EXHIBIT 2.3
ASSET CONTRIBUTION AGREEMENT
This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), dated effective
as of December31, 2002 (the "Effective Date") is entered into by and among
Xspedius Equipment Leasing, LLC, and/or its affiliates and assigns, a Delaware
limited liability company (the "Transferee"), and Mpower Holding Corporation,
and/or its subsidiaries, a Nevada corporation (the "Transferor")
RECITALS
WHEREAS, the Transferor and Transferee are facilities-based
communications providers providing integrated voice and data communication
services and products;
WHEREAS Transferor desires to contribute to the Transferee, and the
Transferee desires to acquire from the Transferor, certain of the assets of the
Transferor used by Transferor in Transferor's Texas operations in exchange for
Transferee's assumption of the Assumed Liabilities, the Membership Interest
(defined below) and the additional consideration described below on the terms
and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the respective
representations, warranties, agreements and covenants hereinafter set forth, the
Transferee and the Transferor hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Certain Defined Terms
As used in this Agreement, the following terms shall have the following
meanings (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"Ancillary Agreements" means, collectively, the Bills of Sale, the
Management Agreement, Transition Services Agreement, and any other agreement or
instrument contemplated to be entered into between the Transferor and Transferee
under the terms and conditions of this Agreement.
"Bills of Sale" means the Xxxx of Sale, Assignment and Assumption
Agreements in the form agreed upon by the parties.
"Business" means the business of the Transferor as conducted as of the
date of this Agreement relating solely to Transferor's operation of Transferor's
Texas markets, including but not limited to the following cities: Dallas, Fort
Worth, Houston, Austin and San Antonio.
"Intellectual Property" means a) patents and patent applications, (b)
trademarks, service marks, trade names, trade dress and domain names, together
with the goodwill associated exclusively therewith, (c) copyrights, (d) computer
software, (e) confidential and proprietary information, including trade secrets,
techniques, technology, processes and know-how, data, IP addresses and (f)
registrations and applications for registration of the foregoing
"Liability" or "Liabilities" shall mean any liability or obligation
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether incurred or consequential and whether due or to become due).
"Liens" means, collectively, all mortgages, liens (statutory or
otherwise), security interests, licenses, assessments, levies, pledges, charges,
encumbrances, obligation, liability, equities, claims, covenants, conditions, or
restrictions of any kind or nature whatsoever, other than Permitted
Encumbrances.
"Material Adverse Change" means any effect or change that, when taken
together with all other effects or changes, is materially adverse to (i) the
Assets or to the Assumed Liabilities, business, financial condition, or results
of operation of the Business or (ii) the ability of Transferor to perform its
obligations under this Agreement or the Ancillary Agreements or to consummate
the transactions contemplated hereby or thereby; provided, however, that
"Material Adverse Change" shall not include any event, circumstance, change or
effect arising out of or attributable to (a) events, circumstances, changes or
effects that generally affect the industries in which the Business operates due
to legal and regulatory changes, (b) general economic or political conditions or
events, circumstances, changes or effects affecting the securities markets
generally, (c) changes arising from the consummation of the transactions
contemplated by, or the announcement of the execution of, this Agreement, except
as otherwise specifically provided in this Agreement, (d) any reduction in the
price of services or products offered by Seller or the Business in response to
the reduction in price of comparable services or products offered by a
competitor in the normal course of business, or (e) changes caused by a material
worsening of current conditions caused by acts of terrorism or war (whether or
not declared) occurring after the date hereof.
"Permitted Encumbrances" means (a) encumbrances for Taxes not yet due
and payable, or that are being contested in good faith in proper proceedings (b)
zoning, entitlement, conservation restriction and other land use and
environmental regulations by Governmental Authorities which do not materially
interfere with the present use of the Assets, or (c) exceptions, restrictions,
easements, charges, rights of way and other encumbrances, incurred or suffered
in the ordinary course of business, set forth in any state, local or municipal
franchise under which the Business is conducted which do not materially
interfere with the present use of the Assets or the conduct of the Business and
which are set forth on Schedule 1.01.
