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EXHIBIT 10.01
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 19th day of May, 1998 (the "Closing Date"), by and among IXC
Internet Services, Inc., a Delaware corporation ("IXC"), Grumman Hill
Investments III, L.P., a Delaware limited partnership ("Grumman Hill", and,
together with IXC, the "Purchasers"), AppliedTheory Communications, Inc., a
New York corporation (the "Company"), XXXXXXxx.xxx, Inc. ("NYSERNet") and
Xxxxxxx Xxxxxxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxx and Xxxx Xxxx (the
"Management Stockholders").
WITNESSETH
WHEREAS, Purchasers desire to purchase, and the Company and NYSERNet
desire to sell, for the purchase price and upon the terms and subject to the
conditions of this Agreement, certain shares of common stock of the Company from
the persons named and in the amounts set forth on Exhibit A hereto (the "Initial
Shares"); and
WHEREAS, the parties desire to enter into certain other agreements
regarding future purchases by Purchasers and sales of shares of common stock of
the Company by the Management Stockholders and other stockholders of the Company
(the "Option Shares") in the amounts set forth on Exhibit A attached hereto;
and to enter into other agreements referred to herein (the "Ancillary
Agreements") in connection with such purchases and sales.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
respective representations, warranties, covenants, agreements and conditions
contained herein, the sufficiency of which is hereby acknowledged, the parties,
intending to be legally bound, agree as follows:
ARTICLE I
AGREEMENTS
1.1. Purchase and Sale of Stock. On the Closing Date, upon the terms
and subject to the conditions of this Agreement, the Company shall issue, sell,
assign, transfer and deliver, as applicable, and NYSERNet shall sell, assign,
transfer and deliver, the Initial Shares to Purchasers (two-thirds to IXC and
one-third to Grumman Hill) and Purchasers shall purchase and acquire the Initial
Shares from the Company and NYSERNet.
1.2. Purchase Price. The purchase price for the sale, assignment,
transfer and delivery of the 880,000 Initial Shares to Purchasers (the "Purchase
Price") is $22.0290 per share for an aggregate purchase price for all the
Initial Shares of $19,385,520. The Purchase Price shall be payable by Purchasers
(two-thirds by IXC and
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one-third by Grumman Hill) to the Company and NYSERNet in cash by wire transfer
to each of their respective accounts, in the amounts set forth opposite each of
their respective names on Exhibit A hereto, which amounts, in the aggregate,
shall be equal to the aggregate Purchase Price.
1.3. Amendment to By-laws. On the Closing Date, the Company shall adopt
By-laws in the form attached hereto as Exhibit B.
1.4. Joint Marketing Agreement. IXC and the Company agree to work
together in good faith to negotiate, on mutually acceptable terms, an agreement
(the "Joint Marketing Agreement") to cover the resale by each company of the
others' products and services.
1.5. Option Agreements. On the Closing Date, the Purchasers and certain
stockholders of the Company as set forth on Exhibit A hereto shall enter into
and deliver an Option Agreement substantially in the form of Exhibit C hereto
with respect to the Option Shares. Within ten (10) business days after the
Closing Date, the Purchasers shall offer all other stockholders of the Company
the right to sell up to an aggregate of 20,000 of their shares to the Purchasers
by executing an Option Agreement with the Purchasers.
1.6. Other Agreements. On the Closing Date, the Purchasers, the
Company, NYSERNet and the Stockholders shall enter into and deliver (i) that
certain Stockholders Agreement substantially in the form of Exhibit D hereto and
(ii) that certain Registration Rights Agreement substantially in the form of
Exhibit E hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY, MANAGEMENT AND NYSERNET
The Company and the Management Stockholders hereby represent and
warrant to Purchasers as follows:
2.1. Company's Organization, Good Standing, Capitalization. The
Company is a corporation, duly organized, validly existing and in good standing
under the laws of the State of New York. The Company has all requisite power and
authority to carry on its business as it is now being conducted, and is duly
qualified to do business as a foreign entity and is in good standing in each
jurisdiction in which such qualification is necessary under applicable law with
respect to the business presently conducted by the Company (the "business"),
except where the failure to be so qualified would not have a material adverse
effect on the business, financial condition, results of operations or prospects
of the Company taken as a whole (a "Material Adverse Effect"). True, complete
and current copies of the Certificate of Incorporation, Bylaws and stock ledger
of the Company as of the date of this Agreement have been delivered to
Purchasers and no amendment or modification has been made thereto.
As of the date hereof, the authorized capital stock of the Company
consists of (i) 75,000 shares of the Company's preferred stock, $.01 par value
per share (the
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"Preferred Stock"), of which 15,000 shares are issued and outstanding and (ii)
2,500,000 shares of the Company's common stock, $.01 par value per share (the
"Common Stock"), of which 1,439,475 shares are issued and outstanding. The
number of outstanding shares of Preferred Stock and Common Stock are hereinafter
referred to as the "Outstanding Shares." All of the Outstanding Shares have been
duly authorized and validly issued and are fully paid and non-assessable and
free of preemptive rights with respect thereto and were issued in compliance
with all applicable securities laws. There are no voting trusts or other
agreements, arrangements or understandings with respect to the voting of the
Common Stock to which the Company, any Stockholder or any other person is a
party. Except as set forth in Schedule 2.1 hereto, there are no preemptive
rights, registration rights, subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of any character
relating to issued or unissued shares of Common Stock or other securities of the
Company and there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire or sell, issue or otherwise transfer any
outstanding securities thereof.
Schedule 2.1 hereto sets forth the record ownership of all the
outstanding shares and options.
2.2. Authority; Execution; Delivery. The Company has full power and
authority to enter into and perform its obligations under this Agreement and
each of the Ancillary Agreements to be executed or delivered by it, and to sell
the shares to be sold by the Company pursuant to this Agreement (the "Shares")
in accordance with the terms hereof so as to vest in Purchasers on the Closing
Date good and marketable title to the Shares, free and clear of any claim, lien,
pledge, option, charge, security interest or encumbrance of any nature
whatsoever (collectively, "liens"). The execution, delivery and performance of
this Agreement by the Company has been duly and effectively authorized by all
necessary corporate or other organizational action. Except as set forth on
Schedule 2.2 hereof, no other corporate or other organizational proceedings on
the part of the Company are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors rights
in general, moratorium laws or by general principles of equity.
2.3. Consents; No Violation, Etc. (a) Except as reflected in Schedule
2.3(a), no authorization, consent, approval, license, exemption by filing or
registration with any court, arbitrator or governmental, administrative or
self-regulatory authority, is or will be necessary in connection with the entry
into, execution, delivery and performance of this Agreement or any of the
documents relating to the transactions contemplated hereunder by the Company, or
for the consummation of the transactions contemplated hereby and thereby.
