with the Securities and Exchange Commission the Registration Statement, of
which the Proxy Statement/Prospectus will form a part, and shall use its best
efforts to have the Registration Statement declared effective by the Securities
and Exchange Commission as promptly as practicable thereafter. The Company and
Qwest shall cooperate with each other in the preparation of the Proxy
Statement/Prospectus, and each shall provide to the other promptly copies of
all correspondence between it or any of its representatives and the Securities
and Exchange Commission. Each of the Company and Qwest shall furnish to the
other all information concerning it and its Affiliates required to be included
in the Proxy Statement/Prospectus and the Registration Statement. As promptly
as practicable after the effectiveness of the Registration Statement, the
Company shall mail the Proxy Statement/Prospectus to the stockholders of the
Company. No amendment or supplement to the Proxy Statement/Prospectus or the
Registration Statement shall be made without the approval of each of the
Company and Qwest, which approval shall not be unreasonably withheld,
conditioned or delayed. Each of the Company and Qwest shall advise the other,
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any amendment thereto or any supplement or
amendment to the Proxy Statement/Prospectus has been filed, or the issuance of
any stop order, or the suspension of the qualification of Qwest Common Stock to
be issued in the Merger for offering or sale in any jurisdiction, or of any
request by the Securities and Exchange Commission or the NASD for amendment of
the Registration Statement or the Proxy Statement/Prospectus. The parties
shall take any action required to be taken under state blue sky or securities
Regulations in connection with the Transactions.
SECTION 6.3 LETTERS OF ACCOUNTANTS. Each of the Company
and Qwest shall use commercially reasonable efforts to cause to be delivered to
the other "comfort" letters of Grant Thornton LLP, the Company's independent
public accountants, and of KPMG Peat Marwick LLP, Qwest's independent public
accountants, respectively, in each case, dated and delivered on the date on
which the Registration Statement shall become effective and as of the Effective
Time, and addressed to the Boards of Directors of the Company and Qwest, in
form and substance reasonably satisfactory to the other and reasonably
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by this
Agreement.
ARTICLE VII
ADDITIONAL COVENANTS OF
THE COMPANY
SECTION 7.1 AFFIRMATIVE COVENANTS OF THE COMPANY. The
Company agrees for the benefit of Qwest and Qwest Subsidiary that, until the
Effective Time, the Company shall, and shall cause each of its Subsidiaries to,
do the following:
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(a) American Stock Exchange. Take all action required, if
any, to cause the Company Common Stock to continue to be listed for trading on
the American Stock Exchange and give such notice to the American Stock Exchange
and the NASD as shall be required, if any, with respect to the Transaction
Documents and the Transactions.
(b) Maintenance of Records. Keep adequate records and
books of account reflecting all its financial transactions, keep minute books
containing accurate records of all meetings and accurately reflecting all
corporate action of its stockholders and its Board of Directors (including
committees) and keep stock books and ledgers correctly recording all transfers
and issuances of all capital stock.
(c) Maintenance of Properties. Maintain, keep and
preserve all its Material Properties such that the representations and
warranties stated in Section 4.15(c) shall at all times be true.
(d) Conduct of Business. Except as otherwise contemplated
by this Agreement, continue to engage in the Ordinary Course in the same lines
of business as conducted by it on the date of this Agreement; and use its best
efforts to preserve the business of the Company and its Subsidiaries and to
preserve the goodwill of customers, suppliers and others having business
relations with any of the Company and its Subsidiaries.
(e) Maintenance of Insurance. Maintain insurance such
that the representations and warranties stated in Section 4.18 shall at all
times remain true.
(f) Payment of Taxes. (1) Timely file (or cause to be
filed) all Tax Returns that are required to be filed by it, except for the
filing of such Tax Returns as to which the failure to file, individually or in
the aggregate, could not reasonably be expected to have a Materially Adverse
Effect, and (2) pay (or cause to be paid) before they become delinquent all
Taxes due whether or not shown on such Tax Returns or any assessment received
by it or otherwise required to be paid, except Taxes being contested in good
faith by appropriate proceedings and for which adequate reserves or other
provisions are maintained.
(g) Reporting Requirements. Furnish to Qwest and Qwest
Subsidiary:
(1) Adverse events. Promptly after the
occurrence, or failure to occur, of any such event, information with
respect to any event (A) which could reasonably be expected to have a
Material Adverse Effect, (B) which, if known as of the date of this
Agreement, would have been required by any Transaction Document to be
disclosed to Qwest or Qwest Subsidiary or (C) which could reasonably be
expected to cause any representation or warranty contained in any
Transaction Document with respect to the Company or a Subsidiary to be
untrue or inaccurate in any material respect at any time from the date
of this Agreement to the Effective Time;
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(2) Monthly financial statements. As soon as
available, and in any event within 30 days after the end of each month,
the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of the month and the related consolidated
statements of income (loss), stockholders' equity and cash flows for
the portion of the fiscal year of the Company ended with the last day
of the month, all in reasonable detail and stating in comparative form
the respective consolidated figures for the corresponding date and
period in the previous fiscal year (subject to year-end adjustments);
(3) Quarterly financial statements. As soon as
available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Company, the
consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of the quarter and the related consolidated
statements of income (loss) and stockholders' equity and cash flows for
the portion of the fiscal year ended with the last day of the quarter,
all in reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the
previous fiscal year and certified by the chief financial officer of
the Company (subject to year-end adjustments);
(4) Annual financial statements. As soon as
available and in any event within 90 days after the end of each fiscal
year of the Company, the consolidated balance sheet of the Company and
its consolidated Subsidiaries as of the end of the fiscal year and the
related consolidated statements of income (loss) and stockholders'
equity and cash flows for the fiscal year, all in reasonable detail and
stating in comparative form the respective consolidated figures for the
corresponding date and period in the prior fiscal year and accompanied
by an opinion of Grant Thornton LLP or other independent accountants of
recognized national standing selected by the Company;
(5) Notice of litigation. Promptly after the
commencement of each such matter, notice of all Actions affecting the
Company or a Subsidiary that, individually or in the aggregate, if
determined adversely to any of them, could reasonably be expected to
have a Material Adverse Effect;
(6) Access to information. Afford to Qwest and
Qwest Subsidiary and their respective officers, employees, financial
advisors, attorneys, accountants and other representatives, reasonable
access and duplicating rights (at the requesting party's expense)
during normal business hours and upon reasonable advance notice to all
its properties, books, contracts commitments, personnel and records;
furnish as promptly as practicable to Qwest and Qwest Subsidiary and
their respective officers, employees, financial advisors, attorneys,
accountants and other representatives such information with respect to
the business, properties, operations, prospects or condition (financial
or otherwise) of the Company and its Subsidiaries as they may from time
to time reasonably request and instruct the officers, employees,
financial advisors, attorneys, accountants and other representatives of
each of the Company
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and its Subsidiaries to cooperate with Qwest and Qwest Subsidiary and
their respective officers, employees, financial advisors, attorneys,
accountants and other representatives in their investigation of each of
the Company and the Subsidiaries;
(7) Reports to creditors and other persons.
Promptly after the furnishing of each such document, copies of any
statement or report furnished to any other person pursuant to the terms
of the Credit Agreement or any other indenture, loan or credit or
similar agreement and not otherwise required by any other clause of
this Section 8.1 to be furnished to Qwest and Qwest Subsidiary;
(8) SEC documents. Promptly after filing any
report, schedule, form, statement or other document with the Securities
and Exchange Commission, the Company shall deliver a copy thereof to
Qwest and Qwest Subsidiary; and
(9) General information. Such other information
respecting the condition or operations, financial or otherwise, of any
of the Company and its Subsidiaries as Qwest or Qwest Subsidiary may
from time to time reasonably request.
(h) Certain Resignations and Releases. Obtain from the
persons identified in Section 3.1(n)(1) the resignations and releases referred
to therein, without cost or other liability, subject to Section 8.3(c), to any
of the Company, its Subsidiaries, Qwest and Qwest Subsidiary.
(i) Affiliate Agreements. Deliver to Qwest and Qwest
Subsidiary a list (reasonably satisfactory to counsel for Qwest and Qwest
Subsidiary), setting forth names and addresses who are, at the time of the
Company Stockholders Meeting, in the Company's reasonable judgment,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act;
furnish such information and documents as Qwest and Qwest Subsidiary may
reasonably request for the purpose of reviewing such list; and use its best
efforts to obtain from each such person the written agreement referred to in
Section 3.1(n)(2), without cost or other liability to any of the Company, its
Subsidiaries, Qwest and Qwest Subsidiary.
(j) Stock Options, Warrants, etc. Cancel or otherwise
terminate, without cost or other liability to any of the Company, Qwest, Qwest
Subsidiary and any other person, all of the Stock Options and Warrants, and all
rights of participants in any stock option, stock purchase, stock appreciation
rights, phantom stock, restricted stock or other Company Employee Plan, that
shall not have been exercised on or before the Business Day preceding the
Closing Date, in each case on terms approved by Qwest and Qwest Subsidiary;
provided that, (1) Company Series F Warrants exercisable for no more than
275,000 shares of Company Common Stock in the aggregate and (2) Company Sunrise
Warrants exercisable for no more than 103,333 shares of Company Common Stock in
the aggregate, may remain outstanding after the Closing Date if both (x) the
Company shall have used commercially reasonably efforts to cause the
cancellation or other termination of such Company Series F Warrants and Company
Sunrise Warrants, as the case may be, and (y) only shares of Qwest Common Stock
(and no Equity Securities of the Surviving Corporation or any other
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person) shall be issuable upon the exercise of such Company Series F Warrants
and Company Sunrise Warrants after the Effective Time.
(k) Voting Agreements. Recognize and give effect to the
proxies granted by the Principal Stockholders in their respective Voting
Agreements and direct the transfer agent for the Company Common Stock not to
effect the transfer by any Principal Stockholder of any Company Restricted
Shares in violation of the related Voting Agreement.
(l) Company Stockholders Meeting; Proxy
Statement/Prospectus.
(1) The Company (to the extent necessary, acting
through its Board of Directors) shall, in accordance with applicable
Regulations and as soon as practicable following the execution and
delivery of this Agreement, (A) duly call, give notice of, convene and
hold a meeting of the holders of the Company Capital Stock (the
"COMPANY STOCKHOLDERS MEETING") for the purpose of considering the
approval of the Certificate Amendment, this Agreement and the Merger,
which date shall be not less than 20 days after the date the Proxy
Statement/Prospectus shall be first mailed to the stockholders of the
Company, (B) fix a record date for determining stockholders entitled to
vote at the Company Stockholders Meeting and (C) subject to Section
7.2(z), include in the Proxy Statement/Prospectus the recommendation by
the Board of Directors of the Company that the stockholders of the
Company approve the Certificate Amendment, this Agreement and the
Merger.
(2) Notwithstanding the provisions of Section
7.2(z) and this Section 7.1(l), the obligations of the Company under
Section 7.1(l)(1) shall not be affected by the withdrawal or
modification by the Board of Directors of the Board Approval with
respect to any matter other than the approval of the Certificate
Amendment, this Agreement and the Merger.
(m) Customer Introductions. To the extent practicable,
upon the request of Qwest or Qwest Subsidiary, introduce Qwest or Qwest
Subsidiary, or arrange for a personal introduction of their respective
representatives, to customers of any of the Company and its Subsidiaries for
the purpose of ensuring good customer relationships following the Closing.
(n) Certificate Amendment. Cause the Certificate
Amendment, if approved by the stockholders of the Company, to be filed with the
Secretary of State of the State of Delaware and make all other filings or
recordings required by the DGCL to effect the Certificate Amendment.
SECTION 7.2 NEGATIVE COVENANTS OF THE COMPANY. The
Company agrees for the benefit of Qwest and Qwest Subsidiary that, until the
Effective Time and except as contemplated by the Transaction Documents or with
the prior written approval of Qwest and Qwest Subsidiary (which approval may be
granted, withheld, delayed or conditioned in
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their sole discretion), the Company shall not, and shall not permit any of its
Subsidiaries to, do any of the following or enter into any agreement or other
arrangement (other than the Transaction Documents) with respect to any of the
following:
(a) Dissolution. Dissolve any of the Company and its
Subsidiaries, or take any action in contemplation thereof.
(b) Charter documents. Except as contemplated by Section
7.1(n), amend its articles of incorporation, certificate of incorporation,
bylaws, operating agreement or limited partnership agreement, as applicable.
(c) Capitalization. Issue any shares of capital stock or
other equity Securities, except in connection with the conversion of shares of
Company Series I Preferred Stock or the exercise of any Stock Options and
Warrants, or enter into an agreement or arrangement restricting the voting or
transfer of any Equity Securities of any of the Company and its Subsidiaries.