"Tax" or "Taxes" means all income, gross receipts, sales, use,
employment, franchise, profits, property, stamp or other taxes, fees, duties,
assessments or charges of any kind
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whatsoever, whether payable directly or by withholding (together with any
interest and any penalties, additions to tax or additional amounts imposed with
respect thereto), imposed by any governmental or taxing authority.
Whenever the word "including" is used, such term shall not be
interpreted as being restrictive, but shall mean in all cases, "including
without limitation"
SECTION 1.02. Certain Additional Defined Terms
In addition to terms defined in Section 1.01, the following capitalized
terms are used as defined in the Sections set forth opposite such terms:
Defined Terms Section Reference
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Agreement Preamble
Assets Section 2.01(a)
Assumed Liabilities Section 2.02(a)
Closing Section 2.04(a)
Closings Section 2.04(d)
Closing Date Section 2.04(a)
Collection Period Section 2.03(c)
Collections Section 2.03(c)
Contracts Section 2.01(a)(iv)
Customer Contracts Section 2.01(a)(iii)
Excluded Assets Section 2.01(b)
First Closing Section 2.04(a)
Intellectual Property Section 2.01(a)(ii)
Leased Real Property Section 2.01(a)(v)
Licenses Section 3.08
Management Agreement Recitals
Transferee Preamble
Second Closing Section 2.04(a)
Transferor Preamble
ARTICLE II. TRANSFERS AND ASSIGNMENTS
SECTION 2.01. Transfer of Acquired Assets
(a) On the terms and subject to the conditions set forth in this
Agreement, the Transferor shall contribute, assign, transfer, convey and deliver
to the Transferee, free and clear of all Liens, other than the Assumed
Liabilities, and the Transferee shall acquire, and accept from the Transferor
all rights, title and interests in and to Transferor's properties, assets and
rights of any kind, whether tangible or intangible, real or personal, primarily
held for and used in the Business (other than the Excluded Assets referred to in
Section 2.01(b)), including, but not limited to, the following assets to the
extent, but only to the extent, that
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they are primarily held for and used in the Business and are not Excluded Assets
(all such assets, other than the Excluded Assets, being referred to herein,
collectively, as the "Assets"):
(i) all of the tangible assets used or held by the Transferor,
including, without limitation, all telecommunications
voice, data and network hardware, operating system and
desktop hardware, all vehicles, tools, test equipment,
furniture, fixtures, office equipment, video equipment,
supplies and all inventory more particularly described on
Schedule 2.01(a)(i);
(ii) all of the intangible assets and Intellectual Property
possessed or owned, held for or used by Transferor in the
Business and all related rights thereto and rights of
Transferor to computer software, and related documents,
licensed to Transferor by third parties held for or used by
Transferor in the Business, to the extent all of the
foregoing are capable of being assigned and/or such
assignment does not prohibit Transferor from the continued
operation of its non-Texas business and in such an
event(s), Transferor hereby grants to Transferee and its
affiliates a non-exclusive, royalty-free, fully-paid,
world-wide, perpetual, irrevocable, non-terminable,
transferable, with rights to sublicense, right and license
to use, disclose, copy, distribute, make, have made, make
derivative works from, and otherwise fully exploit any of
the foregoing pursuant to the terms and conditions of this
Agreement in any manner and without limitation. The
foregoing rights granted to Transferee shall survive the
termination of this Agreement. The foregoing
notwithstanding the Intellectual Property embedded or
relating to the items set forth on Schedule 5.03 shall be
assigned to Transferee pursuant to such consents required
to be obtained under this Agreement;
(iii) all customer contracts and rights of the Transferor under
such contracts (whether written, oral or work in progress)
relating to the Business, inclusive with all customer
advance deposits (the "Customer Contracts"), and all trade
accounts receivable and other rights to payment from
customers of Transferor for products or services to be
provided on or after the Effective Date, and all other
accounts receivable of the Transferor to the extent related
to the Business and any claim, remedy, or other right
related to any of the foregoing, in each case for products
or services to be provided on or after the Effective Date,
(collectively, "Accounts Receivable") including without
limitation those listed on Schedule 2.01(a)(iii), with
payments of Accounts Receivable remitted from one party to
the other as applicable, all billing information, NPA-NXXs