(b) Except as set forth on Schedule 2.3(b), neither the execution and
delivery of this Agreement, the other agreements contemplated hereby, the
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consummation of the transactions contemplated herein or therein, nor compliance
by the Company with any of the provisions hereof or thereof will (with or
without the giving of notice or the passage of time) (i) violate, conflict with,
result in a breach of, constitute a default under, or result in the creation of
any lien upon the assets, under any of the terms, conditions or provisions of
(A) the certificate of incorporation of the Company, (B) any note, bond,
mortgage, indenture, deed of trust, or any license, agreement, or any other
instrument or obligation to which the Company is a party, or by which the
Company or any of the Company's assets or properties may be bound or affected,
or (ii) violate any judgment, order, writ, injunction, decree, statute, law,
rule or regulation applicable to the Company or any of the Company's assets or
properties.
2.4. Financial Statements. Attached hereto as Schedule 2.4 are the
financial statements of the Company at and for the fiscal year ended December
31, 1997 (the "Financial Statements"). Except as disclosed on Schedule 2.4, such
Financial Statements: (a) have been prepared in accordance with the books and
records of the Company; (b) have been prepared in accordance with GAAP
consistently applied throughout the period covered thereby; (c) fairly present
the financial condition and results of operations of the Company's business as
of the date thereof and for the period covered therein; and (d) contain and
reflect all necessary adjustments and accruals, subject to normal year-end
adjustments, for a fair presentation of the financial condition and the results
of operations of the business as of the date thereof and for the period covered
by such Financial Statements.
2.5. Absence of Undisclosed Liabilities and Obligations. Except as set
forth on Schedule 2.5, to the best of the Company's knowledge, the Company has
no liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) other than (a) liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business since the date of the Financial Statements and (b) liabilities and
obligations specifically disclosed on a Schedule hereto.
2.6. Absence of Certain Changes or Events. Except as disclosed on
Schedule 2.6, since the date of the Financial Statements, there has not been
any:
(a) change in the business which has or is reasonably likely to result
in a Material Adverse Effect;
(b) change in the shares of outstanding capital stock, issuance of any
security convertible into capital stock or any declaration, setting aside,
or payment of any dividend or other distribution (whether in cash,
securities, property or otherwise) in respect of the Company's capital
stock;
(c) increase in the compensation payable or to become payable by the
Company in connection with the business to any of its current or former
officers, directors, employees, consultants or agents (collectively, the
"Personnel") or any increase of general applicability in the compensation
payable to Personnel (other than pursuant to existing corporate policies,
practices and procedures) or any amendment to any Employee Plan or the
adoption of any new Employee Plan, as defined in Section 2.13, that would
increase the benefits or rights of Personnel
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participating under such Plans;
(d) significant labor trouble or any material controversy or
unsettled grievance pending or, to the best of the Company's knowledge,
threatened between the Company and any Personnel or a collective bargaining
organization representing or seeking to represent Personnel;
(e) sale, assignment or transfer of any material asset or any
conducting of business other than in the ordinary course;
(f) waiver of any material rights of the Company with respect to the
Company's business whether or not in the ordinary course of business;
(g) material liability or loss incurred with respect to any of the
Company's assets or the operation of the business, except liabilities
incurred in the ordinary course of business consistent with past practice
and operating losses consistent with the Company's business plan;
(h) any capital expenditure or execution of any lease with respect to
any of the assets or any aspect of the business, or any incurring of
liability therefor, requiring any payment or payments in excess of $10,000
individually or $250,000 in the aggregate;
(i) borrowing or lending of money by or pledging the credit of the
business or guaranteeing of any indebtedness of others by the Company or
default with respect to, or failure to pay, any material obligation of the
Company;
(j) failure to operate the business in the ordinary course so as to
preserve the business intact and to preserve the goodwill of the business'
suppliers, customers and others having business relations with it;
(k) loss of service of any Personnel that is or are material,
individually or in the aggregate, to the conduct of the business;
(l) material change in accounting practice of the Company with respect
to the business, except as required by GAAP;
(m) material cancellations by any supplier, customer or contractor with
respect to the business;
(n) any agreement, arrangement or understanding by the Company to do
any of the foregoing.
2.7. Taxes. (a) For purposes of this Agreement, the term "Tax" means
any net or gross income, gross receipts, sales, use, rental, value added, ad
valorem, transfer, turnover, franchise, profits, license, withholding, payroll,
employment, excise, capital, severance, stamp, occupation, premium, property or
windfall profits tax, alternative or add-on minimum tax, customs, duty or other
tax, fee, assessment or charge
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of any kind whatsoever, together with any interest and any penalty, fine,
addition to tax or additional amount imposed by any governmental department,
court or other authority, whether domestic or foreign.
(b) For purposes of this Agreement, the term "Tax Return" means any
report, return, declaration, statement, form, extension or other document filed
or required to be filed with any federal, state, local or other governmental
department, court or other authority in respect of Taxes.
(c) Except as set forth on Schedule 2.7(c), all Tax Returns required to
be filed on or before the Closing Date by or on behalf of the Company have been
or will be timely filed on or before the Closing Date. All such Tax Returns were
(or to the extent not yet filed will be) true, complete and correct in all
material respects and filed on a timely basis.
(d) The Company has complied (and until the Closing Date will comply)
in all material respects with the provisions of the Code relating to the payment
and withholding of Taxes, including without limitation, the withholding and
reporting requirements under Sections 1441 through 1464, 3401 through 3406, and
6041 and 6049 of the Code, as well as similar provisions under any other laws,
and has, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required to be so paid.
(e) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency and there are no outstanding deficiencies, assessments, or written
proposals for the assessment of any amount of Taxes proposed, asserted or
assessed against the Company.
(f) The Company has established on its books and records reserves
adequate to pay all Taxes attributable to periods prior to the Closing Date and
not yet due and payable in accordance with GAAP.
(g) There are no liens for Taxes (other than for current Taxes not yet
due and payable) on the Company's assets.
2.8. Accounts Receivable. Except as set forth on Schedule 2.8, the
Company's accounts receivable arose out of the sale of services in the ordinary
course of the business, have been billed or invoiced in the ordinary course of
the business in accordance with all applicable laws, regulations and
administrative rulings and procedures, represent bona fide indebtedness of the
applicable account debtor not subject to defense, set-off or counterclaim and
are collectible in full, net of the reserves set forth in the books of the
Company.
2.9. Properties. The structures and equipment owned, operated or leased
by the Company are in good operating condition and repair (ordinary wear and
tear, excepted), and are in conformity in all material respects with all
applicable laws, ordinances, orders, regulations and other requirements
(including applicable zoning,
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environmental, occupational safety and health laws and regulations) presently in
effect or, to the Company's knowledge, presently scheduled to take effect.
2. 10. Intellectual Property. (a) All domestic and foreign patents,
patent applications, trademarks, trademark registrations, servicemarks, trade
names, registered copyrights and licenses with respect to the foregoing
("Intellectual Property"), owned in whole or in part, related to or used by the
Company and that relate to and are used by the business are set forth on
Schedule 2.10(a).