(d) Debt. Create, incur, assume or suffer to exist any
Debt, except:
(1) any Debt under the Credit Agreement, in an
aggregate principal amount not greater than $4,620,000 plus the
aggregate outstanding amount of revolving advances under Section 2 of
the Credit Agreement, on the terms and conditions thereof in existence
as of the date of this Agreement or on other terms and conditions
reasonably satisfactory to Qwest and Qwest Subsidiary; and
(2) any other Debt existing on the date of this
Agreement, and all amendments, extensions, modifications, refunding,
renewals, refinancings and substitutions thereof, but only if the
aggregate principal amount thereof is not increased thereby, the term
thereof is not extended thereby and the other terms and conditions
thereof, taken as a whole, are not less advantageous to the Company and
its Subsidiaries than those in existence as of the date of this
Agreement.
(e) Liens. Create, incur, assume, or suffer to exist any
Lien upon or with respect to any of its properties, now owned or hereafter
acquired, except Permitted Liens.
(f) Liabilities. Any of (1) incur any Liability, except
Liabilities (A) incurred in the Ordinary Course or (B) expressly contemplated
by the Transaction Documents, (2) pay, discharge or satisfy any Liabilities,
except Liabilities (A) reflected or reserved against in, or contemplated by,
the financial statements (or the notes thereto) of the Company and its
Subsidiaries referred to in Section 4.5, (B) incurred in the Ordinary Course,
(C) legally required to be paid, discharged or satisfied or (D) expressly
contemplated by the Transaction Documents and (3) renegotiate, settle or
compromise the Sprint Payables Obligation or the MCI Payables Obligation or
both (provided that the approval of Qwest and Qwest Subsidiary with respect to
such renegotiation, settlement or compromise shall not be unreasonably
withheld, delayed or conditioned).
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(g) Settle Litigation. Settle or compromise any
litigation (whether or not commenced prior to the date of this Agreement) or
settle, pay or compromise any claims not required to be paid (which are not
payable or reimbursable under policies of insurance maintained by or on behalf
of any of the Company and its Subsidiaries), individually in an amount in
excess of $50,000 and in the aggregate in an amount in excess of $100,000,
other than in consultation and cooperation with Qwest and Qwest Subsidiary,
and, with respect to any such settlement, with the prior written consent of
Qwest and Qwest Subsidiary.
(h) Restricted Payments. Declare or make any Restricted
Payment to any person other than any of the Company and its Wholly-Owned
Subsidiaries.
(i) Capital Expenditures. Make (or commit to make) any
Capital Expenditures except in the Ordinary Course.
(j) Acquisitions. Acquire (1) by merger, consolidation,
acquisition of stock or assets, or otherwise, all or substantially all of the
Equity Securities of any corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated association or other entity
or organization or (2) any assets except for fair value and in the Ordinary
Course.
(k) Investments. Make or acquire any Investment in any
person, other than (1) Investments in Wholly-Owned Subsidiaries and (2)
Investments existing on the date of this Agreement in other Subsidiaries,
including, without limitation, any extension of the maturity, renewal,
refunding or modification of such existing Investments in other Subsidiaries
and all amendments, extensions, modifications, refundings, renewals and
substitutions of such existing Investments, but only if the aggregate amount of
such existing Investments shall not increase except as a result of the accrual
of interest, dividends and other amounts payable in respect of such
Investments.
(l) Mergers, Etc. Merge or consolidate with any person,
sell, lease, license or dispose of all or substantially all of its assets
(whether now owned or hereafter acquired) to any person or acquire all or
substantially all of the assets or the business of any person, or take any
other action to effect, any Business Combination Transaction (other than the
Transactions), in each case whether in one transaction or in a series of
transactions, except that a Subsidiary may merge into or transfer assets to the
Company or a Wholly-Owned Subsidiary.
(m) Leases. Create, incur, assume or suffer to exist,
pursuant to a Guarantee or otherwise, any obligation as lessee for the rental
or hire of any real or personal property, except the following:
(1) conditional sale contracts that are Permitted
Liens;
(2) capitalized leases that are Permitted Liens;
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(3) leases existing on the date of this Agreement
and any extensions or renewals of those leases; and
(4) leases (other than capitalized leases)
entered into in the Ordinary Course.
(n) Sale and Leaseback. Transfer any real or personal
property to any person and thereafter directly or indirectly lease back the
same or similar property.
(o) Sale or Lease of Assets. Transfer any of its assets
now owned or hereafter acquired (including, but not limited to, shares of
capital stock and indebtedness of Subsidiaries and leasehold interests), except
the following:
(1) assets that are no longer used or useful in
the conduct of its business; and
(2) assets that are transferred for fair value
and in the Ordinary Course.
(p) Conduct of Business. Either (1) cease to engage in
the Ordinary Course in the same lines of business as conducted by the Company
or a Subsidiary on the date of this Agreement, (2) engage in any line of
business that is not conducted by the Company or a Subsidiary on the date of
this Agreement or (3) enter into any agreement, arrangement, commitment,
contract or transaction, amend or terminate any of the same, take any action or
omit to take any action or otherwise conduct any of its affairs, in any case
not in the Ordinary Course.
(q) Confidential Information. Except as otherwise
expressly permitted by the proviso to Section 7.2(z) with respect to a Business
Combination Proposal or pursuant to confidentiality agreements with respect to
the business, properties and operations of the Company and its Subsidiaries in
effect as of the date of this Agreement or entered into thereafter in the
ordinary course of business and consistent with past practice, use or disclose
to any person (other than Qwest, Qwest Subsidiary and their Affiliates), except
as required by law, any material non-public information concerning the
business, properties, operations, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries.
(r) Transactions with Affiliates. Enter into any
transaction (including, but not limited to, the purchase, sale or exchange of
property or the rendering of any service or the amendment, modification or
termination of any of, or waiver of any provision of, the Affiliate Agreements)
with any of its directors, officers or stockholders having beneficial ownership
of 5.0% or more of the shares of any class of Company Capital Stock then issued
and outstanding, or with any of its Affiliates or the directors, officers or
such stockholders thereof, except (1) transactions among the Company and its
Wholly-Owned Subsidiaries, (2) transactions pursuant to agreements,
arrangements or understandings that are set forth in
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Section 7.2(r) of the Company's Disclosure Schedule and (3) transactions that
do not require the payment or provision by or to any of the Company and its
Subsidiaries of money in an aggregate amount, or goods or services having an
aggregate value, in excess of $50,000.
(s) Compliance With ERISA. Permit there to occur an
Employee Plan Event that results in any material liability of any of the
Company and its Subsidiaries.
(t) Compensation. Permit (1) an increase in the amount of
compensation of any senior executive officer of any of the Company and its
Subsidiaries (including wages, salaries, bonuses, extra compensation, pension
and continuation, severance or termination pay of all types, whether paid or
accrued) that is not required by an existing agreement or, if not so required,
is not in the Ordinary Course, (2) the adoption or amendment of, or
acceleration of payment or vesting of the amounts payable or to become payable
under, any bonus, profit sharing, compensation, severance, termination, stock
option, stock purchase, stock appreciation rights, phantom stock, restricted
stock or other stock-based plan, pension, retirement, employment or other
employee benefit agreement, trust, plan or other arrangement for the benefit or
welfare of any current or former officer, director, employee, consultant or
agent of any of the Company and its Subsidiaries, (3) grant of any additional
Stock Options or Warrants, (4) the payment of any benefit not required by any
existing agreement, (5) the adoption or amendment of any existing, employment,
consulting, continuation pay, severance pay or termination pay agreement
(including, without limitation, any such agreement that provides for the
acceleration or payment of any benefit upon the occurrence of a change in
control, however defined) with any officer, director or employee of any of the
Company and its Subsidiaries or, except in accordance with the existing written
policies of the Company or the Subsidiary, as the case may be, in existence as
of the date of this Agreement, the grant of any continuation, severance or
termination pay to any officer, director or employee of any of the Company and
its Subsidiaries or (6) the placement of any assets in any trust for the
benefit of officers, directors or employees of any of Company and its
Subsidiaries; provided, however, that notwithstanding the foregoing, (x) each
of the Company and its Subsidiaries may amend the provisions of any employee
pension plan which is intended to be qualified under Section 401(a) of the Code
in order to maintain such qualified status and (y) except as contemplated by
this Agreement, none of the Company and its Subsidiaries shall take any action,
or refrain from taking any action, as the result of which the Company and its
Subsidiaries shall be, or upon the occurrence of any change of control (however
defined) or other event become, obligated to pay benefits.
(u) New Executive Officers. Employ, directly or
indirectly (including as a consultant), any executive officers of any of the
Company and its Subsidiaries not employed by the Company or the Subsidiary, as
the case may be, in the same position or capacity on the date of this
Agreement.
(v) Union Contracts. Enter into or amend any agreements
with any labor union or other collective bargaining group, other than in the
Ordinary Course.
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(w) Stock of Subsidiary. Transfer any shares of capital
stock of any Subsidiary, except in connection with a transaction permitted by
Section 7.2(z).
(x) Taxes. Make any tax election or settle or compromise
any income tax liability.
(y) Accounting Changes. Except as disclosed in Section
7.2 of the Company's Disclosure Schedule, make or permit any significant change
in accounting policies or reporting practices, except for any change required
by GAAP, in the opinion of the Company's independent accountants.
(z) Business Combination Transactions. Do, or permit any
of its officers, directors, employees, financial advisors and other
representatives to do, any of the following or to enter into an agreement or
other arrangement (other than the Transaction Documents) with respect to any of
the following:
(1) enter into any agreement with respect to, or
take any other action to effect, any Business Combination Transaction
(other than the Transactions) with respect to any of the Company and
its Subsidiaries;
(2) solicit, initiate or encourage (including,
without limitation, by way of furnishing information), or take any
other action to facilitate, any inquiry or the making of any proposal
to any of the Company, its Subsidiaries and its stockholders from any
person (other than Qwest, Qwest Subsidiary or any Affiliate of, or any
person acting in concert with, Qwest or Qwest Subsidiary) which
constitutes, or may reasonably be expected to lead to, a proposal with
respect to a Business Combination Transaction (other than the
Transactions) with respect to any of the Company and its Subsidiaries,
or endorse any Business Combination Transaction (other than the
Transactions) with respect to any of the Company and its Subsidiaries;
or
(3) continue, enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish
to any other person any information with respect to the business,
properties, operations, prospects or condition (financial or otherwise)
of the Company and its Subsidiaries or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to
do or seek any of the foregoing;
provided, that this Section 7.2(z) shall not prohibit (1) the Company from (A)
furnishing to any person (other than a Principal Stockholder or any Affiliate
of, or other person acting in concert with, the Company or a Principal
Stockholder) that has made an unsolicited, bona fide written proposal with
respect to a Business Combination Transaction with respect to any of the
Company and its Subsidiaries information concerning the Company and its
Subsidiaries and the business, properties, operations, prospects or condition
(financial or
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otherwise) of the Company and its Subsidiaries or (B) engaging in discussions
or negotiations with such a person that has made such written proposal with
respect to a Business Combination Transaction, (2) following receipt of such
written proposal with respect to a Business Combination Transaction, the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) under the Exchange Act, or (3) following receipt of such
written proposal with respect to a Business Combination Transaction, the Board
of Directors of the Company from withdrawing or modifying the Board Approval;
provided, however, that the Company or the Board of Directors of the Company,
as the case may be, (x) shall take any action referred to in the preceding
clauses (1) and (3) with respect to such written proposal (a "SUPERIOR
PROPOSAL") only if such action is consistent with (i) the written opinion,
subject only to customary qualifications, of a financial advisor of nationally
recognized reputation, taking into account the terms and conditions of such
proposed Business Combination Transaction and the Merger, respectively, all
other legal, financial, regulatory and other aspects of such proposed Business
Combination Transaction and the Merger, respectively, and the identity of the
person making such Superior Proposal, that (A) such proposed Business
Combination Transaction is reasonably capable of being completed and would, if
completed, result in a transaction more favorable to the Company and its
stockholders from a financial and strategic point of view than is the Merger
and (B) financing for such proposed Business Combination Transaction, to the
extent required, is then committed and is reasonably capable of being provided
by a financial institution or other source able to provide such financing and
(ii) the written opinion of independent counsel for the Company that the
failure to take such action would result in a substantial risk of liability for
a breach by the Board of Directors of the Company of its fiduciary obligations
under applicable law, (y) shall furnish to the person making such Superior
Proposal any information referred to in the preceding clause (1)(A) only if
both (A) the Company shall then furnish such information to Qwest and Qwest
Subsidiary, or shall have previously furnished such information to Qwest or
Qwest Subsidiary, and (B) such information shall be so furnished to such person
pursuant to a confidentiality agreement no less favorable to the Company than
the terms of the Confidentiality Agreement and (z) shall take any action
referred to in the preceding clauses (1), (2) and (3) only if the Board of
Directors of the Company shall, by written notice delivered to Qwest and Qwest
Subsidiary not less than 24 hours prior thereto, inform Qwest and Qwest
Subsidiary of its intention to take such action. The Company shall cease and
cause to be terminated any existing activities, discussions or negotiations
with all persons (other than Qwest, Qwest Subsidiary or any Affiliate of, or
any person acting in concert with, Qwest or Qwest Subsidiary) conducted on or
before the date of this Agreement with respect to any Business Combination
Transaction. The Company shall inform the persons referred to in the first
sentence of this Section 7.2(z) of the obligations undertaken in this Section
7.2(z). If the Company, or any member of the Board of Directors thereof,
receives a proposal with respect to a Business Combination Transaction with
respect to any of the Company and its Subsidiaries, then the Company shall, by
written notice delivered within 24 hours after the receipt of such proposal,
inform Qwest and Qwest Subsidiary of the terms and conditions of such proposal
and the identity of the person making the proposal with respect to such
Business Combination Transaction and shall keep Qwest and Qwest
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Subsidiary generally informed with reasonable promptness of any steps it is
taking pursuant to the preceding sentence with respect to such proposal.