and other customer data associated with such Customer
Contracts, and all sales and
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promotional literature, customer lists and other
sales-related materials used in the Business with respect to
those customers;
(iv) all of the Transferor' rights and interest in the
contracts, agreements, instruments, licenses (but, with
respect to software or firmware licenses, only to the
extent assignable without the payment of additional
consideration, except as otherwise provided in this
Agreement), and other binding arrangements described in
Schedule 2.01(a)(iv) (collectively, the "Contracts");
(v) all of the Transferor' rights and interest in the real
property leases, easements, rights of way and similar
rights described in Schedule 2.01(a)(v) (collectively, the
"Leased Real Property");
(vi) all of the Transferor' interest in the equipment,
improvements and fixtures located on the Leased Real
Property;
(vii) all municipal, state, federal and foreign franchises,
permits, licenses, easements, rights of way and similar
rights, agreements, waivers and authorizations held or used
by the Transferor in connection with, or required for, the
conduct of the Business, to the extent transferable and all
pending applications therefor or renewals thereof;
(viii) all telephone numbers and listings solely used by the
Transferor in connection with the Business, excluding, but
not limited to, those telephone numbers listed on Schedule
2.01(a)(viii), but specifically including all NPA-NXXs;
(ix) all of the insurance proceeds paid after the date hereof
with respect to any damage or destruction or loss of any
asset or right referred to in this Section 2.01(a),
including any assets that could reasonably be expected to
have been included in the Assets but for such damage,
destruction or loss from claims arising from the operation
of the Business after the Effective Date;
(x) the Transferor' inventory, including the inventory existing
as of the Effective Date;
(xi) all claims against third-parties relating to the Assets,
whether xxxxxx or inchoate, known or unknown, contingent or
noncontingent, arising after the Effective Date as a result
of the operation of the Business or use of the Assets after
the Effective Date, provided however, any claims arising
prior to the Effective Date which may affect the
Transferee's operation of the Business after the Effective
Date shall be included to such an extent; and
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(xii) all goodwill associated with the foregoing.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Assets will not include all assets belonging to the Transferor
not primarily used or primarily held for use in the conduct of the Business (the
"Excluded Assets"), including but not limited to,:
(i) all of the Transferor' general, financial and other
records, including the Transferor's minute books, stock
ledgers and Tax records;
(ii) employee benefit plan assets related to employees of the
Transferor;
(iii) any cash, cash equivalents, and accounts receivable
relative to the Business prior to the Effective Date, other
than cash, cash equivalents and accounts receivable
attributable to services to be provided on and after the
Effective Date regardless of when such cash, cash
equivalents and accounts receivable are billed or received
by the Transferor;
(iv) all leases, contracts, agreements and obligations other
than the Contracts, Customer Contracts, Network Contracts
and such leases, contracts, agreements and obligations that
are Assumed Liabilities;
(v) all prepaid expenses, deposits, claims for refunds or
prepaid expenses, whether xxxxxx or unchoate, known or
unknown, contingent or noncontingent, other than those
covered by Section 2.01(a)(iii);
(vi) refunds, rebates, abatements or credits for Taxes relating
to the Business or the Assets prior to the Effective Date
and Tax loss carry-forwards allocated to the Transferor
pursuant to this Agreement;
(vii) all business insurance policies or other insurance policies
relating to the Business, any refunds paid or payable in
connection with the cancellation or discontinuance of any
insurance policies applicable to the Business and any
claims made under any such insurance policies for losses or
occurrences prior to the Effective Date, except as
otherwise provided in Section 2.01(a)(ix); and
(viii) all claims, rights and chooses in action of the Transferor
relating to the Business or the Assets against any person,
whether matured or unmatured, direct or indirect, known or
unknown, absolute or contingent, xxxxxx or inchoate,
existing prior to the Effective Date or arising after the
Effective Date as a result of the operation of the Business
or the use of the Assets prior to the Effective Date,
except as otherwise provided in Section 2.01(a)(xi).