(b) All registration and maintenance fees that have become due and
payable in respect of any grant or registration of any Intellectual Property
have been paid and no act has been done or omitted to be done by the Company, or
any licensee thereof or any holder of any rights with respect thereto, to impair
or dedicate to the public or entitle any U.S. or foreign governmental authority
or any other person to cancel, forfeit, modify or consider abandoned any
Intellectual Property, or to give any person any rights with respect thereto,
and all of the Company's rights in the Intellectual Property are valid,
enforceable and free of defects. The Company has no knowledge of any facts or
claims which cause or might cause any patent to be invalid or unenforceable, and
the Company has not received any notice of an intention on the part of any
person to assert such a claim. Except as set forth on Schedule 2.10(b), the
Company is the sole and exclusive owner of the Intellectual Property. Except as
set forth on Schedule 2.10(b), the Company owns or otherwise has the right to
use any and all Intellectual Property that is used in or is necessary for the
conduct of its business free and clear of any lien, royalty or other payment
obligations.
(c) The Company has not received any notice of any conflict with or
violation or infringement of, nor are proceedings or claims pending, nor have
any such proceedings or claims been instituted or asserted in writing against
the Company, nor are any proceedings threatened, alleging any violation, nor is
there any valid basis known to the Company for any such proceeding or claim, of
any rights or asserted rights of any other person with respect to any
Intellectual Property of such other person.
(d) The Company has taken all actions consistent with standard practice
in its industry to preserve and maintain its Intellectual Property relating to
the business.
2.11. Insurance. The Company maintains policies of insurance against
such losses and risks as are adequate in accordance with customary industry
practice to protect the Company's business, subject to the Company's
self-insurance retention levels. The Company has not received notice from any
insurer or agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance and, so
far as known to the Company, no such improvements or expenditures are required.
2.12. Employment Matters. Except as set forth on Schedule 2.12, with
respect to the Personnel, (i) there are no pending claims by any current or
former Personnel against the Company other than for compensation and benefits
due in the ordinary course of employment; (ii) there are no pending claims
against the Company
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arising out of any statute, ordinance or regulation relating to employment
practices or occupational or safety and health standards; (iii) there are no
pending or, to the best knowledge of the Company, threatened labor disputes,
strikes or work stoppages against the Company; and (iv) to the best knowledge of
the Company, there are no union organizing activities in process or contemplated
with respect to the business.
2.13. Employee Benefit Plans. (a) A list of all employee
profit-sharing, incentive, deferred compensation, welfare, pension, retirement,
group insurance, bonus, severance and other employee benefit plans, arrangements
or agreements (oral or written), regardless of whether any such plan,
arrangement or agreement is an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or previously maintained or contributed to or previously
contributed to by the Company for the benefit of current or former Personnel
("Employee Plans") is set forth on Schedule 2.13(a).
(b) The Employee Plans by their terms and operation are in material
compliance with all applicable laws (including, but not limited to, ERISA and
the Code). There are no actions, suits or claims pending or threatened (other
than routine noncontested claims for benefits) or, to the Company's knowledge,
no set of circumstances exist which may reasonably give rise to such a claim
against any Employee Plan or administrator or fiduciary of any such Employee
Plan.
2.14. Litigation. There is neither (a) any litigation, proceeding,
arbitral action or government investigation pending or, so far as known to the
Company, threatened against, relating to or affecting (i) the business, (ii) any
Employee Plan or any fiduciary or administrator thereof or (iii) the
transactions contemplated by this Agreement, nor (b) any valid basis known to
the Company for any such litigation, proceeding or investigation which if
adversely determined could, in any one case or in the aggregate, have a Material
Adverse Effect. Except as set forth on Schedule 2.14 hereof, there are no
decrees, injunctions or orders of any court or governmental department or agency
outstanding against the Company with respect to the business.
2.15. Compliance with Laws. (a) The Company has complied in all
material respects with all applicable statutes, regulations, rules, orders,
ordinances and other laws ("Laws") of the United States of America, all state,
local and foreign governments and other governmental bodies and authorities, and
agencies of any of the foregoing ("Governmental Authority") to which it is
subject with respect to regulatory matters. The Company has maintained all
material records required to be maintained by all governmental authorities and
there are no presently existing circumstances known to the Company which would
result or would be likely to result in violations of any such laws.
(b) The Company is in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Authority
(including, without limitation, Environmental Laws (as such term is hereinafter
defined in Section 2.19) applicable to the business), except to the extent
noncompliance would not have a Material Adverse Effect. Except as set forth on
Schedule 2.15(b), the Company has not
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received any notice or other communication to the effect that, or otherwise been
advised that, it is not in compliance with any of such laws, and the Company has
no reason to anticipate that any presently existing circumstances are likely to
result in violations of any such laws which could, in any one case or in the
aggregate, have a Material Adverse Effect.
(c) The Company has not made, and, to the knowledge of the Company, no
Personnel or representative of the Company or any person acting on behalf of the
Company has made, directly or indirectly with respect to the Company's business,
any bribes, kickbacks, or other illegal payments or illegal political
contributions, illegal payments from corporate funds to governmental officials
in their individual capacities, or illegal payments from corporate funds to
obtain or retain business either within the United States or abroad.
2.16. No Brokers. The Company has not entered into and will not enter
into any agreement, arrangement or understanding with any person or firm which
will result in the obligation of Purchaser to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby or any other transaction.
2.17. Transactions with Certain Persons. Except as disclosed in the
Financial Statements and on Schedule 2.17 hereto, no affiliate, shareholder.,
officer, director, employee or agent of the Company, or member of his or her
immediate family, is presently a party to any material transaction with the
Company relating to the business, including, without limitation, any contract,
agreement or other arrangement (a) providing for the furnishing of services by,
(b) providing for the rental of real or personal property from, or (c) otherwise
requiring payments to (other than services as officers, directors or employees)
any such person or entity in which any such person has a substantial interest as
a shareholder, officer, director, trustee, member, partner or similar status.
2.18. Records. The records of the Company relating to the business have
been maintained in all material respects in accordance with good business
practices and, as applicable, in accordance with GAAP consistently applied. The
minute books of the Company are correct, complete and current in all material
respects.
2.19 Environmental Matters. (a) No substance defined as or subject to
regulation as hazardous substances, hazardous or toxic pollutants or hazardous
wastes, in or pursuant to any of the Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act of 1976, the Hazardous Materials
Transportation Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), the Emergency Planning and Community
Right-to-Know Act or in any other federal, state or local environmental law in
effect on the Closing Date (collectively, "Environmental Laws"), including,
irrespective of inclusion or exclusion from any of the aforementioned
categories, crude oil or any substances derived from the fractional distillation
of crude oil, polychlorinated biphenyls, asbestos-containing material,
radioactive materials, pesticides, and any pharmaceutical products that exhibit
any characteristics that would render such products a regulated hazardous waste
if a waste (all
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of the above being collectively referred to herein as "Hazardous Materials")
have been or are stored, treated, disposed of, managed, generated, manufactured,
produced, released (as defined in CERCLA Section 101(22)), emitted or discharged
on, to, in, under or from the real property owned or leased by the Company
relating to the business or disposed of at a location owned or operated by a
third party pursuant to an arrangement for disposal.
