AGREEMENT AND PLAN OF MERGER

 

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                                                                     Exhibit 2.1

 

                          AGREEMENT AND PLAN OF MERGER

 

     This AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of

October 3, 2005, by and among Dex Media, Inc., a Delaware corporation (the

"Company"), R.H. Donnelley Corporation, a Delaware corporation ("Parent"), and

Forward Acquisition Corp., a Delaware corporation and wholly owned subsidiary of

Parent ("Merger Sub").

 

                                     RECITALS:

 

     A. The Boards of Directors of the Company, Parent and Merger Sub have

determined that it is in the best interests of their respective companies and

stockholders to enter into a business combination pursuant to the terms and

subject to the conditions set forth herein, and have approved this Agreement and

the Merger;

 

     B. This Agreement contemplates (1) the merger of the Company with and into

Merger Sub (the "Merger") and (2) the conversion of the capital stock of the

Company into the right to receive cash and capital stock of Parent;

 

     C. For federal income tax purposes, it is intended that the Merger qualify

as a "reorganization" and this Agreement shall constitute a "plan of

reorganization" within the meaning of Section 368(a) of the Internal Revenue

Code of 1986, as amended (the "Code") and the Treasury Regulations promulgated

thereunder;

 

     D. It is intended that Parent will be treated as the acquiring entity for

accounting purposes;

 

     E. As an inducement and condition to Parent's entering into this Agreement,

Parent and certain stockholders of the Company (collectively, the "Company

Sponsors") are entering into (1) support agreements pursuant to which, among

other things, the Company Sponsors have agreed to vote in favor of the adoption

of this Agreement (the "Company Sponsors Support Agreements") and (2)

stockholders agreements (the "Sponsor Stockholders Agreements"), effective as of

the Effective Time, providing for certain rights of the Company Sponsors;

 

     F. In connection with the parties entering into this Agreement, Parent,

R.H. Donnelley, Inc. and certain investment partnerships affiliated with The

Goldman Sachs Group, Inc. (collectively, the "GS Funds") are entering into an

agreement pursuant to which, among other things, the GS Funds have agreed to

vote in favor of the issuance of the Parent Shares in the Merger (the "GS

Support Agreement"); and

 

     G. The parties desire to make certain representations, warranties and

agreements in connection with the Merger and also to prescribe certain

conditions to the Merger.

 

     NOW, THEREFORE, the parties agree as follows:

 

                              ARTICLE I. THE MERGER

 

     1.1 The Merger. Subject to the terms of this Agreement and the conditions

set forth in Article VII, and in accordance with the Delaware General

Corporation Law (the "DGCL"),

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at the Effective Time, the Company will be merged with and into Merger Sub, the

separate corporate existence of the Company will cease and Merger Sub will

continue as the surviving corporation of the Merger (the "Surviving

Corporation").

 

     1.2 Effective Time. As promptly as practicable after the satisfaction or,

if permissible, waiver of the conditions set forth in Article VII, the parties

hereto will cause the Merger to be consummated by filing a certificate of merger

(the "Certificate of Merger") with the Secretary of State of the State of

Delaware, in such form as is required by, and executed in accordance with, the

relevant provisions of the DGCL (the date and time of such filing of the

Certificate of Merger (or such later time as may be agreed by each of the

parties hereto and specified in the Certificate of Merger) being the "Effective

Time").

 

     1.3 Effect of the Merger. At the Effective Time, the effect of the Merger

will be as provided in the DGCL.

 

     1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation.

At the Effective Time, the Certificate of Incorporation and Bylaws of Merger

Sub, attached hereto as Exhibit A and Exhibit B, respectively, will be the

Certificate of Incorporation and Bylaws, respectively, of the Surviving

Corporation until thereafter amended in accordance with applicable Law.

 

     1.5 Directors and Officers of the Surviving Corporation. The directors of

Merger Sub immediately prior to the Effective Time will be the directors of the

Surviving Corporation until the next annual meeting (or the earlier of their

resignation or removal) and until their respective successors are duly elected

and qualified, as the case may be. The officers of Merger Sub immediately prior

to the Effective Time will be the officers of the Surviving Corporation until

the earlier of their resignation or removal or until their respective successors

are duly elected and qualified, as the case may be.

 

     1.6 Bylaws of the Parent. At the Effective Time, the Bylaws of Parent will

be amended and restated in the form attached hereto as Exhibit C.

 

     1.7 Tax Consequences. It is intended that (i) the Merger qualify as a

"reorganization" within the meaning of Section 368(a) of the Code, (ii) this

Agreement will constitute a "plan of reorganization" within the meaning of

Treasury Regulation Section 1.368-2(g), and (iii) the Company, Parent and Merger

Sub will each be a party to the reorganization within the meaning of Section

368(b) of the Code.

 

     1.8 Headquarters. The headquarters of Parent will be in Raleigh, North

Carolina. The parties expect to maintain a significant operating presence in

Denver, Colorado.

 

     1.9 Certain Executive Officers of Parent and Other Matters. Immediately

following the Effective Time, the individuals set forth on Exhibit D will have

the executive officer positions at Parent as set forth therein, until the

earlier of their resignation or removal and until their respective successors

are duly elected and qualified, as the case may be. In addition, certain other

matters with respect to Parent following the Effective Time are set forth on

Exhibit D.

 

 

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     1.10 Parent Board. Effective as of the Effective Time, (i) the Parent Board

shall be composed of 13 directors, consisting of (A) Parent's Chief Executive

Officer, (B) six individuals designated by Parent from among the members of the

Parent Board prior to the Effective Time (at least five of whom shall be

independent under the New York Stock Exchange (the "NYSE") rules and

regulations), (C) the Chief Executive Officer of the Company immediately prior

to the Effective Time, (D) one designee of each Company Sponsor, pursuant to the

terms of the Sponsor Stockholders Agreements, and (E) three individuals

designated by the Company from among the members of the Company Board prior to

the Effective Time, each of whom shall be independent under the NYSE rules and

regulations and not affiliated with any Company Sponsor (with the individuals

described in clauses (C) through (E) being referred to as the "Company

Directors"), (ii) two Company Directors shall have been assigned to each of the

three classes of directors on the Parent Board; provided, however, that three

Company Directors may be elected to the class of Parent directors whose term

expires in 2008 (with the remaining directors spread as evenly as possible among

the other two classes) and the Company will designate the individuals to be

assigned to each class in accordance with the foregoing, and (iii) the Presiding

Director (as defined in the Parent Bylaws) shall be an individual designated by

Parent from among the members of the Parent Board prior to the Effective Time

who shall be independent under the NYSE rules and regulations.

 

         ARTICLE II. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

 

     2.1 Conversion of Securities. At the Effective Time, by virtue of the

Merger and without any action on the part of the Company, Parent, Merger Sub or

the holders of any of the following securities:

 

          (a) Cancellation of Certain Company Common Stock. Each share of common

stock, par value $0.01 per share, of the Company (the "Company Common Stock")

issued and outstanding and owned by Parent, Merger Sub or any direct or indirect

wholly owned subsidiary of Parent or of the Company (all issued and outstanding

shares of the Company Common Stock being hereinafter collectively referred to as

the "Company Shares") and each share of Company Common Stock held in the

treasury of the Company immediately prior to the Effective Time will be canceled

without any conversion thereof and no payment or distribution will be made with

respect thereto.

 

          (b) Shares of Merger Sub Stock. Each share of common stock, par value

$0.01 per share, of Merger Sub issued and outstanding immediately prior to the

Effective Time will be converted into and exchanged for one validly issued,

fully paid and nonassessable share of common stock, par value $0.01 per share,

of the Surviving Corporation.

 

          (c) Conversion of Company Common Stock. Each Company Share (other than

any Company Shares canceled pursuant to Section 2.1(a)) will be canceled and

converted automatically, subject to adjustment in accordance with this Section

2.1 and Section 2.2, into the right to receive (i) $12.30 in cash (the "Cash

Consideration") and (ii) 0.24154 of a share of common stock (the "Exchange

Ratio"), par value $1.00 per share ("Parent Shares"), of Parent (the "Stock

Consideration," together with the Cash Consideration, the "Merger

Consideration"),

 

 

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in each case payable upon surrender, in the manner provided in Section 2.2, of

the certificate that formerly evidenced such Company Share.

 

          (d) Anti-Dilution Provisions. In the event either Parent or the

Company (i) changes (or establishes a record date for changing) the number of

shares of its capital stock issued and outstanding prior to the Effective Time

as a result of a stock split, reverse stock split, stock dividend (including any

dividend or distribution of securities convertible into shares of its capital

stock), extraordinary dividends, stock combination, recapitalization,

reclassification, reorganization, combination, exchange of shares or similar

transaction or like change with respect to shares of its capital stock or

(ii) pays or makes an extraordinary dividend or distribution in respect of

shares of its capital stock (other than a distribution referred to in clause (i)

of this sentence) and, in either case, the record date therefor is prior to the

Effective Time, the Merger Consideration will be proportionately adjusted. Cash

dividends and increases thereon, the purchase referred to in Section 6.15 and

redemptions not prohibited by Sections 5.2(c) and 5.3(c) of this Agreement will

not be considered extraordinary for purposes of the preceding sentence.

 

     2.2 Exchange of Certificates and Cash Consideration. (a) Exchange Agent.

Parent will deposit, or cause to be deposited, with a bank or trust company

designated by Parent (the "Exchange Agent"), for the benefit of the holders of

Company Shares, for exchange in accordance with this Article II through the

Exchange Agent, certificates representing the Parent Shares issuable pursuant to

Section 2.1, and cash, from time to time as required to make payments in respect

of the Cash Consideration and payments in lieu of any fractional shares pursuant

to Section 2.2(e) (such cash and certificates for Parent Shares, together with

any dividends or distributions with respect thereto, being hereinafter referred

to as the "Exchange Fund"). The Exchange Agent will, pursuant to irrevocable

instructions, deliver the Parent Shares and cash payments contemplated to be

issued pursuant to Section 2.1 out of the Exchange Fund. Except as contemplated

by Section 2.2(f), the Exchange Fund will not be used for any other purpose.