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(c) Notwithstanding anything contained in this Agreement to the
contrary, this Agreement shall not constitute an agreement to transfer or assign
any Assets or any claim or right or other benefit arising thereunder or
resulting therefrom if a transfer or assignment thereof, without receiving the
waiver or consent of a third party, would constitute a breach or other
contravention of any agreement or Requirement of Law. The parties shall work
together and use reasonable commercial efforts to obtain all requisite waivers
and consents before the First Closing. The cost of obtaining such waivers or
consents (other than costs or liabilities incurred prior to the Effective Date
which must be paid by the Transferor to obtain such third party consent) shall
be shared equally by both the Transferor and the Transferee to the extent that
the aggregate amount of such costs before sharing is less than $250,000. The
foregoing notwithstanding, those specific transfer costs (the "Transferee
Transfer Costs") set forth on Schedule 2.01(c) shall be paid by the Transferee.
Notwithstanding the foregoing, each party shall bear its own travel related
costs incurred in obtaining such waivers or consents.
SECTION 2.02. Assumption of Liabilities; Liabilities Retained by
Transferor
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing or Closings, the Transferee shall assume, accept
assignment of and/or agree to pay, perform and discharge the following specific
liabilities and obligations of the Transferor (collectively, the "Assumed
Liabilities") pursuant to the Xxxx of Sale or such other form of assignment and
assumption: (i) all of the Transferor's liabilities and obligations to the
extent arising after the Effective Date under the express terms of the Customer
Contracts, Contracts and the Leased Real Property included in the Assets, (ii)
those circuits, customer access lines and collocations listed on Schedule
2.02(a)(ii) (collectively the "Network Contracts"), which Schedule 2.02(a)(ii)
shall be supplemented from time to time by the Transferee on or before the
termination of the Transition Services Agreement as the Transferee determines
which network circuits it intends to assume and/or renegotiate upon such terms
and conditions in the sole discretion of the Transferee; (iii) those liabilities
and obligations expressly assumed by the Transferee under the Transition
Services Agreement and under the Management Agreement; (iv) all residual
commissions calculated and payable with respect to the Retained Agents (defined
below) for services rendered on or after the Effective Date; (v) any liability
or obligation for Taxes attributable to the Assets or the Business and relating
to any period or portion thereof on or after the Effective Date (other than
Taxes allocated to the Transferor pursuant to Section 5.04 hereof); and (vi) the
specific amount of any other liability or obligation expressly assumed in
writing by the Transferee in the Transferee's sole discretion and set forth on
Schedule 2.02(a)(iii) (the "Specified Liabilities"); provided, however, that the
Transferee shall not otherwise succeed to or assume any liabilities and
obligations arising out of any breach by the Transferor of any such Customer
Contracts, Contracts, Network Contracts or Leased Real Property or any failure
by Transferor to discharge or perform any liability or obligation arising on or
prior to the Effective Date of any such Customer Contracts, Contract, Network
Contracts or Leased Real Property or other liability or obligation that is
expressly assumed hereunder.
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(b) Notwithstanding anything to the contrary, it is agreed that the
Transferee does not, and by this Agreement, any Ancillary Agreement or the
transactions contemplated hereby or thereby or otherwise shall not, assume or
agree to pay, perform, defend or discharge any liabilities or obligations of the
Transferor, claims or threatened or actual litigation against the Transferor or
violations of any federal, state or local laws, rules, orders or regulations by
the Transferor of any and every kind whatsoever, other than the Assumed
Liabilities. Further, Transferor shall be responsible for and liable for
refunding any customer installation charges and services charges relating to
services prior to the Effective Date, if any such customer elects to terminate
its service and request a refund under the "Mpower 90 Day Service Guarantee".
For the avoidance of doubt, the Transferor shall be responsible for and liable
for any liability or obligation for Taxes attributable to the Assets or the
Business and relating to any period or portion thereof prior to the Effective
Date, and for Taxes allocated to the Transferor pursuant to Section 5.04 hereof.
SECTION 2.03. Consideration and Ancillary Agreements
(a) Subject to the terms and conditions of this Agreement, Transferor
shall transfer the Assets to the Transferee in exchange for a fourteen percent
(14%) membership interest in the Transferee (the "Membership Interest") and the
Transferee shall in exchange for the contribution, transfer, assignment,
conveyance and delivery of the Assets to the Transferee issue the Membership
Interest to the Transferor. Transferor shall upon receipt of the Membership
Interest execute and deliver to the Transferee a signed consent to be bound by
the terms and conditions of the Transferee's operating agreement. The aggregate
consideration for the contribution, transfer, assignment, conveyance and
delivery of the Assets to Transferee upon the execution of this Agreement shall
be the Membership Interest and the assumption of the Assumed Liabilities.