(b) The Company is in compliance in all material respects with all
Environmental Laws and has obtained all environmental licenses, permits,
approvals, registrations and authorizations (federal, state and local) material
to the business. Except as set forth on Schedule 2.19(b), all such licenses,
permits, approvals, registrations and authorizations will remain in full force
and effect as of the Closing.
(c) No governmental or private action, suit or proceeding to enforce or
impose liability under any Environmental Laws is pending or, to the best of the
Company's knowledge, threatened against the Company and, to the best of the
Company's knowledge, no lien has been created on any real property owned or
leased by the Company relating to the business, under any Environmental Laws.
2.20. Investments. The Company does not own any capital stock,
partnership interests or other equity interests in any corporation, partnership,
joint venture, trust or other business association.
2.21. Material Contracts and Other Agreements. Schedule 2.21 hereto
discloses all material peering agreements, arrangements and relationships,
collocate agreements, service swap agreements and local access agreements; all
material vendor maintenance contracts; a written description of any and all
material affinity, bounty and retail programs; all agreements containing
covenants not to compete on the part of the Company or otherwise restricting the
ability of the Company or any Management Stockholder in any material way to
engage in the business of the Company as currently conducted; all material
notes, mortgages, indentures, letters of credit, guarantees, performance bonds
an other obligations and agreements and other instruments for or relating to any
lending or borrowing (including assumed debt) entered into by the Company or
pursuant to which any properties or assets of the Company are pledged or
mortgaged as collateral; any employment or consulting agreement with any
Stockholder or any present or former director, officer or employee of the
Company which calls for annual compensation in excess of Fifty Thousand Dollars
($50,000); all agreements with independent sales representatives or contractors
relating to the sale and distribution of the Company's products and services;
all material personal property leases; and any other Contracts which are
material to the Company. With respect to each such Contract, (1) such Contract
is valid, binding and enforceable against the Company and, to the best knowledge
of the Company and the Stockholders, and each other party thereto in accordance
with its terms; (2) neither the Company nor, to the best knowledge of the
Company and the Management Stockholders, and other party to such Contract is in
material breach thereof or material default thereunder, and (3) there does not
exist any event that, with the giving notice or the lapse of time or both, would
constitute a material of or a material default under such Contract, and neither
the Company nor the Management Stockholders has received or given notice of any
such breach, default or
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event. None of the Company or the Stockholders is aware of any circumstances
pursuant to which Purchaser's purchase of shares pursuant to the terms of this
Agreement could reasonably be expected to materially and adversely affect the
relationship of the Company with any party or parties to any Contract.
2.22. Suppliers and Customers. Schedule 2.22 hereto sets forth the ten
(10) largest suppliers of goods and services of the Company for the fiscal year
ended December 31, 1997 (the "Large Suppliers"), the amount of all payments made
to each large Supplier for such fiscal year, the ten (10) largest customers,
groups of related customers or bulk customers for the fiscal year ended December
31, 1997 (the "Large Customers"), and the amount of all payments made by such
Large Customers for such fiscal year. The Company has a good business
relationship with its Large Suppliers and Large Customers and no supplier is a
sole source of supply of any good or service used by the Company. None of the
Large Suppliers or Large Customers has canceled or otherwise terminated or
threatened in writing to cancel or otherwise terminate, its relationship with
the Company or since the Balance Sheet Date, decreased materially, or threatened
to decrease or limit materially, it services, supplies or materials to the
Company or its usage or purchase of the products or services of the Company.
Neither the Company nor the Stockholders is aware of any circumstances pursuant
to which Purchasers' purchase of shares pursuant to the terms of this Agreement
could reasonably be expected to materially and adversely affect the relationship
of the Company with any Large Supplier or Large Customer.
2.23. Title to Assets. The Company owns or leases all tangible personal
property necessary for the conduct of its business as presently conducted. Each
such asset has been maintained in accordance with ordinary industry practice, is
in good operating condition and is usable in the ordinary course of business,
other than where any such failures individually or in the aggregate would not
have a Material Adverse Effect. Except for Encumbrances arising under Contracts
identified on Schedule 2.23 hereto and for other imperfections which
individually or in the aggregate would not have a Material Adverse Effect and
except for leased or licensed assets, the Company has good and marketable title
to all of the owned tangible personal property used in the conduct of its
business, free and clear of any and all Encumbrances. The Company has good and
valid leasehold title to all leased tangible personal property leased by it from
third parties, free and clear of all Encumbrances, except for imperfections
individually or in the aggregate as would not cause a Material Adverse Effect.
2.24. Disclosure. No representation or warranty by the Company or
NYSERNet set forth in this Agreement, or any other agreement delivered in
connection herewith contains any untrue statement of a material fact or omits to
state any material fact necessary, in light of the circumstances under which it
was made, in order to make such representations and warranties not misleading.
2.25. Exclusive Representations and Warranties. Other than the
representations and warranties set forth herein, the Company is not making any
other representation or warranty, express or implied, with respect to its
business or operations.
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NYSERNet represents and warrants to the Purchasers as follows:
2.26. Corporate Organization. NYSERNet is duly organized, validly
existing and in good standing under the laws of the State of New York, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted.
2.27. Authority Relative to Agreement. NYSERNet has the full power and
authority to execute and deliver this Agreement and each of the Ancillary
Agreements, to the extent it is a party thereto, to carry out its obligations
hereunder and thereunder, and to consummate the transactions contemplated on its
part hereby and thereby. This Agreement and each of the Ancillary Agreements, to
the extent NYSERNet is a party thereto, have been duly executed and delivered by
NYSERNet and constitute the legal, valid and binding obligations of NYSERNet,
enforceable against NYSERNet in accordance with their terms, subject to
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting creditors' rights generally and subject to general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
2.28. No Violations or Consents. Except as set forth on Schedule 2.28
hereto, the execution, delivery and performance of this Agreement and each of
the Ancillary Agreements by NYSERNet, to the extent NYSERNet is a party thereto,
and the consummation by it of the transactions contemplated hereby and thereby
will not (a) violate or conflict with any provision of any law applicable to
NYSERNet by which any property or asset of it is bound or (b) require the
consent, waiver, approval, license or authorization of or any filing by NYSERNet
with any public authority.
2.29. Ownership. NYSERNet has good and marketable title in and to the
shares (the "NYSERNet Shares") set forth opposite its name on Schedule 2.1
hereto. The NYSERNet Shares are, and on the Closing Date will be, free and clear
of any and all Encumbrances. At the Closing, upon consummation of the
transactions contemplated by this Agreement, Purchasers will acquire good and
marketable title to the NYSERNet Shares, free and clear of any and all
Encumbrances.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to the Company as follows:
3. 1. Corporate Organization. Such Purchaser is duly organized, validly
existing and in good standing under the laws of its state of formation, with all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted.