 

          (b) Exchange Procedures. As promptly as practicable after the

Effective Time, Parent will cause the Exchange Agent to mail to each person who

was, at the Effective Time, a holder of record of Company Shares entitled to

receive the Merger Consideration pursuant to Section 2.1(c): (i) a letter of

transmittal (which will be in customary form and will specify that delivery will

be effected, and risk of loss and title to the certificates evidencing such

Company Shares (the "Certificates") will pass, only upon proper delivery of the

Certificates to the Exchange Agent) and (ii) instructions for use in effecting

the surrender of the Certificates pursuant to such letter of transmittal. Upon

surrender to the Exchange Agent of a Certificate for cancellation, together with

such letter of transmittal, duly completed and validly executed in accordance

with the instructions thereto, and such other documents as may be required

pursuant to such instructions, (i) the holder of such Certificate will be

entitled to receive in exchange therefor (A) a certificate representing that

number of whole Parent Shares which such holder has the right to receive in

respect of the Company Shares formerly represented by such Certificate (after

taking into account all Company Shares then held by such holder), if any, (B)

cash in respect of the Cash Consideration to be received by such holder, if any,

(C) cash in lieu of any fractional Parent Shares to which such holder is

entitled pursuant to Section 2.2(e), and (D) any dividends or other

distributions to which such holder is entitled pursuant to Section 2.2(c) (such

items described in clauses (A) - (D), the "Delivered Items"), and (ii) the

Certificate so

 

 

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surrendered will forthwith be cancelled. In the event of a transfer of ownership

of Company Shares that is not registered in the transfer records of the Company,

the Delivered Items may be issued to a transferee if the Certificate

representing such Company Shares is presented to the Exchange Agent, accompanied

by all documents required to evidence and effect such transfer and by evidence

that any applicable stock transfer taxes have been paid. Until surrendered as

contemplated by this Section 2.2, each Certificate will be deemed at all times

after the Effective Time to represent only the right to receive upon such

surrender the Delivered Items.

 

          (c) Distributions with Respect to Unexchanged Parent Shares. No

dividends or other distributions declared or made after the Effective Time with

respect to Parent Shares with a record date after the Effective Time will be

paid to the holder of any unsurrendered Certificate with respect to the Parent

Shares represented thereby, and no cash payment in lieu of any fractional shares

will be paid to any such holder pursuant to Section 2.2(e), until the holder of

such Certificate surrenders such Certificate. Subject to the effect of escheat,

tax or other applicable Laws, following surrender of any such Certificate, there

will be paid to the holder of the certificates representing whole Parent Shares

issued in exchange therefor, without interest, (i) promptly, the amount of any

cash payable with respect to a fractional Parent Share to which such holder is

entitled pursuant to Section 2.2(e) and the amount of dividends or other

distributions with a record date after the Effective Time and theretofore paid

with respect to such whole Parent Shares and (ii) at the appropriate payment

date, the amount of dividends or other distributions, with a record date after

the Effective Time but prior to surrender and a payment date occurring after

surrender, payable with respect to such whole Parent Shares.

 

          (d) No Further Rights in Company Common Stock. All Merger

Consideration issued upon conversion of the Company Shares in accordance with

the terms hereof (together with cash paid pursuant to Section 2.2(c) or Section

2.2(e)) will be deemed to have been issued in full satisfaction of all rights

pertaining to such Company Shares, including any "Rights" under the Company

Rights Agreement.

 

          (e) No Fractional Shares. No certificate or scrip representing

fractional Parent Shares will be issued upon the surrender for exchange of

Certificates, and such fractional share interests will not entitle the owner

thereof to vote or to any other rights of a stockholder of Parent.

Notwithstanding any other provision of this Agreement, each holder of shares of

Company Common Stock converted pursuant to the Merger who would otherwise have

been entitled to receive a fraction of a share of Parent Common Stock (after

taking into account all Certificates delivered by such holder) will receive, in

lieu thereof, cash (without interest) in an amount equal to such fraction as

determined below. As promptly as practicable following the Effective Time, the

Exchange Agent will determine the excess of (i) the number of full Parent Shares

delivered to the Exchange Agent by Parent for issuance to holders of

Certificates over (ii) the aggregate number of full Parent Shares to be

distributed to holders of Company Common Stock (such excess being herein

referred to as the "Excess Shares"). As soon as practicable after the Effective

Time, the Exchange Agent, as agent for such holders of Company Common Stock will

sell the Excess Shares at then prevailing prices on the NYSE all in the manner

provided herein. The sale of the Excess Shares by the Exchange Agent will be

executed on the NYSE and will be executed in round lots to the extent

practicable. Until the net proceeds of any such sale or sales have been

distributed to the holders of Company Common Stock, the Exchange Agent will hold

such proceeds in trust for such holders. Parent will pay all commissions,

transfer taxes and other out-of-pocket transaction costs of the Exchange Agent

incurred in connection with such

 

 

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sale or sales of Excess Shares and the Exchange Agent's compensation and

expenses in connection with such sale or sales. The Exchange Agent will

determine the portion of such net proceeds to which each holder of Company

Common Stock will be entitled, if any, by multiplying the amount of the

aggregate net proceeds by a fraction, the numerator of which is the amount of

the fractional share interest to which such holder of Company Common Stock is

entitled (after taking into account all Certificates then held by such holder)

and the denominator of which is the aggregate amount of fractional share

interests to which all holders of Company Common Stock are entitled. As soon as

practicable after the determination of the amount of cash, if any, to be paid to

holders of Certificates with respect to any fractional share interests, the

Exchange Agent will promptly pay such amounts to such holders of Company Common

Stock, subject to and in accordance with the terms of Sections 2.2(b) and (c).

 

          (f) Termination of Exchange Fund and Additional Exchange Fund. Any

portion of the Exchange Fund that remains undistributed to the holders of

Company Shares for one year after the Effective Time will be delivered to

Parent, upon demand, and any holders of Company Shares who have not theretofore

complied with this Article II will thereafter look only to Parent for the

Delivered Items. Any portion of the Exchange Fund remaining unclaimed by holders

of Company Shares as of a date which is immediately prior to such time as such

amounts would otherwise escheat to or become property of any government entity

will, to the extent permitted by applicable Law, become the property of Parent

free and clear of any claims or interest of any person previously entitled

thereto.

 

          (g) No Liability. None of the Exchange Agent, Parent or the Surviving

Corporation will be liable to any holder of Company Shares for any such Company

Shares (or dividends or distributions with respect thereto), or cash delivered

to a public official pursuant to any abandoned property, escheat or similar Law.

 

          (h) Withholding Rights. Each of the Surviving Corporation and Parent

will be entitled to deduct and withhold from the consideration otherwise payable

pursuant to this Agreement to any holder of Company Shares, options to purchase

shares of Company Common Stock (a "Company Stock Option") or other awards based

on Company Common Stock (the "Company Stock-Based Awards"), such amounts as it

is required to deduct and withhold with respect to the making of such payment

under the Code, or any provision of state, local or foreign tax Law. To the

extent that amounts are so withheld by the Surviving Corporation or Parent, as

the case may be, such withheld amounts will be treated for all purposes of this

Agreement as having been paid to the holder of the Company Shares, Company Stock

Options or Company Stock-Based Awards in respect of which such deduction and

withholding was made by the Surviving Corporation or Parent, as the case may be.

Any amounts deducted and withheld from the consideration otherwise payable

pursuant to this Agreement shall be remitted by Parent or the Surviving

Corporation to the appropriate governmental authority on a timely basis.

 

          (i) Lost Certificates. If any Certificate has been lost, stolen or

destroyed, upon the making of an affidavit of that fact by the person claiming

such Certificate to be lost, stolen or destroyed and, if required by the

Surviving Corporation, the posting by such person of a bond, in such reasonable

amount as the Surviving Corporation may direct, as indemnity against any claim

that may be made against it with respect to such Certificate, the Exchange Agent

will issue in exchange for such lost, stolen or destroyed Certificate the

Delivered Items.

 

 

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     2.3 Stock Transfer Books. At the Effective Time, the stock transfer books

of the Company will be closed and there will be no further registration of

transfers of Company Shares thereafter on the records of the Company. From and

after the Effective Time, the holders of Certificates will cease to have any

rights with respect to such Company Shares, except as provided in this Agreement

or by Law. On or after the Effective Time, subject to, with respect to the

relevant holders of Company Shares, their delivery of the Certificates required

by Section 2.2 of this Agreement, any Certificates presented to the Exchange

Agent or Parent for any reason will be converted into the Delivered Items.

 

     2.4 Company Options; Other Company Stock-Based Awards. (a) As soon as

practicable following the date of this Agreement, the Company will take such

actions so that the Company Board or, if appropriate, any committee thereof

administering the Company Stock Plans (as identified on Section 3.11(a) of the

Company Disclosure Schedule) adopts such resolutions and takes such other

actions (including obtaining any required consents) as may be required to

provide that each Company Stock Option that is outstanding immediately prior to

the Effective Time, whether vested or unvested, will, at the Effective Time, be

converted into an option to purchase a number of shares of Parent Common Stock

equal to the number of shares of Company Common Stock subject to such Company

Stock Option multiplied by 0.43077 (the "Stock Exchange Ratio") (rounded down to

the nearest whole share), at an exercise price per share of Parent Common Stock

equal to the exercise price per share of Company Common Stock under such Company

Stock Option divided by the Stock Exchange Ratio (rounded up to the nearest

whole cent), and otherwise having the same terms and conditions as were

applicable under such Company Stock Option immediately prior to the Effective

Time (each, a "Company Rollover Option"). Notwithstanding the foregoing, the

Company may adjust the conversion described in this Section 2.4(a) by modifying

the exercise price per share of Parent Common Stock and may take such actions as

may be necessary or appropriate to comply with Section 409A of the Code and to

preserve the intended tax treatment of the Company Rollover Options; provided,

however, that in no event shall any such adjustment to the conversion described

in this Section 2.4(a) increase the aggregate number of shares of Parent Common

Stock subject to the Company Rollover Options without the prior written consent

of Parent.