ARTICLE VIII
ADDITIONAL COVENANTS OF QWEST
SECTION 8.1 AFFIRMATIVE COVENANTS OF QWEST. Qwest agrees
for the benefit of the Company that, until the Effective Time, Qwest shall take
all action required, if any, to cause the Qwest Common Stock that shall be
issued in the Merger to be approved for inclusion in NASDAQ/NM, if necessary,
subject only to official notice of issuance, and give such notice to the NASD
as shall be required, if any, with respect to the Transaction Documents and the
Transactions.
SECTION 8.2 DIRECTORS' AND OFFICERS' INSURANCE;
INDEMNIFICATION. Qwest agrees for the benefit of the Indemnified Persons that
Qwest shall do the following:
(a) For six years after the Effective Time, the Surviving
Corporation and its Subsidiaries shall indemnify each person who is now, or has
been at any time prior to the date of this Agreement, a director, officer,
employee or agent of any of the Company and its Subsidiaries, and the
successors and assigns of such person (individually, an "INDEMNIFIED PERSON"
and, collectively the "INDEMNIFIED PERSONS"), to the same extent and in the
same manner as is now provided in the respective articles of incorporation,
certificates of incorporation, by-laws, operating agreements or limited
partnership agreements, as applicable, of the Company and its Subsidiaries in
effect on the date of this Agreement, with respect to any Loss whenever
asserted or claimed (an "INDEMNIFIED LIABILITY"), based in whole or in part on,
or arising before or after the Effective Time in whole or in part out of, any
matter existing or occurring at or prior to the Effective Time. Qwest hereby
guarantees the obligation of the Surviving Corporation provided for under this
Section 8.2(a); provided, that the guarantee obligation of Qwest provided for
in this Section 8.2(a) shall, in the aggregate, be limited to an amount equal
to (1) the aggregate value of the consolidated assets of the Company and its
consolidated Subsidiaries minus (2) the aggregate value of the consolidated
liabilities of the Company and its consolidated Subsidiaries, each as reflected
on the books and records of the Company as of the Closing Date.
(b) Qwest shall cause the Surviving Corporation to
maintain in effect for not less than six years after the Effective Time the
current policies of directors' and officers' liability insurance maintained by
the Company and its Subsidiaries on the date of this Agreement; provided that
(x) Qwest may substitute therefor policies providing coverage with respect to
matters existing or occurring at or prior to the Effective Time (whether
arising before or after the Effective Time) and containing terms and conditions
that, taken as a whole, are no less advantageous to the persons covered by such
current insurance policies and (y) if the aggregate annual premiums for such
insurance at any time during such period shall exceed 200% of the per annum
rate of premiums paid by the Company and its
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Subsidiaries for such insurance on the date of this Agreement, then Qwest shall
cause the Surviving Corporation to, and the Surviving Corporation shall,
provide the maximum coverage that shall then be available at an annual premium
equal to 200% of such rate, and, in addition to the indemnification provided
above in this Section 8.2(b), shall indemnify the Indemnified Persons for the
balance of such insurance coverage on the same terms and conditions as though
Qwest were the insurer under those policies.
(c) Promptly after receipt by an Indemnified Person of
notice of the assertion (an "ASSERTION") of any claim or the commencement of
any action against the person in respect of which indemnity or reimbursement
may be sought hereunder against any of the Company, Qwest, the Surviving
Corporation or their respective Subsidiaries (collectively, "INDEMNITORS"),
such Indemnified Person shall notify any Indemnitor in writing of the
Assertion, but the failure to so notify any Indemnitor shall not relieve any
Indemnitor of any liability it may have to such Indemnified Person hereunder
except where such failure shall have materially prejudiced Indemnitor in
defending against such Assertion. The Indemnitors shall be entitled to
participate in and, to the extent the Indemnitors elect by written notice to
such Indemnified Person within 30 days after receipt by any Indemnitor of
notice of such Assertion, to assume the defense of such Assertion, at their own
expense, with counsel chosen by the Indemnitors and reasonably satisfactory to
an Indemnified Person. Notwithstanding that the Indemnitors shall have elected
by such written notice to assume the defense of any Assertion, such Indemnified
Person shall have the right to participate in the investigation and defense
thereof, with separate counsel chosen by such Indemnified Person, but in such
event the fees and expenses of such counsel shall be paid by such Indemnified
Person, except to the extent that, in the opinion of counsel for the
Indemnified Person, the Indemnified Person and the Indemnitor have conflicting
interests in which case the Indemnitor shall pay the fees and expenses of such
separate counsel; provided that, in connection with any Action or substantially
similar actions in the same jurisdiction arising out of the same general
allegations, the Indemnitors shall not be liable for fees and expenses of more
than one separate firm of attorneys for all Indemnified Persons, which firm
shall be identified in writing to the Indemnitors. No Indemnified Person shall
settle any Assertion without the prior written consent of Qwest nor shall Qwest
settle any assertion without either (1) the written consent of all Indemnified
Persons against whom such Assertion was a made or (2) obtaining a general
release from the party making the Assertion for all Indemnified Persons as a
condition of such settlement.
SECTION 8.3 EMPLOYEE BENEFITS MATTERS.
(a) On and after the Effective Time, Qwest shall cause the
Surviving Corporation and its Subsidiaries to promptly pay or provide when due
all compensation and benefits earned through or prior to the Effective Time as
provided pursuant to the terms of any compensation arrangements, employment
agreements and employee or director benefit plans (including, without
limitation, deferred compensation plans), programs and policies in existence as
of the date of this Agreement for all employees, former employees, directors
and former directors of any of the Company and its Subsidiaries.
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(b) On and after the Effective Time, if employees of any
of the Company and its Subsidiaries become eligible to participate in a
medical, dental or health plan of any of Qwest and its Subsidiaries, Qwest
shall cause such plan to (1) waive any pre-existing condition limitations for
conditions covered under the applicable medical, health or dental plans of the
Company and its Subsidiaries existing on the date of this Agreement and (2)
honor any deductible and out-of-pocket expenses incurred by the employees and
their beneficiaries under such plans during the portion of the calendar year
prior to the date on which such employees become eligible for such
participation.
(c) At the Effective Time, Qwest shall pay, or shall cause
the Surviving Corporation to pay, all amounts then due to Wallace M. Hammond
and Jon F. Beizer, respectively, pursuant to their respective employment
agreements by reason of the occurrence of a change of control (as defined
therein), subject in each case to all necessary withholdings, and Qwest shall
pay, or shall cause the Surviving Corporation to pay, all reasonable
out-of-pocket costs, fees and expenses of such persons (including, without
limitation, the reasonable fees and disbursements of counsel and the expenses
of litigation) incurred by them in connection with collecting such amounts.
(d) Nothing in this Section 8.3 shall (1) before or after
the Effective Time, require the continued employment of any person by any of
the Company, Qwest, the Surviving Corporation and their respective
Subsidiaries, either before or after the Effective Time, or (2) after the
Effective Time, prevent any of the Company, the Surviving Corporation and their
respective Subsidiaries from taking any action or refraining from taking any
action with respect to any employee that may then be permitted by law.
SECTION 8.4 SEC DOCUMENTS. Promptly after filing any
report, schedule, form, statement or other document with the Securities and
Exchange Commission, Qwest or Qwest Subsidiary, as the case may be, shall
deliver a copy thereof to the Company.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION.
(a) The obligations of the parties under this Agreement
(other than Section 6.1(g) and Articles IX and X) may be terminated and the
Merger abandoned on any date (the "TERMINATION DATE") prior to the Effective
Time, whether before or after this Agreement and the Merger shall have been
approved by the stockholders of the Company, in each case by:
(1) the agreement of the parties;
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(2) the Company, on or after May 31, 1998, if (A)
the Closing shall then not have occurred for any reason other than the
breach or violation by the Company, in any material respect, of any of
its representations, warranties, covenants and agreements set forth in
this Agreement, (B) there shall not have occurred and be continuing a
breach or violation by the Company, in any material respect, of any of
its representations, warranties, covenants and agreements set forth in
this Agreement and (C) the Company shall have paid in full to Qwest and
Qwest Subsidiary all amounts then owed to Qwest and Qwest Subsidiary
pursuant to Section 9.2, if any;
(3) Qwest or Qwest Subsidiary, on or after May
31, 1998, if (A) the Closing shall then not have occurred for any
reason other than the breach or violation by Qwest or Qwest Subsidiary,
in any material respect, of any of their respective representations,
warranties, covenants and agreements set forth in this Agreement and
(B) there shall not have occurred and be continuing a breach or
violation by Qwest or Qwest Subsidiary, in any material respect, of any
of its representations, warranties, covenants and agreements set forth
in this Agreement;
(4) the Company, if (A) a representation,
warranty, covenant or agreement of either Qwest or Qwest Subsidiary set
forth in this Agreement is breached or violated by Qwest or Qwest
Subsidiary, as the case may be, in any material respect, and (B) there
shall not have occurred and be continuing a breach or violation by the
Company, in any material respect, of any of its representations,
warranties, covenants and agreements set forth in this Agreement and
(C) the Company shall have paid in full to Qwest and Qwest Subsidiary
all amounts then owed to Qwest and Qwest Subsidiary pursuant to Section
9.2, if any;
(5) Qwest or Qwest Subsidiary, if (A) any one or
more of (i) a representation, warranty, covenant or agreement of the
Company set forth in this Agreement is breached or violated by the
Company in any material respect, (ii) there shall exist or there shall
have occurred an event (other than an Event of Default (as defined)
under the Credit Agreement) that has had, will have or could reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries and (iii) there shall have occurred and be continuing an
Event of Default (as defined) under the Credit Agreement and the Debt
thereunder shall have become due and payable or the lender thereunder
shall have exercised any rights or remedies in connection therewith and
(B) there shall not have occurred and be continuing a breach or
violation by Qwest or Qwest Subsidiary, in any material respect, of any
of its representations, warranties and covenants set forth in this
Agreement;
(6) the Company, if the stockholders of the
Company shall not have approved the Certificate Amendment, this
Agreement and the Merger at the Company Stockholders Meeting, or any
adjournment thereof, and the Company shall have paid in full to Qwest
and Qwest Subsidiary all amounts then owed to Qwest and Qwest
Subsidiary pursuant to Section 9.2, if any;
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(7) Qwest or Qwest Subsidiary, if the
stockholders of the Company shall not have approved the Certificate
Amendment, this Agreement and the Merger at the Company Stockholders
Meeting, or any adjournment thereof;
(8) Qwest or Qwest Subsidiary, if the Company or
the Board of Directors of the Company (A) shall have authorized,
recommended or proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement with respect to a
Business Combination Transaction (other than the Transactions) with
respect to any of the Company and its Subsidiaries, (B) shall have
recommended that the stockholders of the Company accept or approve any
such Business Combination Transaction or (C) within the time period
contemplated by Rule 14e-2 under the Exchange Act, shall have failed to
publicly confirm the Board Approval and recommend against the
acceptance by the stockholders of the Company of any tender offer or
exchange offer that, if concluded in accordance with its terms, would
constitute or result in a Business Combination Transaction (which
failure shall include, without limitation, the determination by the
Board of Directors of the Company to take no position with respect to
such tender offer or exchange offer);
(9) the Company, if (A) the Board of Directors of
the Company shall have determined that an unsolicited, bona fide
proposal made by any person (other than a Principal Stockholder or an
Affiliate of, or other person acting in concert with, the Company or a
Principal Stockholder) with respect to a Business Combination
Transaction with respect to any of the Company and its Subsidiaries is
a Superior Proposal, (B) the Board of Directors of the Company shall
have complied in all material respects with Section 7.2(z) with respect
to actions taken or proposed to be taken by the Company or the Board of
Directors of the Company with respect to such Superior Proposal, (C)
the Company shall have notified Qwest and Qwest Subsidiary in writing,
in each case not less than three full Business Days in advance of
taking such action, of its election to terminate the obligations of the
parties pursuant to this Section 9.1 for the purpose of recommending
that the stockholders of the Company accept or approve such Superior
Proposal or authorizing, recommending or proposing an agreement with
respect to such Superior Proposal, (D) the Company and its advisors and
representatives shall have discussed with Qwest and Qwest Subsidiary
the modifications to the terms of this Agreement and the other
Transaction Documents that would permit the Company to conclude the
Merger in lieu of concluding such Superior Proposal, (E) at the end of
such three Business Day period the Board of Directors of the Company
shall have determined that such Superior Proposal continues to
constitute a Superior Proposal and (F) the Company shall have paid in
full to Qwest and Qwest Subsidiary all amounts then owed to Qwest and
Qwest Subsidiary pursuant to Section 9.2; or
(10) Qwest and Qwest Subsidiary, if there shall have
occurred a Business Combination Transaction (other than the
Transactions) with respect to any of the Company and its Subsidiaries.