3.2. Authority Relative to Agreement. Such Purchaser has the full power
and authority to execute and deliver this Agreement and each of the Ancillary
Agreements, to the extent it is a party thereto, to carry out its obligations
hereunder and thereunder, and to consummate the transactions contemplated on its
part hereby and
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thereby. This Agreement and each of the Ancillary Agreements, to the extent such
Purchaser is a party thereto, have been duly executed and delivered by such
Purchaser and constitute the legal, valid and binding obligations of such
Purchaser, enforceable against such Purchaser in accordance with their terms,
subject to applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting creditors' rights generally and subject to general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.3. No Violations or Consents. The execution, delivery and performance
of this Agreement and each of the Ancillary Agreements by such Purchaser, to the
extent such Purchaser is a party thereto, and the consummation by it of the
transactions contemplated hereby and thereby will not (a) violate or conflict
with any provision of any law applicable to such Purchaser or by which any
property or asset of it is bound or (b) require the consent, waiver, approval,
license or authorization of or any filing by such Purchaser with any public
authority.
3.4. Securities Act Representation. Such Purchaser hereby represents,
acknowledges, covenants and agrees as follows: (i) the Initial shares acquired
hereunder are being acquired for such Purchaser's own account for investment
purposes only and not with a view to any resale in violation of the Securities
Act of 1933, as amended (the "Securities Act") or any state securities or "blue
sky" law; (ii) the Initial Shares have not been registered under the Securities
Act or any state securities or "blue sky" law (iii) such Purchaser is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act; and (iv) such Purchaser has been afforded
an opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and its representatives concerning the terms of this
Agreement, the transactions contemplated hereby and as set forth in the Exhibits
attached hereto and such Purchaser's purchase of the Initial shares.
3.5. Further Representations. IXC hereby represents, acknowledges,
covenants and agrees as follows: (i) the IRU and Stock Purchase Agreement dated
as of July 22, 1997, as amended (the "PSINet Agreement"), by and between IXC and
PSINet Inc. ("PSI") and the Contribution Agreement dated as of December 22, 1997
by and between IXC and IXC Carrier Inc. ("Carrier") (the "Fiber Agreement") are
in full force and effect, (ii) IXC owns of record or beneficially at least fifty
percent (50%) of the approximately 20% interest in common stock of PSI received
under the PSINet Agreement (a total of approximately 10 million shares), which
has as of April 15, 1998 a market value of not less than $60 million, (iii) IXC
owns an IRU in two fibers over a significant portion of the network of Carrier,
as set forth in the Fiber Agreement and (iv) IXC shall not transfer any of its
assets to any other entity including any Affiliate of IXC with the intent of
avoiding its obligations hereunder or under the Option Agreements contemplated
hereby.
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ARTICLE 4
INDEMNITY
4.1. Indemnification by Purchasers. (a) Each Purchaser agrees to
indemnify the Stockholders against, and hold each Stockholder harmless from, any
and all Damages (as defined in Section 4.3 below) arising out of the breach of
any representation, warranty, covenant or agreement of Purchasers contained
herein or as set forth in the Exhibits attached hereto. Notwithstanding the
foregoing, Purchasers shall not be liable to the Stockholders under this Section
4.1(a) for any Damages arising out of the breach of any representation or
warranty of Purchasers herein or as set forth in Exhibits attached hereto unless
and until the aggregate amount of all such Damages exceeds $100,000
("Purchasers' Threshold Amount"), in which case Purchasers shall be required to
indemnify the Stockholders for the amount of such Damages above the Purchasers'
Threshold Amount.
(b) The Stockholders agree to give each Purchaser prompt written notice
of any action by or in respect of a third party of which they have actual
knowledge concerning any Damage as to which they may request indemnification
hereunder. Purchasers shall have the right to direct, through counsel of their
choosing, the defense or settlement of any such action (provided that Purchasers
shall have first acknowledged their indemnification obligations hereunder
specifically in respect of such action) at their own expense, which counsel
shall be reasonably satisfactory to the indemnified party or parties. If
Purchasers elect to assume the defense of any such action, the indemnified party
or parties may participate in such defense, but in such case the expenses of the
indemnified party or parties incurred in connection with such participation
shall be paid by the indemnified party or parties. The indemnified party or
parties shall cooperate with Purchasers in the defense or settlement of any such
action. If Purchasers elect to direct the defense of any such action, the
indemnified party or parties shall not pay, or permit to be paid, any part of
any claim or demand arising from such asserted Damages, unless (i) each
Purchaser consents in writing to such payment, (ii) each Purchaser withdraws
from the defense of such asserted Damages, or (iii) a final judgment from which
no appeal may be taken by or on behalf of Purchasers is entered against such
indemnified party for such Damages. If Purchasers shall fail to defend, or if,
after commencing or undertaking any such defense, Purchasers (i) fail to
prosecute or (ii) withdraw from such defense, the indemnified party or parties
shall have the right to undertake the defense or settlement thereof at
Purchaser's expense.
4.2. Indemnification by the Company and NYSERNet. (a) The Company and
NYSERNet agree to indemnify each Purchaser against and hold each Purchaser
harmless from any and all Damages of such Purchaser arising out of the breach of
any representation, warranty, covenant or agreement of the Company contained
herein. NYSERNet also agrees to indemnify each Purchaser against and hold each
Purchaser harmless from any and all Damages of such Purchaser arising out of the
breach of any representation, warranty, covenant or agreement of NYSERNet
contained herein. Notwithstanding the foregoing, neither the Company nor
NYSERNet shall be liable to Purchasers under this Section 4.2 (a) for any
Damages arising hereunder unless and until the aggregate amount of all such
Damages exceeds $100,000 (the "Company's and
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NYSERNet's Threshold Amount"), in which case (i) the Company and NYSERNet shall
be required to indemnify Purchasers for the amount of such Damages above the
Company's and NYSERNet's Threshold Amount, and (ii) the aggregate liability of
the Company and NYSERNet under this Section 4.2 (a) shall not exceed 10% of the
total amount of the Purchase Price received by such person pursuant to this
Agreement.