 

          (b) The Company will take all actions necessary to ensure that all

restrictions and limitations on vesting, transfer and exercise and all risk of

forfeiture and rights of repurchase with respect to Company Stock Options,

shares of Company Common Stock and other Company Stock-Based Awards, to the

extent not already lapsed as of the Effective Time, will remain in full force

and effect with respect to such Company Stock Options, shares of Company Common

Stock and other Company Stock-Based Awards after giving effect to the Merger and

their conversion into Company Rollover Options, shares of Parent Common Stock

and awards denominated in Parent Common Stock, except to the extent required by

the terms of such Company Stock Options and Company Stock-Based Awards Benefit

Plan or pursuant to any Company Benefit Plan as in effect on the date hereof and

except as set forth on Section 2.4(b) of the Company Disclosure Schedule.

 

 

 

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          (c) Parent will prepare and file with the Securities and Exchange

Commission (the "SEC"), and use reasonable best efforts to cause to be effective

prior to or at the Effective Time, a registration statement on Form S-8 (or

another appropriate form) registering under the Company Stock Plans all shares

of Parent Common Stock subject to the Company Rollover Options and the Company

Stock-Based Awards which survive the Effective Time and become denominated in

the form of Parent Common Stock. Such registration statement will be kept

effective (and the current status of the prospectus or prospectuses required

thereby will be maintained) as long as any Company Rollover Options and Company

Stock-Based Awards remain outstanding.

 

     2.5 Appraisal Rights/Dissenting Shares. (a) Notwithstanding any provision

of this Agreement to the contrary and to the extent available under the DGCL,

Company Shares that are outstanding immediately prior to the Effective Time and

that are held by stockholders who have neither voted in favor of the Merger nor

consented thereto in writing and who have demanded properly in writing appraisal

for such Company Shares in accordance with Section 262 of the DGCL

(collectively, the "Dissenting Shares") will not be converted into, or represent

the right to receive, the Merger Consideration payable to No Election Shares.

Such stockholders will be entitled to receive payment of the appraised value of

Dissenting Shares held by them in accordance with the provisions of such Section

262, except that all Company Shares held by stockholders who have failed to

perfect or who effectively have withdrawn or lost their rights to appraisal of

such Dissenting Shares under such Section 262, will thereupon be deemed to have

been converted into, and to have become exchangeable for, as of the

 

 

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Effective Time, the right to receive the Merger Consideration, without any

interest thereon, upon surrender, in the manner provided in Section 2.2, of the

certificate or certificates that formerly evidenced such Company Shares.

Notwithstanding anything to the contrary contained in this Section 2.5, if the

Merger is rescinded or abandoned, then the right of any stockholder to be paid

the appraised value of such stockholder's Dissenting Shares pursuant to Section

262 of the DGCL will cease.

 

          (b) The Company will give Parent (i) prompt (and in any event prior to

the Effective Time) notice of any demands for appraisal received by the Company,

and prompt notice of any withdrawals of such demands, and any other instruments

served pursuant to the DGCL and received by the Company and (ii) the opportunity

to direct all negotiations and proceedings with respect to demands for appraisal

under the DGCL. The Company will not, except with the prior written consent of

Parent, make any payment with respect to any demands for appraisal or offer to

settle or settle any such demands.

 

           ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

     Except as disclosed in (x) a publicly available final registration

statement, prospectus, report, form, schedule or definitive proxy statement

filed since January 1, 2005 by the Company with the SEC pursuant to the

Securities Act of 1933, as amended (the "Securities Act"), or the Securities

Exchange Act of 1934, as amended (the "Exchange Act") (collectively, the

"Company SEC Reports"), and prior to the close of business on September 30, 2005

(the "Measurement Date"), but excluding any risk factor disclosure contained in

any such Company SEC Report under the heading "Risk Factors" or "Forward-Looking

Information," or (y) the disclosure letter (the "Company Disclosure Schedule")

delivered by the Company to Parent prior to the execution of this Agreement

(which letter sets forth items of disclosure with specific reference to the

particular Section or subsection of this Agreement to which the information in

the Company Disclosure Schedule relates; provided, however, that any information

set forth in one section of the Company Disclosure Schedule will be deemed to

apply to each other Section or subsection of this Agreement to which its

relevance is reasonably apparent; provided, further, that, notwithstanding

anything in this Agreement to the contrary, the inclusion of an item in such

schedule as an exception to a representation or warranty will not be deemed an

admission that such item represents a material exception or material fact, event

or circumstance or that such item has had or would reasonably be expected to

have a Material Adverse Effect on the Company), the Company represents and

warrants to Parent as follows:

 

     3.1 Corporate Organization. (a) The Company is a corporation duly

organized, validly existing and in good standing under the laws of the State of

Delaware. The Company has the corporate power and authority to own or lease all

of its properties and assets and to carry on its business as it is now being

conducted, and is duly licensed or qualified to do business in each jurisdiction

in which the nature of the business conducted by it or the character or location

of the properties and assets owned or leased by it makes such licensing or

qualification necessary, except where the failure to be so licensed or qualified

would not, individually or in the aggregate, reasonably be expected to have a

Material Adverse Effect on the Company. As used in this Agreement, the term

"Material Adverse Effect" means, with respect to Parent or the Company, as the

case may be, any change, effect, event, occurrence or state of facts that has

had or would be reasonably expected to have a material adverse effect on

 

 

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(i) the business, results of operations or financial condition of such party and

its Subsidiaries, taken as a whole (provided, however, that with respect to this

clause (i), Material Adverse Effect will be deemed not to include effects to the

extent resulting from (A) changes in or relating to the United States economy or

United States financial, credit or securities markets in general or (B) changes

in or relating to the industries in which such party operates or the markets for

any of such party's products or services in general, which changes in the case

of clauses (A) and (B) do not affect such party to a materially disproportionate

degree relative to other entities operating in such markets or industries or

serving such markets) or (ii) the ability of such party to consummate the

transactions contemplated by this Agreement in the manner contemplated hereby.

 

          (b) True and complete copies of the Second Amended and Restated

Certificate of Incorporation of the Company, as amended through, and as in

effect as of, the date of this Agreement (including any certificates of

designation thereto) (the "Company Charter"), and the Amended and Restated

By-laws of the Company, as amended through, and as in effect as of, the date of

this Agreement (the "Company Bylaws"), have previously been made available to

Parent.

 

          (c) Each Company Subsidiary (i) is duly organized and validly existing

under the laws of its jurisdiction of organization, (ii) is duly qualified to do

business and in good standing in all jurisdictions (whether federal, state,

local or foreign) where its ownership or leasing of property or the conduct of

its business requires it to be so qualified, and (iii) has all requisite

corporate power and authority to own or lease its properties and assets and to

carry on its business as now conducted, except for such variances from the

matters set forth in any of clauses (i), (ii) or (iii) as would not,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect on the Company.

 

     3.2 Capitalization. (a) As of the date of this Agreement, the authorized

Company capital stock consists of (i) 700,000,000 shares of Company Common Stock

of which, as of the Measurement Date, 150,508,492 shares were issued and

outstanding, and (ii) 200,000 shares of Company Series A junior participating

preferred stock, par value $0.01 per share, of which, as of the Measurement

Date, no shares were issued and outstanding (the "Company Series A Preferred

Stock" and, together with the Company Common Stock, the "Company Capital

Stock"). As of the Measurement Date, no shares of Company Capital Stock were

held in the Company's treasury. As of the Measurement Date, no shares of Company

Capital Stock were reserved for issuance except for 4,821,858 shares of Company

Common Stock reserved for issuance upon the exercise of Company Stock Options or

Company Stock-Based Awards issued or issuable pursuant to the equity-based

compensation plans identified on Section 3.11(a) of the Company Disclosure

Schedule (the "Company Stock Plans"). All of the issued and outstanding shares

of Company Capital Stock have been duly authorized and validly issued and are

fully paid, nonassessable and free of preemptive rights, with no personal

liability attaching to the ownership thereof. As of the date of this Agreement,

except as set forth above or in the last sentence of this Section 3.2(a), or

pursuant to this Agreement and the Company Stock Plans, there are no outstanding

shares of capital stock or other voting securities of the Company, and the

Company does not have and is not bound by any outstanding subscriptions,

options, warrants, calls, commitments, preemptive rights, redemption obligations

or agreements of any character calling for the purchase, issuance or

registration of any shares of

 

 

                                       10

<PAGE>

the Company's capital stock or any other equity securities of the Company or any

securities representing the right to purchase or otherwise receive any shares of

the Company's capital stock. Section 3.2(a) of the Company Disclosure Schedule

sets forth the following information with respect to each Company Stock Option

and Company Stock-Based Award outstanding as of the date of this Agreement, as

applicable: (i) the name of the recipient; (ii) the number of shares of Company

Common Stock subject to such Company Stock Option or Company Stock-Based Award;

(iii) the exercise, purchase or grant price; (iv) the date of grant; (v) the

applicable vesting schedule; (vi) the date of expiration; (vii) the type of such

awards and the Company Stock Plans under which such Company Stock Options or

Company Stock-Based Awards were issued; and (viii) whether the exercisability of

such Company Stock Option or Company Stock-Based Award will be accelerated in

any way by the transactions contemplated by this Agreement, and the extent of

such acceleration. From and after the Measurement Date through the date hereof,

the Company has not issued or awarded any Company Capital Stock, Company Stock

Options or Company Stock-Based Awards (other than upon the exercise or

satisfaction of Company Stock Options or Company Stock-Based Awards or the

conversion of convertible securities, in each case outstanding as of the

Measurement Date).