Xspedius Communications, LLC ("XCC"), f/k/a Xspedius, LLC, shall enter into a
Transition Service Agreement that will provided for the payment of One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000) to be paid pursuant to the
terms of such Agreement. The Transition Services Payments shall be reduced
dollar-for-dollar by the amount of any outstanding liabilities or obligations
arising on or prior to the Closing which the Transferee, at the Transferee's
option, is required to pay or assume liability for in order to transfer the
Assets to Transferee other than the Transferee Transfer Costs and the Assumed
Liabilities. The foregoing notwithstanding, prior to or simultaneously with any
such reduction or offset, the Transferee shall initiate the procedures (the
"Offset Procedures") set forth in Schedule 2.03(a). The aggregate consideration
for the Assets shall be subject to adjustments for expenses and amounts paid
associated with the Assets and operation of the Business after the Effective
Date in accordance with the terms and conditions of the Transition Services
Agreement, including but not limited to:
(i) All real property, personal property or similar ad valorem
Taxes levied with respect to the Assets for any taxable period (or portion
thereof) ending prior to the Effective Date, whether imposed or assessed before
or after the Effective Date, shall be prorated between the Transferor and the
Transferee on a per diem basis as of 12:01 A.M. on the Effective Date. If any
such Taxes are paid by the Transferee, on the one hand, or
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Transferor, on the other hand, the proportionate amount of such Taxes allocable
to the other party pursuant to the first sentence hereof shall be paid by such
other party to the Transferee or the Transferor, as the case may be, promptly
after the receipt by such other party of written notice of the payment of such
Taxes. If a refund of any such Taxes is received by the Transferee, on the one
hand, or the Transferor, on the other hand, the proportionate amount of such
refund attributable to Taxes allocable to the other party pursuant to the first
sentence hereof shall be paid over to such other party promptly following the
receipt of any such refund.
(ii) All installments of special assessments or other charges on or
with respect to the Assets payable by Transferor for any period in which the
Effective Date shall occur, including, without limitation, base rent, common
area maintenance, all municipal, utility or authority charges for water, sewer,
electric or gas charges, garbage or waste removal, and cost of fuel with respect
to the Leased Real Property only, shall be apportioned as of the Effective Date
and each party shall pay its proportionate share promptly upon the receipt of
any xxxx, statement or other charge with respect thereto. If such charges or
rates are assessed either based upon time or for a specified period, such
charges or rates shall be prorated as of 12:01 A.M. on the Effective Date. If
such charges or rates are assessed based upon usage of utility or similar
services, such charges shall be prorated based upon meter readings taken on the
Effective Date.
(iii) All refunds, reimbursements, installments of base rent,
additional rent, license fees or other use related revenue receivable by any
party to the extent attributable to the operation of the Business for any period
in which the Effective Date shall occur shall be prorated so that Transferor
shall be entitled to that portion of any such installment applicable to the
period up to but not including the Effective Date and Transferee shall be
entitled to that portion of any such installment applicable to any period from
and after the Effective Date, and if Transferee or Transferor, as the case may
be, shall receive any such payments after the Effective Date, they shall
promptly remit to such other parties their share of such payments.
(iv) All prepayments made by Transferor with respect to the Assets
or the Business, including but not limited to insurance premiums, advance
payments on maintenance agreements and deposits, shall be prorated so that
Transferor shall be entitled to that portion of any such payment applicable to
the period after and including the Effective Date, and in the case of any
deposits, the full amount of the deposit shall be the amount of the adjustment.
The prorations pursuant to this Section 2.03(a) or that may be required
under any of the Ancillary Agreements may be calculated after the Effective
Date, as each item to be prorated (including without limitation any such Tax,
obligation, assessment, charge, refund, reimbursement, rent installment, fee or
revenue) accrues or comes due, provided that, in any event, any such proration
shall be calculated not later than thirty (30) days after the party requesting
proration of any item obtains the information required to calculate such
proration
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of such item, and the party owing the prorated amount shall pay such amount to
the other party as soon as practicable but in no event more than 15 Business
Days after the final determination of such amount.