(b) Each Purchaser agrees to give the Company and NYSERNet prompt
written notice of any action by or in respect of a third party of which it has
actual knowledge concerning any Damages as to which it may request
indemnification hereunder. The Company and NYSERNet shall have the right to
direct, through counsel of their own choosing, the defense or settlement of any
such action (provided that the Company and NYSERNet shall have first
acknowledged their indemnification obligations hereunder specifically in respect
of such action) at their own expense, which counsel shall be reasonably
satisfactory to Purchasers. If the Company and NYSERNet elect to assume the
defense of any such action, Purchasers may participate in such defense, but in
such case the expenses of Purchasers incurred in connection with such
participation shall be paid by Purchasers. Purchasers shall cooperate with the
Company and NYSERNet in the defense or settlement of any such action. If the
Company and NYSERNet elect to direct the defense of any such action, Purchasers
shall not pay, or permit to be paid, any part of any claim or demand arising
from such asserted Damages, unless the Company and NYSERNET (i) consent in
writing to such payment, (ii) the Company and NYSERNet withdraw from the defense
of such asserted Damages, (iii) a final judgment from which no appeal may be
taken by or on behalf of the Company and NYSERNet is entered against Purchasers
for such Damages. If the Company and NYSERNet (i) fail to defend, or if, after
commencing or undertaking any such defense, the Company and NYSERNet fail to
prosecute or (ii) withdraw from such defense, Purchasers shall have the right to
undertake the defense or settlement thereof at the Company's and NYSERNet's
expense.
4.3. Damages. "Damages" shall mean any claim, demand, loss, liability,
damage or expense, including without limitation, interest, penalties and
reasonable attorneys', accountants' and experts' fees and costs of investigation
incurred as a result thereof. The term "Damages" shall not be limited to matters
asserted by third parties against the indemnified party, but shall also include
Damages sustained or incurred by the indemnified party in the absence of third
party claims. In particular, in the event of the existence or occurrence of a
fact or event which is not disclosed on the disclosure schedules and which
constitutes a breach of a representation or warranty by the Company or NYSERNet,
the Damages relating to such breach for IXC or GHI, respectively, shall be
deemed equal to the product of: (1) the Detriment (as defined) to the Company
with respect to such breach, and (2) IXC's or GHI's Ownership Percentage (as
defined). "Detriment" shall mean the dollar value of the negative effect on the
Company of the existence or occurrence of the fact or event constituting the
breach, e.g., in the event an undisclosed liability for $100,000 exists, the
Detriment is $100,000. "Ownership Percentage" shall mean the percentage of the
outstanding shares of the Company's common stock purchased hereunder by IXC or
GHI, as applicable.
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4.4. General Indemnification Provisions. If the indemnifying party is
controlling the defense of an action, the indemnifying party will not, without
the prior written consent of the indemnified party or parties, enter into any
settlement of such action which could reasonably be expected to lead to
liability or create any financial or other obligation on the part of the
indemnified party or parties. If the indemnified party or parties are
controlling the defense of an action, the indemnified party or parties will not
enter into any settlement of such action without the consent of the indemnifying
party, which consent shall not be unreasonably withheld. The controlling party
shall deliver, or cause to be delivered, to the other party or parties copies of
all correspondence, pleadings, motions, briefs, appeals or other written
statements relating to or submitted in connection with the defense of any such
action and timely notices of, and the right to participate in any hearing or
other court proceeding relating to such action.
4.5. Company and Management Stockholders' Representations and
Warranties. Purchasers' review of the books and records of the Company shall not
be deemed to constitute actual knowledge so as to reduce Purchasers' right to
rely on the Company's and the Management Stockholders' representations and
warranties contained herein.
ARTICLE 5
THE CLOSING
5. 1. Conduct Prior to the Closing. (a) From and after the date of this
Agreement until the earlier to occur of (i) the Closing Date or (ii) the
termination of this Agreement by mutual consent of the parties hereto, except as
expressly contemplated by this Agreement or as consented to by the Purchasers,
neither the Company, NYSERNet nor any Management Stockholder shall take any
action inconsistent with the terms of this Agreement or which would cause any
representation or warranty hereunder not to be true as of the Closing Date.
(b) Access to Information and Documents, Confidentiality. From and
after the date of this Agreement, the Company shall give each Purchaser and such
Purchaser's attorneys, accountants and other representatives full access to its
properties, documents, books and records and shall furnish each Purchaser with
such information concerning the Company as such Purchaser may reasonably
request. Each Purchaser acknowledges and agrees that (i) the information it has
obtained and will obtain concerning the Company's business is confidential and
belongs to the Company, and (ii) such Purchaser will hold and will cause its
officers, directors, attorneys, accountants and agents to hold all such
confidential information in confidence and will use, and cause such other
persons to, use such information solely in connection with such Purchaser's
investment in the Company.
(c) Best Efforts to Satisfy Closing Conditions. The Company and each
Purchaser shall use best efforts to cause the closing conditions set forth below
to be satisfied as soon as practicable following the execution hereof.
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5.2. Closing. The Closing shall be held on May _, 1998 at 10:00 a.m. at
the offices of Xxxxx Xxxxxxxxxx LLP, 1301 Avenue of the Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other time and place mutually agreeable to the parties
hereto.
5.3. Conditions of the Obligations of the Purchasers. The obligation of
each Purchaser to purchase the Initial Shares is subject to the fulfillment or
waiver of each of the following conditions on or before the Closing Date:
(a) Representations and Warranties. The representations and warranties
of the Company, NYSERNet and the Management Stockholders herein shall be true on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date.
(b) Performance. The Company, NYSERNet and the Management Stockholders
shall have performed and complied with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by them on or before the Closing Date.
(c) Proceedings, Documents and Approval. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request. Any required governmental consent or approval shall have been obtained.
(d) Employment and Non-Competition Agreements. Each of the following
persons shall have executed and delivered to the Company an Employment and
Non-Competition Agreement in the Form of Exhibit F hereto: Messrs. Mandelbaum,
Buckel, Xxxxxxx, Xxxxxx and Xxxx.
(e) Stockholders' Agreement. The Company, NYSERNet, the Management
Stockholders and Xxxxxxxx shall have executed and delivered the Stockholders'
Agreement.
(f) Registration Rights Agreement. The Company, NYSERNet, the
Management Stockholders and Xxxxxxxx shall have executed and delivered the
Registration Rights Agreement.
(g) Option Agreements. Each Management Stockholder and Xxxxxxxx shall
have executed and delivered to Grumman Hill and IXC an Option Agreement.
(h) New York State Requirements. Other than those required generally of
New York State corporations, no limitations, consents or requirements relating
to the Company or NYSERNet's interest in the Company, including but not limited
to the Attorney General's consent, shall remain in effect at the Closing Date.
(i) Preferred Stock Rights. The Company shall have delivered to the
Purchasers for filing with the Secretary of State of New York a Restated
Certificate of
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Incorporation in the form of the Certificate filed on March 12, 1998 except that
Sections 4, 5.02 and 6 shall be deleted therefrom and other sections shall, as
required, be appropriately renumbered to reflect such deletions.
5.4. Conditions of the Obligations of the Company. The obligation of
the Company to sell Shares to each Purchaser is subject to the fulfillment or
waiver of each of the following conditions on or before the Closing Date:
(a) Representations and Warranties. The representations and warranties
of each Purchaser hereunder shall be true on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date.
(b) Performance. Each Purchaser shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with on or before the Closing Date.
(c) Approvals. Any required governmental consent or approval shall
have been obtained.