 

          (b) As of the date of this Agreement, no bonds, debentures, notes or

other indebtedness of the Company having the right to vote on any matters on

which stockholders may vote ("Company Voting Debt") are issued or outstanding.

 

          (c) All of the issued and outstanding shares of capital stock or other

equity ownership interests of each "significant subsidiary" (as such term is

defined under Regulation S-X of the SEC) of the Company are owned by the

Company, directly or indirectly, free and clear of any material liens, pledges,

charges and security interests and similar encumbrances, other than for Taxes

that are not yet due ("Liens"), and free of any restriction on the right to

vote, sell or otherwise dispose of such capital stock or other equity ownership

interest (other than restrictions under applicable securities Laws), and all of

such shares or equity ownership interests are duly authorized and validly issued

and are fully paid, nonassessable and free of preemptive rights. No such

significant subsidiary is bound by any outstanding subscriptions, options,

warrants, calls, commitments or agreements of any character calling for the

purchase or issuance of any shares of capital stock or any other equity security

of such significant subsidiary or any securities representing the right to

purchase or otherwise receive any shares of capital stock or any other equity

security of such significant subsidiary. Except for the capital stock or other

equity ownership interests of the Company Subsidiaries, as of the date of this

Agreement, the Company does not beneficially own directly or indirectly any

capital stock, membership interest, partnership interest, joint venture interest

or other equity interest in any Person that constitutes a Substantial

Investment. As used in this Agreement, (i) "Person" means an individual, a

corporation, a partnership, an association, a joint stock company, a business

trust or an unincorporated organization, (ii) "Subsidiary," when used with

respect to either party, means any corporation, partnership, limited liability

company or other organization, whether incorporated or unincorporated, (x) of

which such party or any other Subsidiary of such party is a general partner

(excluding partnerships, the general partnership interests of which held by such

party or any Subsidiary of such party do not have a majority of the voting

interests in such partnership) or (y) a majority of the securities or other

interests of which having by their terms ordinary voting power to elect a

majority of the Board of Directors or others performing similar functions with

respect to such corporation or other organization is directly or indirectly

owned or

 

 

                                       11

<PAGE>

controlled by such party or by any one or more of its Subsidiaries, or by such

party and one or more of its Subsidiaries, and the terms "Company Subsidiary"

and "Parent Subsidiary" will mean any Subsidiary of the Company or Parent,

respectively, and (iii) "Substantial Investment," when used with respect to

either party, means a stock or other equity investment having a fair market

value or book value in excess of $5 million, directly or indirectly, in any

Person.

 

     3.3 Authority; No Violation. (a) The Company has full corporate power and

authority to execute and deliver this Agreement and to consummate the

transactions contemplated hereby. The execution and delivery of this Agreement

and the consummation of the transactions contemplated hereby have been duly and

validly approved by the Board of Directors of the Company (the "Company Board").

The Company Board has determined that this Agreement and the transactions

contemplated hereby are in the best interests of the Company and its

stockholders, has resolved to recommend that holders of Company Common Stock

vote in favor of the adoption of this Agreement and has directed that this

Agreement be submitted to the Company's stockholders for adoption, and the

Merger be submitted to the Company's stockholders for approval, at a duly held

meeting of such stockholders (the "Company Stockholders Meeting"), and, except

for the adoption of this Agreement and the approval of the Merger at such

meeting by the affirmative vote of the holders of a majority of the Company

Shares issued an outstanding and entitled to vote thereon ("Company Stockholder

Approval"), no other corporate proceedings on the part of the Company or vote by

the holders of any class or series of Company Capital Stock are necessary to

approve or adopt this Agreement or to consummate the transactions contemplated

hereby. This Agreement has been duly and validly executed and delivered by the

Company and (assuming due authorization, execution and delivery by the other

parties hereto) constitutes the valid and binding obligation of the Company,

enforceable against the Company in accordance with its terms (except as may be

limited by bankruptcy, insolvency, moratorium, reorganization or similar Laws

affecting the rights of creditors generally and the availability of equitable

remedies).

 

          (b) Neither the execution and delivery of this Agreement by the

Company nor the consummation by the Company of the transactions contemplated

hereby, nor compliance by the Company with any of the terms or provisions of

this Agreement, will (i) assuming that the Company Stockholder Approval is

obtained, violate any provision of the Company Charter or the Company Bylaws or

(ii) assuming that the consents, approvals and filings referred to in Section

3.4 are duly obtained and/or made, (A) violate any order, injunction or decree

issued by any court or agency of competent jurisdiction or other legal restraint

or prohibition (an "Injunction") or any federal, state, local or foreign laws,

statutes, ordinances, rules, regulations, judgments, orders, Injunctions,

decrees, arbitration awards, agency requirements, licenses and permits of all

Governmental Entities (each, a "Law" and collectively, "Laws") applicable to the

Company, any of the Company Subsidiaries or any of their respective properties

or assets or (B) violate, conflict with, result in a breach of any provision of

or the loss of any benefit under, constitute a default (or an event which, with

notice or lapse of time, or both, would constitute a default) under, result in

the termination of or a right of termination or cancellation under, accelerate

the performance required by, or result in the creation of any Lien upon any of

the respective properties or assets of the Company or any of the Company

Subsidiaries under, any of the terms, conditions or provisions of any note,

bond, mortgage, indenture, deed of trust, license, lease, agreement or other

instrument or obligation to which the Company or any of the Company

 

 

                                        12

<PAGE>

Subsidiaries is a party, or by which they or any of their respective properties

or assets may be bound or affected, except, in the case of clause (ii), for such

violations, conflicts, breaches, defaults, terminations, rights of termination

or cancellation, accelerations or Liens that would not, individually or in the

aggregate, reasonably be expected to have a Material Adverse Effect on the

Company.

 

     3.4 Consents and Approvals. Except for (i) the filing with the SEC of a

Joint Proxy Statement in definitive form relating to the Company Stockholders

Meeting and the Parent Stockholders Meeting (the "Joint Proxy Statement") and of

a registration statement on Form S-4 (the "Form S-4") in which the Joint Proxy

Statement will be included as a prospectus, and declaration of effectiveness of

the Form S-4, (ii) the filing of the Certificate of Merger with the Delaware

Secretary of State pursuant to the DGCL, (iii) any notices or filings under the

Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR

Act"), (iv) such filings and approvals as are required to be made or obtained

under the securities or "Blue Sky" laws of various states in connection with the

issuance of the shares of Parent capital stock pursuant to this Agreement, (v)

the Company Stockholder Approval and Parent Stockholder Approval, and (vi) the

consents or approvals listed in Section 3.4 of the Company Disclosure Schedule,

no consents or approvals of or filings or registrations with any federal, state,

local or foreign government, court of competent jurisdiction, administrative

agency, commission or other governmental authority or instrumentality (each, a

"Governmental Entity") are necessary in connection with (A) the execution and

delivery by the Company of this Agreement or (B) the consummation by the Company

of the Merger and the other transactions contemplated by this Agreement.

 

     3.5 Reports. The Company and each of the Company Subsidiaries have timely

filed all reports, registrations, schedules, forms, statements and other

documents, together with any amendments required to be made with respect

thereto, that they were required to file since July 22, 2004 with (i) the SEC,

(ii) any state or other federal regulatory authority (other than any taxing

authority, which is covered by Section 3.10), and (iii) any foreign regulatory

authority (other than any taxing authority, which is covered by Section 3.10)

(collectively, "Regulatory Agencies"), and have paid all fees and assessments

due and payable in connection therewith, except in each case under clauses (ii)

and (iii) where the failure to file such report, registration, schedule, form,

statement or other document, or to pay such fees and assessments, would not,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect on the Company. No Company SEC Report, as of the date of such

Company SEC Report, contained any untrue statement of a material fact or omitted

to state any material fact required to be stated therein or necessary in order

to make the statements made therein, in light of the circumstances in which they

were made, not misleading, except that information as of a later date (but

before the date of this Agreement) will be deemed to modify information as of an

earlier date. Since July 22, 2004, as of their respective dates, all Company SEC

Reports complied as to form in all material respects with the applicable

requirements of the Securities Act and the Exchange Act, and the rules and

regulations thereunder with respect thereto.

 

     3.6 Financial Statements. The Company has previously made available to

Parent copies of (i) the consolidated balance sheets of the Company and the

Company Subsidiaries as of December 31, 2004 and 2003, the related consolidated

statements of operations and cash flows for the years ended December 31, 2004

and December 31, 2003 and for the periods from

 

 

                                       13

<PAGE>

November 9 to December 31, 2002 and January 1 to November 8, 2002, and the

related consolidated statements of changes in stockholders' equity and

comprehensive loss for the years ended December 31, 2004 and December 31, 2003

and for the period from November 9 to December 31, 2002, as reported in the

Company's Annual Report on Form 10-K for the fiscal year ended December 31,

2004, including any amendments thereto filed with the SEC prior to the

Measurement Date (collectively, the "Company 2004 10-K"), filed with the SEC

under the Exchange Act, accompanied by the audit report of KPMG LLP, the

independent registered public accounting firm with respect to the Company for

such periods (such balance sheets and statements, the "Audited Company Financial

Statements"), and (ii) the unaudited condensed consolidated balance sheet of the

Company and the Company Subsidiaries as of June 30, 2005 and the related

condensed consolidated statements of operations and cash flows for the six-month

periods ended June 30, 2005 and 2004, as reported in the Company's Quarterly

Report on Form 10-Q for the quarterly period ended June 30, 2005, including any

amendments thereto filed with the SEC prior to the Measurement Date

(collectively, the "Company 10-Q") (such balance sheets and statements, the

"Unaudited Company Financial Statements" and, together with the Audited Company

Financial Statements, the "Company Financial Statements"). The consolidated

balance sheets of the Company (including the related notes, where applicable)

included in the Company Financial Statements fairly present in all material

respects the consolidated financial position of the Company and the Company

Subsidiaries as of the dates thereof, and the other financial statements

included in the Company Financial Statements (including the related notes, where

applicable) fairly present in all material respects the results of the

consolidated operations, cash flows and changes in stockholders' equity of the

Company and the Company Subsidiaries for the respective periods therein set

forth, subject in the case of the Unaudited Company Financial Statements to

normal year-end audit adjustments that are immaterial in nature and in amounts

consistent with past experience; each of such statements (including the related

notes, where applicable) complies in all material respects with the published

rules and regulations of the SEC with respect thereto; and each of the Company

Financial Statements (including the related notes, where applicable) has been

prepared in all material respects in accordance with U.S. generally accepted

accounting principles ("GAAP") consistently applied during the periods involved,

except, in each case, as indicated in such statements or in the notes thereto.