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(b) Any termination of the obligations of the parties
pursuant to this Section 9.1 shall be made by written agreement or by written
notice from the terminating party to the other parties.
(c) Except as provided to the contrary in Sections 9.2 and
10.11, and subject to the limitations stated therein, no party shall have any
liability (in contract, tort or otherwise) to other parties or persons, whether
based on the same or different claims or causes of action, in excess of
$100,000 in the aggregate, in respect of (1) the termination of the obligations
of the parties pursuant to Section 9.1 or (2) any breach of any warranty,
covenant or agreement of such party, or for any misrepresentation by such
party, under any Transaction Document (other than Section 6.1(g) of this
Agreement).
SECTION 9.2 FEES; EXPENSES; OTHER AMOUNTS.
(a) Damages. Promptly following the termination of the
obligations of the parties pursuant to clause (4) or (5) of Section 9.1(a) by
the Company or by Qwest and Qwest Subsidiary, as the case may be, the other
party or parties shall promptly, but in no event later than three Business Days
following receipt of written demand therefor, pay to the party terminating such
obligations, as liquidated damages (and not as a fee or a penalty), the amount
of $100,000 in the aggregate. The parties acknowledge that the damages that
will result from any breach or violation giving rise to such termination are
uncertain and not capable of accurate calculation, and will be difficult to
prove. The parties further acknowledge that the foregoing liquidated damages'
amount is neither unconscionable nor unreasonably large or small, given the
circumstances, and such amount is not intended as a penalty and is not and
should not be construed as a penalty. In light of the foregoing, and the
inconvenience or nonfeasibility of otherwise obtaining an adequate remedy, the
parties agree that the liquidated damages' amount set forth above is reasonable
in all respects.
(b) Subsequent Event Fee. If the obligations of the
parties shall terminate pursuant to clauses (5), (6), (7), (8), (9) or (10) of
Section 9.1(a) and a Business Combination Transaction (other than the
Transactions) with respect to any of the Company and its Subsidiaries shall
occur on or before January 5, 1999, then the Company shall pay to Qwest not
later than the conclusion of such Business Combination Transaction the amount
by which $3,000,000 exceeds the amount paid to Qwest, if any, pursuant to
Section 9.2(a).
(c) Collection Expenses. In addition to the other
provisions of this Section 9.2, each party shall promptly, but in no event
later than three Business Days following receipt of written demand therefor,
together with related bills or receipts, reimburse the other parties for all
reasonable out-of-pocket costs, fees and expenses (including, without
limitation, the reasonable fees and disbursements of counsel and the expenses
of litigation) incurred in connection with collecting fees, expenses and other
amounts due under this Section 9.2.
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(d) Other Expenses. Except as otherwise provided in this
Section 9.2, whether or not the Merger is concluded, all costs and expenses
incurred or paid by a party shall be paid by the party incurring or paying such
expenses. Notwithstanding the foregoing, the Company shall pay the costs and
expenses of complying with the Hart-Scott- Rodino Act.
(e) Company's Fees for Financial Advisors, Brokers and
Finders. The Company or, after the Effective Time, the Surviving Corporation
shall pay or cause to be paid to each Financial Advisor the entire amount of
the fee, commission, expense reimbursement or other payment to which Financial
Advisor shall become so entitled in connection with the Transactions, all
without cost, expense or any other liability whatsoever to any of Qwest, Qwest
Subsidiary and any other person.
(f) Qwest's Fees for Financial Advisors, Brokers and
Finders. Qwest and Qwest Subsidiary shall pay or cause to be paid the entire
amount of the fee, commission, expense reimbursement or other payment to which
any financial advisor, broker or finder engaged by Qwest or Qwest Subsidiary
shall become so entitled in connection with the Transactions, all without cost,
expense or any other liability whatsoever to any of the Company, its
Subsidiaries and any other person.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES. All notices, requests and other
communications to any party or under any Transaction Document shall be in
writing. Communications may be made by telecopy or similar writing. Each
communication shall be given to a party at its address stated on the signature
pages of this Agreement or any other Transaction Document or at any other
address as the party may specify for this purpose by notice to the other
parties. Each communication shall be effective (1) if given by telecopy, when
the telecopy is transmitted to the proper address and the receipt of the
transmission is confirmed, (2) if given by mail, 72 hours after the
communication is deposited in the mails properly addressed with first class
postage prepaid or (3) if given by any other means, when delivered to the
proper address and a written acknowledgement of delivery is received.
SECTION 10.2 NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
(a) No failure or delay by any party to, or express
beneficiary of, any Transaction Document in exercising any right, power or
privilege under such Transaction Document shall operate as a waiver of the
right, power or privilege. A single or partial exercise of any right, power or
privilege shall not preclude any other or further exercise of the right, power
or privilege or the exercise of any other right, power or privilege. The
rights and remedies provided in the Transaction Documents shall be cumulative
and not exclusive of any rights or remedies provided by law.
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(b) Each party agrees that each other party shall be
entitled to specific enforcement of the terms of Section 6.1(g) in addition to
any other remedy to which the other party may be entitled, at law or in equity,
with respect to such provision.
SECTION 10.3 AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of any Transaction Document, and no
consent to any departure by a party to any Transaction Document from any
provision of the Transaction Document, shall be effective unless it shall be in
writing and signed and delivered by the other parties to the Transaction
Document, and then it shall be effective only in the specific instance and for
the specific purpose for which it is given.
SECTION 10.4 SUCCESSORS AND ASSIGNS; THIRD PARTY
BENEFICIARIES.
(a) No party may assign its rights or delegate its
obligations under this Agreement. Any assignment or delegation in
contravention of this Section 10.4 shall be void ab initio and shall not
relieve the assigning or delegating party of any obligation under this
Agreement.
(b) The provisions of each Transaction Document shall be
binding upon and inure solely to the benefit of the parties to such Transaction
Document, and, except and to the extent that persons are expressly identified
therein as beneficiaries of one or more of the provisions thereof, nothing in
any Transaction Document is intended to or shall confer upon any other person
any right, benefit or remedy whatsoever under or by reason of any Transaction
Document (including, without limitation, by means of subrogation). Without
limiting the generality of the foregoing, (1) the provisions of Section 1.1(f)
are intended to be for the express benefit of the stockholders referred to in
that Section and their respective heirs, executors, legal representatives,
successors and permitted assigns, and no other person, (2) the provisions of
Section 8.2 are intended to be for the express benefit of Indemnified Persons
and their respective heirs, executors, legal representatives, successors and
permitted assigns, and no other person, (3) the provisions of Section 8.3(c)
are intended for the benefit of, and may be relied upon or enforced by, the
persons referred to therein and their respective heirs, executors, legal
representatives, successors and permitted assigns and (4) the other provisions
of Section 8.3 are not intended for the benefit of, and may not be relied upon
or enforced by, any employee of any of the Company, Qwest, the Surviving
Corporation or their respective Subsidiaries and their respective heirs,
executors, legal representatives, successors and permitted assigns.
SECTION 10.5 ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified, all accounting terms shall be interpreted, all accounting
determinations shall be made, all records and books of account shall be kept
and all financial statements required to be prepared or delivered shall be
prepared in accordance with GAAP, applied on a basis consistent (except for
changes approved by the Company's independent public accountants) with the
latest audited financial statements referred to in Section 4.5.
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SECTION 10.6 GOVERNING LAW. Except to the extent provided
to the contrary in 6 Del.C. Section 1- 105(2), each Transaction Document, and
all rights, remedies, liabilities, powers and duties of the parties hereunder
and thereunder, shall be governed by and construed in accordance with the laws
of the State of Delaware without regard to principles of conflicts of laws.
SECTION 10.7 COUNTERPARTS; EFFECTIVENESS. Each
Transaction Document may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if all signatures were on the
same instrument.
SECTION 10.8 SEVERABILITY OF PROVISIONS.
(a) Any provision of any Transaction Document that is
prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions of the Transaction Document or affecting
the validity or enforceability of the provision in any other jurisdiction.
(b) The parties agree that the fees, expenses and other
amounts provided in Sections 9.2(a), 9.2(b) and 9.2(c) are fair and reasonable.
If a court of competent jurisdiction shall nonetheless, by a final,
non-appealable judgment, determine that the amount of any such fee exceeds the
maximum amount permitted by law, then the amount of fees, expenses and other
amounts shall be reduced to the maximum amount permitted by law in the
circumstances, as determined by a court of competent jurisdiction.
SECTION 10.9 HEADINGS AND REFERENCES. Article and section
headings in any Transaction Document are included in the Transaction Document
for the convenience of reference only and do not constitute a part of the
Transaction Document for any other purpose. References to parties, express
beneficiaries, articles, sections, exhibits and schedules in any Transaction
Document are references to the parties to, or the express beneficiaries,
articles and sections of, or the exhibits and schedules to the Transaction
Document, as the case may be, unless the context shall require otherwise. Any
of the terms defined in this Agreement may, unless the context otherwise
requires, be used in the singular or the plural, depending on the reference.
The use in any Transaction Document of the word "include" or "including," when
following any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
SECTION 10.10 ENTIRE AGREEMENT. The Transaction Documents
embody the entire agreement and understanding of the respective parties, and
supersede all prior agreements or understandings, with respect to the subject
matters of the Transaction
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Documents, except that the provisions of the Confidentiality Agreement shall
also bind the parties.
SECTION 10.11 SURVIVAL. The representations and warranties
of the Company contained in Article IV and of Qwest and Qwest Subsidiary
contained in Article V shall terminate and have no force or effect at any time
after the Effective Time. Each covenant or agreement of a party to a
Transaction Document required to be performed on or after the Closing Date
shall remain in full force and effect thereafter in accordance with its terms
and, unless expressly provided otherwise, for an indefinite period.
SECTION 10.12 EXCLUSIVE JURISDICTION. Each party, and each
express beneficiary as a condition to its right to enforce or defend its rights
under or in connection with any Transaction Document, (1) agrees that any
Action with respect to any Transaction Document or any Transaction shall be
brought exclusively in the courts of the State of Delaware or of the United
States of America sitting in the State of Delaware, (2) accepts for itself and
in respect of its property, generally and unconditionally, the jurisdiction of
those courts and (3) irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
Action in those jurisdictions; provided, however, that any party may assert in
an Action in any other jurisdiction or venue each mandatory defense,
third-party claim or similar claim that, if not so asserted in such Action, may
thereafter not be asserted by such party in an original Action in the courts
referred to in clause (1) above. This Agreement and the other Transaction
Documents do not involve less than $100,000, and the parties intend that 6
Del.C. Section 2708 shall apply to all the Transaction Documents.
SECTION 10.13 WAIVER OF JURY TRIAL. Each party, and each
express beneficiary as a condition to its right to enforce or defend its rights
under or in connection with any Transaction Document, waives any right to a
trial by jury in any Action to enforce or defend any right under any
Transaction Document and agrees that any Action shall be tried before a court
and not before a jury.
SECTION 10.14 AFFILIATE. Nothing contained in any
Transaction Document shall constitute Qwest or Qwest Subsidiary an "affiliate"
of any of the Company and its Subsidiaries within the meaning of the Securities
Act and the Exchange Act, including, without limitation, Rule 501 under the
Securities Act and Rule 13e-3 under the Exchange Act.