(b) At the First Closing, Transferee shall, if all of the contingencies
set forth in Sections 6.01 and 6.02 to the First Closing have been first
satisfied or waived in writing, pay (i) the Assumed Liabilities attributable to
the period between the Effective Date and the First Closing Date, to the extent
that such portion of the Assumed Liabilities are known at such time and shall
thereafter pay such portion of the Assumed Liabilities as they become known and
payable; and (ii) any amounts due to the Transferor under the Management
Agreement for the months of January and February. At the First Closing, the
Transferor shall, if all of the contingencies set forth in Sections 6.01 and
6.02 to the First Closing have been first satisfied or waived in writing pay the
portion of the Account Receivables received by Transferor that have been
acquired by the Transferee hereunder to Transferee in accordance with the terms
of the Management Agreement.
(c) On or before January 15, 2003, XCC shall pay the first payment of
Nine Hundred Thirty Seven Thousand Five Hundred Dollars ($937,500.00) required
pursuant to the Transaction Service Agreement in accordance with the terms of
the Transaction Service Agreement. At the Second Closing XCC shall pay the final
payment of Eight Hundred Twelve Thousand Five Hundred Dollars ($812,500)
required pursuant to the Transaction Service Agreement in accordance with the
terms of the Transaction Service Agreement. The foregoing notwithstanding, if
all the contingencies set forth in Sections 6.01 and 6.02 to the First Closing
have not been satisfied or waived in writing, and this Agreement is subsequently
terminated, XCC shall be entitled to a full refund of such first payment.
(d) The Transferee and the Transferor shall at or before the First
Closing execute and deliver to each other a mutually acceptable management
agreement (the "Management Agreement") and shall execute and deliver to each
other a mutually acceptable transition services agreement (the "Transition
Services Agreement").
SECTION 2.04. Closings
(a) Notwithstanding the other provisions of this Section 2.04, the
contribution and transfer of the Assets shall be deemed to have occurred upon
the Effective Date and the transfer of Assets, assumption of the Assumed
Liabilities shall be bifurcated into two closings (the "First Closing" and the
"Second Closing" and collectively the "Closing" or "Closings"). Subject to the
terms and conditions of this Agreement, the First Closing shall take place at
the offices of Transferee, at 10:00 a.m. CST time, on February 6, 2003 provided
conditions to Closing set forth in Sections 6.01 and 6.02 and within this
Agreement have been satisfied or waived in accordance with the terms of this
Agreement, or at such other time, date, place or manner as the Transferor and
Transferee may mutually agree upon in writing. The Second Closing shall occur at
the offices of Transferee at 10:00 a.m., CST within two (2) business days after
the Transferee and Transferor have received all required regulatory consents
necessary for Transferee to legally be able to take title to the Regulated
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Assets, or such other place and time as the Transferor and the Transferee may
mutually agree upon in writing provided conditions to Closing set forth in
Sections 6.01 and 6.02 and within this Agreement have been satisfied or waived
in accordance with the terms of this Agreement (the day on which the Closing
takes place being the "Closing Date"). On and after the Effective Date until and
including the Second Closing Date (hereinafter defined), Transferor will,
subject to the Management Agreement and the Transition Services Agreement,
continue to hold naked title to such of the Assets that may not be legally
transferred to Transferee under applicable federal and state laws and
regulations and/or require third party consent to the transfer (the "Regulated
Assets"), cooperate with Transferee with respect to such assets and will use
reasonable efforts to keep them intact, the costs associated therewith shall be
allocated in accordance with the Transition Services Agreement. At any time or
from time to time after the First Closing, at Transferee's reasonable request
and without further consideration, Transferor shall: (i) execute and deliver to
Transferee such other instruments of sale, transfer, conveyance, assignment and
confirmation; (ii) provide such materials and information; and (iii) take such
other commercially reasonable actions as Transferee may deem reasonably
necessary or desirable in order to more effectively record, grant, transfer,
convey or assign to Transferee, or its successors and assigns, or confirm
Transferee's title to, all of the Assets, and, to the fullest extent permitted
by law, to put Transferee in actual possession and operating control of the
Assets and assist Transferee in exercising all rights with respect thereto, and
otherwise fulfill Transferor's obligations under this Agreement and the
Ancillary Agreements.