To the knowledge of the Company, there is no applicable accounting rule,

consensus or pronouncement that has been adopted by the SEC, the Financial

Accounting Standards Board, the Emerging Issues Task Force or any similar body

but is not in effect as of the date of this Agreement that, if implemented,

would reasonably be expected to have a Material Adverse Effect on the Company.

 

     3.7 Advisors' Fees. None of the Company, any Company Subsidiary or any of

their respective officers or directors has employed any broker or finder or

incurred any liability for any broker's fees, commissions or finder's fees in

connection with the Merger or related transactions contemplated by this

Agreement, other than Lehman Brothers Inc. and Merrill Lynch & Co. (the

"Company's Advisors"), which firms the Company retained pursuant to engagement

letters, copies of which have been provided to Parent.

 

     3.8 Absence of Certain Changes or Events. (a) Since June 30, 2005, no event

has occurred that has had or would reasonably be expected to have, individually

or in the aggregate, a Material Adverse Effect on the Company.

 

 

                                        14

<PAGE>

          (b) From June 30, 2005, through the date hereof, the Company and the

Company Subsidiaries have carried on their respective businesses in all material

respects in the ordinary course and have not taken any action or failed to take

any action that would have resulted in a breach of Section 5.2 had such section

been in effect since June 30, 2005.

 

          (c) The aggregate amount of payments permitted to be made under the

restricted payments covenant under each of the indentures governing the notes of

the Company and Dex Media West, LLC is at least $450 million and $200 million,

respectively.

 

     3.9 Legal Proceedings. (a) None of the Company or any of the Company

Subsidiaries is a party to any, and there are no pending or, to the knowledge of

the Company, threatened, legal, administrative, arbitral or other proceedings,

claims, actions or governmental or regulatory investigations or reviews of any

nature against the Company or any of the Company Subsidiaries, except as would

not, individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect on the Company.

 

          (b) There is no Injunction, judgment, or regulatory restriction

imposed upon the Company, any of the Company Subsidiaries or the assets of the

Company or any of the Company Subsidiaries that would, individually or in the

aggregate, reasonably be expected to have a Material Adverse Effect on the

Company.

 

     3.10 Taxes and Tax Returns. (a) Except as would not, individually or in the

aggregate, reasonably be expected to have a Material Adverse Effect on the

Company: (i) the Company and the Company Subsidiaries have timely filed all Tax

Returns required to be filed by them on or prior to the date of this Agreement

taking into account any extensions of time within which to file such Tax Returns

(all such returns being accurate and complete in all material respects) and have

paid all Taxes required to be paid by them other than Taxes that are not yet due

or that are being contested in good faith in appropriate proceedings; (ii) there

are no Liens for Taxes on any assets of the Company or the Company Subsidiaries

other than Liens for Taxes that are not yet due and payable; (iii) no deficiency

for any Tax has been asserted or assessed by a taxing authority against the

Company or any of the Company Subsidiaries which deficiency has not been paid or

is not being contested in good faith in appropriate proceedings; (iv) the

Company and the Company Subsidiaries have provided adequate reserves in their

financial statements for any Taxes that have not been paid; and (v) neither the

Company nor any of the Company Subsidiaries is a party to or is bound by any Tax

sharing, allocation or indemnification agreement or arrangement (other than such

an agreement or arrangement exclusively between or among the Company and the

Company Subsidiaries).

 

          (b) Within the past five years, neither the Company nor any of the

Company Subsidiaries has been a "distributing corporation" or a "controlled

corporation" in a distribution intended to qualify for tax-free treatment under

Section 355 of the Code.

 

          (c) Neither the Company nor any of the Company Subsidiaries has been a

party to a transaction that, as of the date of this Agreement, constitutes a

"listed transaction" for purposes of Section 6011 of the Code and applicable

Treasury Regulations thereunder (or a similar provision of state law). To the

knowledge of the Company, the Company has disclosed to Parent all "reportable

transactions" within the meaning of Treasury Regulation Section

 

 

                                       15

<PAGE>

1.6011-4(b) (or a similar provision of state law) to which it or any of the

Company Subsidiaries has been a party.

 

          (d) Neither the Company nor any of the Company Subsidiaries has any

liability for the Taxes of any person other than the Company or the Company

Subsidiaries under Treasury Regulation Section 1.1502-6 (or any similar

provision of state, local or foreign law), as a transferee or successor, by

contract, or otherwise.

 

          (e) Neither the Company nor any of the Company Subsidiaries will be

required to include any item of income in, or exclude any item of deduction

from, taxable income for any taxable period (or portion thereof) ending after

the Closing Date (except consistent with its treatment of such items in Tax

Returns for prior periods) as a result of any (i) change in method of

accounting, (ii) agreement with a Tax authority relating to Taxes, (iii)

installment sale or open transaction disposition or intercompany transaction

made on or prior to the Effective Time, (iv) the completed contract method of

accounting or other method of accounting applicable to long-term contracts (or

any comparable provisions of state, local or foreign law), or (v) prepaid amount

received prior to the Effective Time.

 

          (f) As used in this Agreement, the term "Tax" or "Taxes" means (i) all

federal, state, local and foreign income, excise, gross receipts, gross income,

ad valorem, profits, gains, property, capital, sales, transfer, use, payroll,

employment, severance, withholding, duties, intangibles, franchise, backup

withholding and other taxes, charges, levies or like assessments together with

all penalties and additions to tax and interest thereon and (ii) any liability

for Taxes described in clause (i) under Treasury Regulation Section 1.1502-6 (or

any similar provision of state, local or foreign Law), and the term "Tax Return"

means any return, filing, report, questionnaire, information statement or other

document required to be filed, including any amendments that may be filed, for

any taxable period with any taxing authority (whether or not a payment is

required to be made with respect to such filing).

 

     3.11 Employees. (a) As of the date of this Agreement, the Company

Disclosure Schedule sets forth a true and complete list of each material benefit

or compensation plan, program, fund, contract, arrangement or agreement,

including any material bonus, incentive, deferred compensation, vacation, stock

purchase, stock option, severance, employment, golden parachute, retention,

salary continuation, change of control, retirement, pension, profit sharing or

fringe benefit plan, program, fund, contract, arrangement or agreement of any

kind (whether written or oral, tax-qualified or non-tax qualified, funded or

unfunded, foreign or domestic, active, frozen or terminated) and any related

trust, insurance contract, escrow account or similar funding arrangement, that

is maintained or contributed to by the Company or any Company Subsidiary (or

required to be maintained or contributed to by the Company or any Company

Subsidiary) for the benefit of current or former directors, officers or

employees of, or consultants to, the Company and the Company Subsidiaries or

with respect to which the Company or the Company Subsidiaries may, directly or

indirectly, have any liability, as of the date of this Agreement (the "Company

Benefit Plans").

 

          (b) The Company has heretofore made available to Parent true and

complete copies of (i) each written Company Benefit Plan, (ii) the actuarial

report for each Company Benefit Plan (if applicable) for each of the last three

years, (iii) the most recent determination

 

 

                                       16

<PAGE>

letter from the Internal Revenue Service ("IRS") (if applicable) for each

Company Benefit Plan, (iv) the current summary plan description of each Company

Benefit Plan that is subject to the Employee Retirement Income Security Act of

1974, as amended ("ERISA"), (v) a copy of the description of each Company

Benefit Plan not subject to ERISA that is currently provided to participants in

such plan, (vi) a summary of the material terms of each unwritten Company

Benefit Plan, and (vii) the annual report for each Company Benefit Plan (if

applicable) for each of the last three years.

 

          (c) Except as would not, individually or in the aggregate, reasonably

be expected to have a Material Adverse Effect on the Company, (i) each of the

Company Benefit Plans has been operated and administered in compliance with its

terms and applicable Law, including ERISA and the Code, (ii) each of the Company

Benefit Plans intended to be "qualified" within the meaning of Section 401(a) of

the Code is so qualified, and there are no existing circumstances or any events

that have occurred that would reasonably be expected to adversely affect the

qualified status of any such Company Benefit Plan, and each such plan has a

favorable determination letter from the IRS to the effect that it is so

qualified or the applicable remedial amendment period has not expired and, if

the letter for such plan is not current, such plan is the subject of a timely

request for a current favorable determination letter or the applicable remedial

amendment period has not expired, (iii) with respect to each Company Benefit

Plan that is subject to Title IV of ERISA, the present value (as defined under

Section 3(27) of ERISA) of accumulated benefit obligations under such Company

Benefit Plan, based upon the actuarial assumptions used for funding purposes in

the most recent actuarial report prepared by such Company Benefit Plan's actuary

with respect to such Company Benefit Plan, did not, as of its latest valuation

date, exceed the then current value (as defined under Section 3(26) of ERISA) of

the assets of such Company Benefit Plan allocable to such accrued benefits, (iv)

no Company Benefit Plan that is an employee welfare benefit plan (including any

plan described in Section 3(1) of ERISA) (a "Welfare Plan") provides benefits

coverage, including death or medical benefits coverage (whether or not insured),

with respect to current or former employees or directors of the Company or the

Company Subsidiaries beyond their retirement or other termination of service,

other than (A) coverage mandated by applicable Law, (B) benefits the full cost

of which is borne by such current or former employee or director (or his or her

beneficiary), (C) coverage through the last day of the calendar month in which

retirement or other termination of service occurs, or (D) medical expense

reimbursement accounts, (v) no liability under Title IV of ERISA has been

incurred by the Company, the Company Subsidiaries or any trade or business,

whether or not incorporated, all of which together with the Company would be

deemed a "single employer" within the meaning of Section 414(b), 414(c) or

414(m) of the Code or Section 4001(b) of ERISA (a "Company ERISA Affiliate"),

that has not been satisfied in full, and no condition exists that presents a

material risk to the Company, the Company Subsidiaries or any Company ERISA

Affiliate of incurring a liability thereunder, (vi) no Company Benefit Plan is a

"multiemployer plan" (as such term is defined in Section 3(37) of ERISA) or a

"multiple employer plan" (as described in Section 413(c) of the Code), (vii)

none of the Company or the Company Subsidiaries or, to the knowledge of the

Company, any other Person, including any fiduciary, has engaged in a transaction

in connection with which the Company, the Company Subsidiaries or any Company

Benefit Plan would reasonably be expected to be subject to either a civil

penalty assessed pursuant to Section 409 or 502(i) of ERISA or a Tax imposed

pursuant to Section 4975 or 4976 of the Code, (viii) to the knowledge of the

Company, there are no pending, threatened or anticipated claims (other than

routine claims

 