SECTION 10.15 NON-RECOURSE. No recourse under any
Transaction Document shall be had against any "controlling person" (within the
meaning of Section 20 of the Exchange Act) of any party or the stockholders,
directors, officers, employees, agents and Affiliates of the party or such
controlling persons, whether by the enforcement of any assessment or by any
legal or equitable proceeding, or by virtue of any Regulation, 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,
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officer, employee, agent or Affiliate, as such, for any obligations of the
party under this Agreement or any other Transaction Document or for any claim
based on, in respect of or by reason of such obligations or their creation.
____________________
[Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
PHOENIX NETWORK INC.
By: /s/ WALLACE M. HAMMOND
----------------------------------------------
Name: Wallace M. Hammond
Title: President & CEO
Address: 13952 Denver West Parkway
Building 53
Golden, Colorado 80402
Attention: Wallace M. Hammond
Telecopy: (303) 215-5501
QWEST COMMUNICATIONS
INTERNATIONAL INC.
By: /s/ JOSEPH P. NACCHIO
----------------------------------------------
Joseph P. Nacchio
President and Chief Executive Officer
Address: 1000 Qwest Tower
555 Seventeenth Street
Denver, Colorado 80202
Attention: Marc B. Weisberg
Telecopy: (303) 291-1723
QWEST 1997-5 ACQUISITION CORP.
By: /s/ JOSEPH P. NACCHIO
----------------------------------------------
Joseph P. Nacchio
President
Address: 1000 Qwest Tower
555 Seventeenth Street
Denver, Colorado 80202
Attention: Marc B. Weisberg
Telecopy: (303) 291-1723
S-1
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ANNEX 1
DEFINITION ANNEX
"ACQUISITION VALUE" has the meaning stated in Section
1.1(a)(2) of this Agreement. "ACTION" against a person means
an action, suit, investigation, complaint or other proceeding
threatened or pending against or affecting the person or its property, whether
civil or criminal, in law or in equity or before any arbitrator or Governmental
Body.
"AFFILIATE" of a person means (1) any other person that
directly or indirectly controls, is controlled by or is under common control
with, such person or any of its Subsidiaries and (2) if such person is an
individual, any other individual that is a relative (by blood or marriage) of
such person. The term "CONTROL" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract or
otherwise.
"AFFILIATE AGREEMENTS" means, collectively, the agreements
between any of the Company and its Subsidiaries, on the one part, and any
director or officer of any of the Company and its Subsidiaries, any stockholder
having beneficial ownership of 5.0% or more of the shares of Company Common
Stock or Company Preferred Stock then issued and outstanding or any Affiliate
of any of the foregoing, and all stockholders' agreements and voting trusts
with respect to the Company.
"AGGREGATE NUMBER" has the meaning stated in Section 1.1(a)(2)
of this Agreement.
"APPROVAL" means an authorization, consent, approval or waiver
of, clearance by, notice to or registration or filing with, or any other
similar action by or with respect to a Governmental Body or any other person
and the expiration or termination of all prescribed waiting, review or appeal
periods with respect to any of the foregoing.
"AVERAGE MARKET PRICE" per share of any class of stock on any
date means the average of the daily Closing Prices of the shares of such stock
for the fifteen (15) consecutive Trading Days commencing twenty (20) Trading
Days before such date.
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to
any securities means having "beneficial ownership" of such securities (as
determined pursuant to Regulation 13D-G under the Exchange Act), except as
provided below, including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities beneficially owned by a person
shall include securities beneficially owned by all Affiliates of such person
and all other persons with whom such person would constitute a Group.
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"BEST EFFORTS" means the use of all reasonable efforts,
including, without limitation, the expenditure of amounts reasonably related to
the objective sought to be achieved, with respect to matters and actions over
which the person has or could reasonably be expected to exert any control or
influence.
"BOARD APPROVAL" has the meaning stated in Section 4.29 of
this Agreement.
"BUSINESS COMBINATION TRANSACTION" with respect to any of the
Company and its Subsidiaries means, whether concluded or intended to be
concluded in one transaction or series of transactions, each of the following:
(1) the acquisition from any of the Company and
its Subsidiaries, or from any Principal Stockholder or any other holder
thereof, of shares of any class of Equity Securities of any of the
Company and its Subsidiaries as a result of which the holders of shares
of such class of Equity Securities of any of the Company and its
Subsidiaries immediately before such transaction would own beneficially
directly or indirectly less than 90% of the shares of such class of
Equity Securities of the Company or such Subsidiary, as the case may
be, issued and outstanding immediately after such transaction; provided
that the acquisition from any Principal Stockholder or other holder of
Equity Securities of the Company of not more than 30% of the shares of
any class of Equity Securities of the Company, in the aggregate,
pursuant to broker's transactions (as defined in Rule 144 under the
Securities Act) shall not be included in determining whether a Business
Combination Transaction shall have occurred;
(2) the merger or consolidation of any of the
Company and its Subsidiaries with or into any person other than the
Company or its Wholly-Owned Subsidiary;
(3) the transfer of a substantial portion of the
assets of any of the Company and its Subsidiaries to any person or
Group other than the Company or its Wholly-Owned Subsidiary;
(4) any transaction (whether or not any of the
Company and its Subsidiaries shall be a party thereto) as a result of
which a majority of the members of the board of directors, or similar
officials, of the Company or such Subsidiary would not be persons who
on the day after the closing date of such transaction were members of
the board of directors, or similar officials, or who were nominated for
election or elected with the approval of a majority of the directors,
or similar officials, who were directors, or similar officials, on that
date or whose nomination or election was previously so approved; or
(5) any other transaction (whether or not any of
the Company and its Subsidiaries shall be a party thereto) the
conclusion of which would or could reasonably be expected to impede,
interfere with, prevent or materially delay the conclusion of any
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of the Transactions or which would or could reasonably be expected to
materially reduce the benefits to Qwest or Qwest Subsidiary of the
Transactions.
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which is a legal holiday in any of the States of Colorado and New York
or is a day on which banking institutions located in any such jurisdiction are
authorized or required by law or other governmental action to close.
"CAPITAL EXPENDITURE" of a person means payments that are made
by the person for the rental, lease, purchase, construction or use of any
property the value or cost of which should be capitalized and appear on the
balance sheet of the person in the category of property, plant or equipment,
without regard to the manner in which the payments or the instrument pursuant
to which they are made are characterized by the person including, without but
not limited to, payments for the installment purchase of property under
conditional sale contracts and payments under capitalized leases.
"CASH CONSIDERATION" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"CASH CONSIDERATION DATE" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"CERTIFICATE AMENDMENT" means an amendment to the Certificate
of Incorporation of the Company substantially in the form of Exhibit B attached
hereto, with such changes therein as shall be approved by Qwest and Qwest
Subsidiary, which approval shall not be unreasonably withheld, conditioned or
delayed.
"CERTIFICATES" has the meaning stated in Section 1.1(b) of
this Agreement.
"CERTIFICATE OF MERGER" has the meaning stated in Section
1.1(a) of this Agreement.
"CLOSING" has the meaning stated in Section 2.1 of this
Agreement.
"CLOSING DATE" has the meaning stated in Section 2.1 of this
Agreement.
"CLOSING PRICE" means, as applied to any class of stock on any
date, the last reported sales price, regular way, per share of such stock on
such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in each case, as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if shares of
such stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the shares of such stock are listed or admitted to trading,
or, if the shares of such stock are not listed or admitted to trading on any
national securities
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exchange, the last quoted sale price or, if not so quoted, the average of the
high bid and low asked prices in the over- the-counter market, as reported by
the National Association of Securities Dealers, Inc. Automated Quotations
Systems ("NASDAQ") or, if not so reported, as reported by any similar
interdealer system then in general use, or, if on any such date the shares of
such stock are not quoted or reported by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the shares of such stock selected by the Board of Directors
of the Company, if such stock is the Company Capital Stock, or by the Holder,
if such stock is not the Company Capital Stock. If such stock is not publicly
held or so listed or publicly traded, "CLOSING PRICE" means the fair market
value per share as determined in good faith by the Board of Directors of the
Company.
"CODE" has the meaning stated in Recital C to this Agreement.
"COMMON STOCK MERGER CONSIDERATION" has the meaning stated in
Section 1.1(a)(2) of this Agreement.
"COMPANY" has the meaning stated in the heading to this
Agreement.
"COMPANY CAPITAL STOCK" has the meaning stated in Section
1.1(a)(3) of this Agreement.
"COMPANY COMMON STOCK" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"COMPANY EMPLOYEE PLAN" means any Employee Plan of the Company
or any of its Subsidiaries.
"COMPANY ERISA PLAN" means any ERISA Plan of the Company or
any of its Subsidiaries.
"COMPANY'S DISCLOSURE SCHEDULE" means the schedule with
respect to certain matters referred to in Article IV of this Agreement that has
been delivered by the Company to Qwest or Qwest Subsidiary, as such schedule
may be modified in accordance with this Agreement.
"COMPANY PREFERRED STOCK" has the meaning stated in Section
4.13(a) of this Agreement.
"COMPANY QUALIFIED PLAN" means any Qualified Plan of the
Company or any of its Subsidiaries.
"COMPANY SEC DOCUMENTS" has the meaning stated in Section 4.27
of this Agreement.
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"COMPANY SERIES F WARRANTS" means the Warrants issued by the
Company in connection with the issuance of the Series F Convertible Preferred
Stock, par value $.001 per share, of the Company.
"COMPANY SERIES I PREFERRED STOCK" has the meaning stated in
Section 1.1(a)(3) of this Agreement.
"COMPANY STOCKHOLDERS MEETING" has the meaning stated in
Section 7.1(l) of this Agreement.
"COMPANY SUNRISE WARRANTS" means the Warrants issued by the
Company in connection the Settlement Agreement dated May 27, 1996 among Sunrise
Financial Group, Inc., Thomas Bell and the Company.
"CONFIDENTIALITY AGREEMENT" has the meaning stated in Section
6.1(f) of this Agreement.
"CONSOLIDATED" means, as applied to any financial or
accounting term, the term determined on a consolidated basis for a person and
its Subsidiaries, excluding intercompany items and minority interests.
"CONVERSION NUMBER" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"CREDIT AGREEMENT" means the Amended and Restated Loan and
Security Agreement dated as of September 26, 1995 among Foothill Capital
Corporation, the Company, Phoenix Network Acquisition Corp. and AmeriConnect,
Inc., as amended by Amendments Nos. One, Two, Three, Four, Six, Seven and
Eight, respectively, and as further amended in accordance with the terms of
this Agreement.
"DEBT" of a person at any date means, without duplication, the
sum of the following:
(1) all obligations of the person (A) for borrowed
money, (B) evidenced by bonds, debentures, notes or other similar
instruments, (C) to pay the deferred purchase price of property or
services, except current trade accounts payable arising in the ordinary
course of business, (D) as purchaser under conditional sales contracts,
(E) as lessee under capitalized leases, (F) under letters of credit
issued for the account of the person and (G) arising under acceptance
facilities; plus
(2) all Debt of others Guaranteed by the person; plus
(3) all Debt of others secured by a Lien on any asset
of the person and whether or not such Debt is assumed by the person;
plus
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(4) any balance sheet liability with respect to an
ERISA Plan recognized pursuant to Financial Accounting Standards Board
Statement 87 or 88, or with respect to post-retirement benefits other
than pension benefits recognized pursuant to Financial Accounting
Standards Board Statement 106; plus
(5) any withdrawal liability under Section 4201 of
ERISA with respect to a withdrawal from a Multiemployer Plan, as such
liability shall have been set forth in a notice of withdrawal liability
under Section 4219 of ERISA, and as adjusted from time to time
subsequent to the date of such notice.
"DEBT SECURITIES" of a person means the bonds, debentures,
notes and other similar instruments of the person and all other securities
convertible into or exchangeable or exercisable for any such debt securities,
all rights or warrants to subscribe for or to purchase, all options for the
purchase of, and all calls, commitments or claims of any character relating to,
such debt securities and any securities convertible into or exchangeable or
exercisable for any of the foregoing.
"DEPARTMENT OF JUSTICE" means the Department of Justice of the
United States of America.
"DGCL" means the General Corporation Law of the State of
Delaware, Title 8 Del. Code Sections 101 et seq., as amended.
"DISSENTING SHARES" has the meaning stated in Section 1.1(h)
of this Agreement.
"DOLLARS" AND "$" refer to United States dollars and other
lawful currency of the United States of America from time to time in effect.
"EFFECTIVE TIME" has the meaning stated in Section 1.1(a) of
this Agreement.