5.5. Conditions of the Obligations of NYSERNet.
The obligation of NYSERNet to sell Shares to each Purchaser is subject
to the fulfillment or waiver of each of the following conditions on or before
the Closing Date:
(a) Representations and Warranties. The representations and warranties
of each Purchase hereunder shall be true on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date.
(b) Performance. Each Purchaser shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with on or before the Closing Date.
(c) Proceedings, Documents and Approval. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchasers, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request. Any required governmental consent or approval shall have been obtained.
(d) Stockholders' Agreement. Grumman Hill and IXC shall have executed
and delivered the Stockholders' Agreement.
(e) Registration Rights Agreement. Grumman Hill and IXC shall have
executed and delivered the Registration Rights Agreement.
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(f) Option Agreements. Grumman Hill and IXC shall have executed and
delivered an Option Agreement for each of the Management Stockholders and
Xxxxxxxx.
5.6. Deliveries by the Company, NYSERNet. On the Closing Date, the
Company, NYSERNet and the Management Stockholders (to the extent each is a party
thereto) shall deliver the following:
(a) Certificates representing all of the Initial Shares, registered in
the name of the Purchasers and, as to those registered in the name of NYSERNet,
duly endorsed by NYSERNet, for transfer to Purchasers (two-thirds to IXC and
one-third to Grumman Hill) or accompanied by an assignment duly executed by
NYSERNet and any other documents that are necessary to transfer to Purchasers
good and marketable title to all of the Initial Shares;
(b) Evidence of the Company and NYSERNet having obtained the licenses,
permits, authorizations, consents and approvals set forth on Exhibit G hereto;
(c) Executed copies of the Stockholders' Agreement and Registration
Rights Agreement and Option Agreements;
(d) A legal opinion from Xxxxx Xxxxxxxxxx LLP, legal counsel for the
Company, and of Xxxxxxxxx & Xxxxxxx, LLP, legal counsel for NYSERNet, each dated
the Closing Date, in form and substance reasonably satisfactory to the
Purchasers.
5.7. Deliveries by Purchasers. On the Closing Date, Purchasers shall
deliver the following:
(a) Cash by wire transfer to each of the sellers of the Initial Shares
set forth on Exhibit A hereto, in the amount set forth opposite each of such
persons' names.
(b) Executed copies of the Stockholders' Agreement, Registration Rights
Agreement and all Option Agreements.
5.8 Further Assurances. NYSERNet and the Company, at any time on or
after the Closing Date, will execute, acknowledge and deliver any further
assignments and other assurances, documents and instruments of transfer,
reasonably requested by Purchaser, and will take any other action that may be
reasonably requested by Purchasers, for the purpose of assigning, transferring
and confirming to Purchasers, or reducing to possession, any or all of the
Initial Shares purchased hereunder.
ARTICLE 6
ADDITIONAL COVENANTS OF PARTIES
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6.1. Governmental Filings. To the extent necessary to complete all
contemplated transactions under this Agreement and the Option Agreements entered
into on the Closing Date, the Purchasers, NYSERNet, the Company and the
Management Stockholders, as applicable, undertake and covenant to use their best
efforts to file any required applications and filings with any governmental
authorities, including but not
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limited to any initial, renewal or extension filings under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act, and to obtain all necessary consents, approvals and
permits and to meet all required waiting periods thereunder in a timely fashion
in order to permit the transactions contemplated by this Agreement to occur and
in any event prior to the time that the "put" provided for in the Option
Agreements is first exercisable and thereafter throughout the entire period the
"put" is exercisable.
6.2. Right of First Offer. (a) At any time from the Closing under this
Agreement until the time that any class of the Company's equity securities are
registered under the Securities and Exchange Act of 1934, as amended, in the
event that the Company desires to enter into negotiations to issue, sell or
otherwise transfer any of its capital stock or securities exercisable for, or
exchangeable into capital stock (the "Offered Stock") to any person, it shall
promptly so notify Grumman Hill, IXC, NYSERNet and the Management Stockholders
(other than Xxxxxxx Xxxxxxxxxx) (the "Offerees") and shall offer to sell to each
of the Offerees (the "Offer") its pro rata share (as defined below) of the
Offered Stock it desires to sell at the price, and on the terms and conditions,
upon which the Company would be willing to sell the Offered Stock to that
person. In the event that the consideration to be paid by such person is not
cash, the Board shall determine in good faith an equivalent cash price and the
Offerees, at their option, can choose to pay the equivalent cash price, or, if
practicable, to pay consideration of the same or similar kind to that which such
person will pay. At any time during the first seven (7) days following receipt
of the Offer, the Offerees may notify the Company that they exercise their right
to purchase their pro rata portion of the Offered Stock (based on the respective
Offeree's percentage ownership of the Company's capital stock computed on a
basis that assumes full exercise of (i) all employee stock options and (ii) the
put option in the Option Agreements referred to herein) on the same terms and
conditions as are specified in the Offer (an "Acceptance Notice").
If the Company shall not receive any Acceptance Notice or shall not
receive Acceptance Notices sufficient to sell all of the Offered Stock, it shall
have the right to sell any remaining shares of the Offered Stock to any person
or entity at a price equal to the price set out in the Offer, and upon such
other terms and conditions as are no less favorable to the Company than those
set out in the Offer; provide, however, that none of such terms and conditions
shall violate any provision of this Agreement and such sale must be consummated
within ninety (90) days from the date of the Offer.
(b) With respect to each purchase of Offered Stock by the Offerees
under this Section 6.2, the closing therefor shall be held at 10 a.m. at the
principal office of the Company on the date determined in accordance with
Section 6.2(a) hereof. The purchase price for the Offered Stock shall be paid in
full at such closing in cash or by certified check payable to the order of the
Company against delivery of the appropriate stock certificates or instruments
evidencing such Offered Stock, duly endorsed or with duly executed stock powers
attached thereto. Stock delivered at each closing hereunder shall be free and
clear of all liens, charges and encumbrances, and all title thereto, and all
rights and privileges of ownership thereof, immediately shall be vested in the
purchaser thereof. The purchaser shall pay all transfer taxes, and all requisite
transfer tax stamps shall be duly affixed to the stock certificates at the time
of delivery.
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(c) The first offer rights of the Offerees pursuant to this Section 6.2
shall not apply to securities issued, (A) as a stock dividend or upon any
subdivision of shares of Common Stock, provided that the securities issued
pursuant to such stock dividend or subdivision are limited to additional shares
of Common Stock, (B) pursuant to subscriptions, warrants, options, convertible
securities, or other rights outstanding as of the date hereof, (C) options for
employees, directors or consultants issued post Closing provided such options
are solely for non-voting stock, (D) pursuant to a firm commitment underwritten
public offering, and (E) upon the exercise of any right which was not itself
issued in violation of the terms of this Section 6.2. In the event stock options
are issued post Closing for shares of the Company's voting stock, the right of
first offer under this Section 6.2 shall apply such that the Offerees may
acquire their pro rata amount of the shares into which the options are
exercisable at the option issuance date upon payment of the aggregate exercise
price for said shares but shall have no right to acquire actual options
themselves. This right must be exercised, if at all, within seven (7) days
following receipt of the Offer for said shares.