 

                                       17

<PAGE>

for benefits) by, on behalf of or against any of the Company Benefit Plans or

any trusts, insurance contracts, escrow accounts or similar funding arrangements

related thereto, (ix) all contributions or other amounts required to be paid by

the Company or the Company Subsidiaries as of the Effective Time with respect to

each Company Benefit Plan in respect of current or former plan years have been

paid in accordance with Section 412 of the Code or accrued in accordance with

GAAP (as applicable) and (x) since December 31, 2004, no Company Benefit Plan

has been amended or modified in any material respect or adopted or terminated.

 

          (d) Neither the execution and delivery of this Agreement nor the

consummation of the transactions contemplated by this Agreement will (either

alone or in conjunction with any other event) (i) result in the Surviving

Corporation or any of its Subsidiaries being liable for any payment or benefit

(including non-deductible employee remuneration (described in Section 162(m) of

the Code), severance, retention, stay-put, change of control, unemployment

compensation, "excess parachute payment" (within the meaning of Section 280G of

the Code), tax gross-up, forgiveness of indebtedness or otherwise) becoming due

to any director, officer or employee of, or any consultant to, the Company or

any of the Company Subsidiaries from the Company or any of the Company

Subsidiaries under any Company Benefit Plan or otherwise, (ii) increase any

amounts or benefits otherwise payable or due to any such Person under any

Company Benefit Plan or otherwise, or (iii) result in any acceleration of the

time of payment or vesting of, or any requirement to fund or secure, any such

amounts or benefits (including any Company Stock Option or Company Stock-Based

Award) or result in any breach of or default under any Company Benefit Plan.

 

          (e) (i) There are no controversies relating to or arising out of a

collective bargaining relationship between the Company or any Company Subsidiary

and any union pending or, to the knowledge of the Company, threatened between

the Company or any Company Subsidiary and any of their respective employees,

which controversies would, individually or in the aggregate, have a Material

Adverse Effect on the Company, (ii) to the knowledge of the Company, as of the

date hereof there are not any organizational campaigns, petitions or other

activities or proceedings of any labor union to organize any such employees that

would, individually or in the aggregate, have a Material Adverse Effect on the

Company, (iii) neither the Company nor any Company Subsidiary has breached or

otherwise failed to comply with any provision of any collective bargaining or

other labor union contract applicable to persons employed by the Company or any

Company Subsidiary (including any obligation that the Company or any Company

Subsidiary can, will or may have in connection with a sale, merger or any other

like transaction) that would individually or in the aggregate, have a Material

Adverse Effect on the Company, and there are no material grievances outstanding

against the Company or any Company Subsidiary under any such agreement or

contract that would, individually or in the aggregate, have a Material Adverse

Effect on the Company, (iv) there are no unfair labor practice complaints

pending against the Company or any Company Subsidiary before the National Labor

Relations Board or any other Governmental Entity or any current union

representation questions involving employees of the Company or any Company

Subsidiary that would, individually or in the aggregate, have a Material Adverse

Effect on the Company, and (v) as of the date hereof, there is no strike,

slowdown, work stoppage or lockout, or, to the knowledge of the Company, threat

thereof by any union or significant group of union workers, by or with respect

to any employees of the Company or any Company Subsidiary.

 

 

                                        18

<PAGE>

          (f) The Company and each Company Subsidiary is in material compliance

with all applicable Laws relating to the employment of labor, including those

related to wages, hours, collective bargaining and the payment and withholding

of taxes and other sums as required by the appropriate Governmental Entity and

have withheld and paid to the appropriate Governmental Entity or are holding for

payment not yet due to such Governmental Entity all amounts required to be

withheld from employees of the Company or any Company Subsidiary and are not

liable for any arrears of wages, taxes, penalties or other sums for failure to

comply with any of the foregoing except for such failures that would not,

individually or in the aggregate, have a Material Adverse Effect on the Company.

The Company and each Company Subsidiary has paid in full to all employees or

adequately accrued for in accordance with GAAP consistently applied all wages,

salaries, commissions, bonuses, benefits and other compensation due to or on

behalf of such employees and there is no claim with respect to payment of wages,

salary or overtime pay that has been asserted or is now pending or threatened

before any Governmental Entity with respect to any persons currently or formerly

employed by the Company or any Company Subsidiary, that would, individually or

in the aggregate, have a Material Adverse Effect on the Company. Neither the

Company nor any Company Subsidiary is a party to, or otherwise bound by, any

consent decree with any Governmental Entity relating to employees or employment

practices. There is no charge or proceeding with respect to a violation of any

occupational safety or health standards that has been asserted or is now pending

or threatened with respect to the Company or any Company Subsidiary, that would,

individually or in the aggregate, have a Material Adverse Effect on the Company.

There is no charge of discrimination in employment or employment practices, for

any reason, including age, gender, race, religion or other legally protected

category, which has been asserted or is now pending or threatened before the

United States Equal Employment Opportunity Commission, or any other Governmental

Entity in any jurisdiction in which the Company or any Company Subsidiary has

employed or employ any person that would, individually or in the aggregate, have

a Material Adverse Effect on the Company.

 

     3.12 Internal Controls. The Company and the Company Subsidiaries have

designed and maintained a system of internal controls over financial reporting

(as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to

provide reasonable assurances regarding the reliability of financial reporting.

The Company (i) has designed and maintains disclosure controls and procedures

(as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that

material information required to be disclosed by the Company in the reports that

it files or submits under the Exchange Act is recorded, processed, summarized

and reported within the time periods specified in the SEC's rules and forms and

is accumulated and communicated to the Company's management as appropriate to

allow timely decisions regarding required disclosure and (ii) has disclosed to

the Company's auditors and the audit committee of the Company Board and Parent

(A) any significant deficiencies and material weaknesses in the design or

operation of internal controls over financial reporting that are reasonably

likely to adversely affect in any material respect the Company's ability to

record, process, summarize and report financial information and (B) any fraud,

whether or not material, that involves management or other employees who have a

significant role in the Company's internal controls over financial reporting.

 

     3.13 Compliance with Laws; Licenses. The businesses of each of the Company

and the Company Subsidiaries have been conducted in compliance with all Laws,

except where the

 

 

                                       19

<PAGE>

failure to so comply would not, individually or in the aggregate, reasonably be

expected to have a Material Adverse Effect on the Company. Each of the Company

and each Company Subsidiary is in possession of all governmental permits,

licenses, franchises, variances, exemptions, orders issued or granted by a

Governmental Entity and all other authorizations, consents, certificates of

public convenience and/or necessity and approvals issued or granted by a

Governmental Entity (collectively, "Licenses") necessary for each of the Company

or the Company Subsidiaries to own, lease and operate its properties or to carry

on its business as it is now being conducted, except where the failure to have,

or the suspension or cancellation of, any such License would not, individually

or in the aggregate, have a Material Adverse Effect on the Company. As of the

date of this Agreement, no suspension or cancellation of any such License is

pending or, to the knowledge of the Company, threatened, except where the

failure to have, or the suspension or cancellation of, any such License would

not, individually or in the aggregate, have a Material Adverse Effect on the

Company. Neither the Company nor any Company Subsidiary is in conflict with, or

in default, breach or violation of, any such License, except for any such

conflicts, defaults, breaches or violations that would not, individually or in

the aggregate, have a Material Adverse Effect on the Company.

 

     3.14 Certain Contracts. (a) Neither the Company nor any of the Company

Subsidiaries is a party to or bound by any contract, arrangement, commitment or

understanding (whether written or oral) (i) that is a "material contract" (as

such term is defined in Item 601(b)(10) of SEC Regulation S-K) to be performed

after the date of this Agreement that has not been made available to Parent

prior to the date hereof, (ii) that materially restricts the conduct of any

material line of business by the Company or, upon consummation of the Merger,

will materially restrict the ability of Parent following the Effective Time to

engage in any line of business material to the Company or, to the knowledge of

the Company, Parent, (iii) with or to a labor union or guild (including any

collective bargaining agreement) except for the Agreement, effective as of May

16, 1998, between the International Brotherhood of Electrical Workers, AFL-CIO,

Local 1269 and the Company, and the Agreement for Clerical, Production and Sales

Employees, effective October 16, 2003, between the Communications Workers of

America and Dex Media East, LLC, or (iv) a credit agreement or indenture to

which the Company or any Company Subsidiary is a party, guarantor or by which

any of them is bound and pursuant to which Indebtedness in excess of $5,000,000

of the Company and/or any Company Subsidiary is outstanding. Each contract,

arrangement, commitment or understanding of the type described in clauses (i),

(ii), (iii) and (iv) of this Section 3.14(a), whether or not set forth in the

Company Disclosure Schedule or made available to Parent in the case of clause

(i), is referred to as a "Company Contract," and neither the Company nor any of

the Company Subsidiaries knows of, or has received notice of, any violation of

any Company Contract by any of the other parties thereto that would,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect on the Company.