"EFFECTIVE TIME ADJUSTED AVERAGE MARKET PRICE" has the meaning
stated in Section 1.1(a)(2) of this Agreement.
"EMPLOYEE PLAN" of a person means any plan, contract,
commitment, program, policy, arrangement or practice maintained or contributed
to by the person and providing benefits to any employee, former employee,
director or agent of the person, including, without limitation, (1) any ERISA
Plan, (2) any Multiemployer Plan, (3) any other "EMPLOYEE BENEFIT PLAN" (within
the meaning of Section 3(3) of ERISA), (4) any profit-sharing, deferred
compensation, bonus, stock option, stock purchase, stock appreciation rights,
phantom stock, restricted stock, other stock-based pension, retainer,
consulting, retirement, severance, welfare or incentive plan, contract,
commitment, program, policy, arrangement or practice and (5) any plan,
contract, commitment, program, policy, arrangement or practice providing for
"fringe benefits" or perquisites, including, without limitation, benefits
relating to automobiles, clubs,
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<PAGE> 84
vacation, child care, parenting, sabbatical or sick leave and medical, dental,
hospitalization, life insurance and other types of insurance.
"EMPLOYEE PLAN EVENT" means any of the following:
(1) "REPORTABLE EVENT" (within the meaning of
Section 4043 of ERISA) with respect to any ERISA Plan for which the
requirement of notice to the PBGC has not been waived by regulation;
(2) the failure to meet the minimum funding
standard of Section 412 of the Code with respect to any ERISA Plan
(whether or not waived in accordance with Section 412(d) of the Code)
or the failure to make by its due date a required installment under
Section 412(m) of the Code with respect to any ERISA Plan or the
failure to make any required contribution to a Multiemployer Plan;
(3) the provision by the administrator of any
ERISA Plan pursuant to Section 4041(a)(2) of ERISA of a notice of
intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA;
(4) the withdrawal from any ERISA Plan during a
plan year by a "substantial employer" as defined in Section 4001(a)(2)
of ERISA resulting in liability pursuant to Section 4062(e) or Section
4063 of ERISA;
(5) the institution by the PBGC of proceedings to
terminate any ERISA Plan, or the occurrence of any event or condition
which might constitute grounds under ERISA for the termination of, or
the appointment of a trustee to administer, any ERISA Plan;
(6) the imposition of liability pursuant to
Sections 4064 or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA;
(7) the withdrawal in a complete or partial
withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan if there is any potential liability therefor, or
the receipt of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Sections 4241 or 4245 of
ERISA, or that it intends to terminate or has terminated under Sections
4041A or 4042 of ERISA;
(8) the occurrence of an act or omission which
could give rise to the imposition of fines, penalties, taxes or related
charges under Chapter 43 of the Code or under Sections 409, 502(c),
502(i), 502(l) or 4071 of ERISA in respect of any such Employee Plan;
(9) the assertion of a material claim (other than
routine claims for benefits) against any Employee Plan other than a
Multiemployer Plan or the assets of any
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<PAGE> 85
Employee Plan, or against the person maintaining or contributing to
such plan in connection with any such plan;
(10) receipt from the IRS of notice of the failure
of any Qualified Plan to qualify under Section 401(a) of the Code, or
the failure of any trust forming part of any Qualified Plan to fail to
qualify for exemption from taxation under Section 501(a) of the Code;
or
(11) the imposition of a lien pursuant to Sections
401(a)(29) or 412(n) of the Code or pursuant to ERISA with respect to
any ERISA Plan.
"ENVIRONMENTAL LAWS" means any and all presently existing
federal, state, local and foreign Regulations, and any orders or decrees, in
each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"EQUITY SECURITIES" of a person means the capital stock of the
person and all other securities convertible into or exchangeable or exercisable
for any shares of its capital stock, all rights or warrants to subscribe for or
to purchase, all options for the purchase of, and all calls, commitments or
claims of any character relating to, any shares of its capital stock and any
securities convertible into or exchangeable or exercisable for any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974 and the related Regulations, in each case as amended as of the date hereof
and as the same may be amended or modified from time to time. References to
titles, subtitles, sections, paragraphs or other provisions of ERISA and the
related Regulations also refer to successor provisions.
"ERISA AFFILIATE", as applied to any person, means (1) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Code of which such person is a member, (2) any
trade or business (whether or not incorporated) which is a member of a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Code of which such person is a member, and (3) any member of an
affiliated service group within the meaning of Section 414(m) or (o) of the
Code of which such person, any corporation described in clause (1) above or any
trade or business described in clause (2) above is a member. Any former ERISA
Affiliate of Company or its Subsidiaries shall continue to be considered an
ERISA Affiliate within the meaning of this definition with respect to the
period such entity was an ERISA Affiliate of Company or its Subsidiaries and
with respect to liability arising after such period for which Company or its
Subsidiaries could be liable under the Code or ERISA.
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<PAGE> 86
"ERISA PLAN" of a person means an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA), other than a Multiemployer
Plan, that is covered by Title IV of ERISA or subject to the minimum funding
standards of Section 412 of the Code or Section 302 of ERISA that is maintained
by the person, to which the person contributes or has an obligation to
contribute or with respect to which the person is an "employer" (within the
meaning of Section 3(5) of ERISA).
"EXCESS SHARES" has the meaning stated in Section 1.1(g)(2) of
this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the related rules and regulations thereunder.
"EXCHANGE AGENT" has the meaning stated in Section 1.1(c) of
this Agreement.
"EXCHANGE FUND" has the meaning stated in Section 1.1(c) of
this Agreement.
"FEDERAL TRADE COMMISSION" means the Federal Trade Commission
of the United States of America.
"FINANCIAL ADVISORS" means, collectively, J.C. Bradford & Co.,
L.L.C. and McGettigan, Wick & Co., Inc.
"GAAP" means generally accepted accounting principles as in
effect in the United States of America from time to time.
"GOVERNMENTAL BODY" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state, county or local,
domestic or foreign.
"GROUP" has the meaning given such term in Section 13(d)(3) of
the Exchange Act.
"GUARANTEE" by any person means any obligation, contingent or
otherwise, of the person directly or indirectly guaranteeing the payment or
other performance of any Liability of any other person or in any manner
providing for the payment or other performance of any Liability of any other
person or the investment of funds in any other person or otherwise protecting
the holder of such Liability against loss (whether by agreement to indemnify,
to lease assets as lessor or lessee, to purchase assets, goods, securities or
services, or to take-or-pay or otherwise), but the term "GUARANTEE" does not
include endorsements for collection or deposit in the ordinary course of
business. The term "GUARANTEE" used as a verb has a correlative meaning.
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the related rules, regulations and
published interpretations thereunder.
DEF-9
<PAGE> 87
"HAZARDOUS SUBSTANCE" means, collectively, (1) any petroleum
or petroleum products, geothermal products, natural gas, flammable explosives,
radioactive materials, asbestos, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (2) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (3) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited,
limited or regulated under any Environmental Law and which is present in
concentrations or at locations that present a threat to human health or the
environment.
"INDEMNIFIED PERSONS" has the meaning stated in Section 8.2(a)
of this Agreement.
"INVESTMENT" of a person means any investment in any other
person (other than a Subsidiary), whether by means of loan, capital
contribution, purchase of capital stock, obligations or other securities, or
any commitment or option to make an investment or otherwise.
"IRS" means the United States Internal Revenue Service or any
Governmental Body succeeding to any or all of its functions.
"KNOWLEDGE" of (1) an individual means the actual knowledge of
such individual with respect to a representation or warranty of such person
contained in any Transaction Document after due inquiry by such individual or
(2) if a person that is not an individual, means, after due inquiry by such
person of each of the following persons, the actual knowledge of any of the
officers or other employees of such person and its Subsidiaries having
managerial responsibility for the portion of the operations, assets or
liabilities of such person and its Subsidiaries with respect to which such
knowledge of such person is being represented.
"LDDS LIABILITY" has the meaning stated in Section 1.1(a)(2)
of this Agreement.
"LDDS LITIGATION" has the meaning stated in Section 1.1(a)(2)
of this Agreement.
"LIABILITIES" means all debts, claims, costs, expenses,
liabilities, losses, damages, and obligations (in each case whether fixed,
contingent or absolute, matured, unmatured, or inchoate, liquidated or
unliquidated, accrued or not accrued, known or unknown, whenever or however
arising and whether or not the same would be required by generally accepted
accounting principles to be reflected in financial statements of any person or
disclosed in the notes thereto).
"LICENSE" means any license, permit, franchise, certificate of
authority, or order, or any extension, modification or waiver of the foregoing,
required to be issued by a Governmental Body.
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<PAGE> 88
"LIEN" means any mortgage, deed of trust, lien (statutory or
otherwise), pledge, hypothecation, charge, deposit arrangement, preference,
priority, security interest, restriction or transfer or encumbrance of any kind
(including, without limitation, any conditional sale contract, any capitalized
lease or any financing lease having substantially the same economic effect as
the foregoing and the filing of or agreement to give any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction to
evidence any of the foregoing).
"LOSS" means, with respect to any person, any cost, damage,
disbursement, expense, liability, judgment, loss, deficiency, obligation, Tax,
penalty or settlement of any kind or nature, whether foreseeable or
unforeseeable (including, without limitation, interest or other carrying costs,
penalties, legal, accounting, expert witness, consultant and other professional
fees and expenses incurred by such person in the investigation, collection,
prosecution and defense of Actions (including, without limitation, claims in
connection with the enforcement of any rights under any of the Transaction
Documents) and amounts paid in settlement), that may be imposed on or otherwise
incurred or suffered by such person.
"MATERIAL ADVERSE EFFECT" means, with respect to a
circumstance or event that is a condition to the obligation of a person in any
Transaction Document or is the subject of a representation, warranty, covenant
or other agreement of a person in any Transaction Document that includes a
reference therein to the possible occurrence of a Material Adverse Effect,
whether considered individually or together in the aggregate with all other
circumstances or events that are included in the same condition or are the
subject either of the same representation, warranty, covenant or other
agreement or of other representations, warranties, covenants or other
agreements by such person in the Transaction Documents, any one or more of the
following:
(1) a material adverse effect on the business, properties,
operations, prospects or condition (financial or otherwise) of such
person and its Subsidiaries, taken as a whole;
(2) a material adverse effect on the ability of such
person to perform its obligations under any Transaction Document to
which it is or may become a party; or
(3) the term or condition of an Approval, a Regulation, a
decision, ruling, order or award of any arbitrator applicable to such
person or its business, properties or operations or an Action, pending
or threatened, in each case that restricts in any material respect or
prohibits (or, if successful, would restrict or prohibit) the
conclusion of any of the Transactions.
Notwithstanding the foregoing, none of (a) a judgment in the
LDDS Litigation, (b) the occurrence of an Event of Default (as defined) under
the Credit Agreement as a result of a Change of Control (as defined therein) at
the Effective Time and (c) the occurrence of an Event of Default (as defined)
under the promissory note dated January 14, 1997 of the Company payable to Judy
Van Essen Kenyon as a result of any non-payment of amounts due and payable on
January 16, 1998 pursuant to Section 2.2 of the promissory note, shall,
individually or
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<PAGE> 89
collectively, constitute a "Material Adverse Effect" with respect to any of the
Company and its Subsidiaries.
"MATERIAL CONTRACT" has the meaning stated in Section 4.22(a)
of this Agreement.
"MATERIAL DEBT" has the meaning stated in Section 4.19(a) of
this Agreement.
"MATERIAL LICENSE" has the meaning stated in Section 4.11 of
this Agreement.
"MATERIAL PROPERTIES" has the meaning stated in Section
4.15(a) of this Agreement.
"MATERIAL PROPRIETARY RIGHTS" has the meaning stated in
Section 4.17(a) of this Agreement.
"MCI PAYABLES OBLIGATION" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"MERGER" has the meaning stated in Recital A to this
Agreement.
"MERGER CONSIDERATION" has the meaning stated in Section
1.1(a)(3) of this Agreement.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined
in of Section 3(37) of ERISA.
"NASD" means the National Association of Securities Dealers,
Inc. and each person succeeding to the authority thereof with respect to
matters contemplated by or arising from the Transaction Documents and the
Transactions.
"NASDAQ/NM" means the National Association of Securities
Dealers Automated Quotation/National Market.