(d) The right of first offer set forth in this Section 6.2 is not
transferable by any party other than Grumman Hill which shall be permitted to
assign its right of first offer rights herein to (i) one or more of its limited
partners, (ii) any affiliated fund, i.e. an investment partnership with the same
or an affiliated general partner or manager as Grumman Hill, or (iii) IXC or an
affiliate of IXC, provided, however, that in such case, the rights would only be
assignable to the extent that assuming the exercise of the transferred rights,
IXC and its affiliates would beneficially own not more than 49.9% of the
outstanding equity of the Company unless such transfer has received the prior
unanimous consent of the Company's Board of Directors.
6.3 Right of First Refusal At any time after the Closing under this
Agreement and for so long as IXC owns a minimum of the number of shares (subject
to adjustment in the event of stock splits, combinations, other
recapitalization, stock dividends and similar events) acquired from the Company
and NYSERNet under the Agreement, in the event that the Company (or any
subsidiary thereof) develops a need for broadband or private-line services, the
Company will provide written notice to IXC of the nature of the Company's
requirements as soon as is reasonably practicable. IXC shall have the exclusive
right to provide all, or any portion of, such broadband or private-line services
to the Company so long as the price charged by IXC to the Company for such
services is competitive with the prices and discounts of other providers for a
similar amount of similar services. If the Company is able to obtain a quote for
a similar amount of broadband or private-line services from another provider at
less than the price then being quoted by IXC, then IXC shall not have the right
to provide such services to the Company unless it is willing to provide those
services at the price quoted by such other provider.
6.4. Irrevocable Proxy NYSERNet hereby grants to IXC and Grumman Hill
an irrevocable proxy with full power of substitution and revocation pursuant to
the provisions of Section 609 of the New York Business Corporation Law (the
"Proxy") to vote, and to execute and deliver written consents or otherwise act
with respect to 252,000 shares of the Company's Common Stock reduced by the
amount of the shares of the
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Company's common stock acquired after the date of this Agreement by IXC and
Grumman Hill from the Company or from any stockholders of the Company for the
duration of the Initial Option Period (as this term is defined in the Option
Agreement attached hereto as Exhibit C), with such proxy exercisable by IXC with
respect to two thirds the shares of stock and by Grumman Hill with respect to
one third of the shares of stock. NYSERNet hereby affirms that the Proxy is
given as a condition of this Agreement and as such is coupled with an interest
and is irrevocable.
ARTICLE 7
MISCELLANEOUS
7.1. Survival. All of the representations and warranties set forth in
this Agreement and the provisions of Section 7.9 shall terminate and be
extinguished on the first anniversary hereof.
7.2. Notices. All notices, requests, demands and other communications
made under this Agreement shall be in writing, correctly addressed to the
recipient at the addresses set forth under such recipient's signature on the
signature page hereto and shall be deemed to have been duly given; (a) upon
delivery, if served personally on the party to whom notice is to be given; (b)
on the date of receipt, refusal or non-delivery indicated on the receipt if
mailed to the party to whom notice is to be given by first class mail,
registered or certified, postage prepaid, or by air courier; or (c) on
confirmation of receipt if delivered by facsimile transmission, provided the
original thereof is sent by mail, in the manner set forth above, within the next
business day after the facsimile transmission is sent. Any party may give
written notice of a change of address in accordance with the provisions of this
Section 7.2 and after such notice of change has been received, any subsequent
notice shall be given to such party in the manner described at such new address.
7.3. Headings, Agreement. The headings contained in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
The term "Agreement" for purposes of representations and warranties hereunder
shall be deemed to include the Schedules and Exhibits hereto.
7.4. Publicity. So long as this Agreement is in effect, unless
otherwise required by applicable law, the parties hereto shall not, and shall
cause their affiliates not to, issue or cause the publication of any press
release or other announcement with respect to the transactions contemplated by
this Agreement or this Agreement without the consent of the other parties, which
consent shall not be unreasonably withheld or delayed.
7.5. Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement among the parties and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof
7.6. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefits of the parties hereto and their
respective
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successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder (except as permitted by the terms of Section
6.2(d) hereof) shall be assigned by any of the parties hereto without the prior
written consent of the other parties, provided that Purchasers shall be
permitted to assign this Agreement to any respective affiliate thereof without
the prior written consent of the Company or NYSERNet. For this purpose, however,
Grumman Hill and IXC shall not be considered as affiliates of each other.
7.7. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
7.8. Governing Law and Choice of Forum. The validity, construction and
performance of this Agreement, and any action arising out of or relating to this
Agreement or any of the Ancillary Agreements, shall be governed by the laws,
without regard to the laws as to choice or conflict of laws, of the State of New
York.
7.9. Cumulative Remedies. No remedy made available hereunder by any of
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. Notwithstanding the foregoing, the parties
have agreed that the indemnification provisions contained in Sections 4.1 and
4.2, above, shall be the sole and exclusive remedies of the parties with respect
to the breach by the other parties of any representation, warranty, covenant or
agreement herein, except in the case of party who has committed a fraud in
respect thereto.
7.10. Third-Party Beneficiaries. This Agreement is not intended to
confer upon any other person any rights or remedies hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by an individual thereunto duly authorized, all as of the date first
written above.
IXC INTERNET SERVICES, INC.
By: /s/ Xxx X. Xxxxx
------------------------
Name: Xxx X. Xxxxx
Title: Chairman & CEO
Address:
0000 Xxxxxxx xx Xxxxx Xxx X.
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxx, Esq.
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx & XxXxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
GRUMMAN HILL INVESTMENTS III, L.P.
By: Grumman Hill Group LLC, general partner
By: /s/ Xxxxx X. Xxxxxx
------------------------
Name: Xxxxx X. Xxxxxx
Title:
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx & XxXxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
APPLIED THEORY
COMMUNICATIONS, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: President & CEO
Address:
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Chief Financial Officer
With a copy to:
Xxxxx X. Xxxxxx, XX
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
STOCKHOLDERS
/s/ Xxxxxxx Xxxxxxxxxx
------------------------
Xxxxxxx Xxxxxxxxxx
/s/ Xxxxx Xxxxxx
------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxxx
------------------------
Xxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxx
------------------------
Xxxxx Xxxxxx
/s/ Xxxx Xxxx
------------------------
Xxxx Xxxx
With a copy to:
Xxxxx X. Xxxxxx, XX, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
25
XXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
------------------------
Name: Xxxxxxx Xxxxxxxxxx
Title: Chairman
c/o Xxxxxx X. Xxxxxx, Esq.
Xxxxxxxxx & Xxxxxxx, LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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