(b) At the First Closing, the Transferor shall deliver or cause to be
delivered to the Transferee:
(i) payment of any amounts due to Transferee under this Agreement
and the Ancillary Agreements;
(ii) executed counterparts to the Bills of Sale and such other
instruments as may reasonably be requested by the Transferee to
transfer title to the Assets to the respective Transferee free and
clear of the Liens;
(iii) executed counterparts of each other Ancillary Agreement to
which the Transferor is a party (other than such Ancillary Agreements
previously executed and delivered); and
(iv) the certificates and other documents required to be delivered
pursuant to Section 6.02.
(c) At the First Closing, the Transferee shall deliver to the
Transferor:
(i) Payment of any amounts due to Transferor under this Agreement
and the Ancillary Agreements;
(ii) executed counterparts to the Bills of Sale;
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(iii) executed counterparts of each other Ancillary Agreement to
which the Transferee is a party (other than such Ancillary Agreements
previously executed and delivered); and
(iv) the certificates and other documents required to be delivered
pursuant to Section 6.01.
(d) At the Second Closing, the Transferor shall deliver a Xxxx of Sale
for the Regulated Assets.
(e) The contribution of the Assets and the assumption by the
Transferee of the Assumed Liabilities shall be deemed for all purposes to have
taken place as of the Effective Date.
SECTION 2.05 Accounts Receivable Proration
Transferee acknowledges that Transferor shall continue to own all
right, title and interest in and to all receivables associated with the Assets
for services provided to customers through the day before the Effective Date.
Transferor acknowledges that Transferee shall own all right, title and interest
in and to all Accounts Receivable associated with the Assets for services
provided to customers commencing the day of the Effective Date. Transferee
agrees that any payments received by Transferee relating to receivables owned by
Transferor shall be received and held for Transferor and promptly paid to
Transferor. Transferor agrees that any payments received by Transferor relating
to receivables owned by Transferee shall be received and held for Transferee and
promptly paid to Transferee. Transferor and Transferee shall cooperate to
produce bills for services and collect receivables in accordance with the terms
of the Management Agreement and Transferor and Transferee further agree to abide
by the Account Receivable Collection Procedures set forth in the Management
Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLER
Transferor makes the following representations and warranties to the
Transferee, as of the date of this Agreement unless stated otherwise with
respect to a particular representation or warranty.
SECTION 3.01. Organization and Qualification of the Transferor;
Authority
Each of the Transferor is an entity duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
organization, has the power and authority to own, operate or lease its
properties and assets now owned, operated or leased by such Transferor and to
carry on the Business, and is duly qualified to do business, and is in good
standing, in each state or other jurisdiction in which the Business is being
conducted and where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary. Each of the
Transferor has the power and authority to enter into and carry out its
obligations under this Agreement and the Ancillary
12
Agreements to which it is a party. The execution and delivery by each Transferor
of this Agreement and the Ancillary Agreements to which it is a party, the
performance of its obligations hereunder and thereunder and the consummation by
such Transferor of the transactions contemplated hereby and thereby have been
duly authorized by all requisite corporate action on the part of the Transferor.
Each of this Agreement and any Ancillary Agreement executed on the date of this
Agreement has been duly executed and delivered by the Transferor, and
constitutes a legal, valid and binding obligation of each of the Transferor
enforceable against the Transferor in accordance with its terms. The Ancillary
Agreements to which the Transferor are parties shall when duly executed and
delivered by the Transferor, constitute legal, valid and binding obligations of
the Transferor enforceable against them in accordance with their terms.