"ORDINARY COURSE" means, with respect to any person and as of
any date of determination, the conduct or operation of a line of business of
such person in the ordinary course of such business, as then conducted and
proposed to be conducted, in a manner consistent with the past business
practices of such person and in accordance with the reasonable requirements of
such business, in each case as determined with respect to such business as of
such date of determination.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means, collectively, with respect to any of
the Company and its Subsidiaries, (i) Liens for Taxes or governmental
assessments, charges or claims the payment of
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<PAGE> 90
which is not yet due, or for Taxes the validity of which are being contested in
good faith by appropriate proceedings, (2) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other similar
persons and other Liens imposed by applicable Regulations of any Governmental
Body incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, (3) Liens relating to deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, (4) Liens on the
Real Property which do not in the aggregate materially interfere with or impair
the operation of any parcel of such Real Property for the purposes for which it
is or may reasonably be expected to be used, (5) Liens securing the executory
obligations of any person under any lease that constitutes an "operating lease"
under GAAP, (6) Liens securing Debt permitted to be created, incurred, assumed
or suffered to exist by any of the Company and its Subsidiaries pursuant to
Section 7.2(d) of this Agreement, and (7) other Liens approved by Qwest and
Qwest Subsidiary in writing; provided, however, that, with respect to each of
clauses (1) - (6) above, to the extent that any such Lien relates to, or
secures the payment of, a Liability that is required to be accrued under GAAP,
such Lien shall not be a Permitted Lien unless adequate accruals for such
Liability have been established therefor by the Company or such Subsidiary on
the financial statements referred to in Section 4.5 in conformity with GAAP.
Notwithstanding the foregoing, no Lien arising under the Code or ERISA with
respect to the operation, termination, restoration or funding of any employee
benefit plan or arrangement sponsored by, maintained by or contributed to by
the Company or any of its ERISA Affiliates or arising in connection with any
excise tax or penalty tax with respect to such plan or arrangement shall be a
Permitted Lien.
"PERSON" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a trust, an
unincorporated association or any other entity or organization, including a
Governmental Body.
"PREFERRED STOCK MERGER CONSIDERATION" has the meaning stated
in Section 1.1(a)(3) of this Agreement.
"PRINCIPAL STOCKHOLDERS" means, collectively, Thomas H. Bell,
Bell Living Trust, Bell Family Trust, Bell Exempt Trust, Bell Non Exempt
Marital Trust, Claudia Bell Non Exempt Trust, James W. Gallaway, Merrill L.
Magowan, Myron A. Wick III, Wallace M. Hammond, John David Singleton, Max E.
Thornhill, Jon D. Gruber, J. Patterson McBaine, Charles C. McGettigan,
ProActive Partners, L.P., McGettigan, Wick & Co., Lagunitas Partners, L.P.,
Fremont ProActive Partners, Robert M. Kaemmer and JNC Opportunity Fund, Ltd.
"PROPERTY" means any right or interest in or to property of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PROPRIETARY RIGHTS" means all copyrights, uncopyrighted
works, trademarks, trademark rights, service marks, trade names, trade name
rights, patents, patent rights, unpatented inventions, licenses, permits, trade
secrets, know-how, inventions, computer software,
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seismic data and intellectual property rights and other proprietary rights
together with applications and licenses for, and the goodwill of the business
relating to, any of the foregoing.
"PROXY" has the meaning stated in Section 1.2 of this
Agreement.
"PROXY STATEMENT/PROSPECTUS" has the meaning stated in Section
4.28 of this Agreement.
"QUALIFIED PLAN" of a person means any ERISA Plan of the
person and any other pension, profit sharing or stock bonus plan within the
meaning of Section 401(a) of the Code maintained by the person or to which the
person contributes or has an obligation to contribute.
"QWEST" has the meaning stated in the heading to this
Agreement.
"QWEST AND QWEST SUBSIDIARY'S DISCLOSURE SCHEDULE" means the
schedule with respect to certain matters referred to in Article V of this
Agreement that has been delivered by Qwest and Qwest Subsidiary to the Company,
as such schedule may be modified in accordance with this Agreement.
"QWEST PREFERRED STOCK" has the meaning stated in Section
5.9(a) of this Agreement.
"QWEST COMMON STOCK" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"QWEST SEC DOCUMENTS" has the meaning stated in Section 5.10
of this Agreement.
"QWEST SUBSIDIARY" has the meaning stated in the heading to
this Agreement.
"REGISTRATION STATEMENT" has the meaning stated in Section
5.11 of this Agreement.
"REGULATION" means (1) any applicable law, rule, regulation,
ordinance, judgment, decree, ruling, order, award, injunction, recommendation
or other official action of any Governmental Body, and (2) any official change
in the interpretation or administration of any of the foregoing by the
Governmental Body or by any other Governmental Body or other person responsible
for the interpretation or administration of any of the foregoing.
"RESTRICTED PAYMENT" with respect to a person means the
following:
(1) any dividend or other distribution of any
kind on any shares of the person's capital stock, except dividends
payable solely in shares of its capital stock, other than an Equity
Security of the person which by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable
or exercisable), or upon the happening of any event or with the passage
of time, matures or is mandatorily
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redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, or
which is convertible into or exchangeable or exercisable for debt
securities of the person or any of its Subsidiaries, and
(2) any payments in cash or otherwise, on account
of the purchase, redemption, retirement or acquisition of any Equity
Securities of the person.
"RESTRICTED COMPANY SHARES" has the meaning stated in Section
1.2 of this Agreement.
"SEC DOCUMENTS" has the meaning stated in Section 6.1(h) of
this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the related rules and regulations thereunder.
"SPRINT PAYABLES OBLIGATION" has the meaning stated in Section
1.1(a)(2) of this Agreement.
"STOCK OPTION" means any option to purchase Company Capital
Stock granted under the Company's 1989 Option Stock Plan or the Company's 1992
Non-Employee Directors' Stock Option Plan.
"SUBSIDIARY" of a person means (1) any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the person or
(2) a partnership or limited liability company in which the person or a
Subsidiary of the person is, at the date of determination, a general partner,
limited partner or member, as the case may be, but only if the person or its
Subsidiary is entitled at any time to receive more than 50% of the amounts
distributed or distributable by such partnership or limited liability company
to the partners or members thereof whether upon dissolution or otherwise.
Unless the context requires otherwise, references to one or more Subsidiaries
shall be references to Subsidiaries of the Company.
"SUPERIOR PROPOSAL" has the meaning stated in the proviso to
the first sentence of Section 7.2(z) of this Agreement.
"TAXES" means all taxes, charges, fees, levies, duties,
imposts, withholdings, restrictions, fines, interest, penalties, additions to
tax or other assessments or charges, including, but not limited to, income,
excise, property, withholding, sales, use, gross receipts, value added and
franchise taxes, license recording, documentation and registration fees and
custom duties imposed by any Governmental Body.
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"TAX RETURN" means a report, return or other information
required to be filed by a person with or submitted to a Governmental Body with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the person.
"TERMINATION DATE" has the meaning stated in Section 9.1(a) of
this Agreement.
"TRADING DAY" means, as applied to any class of stock, any day
on which the New York Stock Exchange or, if shares of such stock are not listed
or admitted to trading on the New York Stock Exchange, the principal national
securities exchange on which the shares of such stock are listed or admitted
for trading or, if the shares of such stock are not listed or admitted for
trading on any national securities exchange, the NASDAQ or, if the shares of
such stock are not included therein, any similar interdealer system then in
general use in which the shares of such stock are included, is open for the
trading of securities generally and with respect to which information regarding
the sale of securities included therein, or with respect to which sales
information is reported, is generally available.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement,
the Voting Agreement, the other Voting Documents, the Certificate Amendment and
all other instruments and documents executed and delivered by any person in
connection with the conclusion of one or more of the transactions contemplated
hereby and thereby.
"TRANSACTIONS" means, collectively, the transactions
undertaken pursuant to, or otherwise contemplated by, the Transaction
Documents.
"TRANSFER" means a sale, an assignment, a lease, a license, a
grant, a transfer or other disposition of an asset or any interest of any
nature in an asset. The term "TRANSFER" used as a verb has a correlative
meaning.
"VAN ESSEN INDEMNIFICATION AND HOLD HARMLESS AGREEMENT" means
the Indemnification and Hold Harmless Agreement dated as of January 16, 1996
among Phoenix Network Acquisition Corp., the Company, Automated Communications,
Inc. and Judy Van Essen Kenyon, as amended, relating to certain outstanding
items of litigation.
"VOTING AGREEMENT" has the meaning stated in Section 1.2 of
this Agreement.
"VOTING DOCUMENTS" means, collectively, the Voting Agreement
and the other agreements, instruments and other documents executed and
delivered by the Principal Stockholders in connection therewith.
"WARRANTS" means any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind
(other than the Stock Options) for the issuance, delivery or sale of shares of
the Company Capital Stock or other Equity Securities of the Company.
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"WHOLLY-OWNED SUBSIDIARY" of a person means any Subsidiary all
of the shares of capital stock or other ownership interests of which, except
directors' qualifying shares, are at the time directly or indirectly owned by
the person. Unless the context requires otherwise, references to one or more
Wholly-Owned Subsidiaries shall be references to Wholly-Owned Subsidiaries of
the Company.
DEF-17
<PAGE> 95
EXHIBIT A
FORM OF
VOTING AGREEMENT AND PROXY
VOTING AGREEMENT AND PROXY dated as of December 31, 1997 (this
"AGREEMENT") between the person referred to on the signature page hereof as the
Shareholder ("SHAREHOLDER") and QWEST COMMUNICATIONS INTERNATIONAL INC., a
Delaware corporation (together with its successors and assigns, "QWEST").
RECITALS
A. Shareholder beneficially owns not less than the number of shares of [**
Common Stock **](1) [** Preferred Stock, Series I **](2), par value $.001 per
share, of Phoenix Network, Inc., a Delaware corporation (the "COMPANY") [**
(the "COMPANY COMMON STOCK") **](1) [** (the "COMPANY SERIES I PREFERRED
STOCK") **](2). All such shares together with all other shares of [** capital
stock of the Company [** Company Series I Preferred Stock **](2) **](1) with
respect to which Shareholder has beneficial ownership as of the date of this
Agreement or acquires beneficial ownership on or before the Termination Date,
are referred to as the "RESTRICTED SHARES".
B. Shareholder and Qwest desire to enter into this
Agreement to provide for (1) the obligation of Shareholder to vote the
Restricted Shares to approve the Agreement and Plan of Merger dated as of
December 31, 1997 (the "MERGER AGREEMENT") among the Company, Qwest and Qwest
1997-5 Acquisition Corp., a Delaware corporation ("QWEST SUBSIDIARY"), the
merger contemplated thereby (the "MERGER") and the amendment to the certificate
of incorporation of the Company contemplated thereby (the "CERTIFICATE
AMENDMENT") and against any Business Combination (other than the Transactions),
(2) the grant by Shareholder to each of Qwest and Qwest Subsidiary of an
irrevocable proxy in connection therewith and (3) certain restrictions on the
sale or other transfer of the Restricted Shares by Shareholder. This Agreement
and all other agreements, instruments and other documents executed and
delivered by Shareholder in connection with this Agreement are collectively
referred to as the "VOTING DOCUMENTS". Terms not otherwise defined in this
Agreement have the meanings stated in the Merger Agreement.
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(1) Holders of Company Common Stock.
(2) Holders of Company Series I Preferred Stock.
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C. Shareholder acknowledges that Qwest and Qwest
Subsidiary are entering into the Merger Agreement in reliance on the
representations, warranties, covenants and other agreements of Shareholder set
forth in this Agreement and would not enter into the Merger Agreement if
Shareholder did not enter into this Agreement.
AGREEMENT
The parties agree as follows:
SECTION 1. COVENANTS OF SHAREHOLDER.
(a) Voting. Until the day following the Termination
Date, subject to the receipt of proper notice and the absence of a preliminary
or permanent injunction or other final order by any United States federal court
or state court barring such action, Shareholder shall do the following:
(1) be present, in person or represented by
proxy, at each meeting (whether annual or special, and whether or not
an adjourned or postponed meeting) of the stockholders of the Company,
however called, or in connection with any written consent of the
stockholders of the Company, so that all Restricted Shares then
entitled to vote may be counted for the purposes of determining the
presence of a quorum at such meetings; and
(2) at each such meeting held before the
Effective Time and with respect to each such written consent, vote (or
cause to be voted) the Restricted Shares (A) to approve each of the
Certificate Amendment, the Merger Agreement and the Merger, and any
action required in furtherance thereof, (B) except as otherwise
approved in writing in advance by Qwest (which approval may be
granted, withheld, conditioned or delayed in its sole discretion),
against any action or agreement that would result in any breach of any
representation, warranty, covenant or agreement of Shareholder or the
Company contained in any Transaction Document, that would or could
reasonably be expected to impede, interfere with, prevent or
materially delay the conclusion of any of the Transactions or that
would or could reasonably be expected to materially reduce the
benefits to Qwest or Qwest Subsidiary of the Transactions, (C) except
as otherwise approved in writing in advance by Qwest (which approval
may be granted, withheld, conditioned or delayed in its sole
discretion), against any Business Combination Transaction (other than
the Transactions) and (D) except as otherwise approved in writing in
advance by Qwest (which approval may be granted, withheld, conditioned
or delayed in its sole discretion), against any amendment to the
articles of incorporation or the certificate of incorporation, as the
case may be, or bylaws of the Company.