 

          (b) With such exceptions that would not, individually or in the

aggregate, reasonably be expected to have a Material Adverse Effect on the

Company, (i) each Company Contract is valid and binding on the Company or the

applicable Company Subsidiary, as applicable, and is in full force and effect,

(ii) the Company and each of the Company Subsidiaries has performed all

obligations required to be performed by it to date under each Company Contract,

and (iii) no event or condition exists that constitutes or, after notice or

lapse

 

 

                                       20

<PAGE>

of time or both, will constitute, a default on the part of the Company or any of

the Company Subsidiaries under any such Company Contract.

 

          (c) None of the confidentiality agreements or standstill agreements

the Company has entered into with a third party (or any agent thereof) that is

in effect on the date hereof contains any exclusivity or standstill provisions

that are or will be binding on the Company or any Company Subsidiary or, after

the Effective Time, the Parent or any Parent Subsidiary.

 

     3.15 Agreements with Regulatory Agencies. Neither the Company nor any of

the Company Subsidiaries is subject to any material cease-and-desist or other

material order or enforcement action issued by, or is a party to any material

written agreement, consent agreement or memorandum of understanding with, or is

a party to any material commitment letter or similar undertaking to, or is

subject to any material order or directive by, or has been ordered to pay any

material civil money penalty by, any Regulatory Agency or other Governmental

Entity (other than a taxing authority, which is covered by Section 3.10), other

than those of general application that apply to similarly situated directory

publication companies or their Subsidiaries (each item in this sentence, whether

or not set forth in the Company Disclosure Schedule, a "Company Regulatory

Agreement"), nor has the Company or any of the Company Subsidiaries been advised

in writing since January 1, 2004 by any Regulatory Agency or other Governmental

Entity that it is considering issuing, initiating, ordering, or requesting any

such Company Regulatory Agreement.

 

     3.16 Undisclosed Liabilities. Except for those liabilities that are

reflected or reserved against on the Company's condensed consolidated balance

sheet or disclosed in the notes to the Unaudited Company Financial Statements,

in each case included in the Company 10-Q, and for liabilities incurred in the

ordinary course of business consistent with past practice since June 30, 2005,

since such date, neither the Company nor any of the Company Subsidiaries has

incurred any liability of any nature whatsoever (whether absolute, accrued,

contingent or otherwise and whether due or to become due and including any

off-balance sheet loans, financings, indebtedness, make-whole or similar

liabilities or obligations) that would, individually or in the aggregate,

reasonably be expected to have a Material Adverse Effect on the Company.

 

     3.17 Environmental Liability. There are no pending or, to the knowledge of

the Company, threatened legal, administrative, arbitral or other proceedings,

claims, actions, causes of action, private environmental investigations or

remediation activities, or governmental investigations, requests for information

or notices of violation of any nature seeking to impose, or that are reasonably

likely to result in the imposition, on the Company or any of the Company

Subsidiaries, of any liability or obligation arising under common law or under

any local, state or federal environmental statute, regulation, permit or

ordinance including the Comprehensive Environmental Response, Compensation and

Liability Act of 1980, as amended ("CERCLA"), which liability or obligation

would, individually or in the aggregate, reasonably be expected to have a

Material Adverse Effect on the Company. To the knowledge of the Company, there

is no reasonable basis for any such proceeding, claim, action, investigation or

remediation that would impose any liability or obligation that would,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect on

 

 

                                        21

<PAGE>

the Company. Neither the Company nor any of the Company Subsidiaries is subject

to any agreement, order, judgment, decree, directive or Lien by or with any

Governmental Entity or third party with respect to any environmental liability

or obligation that would, individually or in the aggregate, reasonably be

expected to have a Material Adverse Effect on the Company.

 

     3.18 Real Property.

 

          (a) Neither the Company nor any Company Subsidiary owns any parcel of

real property that is material to the business of the Company and the Company

Subsidiaries, taken as a whole.

 

          (b) Section 3.18(b) of the Company Disclosure Schedule lists by

address each material parcel of real property leased or subleased by the Company

or any Company Subsidiary that is currently used in and material to the conduct

of the business of the Company and the Company Subsidiaries, taken as a whole

(the "Company Leased Properties"), and any material guaranty given by the

Company or any Company Subsidiary in connection therewith. The Company or one of

its Subsidiaries has a valid leasehold interest in all of the Company Leased

Properties, free and clear of all Liens, except (i) Liens for current taxes and

assessments not yet past due, (ii) inchoate mechanics' and materialmen's Liens

for construction in progress, (iii) workmen's, repairmen's, warehousemen's and

carriers' Liens arising in the ordinary course of business of the Company or

such Company Subsidiary consistent with past practice, and (iv) all Liens and

other imperfections of title (including matters of record) and encumbrances that

do not materially interfere with the conduct of the business of the Company and

the Company Subsidiaries, taken as a whole, or as have not had, and would not,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect (collectively, "Permitted Liens"). Except as has not had, and

would not, individually or in the aggregate, reasonably be expected to have a

Material Adverse Effect on the Company, the Company or one of the Company

Subsidiaries has the right to the use and occupancy of the Company Leased

Properties, subject to the terms of the applicable leases and subleases relating

thereto and Permitted Liens.

 

     3.19 State Takeover Laws; Company Rights Agreement. (a) The Company Board

has approved this Agreement, the Company Sponsors Support Agreement and the

transactions contemplated hereby and thereby as required to render inapplicable

to such agreements and transactions the restrictions set forth in Section 203 of

the DGCL, and, to the knowledge of the Company, there are no other similar

"takeover" or "interested stockholder" law applicable to the transactions

contemplated by this Agreement (any such laws, "Takeover Statutes").

 

          (b) The Company has taken all action, if any, necessary or appropriate

so that (i) the execution of this Agreement and the consummation of the

transactions contemplated hereby do not and will not result in the ability of

any Person to exercise any "Rights" under the Rights Agreement (the "Company

Rights Agreement"), dated as of July 27, 2004, between the Company and Wachovia

Bank, N.A., (ii) neither Parent nor any of its affiliates is or will become an

"Acquiring Person" under the Company Rights Agreement, (iii) neither a

"Distribution Date" or "Shares Acquisition Date" under the Company Rights

Agreement will occur by reason of the approval, execution, delivery or

announcement of this Agreement or the consummation of the transactions

contemplated hereby, including the Merger, and (iv) that the Company Rights

Agreement will terminate upon consummation of the Merger.

 

 

                                       22

<PAGE>

     3.20 Intellectual Property.

 

          (a) Section 3.20(a) of the Company Disclosure Schedule lists all

material (i) issued patents and pending patent applications, (ii) trademark and

service mark registrations and applications for registration thereof, (iii)

copyright registrations and applications for registration thereof, and (iv)

internet domain name registrations, in each case that are that are owned by the

Company or any of the Company Subsidiaries and are material to the business of

the Company and the Company Subsidiaries, taken as a whole. Except as disclosed

in Section 3.20(a) of the Company Disclosure, with respect to each item that is

required to be identified therein: (A) the Company or the applicable Company

Subsidiary is the sole owner and possesses all material right, title and

interest in and to the item in the listed country or jurisdiction, free and

clear of any Liens, the absence of such interest which would not, individually

or in the aggregate, reasonably be expected to have a Material Adverse Effect of

the Company and (B) neither the Company nor any Company Subsidiary has received

written notice of any pending or threatened action, suit, proceeding, hearing,

investigation, charge, complaint, claim or demand that challenges the legality,

validity, enforceability, registrations, use or ownership of the item in the

listed country or jurisdiction that would, individually or in the aggregate,

reasonably be expected to have a Material Adverse Effect on the Company.

 

          (b) Except as disclosed in Section 3.20(b) of the Company Disclosure

Schedule, to the knowledge of the Company, neither the Company nor any Company

Subsidiary is infringing or misappropriating any material Intellectual Property

rights of third parties in connection with the operation of the Business that

would, individually or in the aggregate, reasonably be expected to have a

Material Adverse Effect on the Company. Except as disclosed in Section 3.20(b)

of the Company Disclosure Schedule, neither the Company nor any Company

Subsidiary has received any written charge, complaint, claim, demand or notice

during the past two years (or earlier, if not resolved) alleging any such

infringement or misappropriation that would, individually or in the aggregate,

reasonably be expected to have a Material Adverse Effect on the Company. To the

knowledge of the Company, except as disclosed in Section 3.20(b) of the Company

Disclosure Schedule, during the past two years (or earlier, if not resolved) no

third party has interfered with, infringed upon, misappropriated or otherwise

come into conflict with any Intellectual Property rights of the Company or any

Company Subsidiary which interference, infringement, misappropriation or

conflict would, individually or in the aggregate, reasonably be expected to have

a Material Adverse Effect on the Company. For purposes of this Agreement,

"Intellectual Property" means (i) all inventions, all patents and patent

applications, (ii) all trademarks, service marks, trade dress, logos, brand

names, trade names and domain names and all registrations of and applications to

register the foregoing, (iii) all copyrightable works, all copyrights and all

registrations of and applications to register the foregoing, (iv) all trade

secrets, know how and confidential business information, and (v) all other

proprietary rights that are, in the case of clauses (i) through (v), material to

the business of the Company and the Company Subsidiaries, taken as a whole.