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(b) Business Combination Transactions. Until the day
following the Termination Date, Shareholder shall not do any of the following
or enter into any agreement or other arrangement (other than the Voting
Documents) with respect to any of the following:
(1) enter into any agreement with respect to or
take any other action to effect any Business Combination Transaction
(other than the Transactions) with respect to any of the Company and
its Subsidiaries;
(2) solicit, initiate or encourage (including,
without limitation, by way of furnishing information) any inquiry or
the making of any proposal to any of the Company, its Subsidiaries and
its stockholders from any person (other than Qwest, Qwest Subsidiary
or any Affiliate of, or any person acting in concert with, Qwest or
Qwest Subsidiary) which constitutes, or may reasonably be expected to
lead to, a proposal with respect to a Business Combination Transaction
(other than the Transactions) with respect to any of the Company and
its Subsidiaries, or endorse any Business Combination Transaction
(other than the Transactions) with respect to any of the Company and
its Subsidiaries; or
(3) continue, enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish
to any other person any information with respect to the business,
properties, operations, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries or any of the
foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any
other person to do or seek any of the foregoing.
If Shareholder receives a proposal with respect to a Business Combination
Transaction with respect to any of the Company and its Subsidiaries, then
Shareholder shall, by written notice delivered within 24 hours after receipt of
such proposal, inform Qwest and Qwest Subsidiary of the terms and conditions of
such proposal and the identity of the person making the a proposal with respect
to such Business Combination Transaction. Shareholder agrees that the
restrictions in this Section 1(b) are reasonable and properly required to
accomplish the purposes of this Agreement.
SECTION 2. IRREVOCABLE PROXY. Shareholder hereby
revokes any previous proxies and appoints each of Qwest and Qwest Subsidiary,
with full power of substitution, as attorney and proxy of the undersigned, (1)
to attend any and all meetings of stockholders of the Company, (2) to vote in
accordance with the provisions of Section 1 the Restricted Shares that the
undersigned is then entitled to vote, (3) to grant or withhold in accordance
with the provisions of Section 1 all written consents with respect to the
Restricted Shares that the undersigned is then entitled to vote, and (4) to
represent and otherwise to act for the undersigned in the same manner and with
the same effect as if the undersigned were personally present, with respect to
all matters subject to Section 1. This proxy shall be deemed to be a proxy
coupled with an interest, is irrevocable until the day following the
Termination Date and shall not be terminated by operation
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of law upon the occurrence of any event. Shareholder authorizes such attorney
and proxy to substitute any other person to act hereunder, to revoke any
substitution and to file this proxy and any substitution or revocation with the
Secretary of the Company.
SECTION 3. TRANSFER OF RESTRICTED SHARES. Until the day
following the Termination Date, Shareholder shall not transfer any Restricted
Shares to any person other than Qwest; provided that Shareholder may [** (a)
**](2) transfer Restricted Shares to (1) Qwest Subsidiary or any Affiliate
thereof in connection with the conclusion of the Transactions and (2) any other
person approved in advance in writing by Qwest, which approval may be granted,
withheld, conditioned or delayed in the sole discretion of Qwest, if such other
person shall execute and deliver to Qwest an agreement identical in all
respects to this Agreement except for the change in the name of Shareholder and
the number of shares of [** Company Common Stock **](1) [** Company Series I
Preferred Stock **] (2) beneficially owned by Shareholder [** and (b) convert
all or any of the shares of Company Series I Preferred Stock into shares of
Company Common Stock **](2). For the purposes of this Agreement, the term
"TRANSFER" means a sale, an assignment, a grant, a transfer or other
disposition of any Restricted Shares or any interest of any nature in any
Restricted Shares, including, without limitation, the "beneficial ownership" of
such Restricted Shares (as determined pursuant to Regulation 13D-G under the
Exchange Act).
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
SHAREHOLDER. Shareholder represents and warrants to Qwest as follows:
(a) Existence and Power. If Shareholder is not a natural
person, Shareholder (1) is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
is a limited liability company, general partnership or limited partnership
formed and validly existing under the laws of the jurisdiction of its formation
and (2) has all necessary power and authority (as a corporation, limited
liability company, general partnership or limited partnership, as the case may
be) to execute and deliver each Voting Document to which it is or may become a
party.
(b) Authorization; Contravention. The execution and
delivery by Shareholder of each Voting Document and the performance by it of
its obligations under each Voting Document have been duly authorized by all
necessary action (as a corporation, limited liability company, general
partnership or limited partnership, as the case may be), if Shareholder is not
a natural person, and do not and will not (1) contravene, violate, result in a
breach of or constitute a default under, (A) its articles of incorporation,
certificate of incorporation, operating agreement,
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(1) Holders of Company Common Stock.
(2) Holders of Company Series I Preferred Stock.
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partnership agreement, bylaws or articles or deed of trust, as applicable, (B)
any Regulation of any Governmental Body or any decision, ruling, order or award
of any arbitrator by which Shareholder, the Restricted Shares or any of its
other properties may be bound or affected or (C) any agreement, indenture or
other instrument to which Shareholder is a party or by which Shareholder, the
Restricted Shares or any of its other properties may be bound or affected or
(2) result in or require the creation or imposition of any Lien on the
Restricted Shares or any of the other properties now owned or hereafter
acquired by it.
(c) Binding Effect. Each Voting Document is, or when
executed and delivered by Shareholder will be, the legally valid and binding
obligation of Shareholder, enforceable against Shareholder in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
(d) Ownership. Shareholder is the sole beneficial owner
of all the Restricted Shares, free and clear of all Liens. As of the date of
this Agreement, Shareholder does not beneficially own any Equity Securities of
the Company other than the Restricted Shares.
(e) Litigation. There is no Action pending against
Shareholder or, to the knowledge of Shareholder, threatened against Shareholder
or any other person that restricts in any material respect or prohibits (or, if
successful, would restrict or prohibit) the exercise by any party or
beneficiary of its rights under any Voting Document or the performance by any
party of its obligations under any Voting Document.
SECTION 5. RESTRICTIONS.
(a) Legend. The following legend shall be printed,
typed, stamped or otherwise impressed on each certificate for the Restricted
Shares and any certificates issued in exchange therefor or upon transfer
thereof (other than to Qwest or Qwest Subsidiary):
"The shares represented by this certificate are subject to
certain voting and transfer restrictions contained in the
Voting Agreement dated as of December 31, 1997 from the
registered holder to Qwest Communications International Inc."
(b) Stop Order. Qwest may direct the Company to impose
stop orders to prevent the transfer of the Restricted Shares on the books of
the Company in violation of this Agreement.
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SECTION 6. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, requests and other
communications to any party under any Voting Document shall be in writing.
Communications may be made by telecopy or similar writing. Each communication
shall be given the party at its address stated on the signature pages of this
Agreement or at any other address as the party may specify for this purpose by
notice to the other party. Each communication shall be effective (1) if given
by telecopy, when the telecopy is transmitted to the proper address and the
receipt of the transmission is confirmed, (2) if given by mail, 72 hours after
the communication is deposited in the mails properly addressed with first class
postage prepaid or (3) if given by any other means, when delivered to the
proper address and a written acknowledgement of delivery is received.
(b) No Waivers; Remedies; Specific Performance.
(1) No failure or delay by Qwest in exercising
any right, power or privilege under any Voting Document shall operate
as a waiver of the right, power or privilege. A single or partial
exercise of any right, power or privilege shall not preclude any other
or further exercise of the right, power or privilege or the exercise
of any other right, power or privilege. The rights and remedies
provided in the Voting Documents shall be cumulative and not exclusive
of any rights or remedies provided by law.
(2) In view of the uniqueness of the agreements
contained in the Voting Documents and the transactions contemplated
hereby and thereby and the fact that Qwest would not have an adequate
remedy at law for money damages in the event that any obligation under
any Voting Document is not performed in accordance with its terms,
Shareholder therefore agrees that Qwest shall be entitled to specific
enforcement of the terms of each Voting Document in addition to any
other remedy to which Qwest may be entitled, at law or in equity.
(c) Amendments, Etc. No amendment, modification,
termination, or waiver of any provision of any Voting Document, and no consent
to any departure by Shareholder or Qwest from any provision of any Voting
Document, shall be effective unless it shall be in writing and signed and
delivered by Shareholder and Qwest, and then it shall be effective only in the
specific instance and for the specific purpose for which it is given.
(d) Successors and Assigns; Third Party Beneficiaries.
(1) Neither party shall assign any of its rights
or delegate any of its obligations under any Voting Document. Any
assignment or delegation in contravention of this Section 6(d) shall
be void ab initio and shall not relieve the assigning or delegating
party of any obligation under any Voting Document.
(2) The provisions of each Voting Document shall
be binding upon and inure to the benefit of the parties, the express
beneficiaries thereof (to the extent provided
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therein) and their respective permitted heirs, executors, legal
representatives, successors and assigns, and no other person.
(e) Governing Law. Except to the extent provided to the
contrary in 6 Del.C. Section 1-105(2), each Voting Document and all rights,
remedies, liabilities, powers and duties of the parties hereto and thereto,
shall be governed in accordance with the laws of the State of Delaware without
regard to principles of conflicts of laws.
(f) Severability of Provisions. Any provision of any
Voting Document that is prohibited or unenforceable in any jurisdiction shall,
as to that jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions of the Voting
Document or affecting the validity or enforceability of the provision in any
other jurisdiction.
(g) Headings and References. Article and section
headings in any Voting Document are included for the convenience of reference
only and do not constitute a part of the Voting Document for any other purpose.
References to parties, express beneficiaries, articles and sections in any
Voting Document are references to parties to or the express beneficiaries and
sections of the Voting Document, as the case may be, unless the context shall
require otherwise. Any of the terms defined in this Agreement may, unless the
context otherwise requires, be used in the singular or the plural, depending on
the reference. The use in this Agreement of the word "include" or "including,"
when following any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
(h) Entire Agreement. The Voting Documents embody the
entire agreement and understanding of Shareholder and Qwest, and supersedes all
prior agreements or understandings, with respect to the subject matters of the
Voting Documents.
(i) Survival. Except as otherwise specifically provided
in any Voting Document, each representation, warranty or covenant of a party
contained in the Voting Document shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary or any waiver by
any other party or beneficiary of a related condition precedent to the
performance by the other party or beneficiary of an obligation under the Voting
Document.
(j) Exclusive Jurisdiction. Each party, and each express
beneficiary of a Voting Document as a condition of its right to enforce or
defend any right under or in connection with such Voting Document, (1) agrees
that any Action with respect to any Voting Document or any transaction
contemplated by any Voting Document shall be brought exclusively in the courts
of the State of Delaware or of the United States of America sitting in the
State of Delaware, (2)
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accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of those courts, (3) agrees that service of
process may be made on such party, or such express beneficiary, as the case may
be, by prepaid certified mail with a proof of mailing receipt validated by the
United States Postal Service constituting evidence of valid service, and that
service made pursuant to this clause (3) shall have the same legal force and
effect as if served upon such person personally within the State of Delaware,
and (4) irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any legal
action in those jurisdictions; provided, however, that any party may assert in
an Action in any other jurisdiction or venue each mandatory defense,
third-party claim or similar claim that, if not so asserted in such Action, may
thereafter not be asserted by such party in an original Action in the courts
referred to in clause (1) above. This Agreement and the other Voting Documents
do not involve less than $100,000, and the parties intend that 6 Del.C. Section
2708 shall apply to all the Voting Documents.
(k) Waiver of Jury Trial. Each party, and each express
beneficiary of a Voting Document as a condition of its right to enforce or
defend any right under or in connection with such Voting Document, waives any
right to a trial by jury in any Action to enforce or defend any right under any
Voting Document and agrees that any Action shall be tried before a court and
not before a jury.
(l) Termination. Qwest may terminate this Agreement, the
proxy granted pursuant to Section 2 of this Agreement, or both at any time upon
written notice to [** the Company and **] Shareholder.
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[Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first written above.
[** SHAREHOLDER **]
By:
----------------------------------
Name:
Title:
Address:
Telecopy:
QWEST CORPORATION
By:
----------------------------------
Name:
Title:
Address:
Telecopy:
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