 

          (c) The Company's and the Company Subsidiaries' use and dissemination

of any data and information concerning users of their web sites is in compliance

with all applicable privacy policies, terms of use, and Laws, the violation of

which would not, individually or in the aggregate, reasonably be expected to

have a Material Adverse Effect on the Company. The transactions contemplated

hereunder will not violate any privacy policy, terms of use, or Laws

 

 

                                       23

<PAGE>

relating to the use, dissemination or transfer of such data or information,

except for such violations which would not, individually or in the aggregate,

reasonably be expected to have a Material Adverse Effect on the Company.

 

     3.21 Reorganization. As of the date of this Agreement, the Company is not

aware of any agreement, plan, fact or circumstance that could reasonably be

expected to prevent the Merger from qualifying as a "reorganization" within the

meaning of Section 368(a) of the Code.

 

     3.22 Opinions. Prior to the execution of this Agreement, the Company has

received opinions from Lehman Brothers Inc. and Merrill Lynch & Co., copies of

which have been or will promptly be provided to Parent, to the effect that as of

the date thereof and based upon and subject to the matters set forth therein the

Merger Consideration to be received by holders of Company Common Stock is fair

from a financial point of view to such holders. Such opinions have not been

amended or rescinded as of the date of this Agreement.

 

     3.23 Company Information. The information relating to the Company and the

Company Subsidiaries that is provided by the Company or its representatives for

inclusion in the Joint Proxy Statement and the Form S-4, or in any other

document filed with any other Regulatory Agency in connection with the

transactions contemplated by this Agreement, will not contain any untrue

statement of a material fact or omit to state a material fact necessary to make

the statements therein, in light of the circumstances in which they are made,

not misleading. The Joint Proxy Statement (except for such portions thereof that

relate only to Parent or any of the Parent Subsidiaries) will comply in all

material respects with the provisions of the Exchange Act and the rules and

regulations thereunder.

 

     3.24 Affiliate Transactions. As of the date hereof, there are no

transactions, contracts, arrangements, commitments or understandings between the

Company or any of the Company Subsidiaries, on the one hand, and any of the

Company's affiliates (other than wholly owned Company Subsidiaries), on the

other hand, that would be required to be disclosed by the Company under Item 404

of Regulation S-K under the Securities Act (the "Company S-K 404 Arrangements").

 

      ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

     Except as disclosed in (x) a publicly available final registration

statement, prospectus, report, form, schedule or definitive proxy statement

filed since January 1, 2005 by Parent with the SEC pursuant to the Securities

Act or the Exchange Act (collectively, the "Parent SEC Reports") and prior to

the Measurement Date, but excluding any risk factor disclosure contained in any

such Parent SEC Report under the heading "Risk Factors" or "Forward-Looking

Statements," or (y) the disclosure letter (the "Parent Disclosure Schedule")

delivered by Parent to the Company prior to the execution of this Agreement

(which letter sets forth items of disclosure with specific reference to the

particular Section or subsection of this Agreement to which the information in

the Parent Disclosure Schedule relates; provided, however, that any information

set forth in one section of the Parent Disclosure Schedule will be deemed to

apply to each other Section or subsection of this Agreement to which its

relevance is reasonably apparent; provided,

 

 

                                       24

<PAGE>

further, that, notwithstanding anything in this Agreement to the contrary, the

inclusion of an item in such schedule as an exception to a representation or

warranty will not be deemed an admission that such item represents a material

exception or material fact, event or circumstance or that such item has had or

would reasonably be expected to have a Material Adverse Effect on Parent),

Parent and Merger Sub jointly and severally represent and warrant to the Company

as follows:

 

     4.1 Corporate Organization. (a) Parent is a corporation duly organized,

validly existing and in good standing under the laws of the State of Delaware.

Parent has the corporate power and authority to own or lease all of its

properties and assets and to carry on its business as it is now being conducted,

and is duly licensed or qualified to do business in each jurisdiction in which

the nature of the business conducted by it or the character or location of the

properties and assets owned or leased by it makes such licensing or

qualification necessary, except where the failure to be so licensed or qualified

would not, individually or in the aggregate, reasonably be expected to have a

Material Adverse Effect on Parent.

 

          (b) True and complete copies of the Restated Certificate of

Incorporation of Parent, as amended through, and as in effect as of, the date of

this Agreement (including any certificates of designation thereto) (the "Parent

Charter"), and the Amended and Restated By-Laws of Parent, as amended through,

and as in effect as of, the date of this Agreement (the "Parent Bylaws"), have

previously been made available to the Company.

 

          (c) Each Parent Subsidiary (i) is duly organized and validly existing

under the laws of its jurisdiction of organization, (ii) is duly qualified to do

business and in good standing in all jurisdictions (whether federal, state,

local or foreign) where its ownership or leasing of property or the conduct of

its business requires it to be so qualified, and (iii) has all requisite

corporate power and authority to own or lease its properties and assets and to

carry on its business as now conducted, except for such variances from the

matters set forth in any of clauses (i), (ii) or (iii) as would not,

individually or in the aggregate, reasonably be expected to have a Material

Adverse Effect on Parent.

 

     4.2 Capitalization. (a) As of the date of this Agreement, the authorized

Parent capital stock consists of (i) 400,000,000 shares of Parent common stock,

of which, as of the Measurement Date, 31,856,812 shares were issued and

outstanding (the "Parent Common Stock"), (ii) 10,000,000 shares of Parent

Convertible Cumulative Preferred Stock, of which, as of the Measurement Date,

100,301 shares were issued and outstanding (the "Parent Convertible Preferred

Stock"), and (iii) 400,000 shares of Series B Participating Cumulative Preferred

Stock, of which, as of the Measurement Date, no shares were issued and

outstanding (the "Series B Preferred Stock" and, together with the Parent Common

Stock and the Parent Convertible Preferred Stock, the "Parent Capital Stock").

As of the Measurement Date, no more than 19,765,082 shares of Parent's capital

stock were held in Parent's treasury. As of the Measurement Date, no shares of

Parent Capital Stock were reserved for issuance except for (i) 5,249,895 shares

of Parent Common Stock reserved for issuance upon the exercise of Parent Stock

Options or for other awards based on Parent Common Stock (the "Parent

Stock-Based Awards") issued or issuable pursuant to the Parent Stock Plans, (ii)

6,000,000 shares of Parent Common Stock reserved for issuance upon conversion of

shares of Parent Convertible Preferred Stock, and (iii) 1,650,000 shares of

Parent Common Stock reserved for issuance upon exercise of the Warrant

Agreements, dated as of November 25, 2002 and January 3,

 

 

                                       25

<PAGE>

2003, among Parent and the GS Funds. All of the issued and outstanding shares of

Parent Capital Stock have been duly authorized and validly issued and are fully

paid, nonassessable and free of preemptive rights, with no personal liability

attaching to the ownership thereof. As of the date of this Agreement, except as

set forth above or in the last sentence of this Section 4.2(a), or pursuant to

this Agreement, the Registration Rights Agreement, dated as of November 25,

2002, among Parent and the GS Funds, the Preferred Stock and Warrant Purchase

Agreement, dated as of September 21, 2002, among Parent and the GS Funds, as

amended, the Parent Stock Plans and the Parent Charter, there are no outstanding

shares of capital stock, securities convertible into shares of Parent Common

Stock or other voting securities of Parent, and Parent does not have and is not

bound by any outstanding subscriptions, options, warrants, calls, commitments,

preemptive rights, redemption obligations or agreements of any character calling

for the purchase, issuance or registration of any shares of Parent's capital

stock or any other equity securities of Parent or any securities representing

the right to purchase or otherwise receive any shares of Parent's capital stock.

From and after the Measurement Date through the date hereof, Parent has not

issued or awarded any Parent Capital Stock, Parent Stock Options or Parent

Stock-Based Awards (other than upon the exercise or satisfaction of Parent Stock

Options or Parent Stock-Based Awards or the conversion of convertible

securities, in each case outstanding as of the Measurement Date).

 

          (b) As of the date of this Agreement, no bonds, debentures, notes or

other indebtedness of Parent having the right to vote on any matters on which

stockholders may vote ("Parent Voting Debt") are issued or outstanding.

 

          (c) All of the issued and outstanding shares of capital stock or other

equity ownership interests of each "significant subsidiary" (as such term is

defined under Regulation S-X of the SEC) of Parent are owned by Parent, directly

or indirectly, free and clear of any Liens and free of any restriction on the

right to vote, sell or otherwise dispose of such capital stock or other equity

ownership interest (other than restrictions under applicable securities Laws),

and all of such shares or equity ownership interests are duly authorized and

validly issued and are fully paid, nonassessable and free of preemptive rights.

No such significant subsidiary is bound by any outstanding subscriptions,

options, warrants, calls, commitments or agreements of any character calling for

the purchase or issuance of any shares of capital stock or any other equity

security of such significant subsidiary or any securities representing the right

to purchase or otherwise receive any shares of capital stock or any other equity

security of such significant subsidiary. Except for the capital stock or other

equity ownership interests of the Parent Subsidiaries, as of the date of this

Agreement, Parent does not beneficially own directly or indirectly any capital

stock, membership interest, partnership interest, joint venture interest or

other equity interest in any Person that constitutes a Substantial Investment.

 

     4.3 Authority; No Violation. (a) Parent has full corporate power and

authority to execute and deliver this Agreement and to consummate the

transactions contemplated hereby. The execution and delivery of this Agreement

and the consummation of the transactions contemplated hereby have been duly and

validly approved by the Board of Directors of Parent (the "Parent Board"). The

Parent Board has determined that this Agreement and the transactions

contemplated hereby are in the best interests of Parent and its stockholders,

has resolved to recommend that holders of Parent Common Stock vote in favor of

the approval of this Agreement, the Sponsor Stockholders Agreements and the

transactions contemplated

 

 

                                        26

<PAGE>

hereby and thereby and has directed that this Agreement and the Sponsor

Stockholders Agreements be submitted to Parent's stockholders for approval at a

duly held meeting of such stockholders (the "Parent Stockholders Meeting"), and,

except for (i) the approval of t