SECTION 3.02 No Conflict
Except for those consents set forth in Schedule 5.03, the execution,
delivery and performance by each Transferor of this Agreement and the Ancillary
Agreements to which such Transferor is a party do not, and shall not (a) violate
or conflict with the Articles of Incorporation or Bylaws of such Transferor, as
amended, (b) conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to such
Transferor, or (c) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any Lien on any of
the assets or properties of such Transferor pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument relating to such assets or properties, to which such Transferor
is a party or by which any of such assets or properties is bound or affected,
except, in the case of clause (b) and (c), as would not (i) materially adversely
affect the ability of Transferor to carry out its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Ancillary
Agreements, (ii) materially adversely affect the ability of Transferor or
Transferee to conduct the Business or (iii) otherwise result in a Material
Adverse Change to the Business. Except for those consents set forth in Schedule
5.03, the execution, delivery and performance by each Transferor of this
Agreement and the Ancillary Agreements to which such Transferor is a party do
not, and shall not, conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to such
Transferor.
SECTION 3.03. Consents and Approvals
The execution, delivery and performance by each of the Transferor of
this Agreement and the Ancillary Agreements to which it is a party, do not, and
will not, require any consent, approval, exemption, authorization or other
action by, or filing with or notification to, any third party, court,
administrative agency or other governmental or regulatory authority, except (i)
for those consents and filings set forth in Schedule 3.03, and (ii) where
failure to obtain such consent, approval, exemption, authorization or other
action, or filing or notification to, any third party, court, administrative
agency or other governmental or regulatory authority
13
would not prevent or materially delay the consummation by Transferor of the
transactions contemplated by this Agreement and the Ancillary Agreements and
would not result in a Material Adverse Change to the Business or Transferee's
ability to operate the Business after the First Closing.
SECTION 3.04 Material Adverse Change and Contracts
No Material Adverse Change has occurred subsequent to November 30,
2002, except as disclosed on Schedule 3.04. Each of the Customer Contracts,
Contracts, Network Contracts and Leased Real Property agreements are in full
force and effect, is valid and effective in accordance with its terms, and
Transferor is not in default under any such Contract, Network Contracts or
Leased Real Property agreements nor, to Transferor's knowledge, is any party in
default to Transferor pursuant to any such Contract, Network Contract or Leased
Real Property agreement. Transferor has not breached, violated or defaulted
under, nor received notice that Transferor has breached, violated or defaulted
under, any of the terms or conditions of any such agreement.
SECTION 3.05. Litigation
Except as disclosed on Schedule 3.05, there is no action, suit, or
proceeding of any nature pending or, to the Transferor's knowledge, threatened
against Transferor, its properties or any of its officers or directors, or
relating to the Business, the Assets or the employees, nor, to the Transferor's
knowledge, is there any basis therefore which, individually, or in the
aggregate, would have a Material Adverse Effect. No Transferor is subject to any
order, writ, judgment, injunction, decree, determination or award that prohibits
any action taken or to be taken by any Transferor pursuant to this Agreement or
any Ancillary Agreement.
SECTION 3.06 State PUC and FCC Matters
Transferor has obtained all material licenses, permits, certificates,
registrations or other regulatory authorizations from the state public utilities
commissions and the Federal Communications Commission as they apply to the
Assets ("Licenses"). Each of the Licenses issued to the Transferor was duly
issued , is valid and in full force and effect, has not been suspended,
cancelled or revoked in any adverse manner. Transferor has operated such
Licenses in all material respects in compliance with the terms of the Licenses
and in compliance with the governmental authorities laws, rules and regulations.
SECTION 3.07. Labor Matters
No Transferor is a party to any collective bargaining agreement or
other labor union contract applicable to any of the Transferor employees.
Schedule 3.07 lists all employees of Transferor primarily engaged in the conduct
of the Business. As of the Effective Date, each of the Transferor employees
identified on Schedule 5.06 will have been paid all of the compensation payable
to such employee by any Transferor with respect to the period prior to the
Effective Date. As of the Effective Date, the Transferor shall waive any
noncompetition, nonsolicitation or confidentiality agreement between any of the
Transferor and any Transferor
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employee identified on Schedule 5.06 to be delivered by Transferee before the
First Closing to the extent any such agreement interferes with the business of
the Transferee. Transferor shall be responsible for all severance payable to
employees of Transferor who are not hired by Transferee on or before the First
Closing Date. With respect to those employees listed on Schedule 5.06,
Transferee shall be responsible for all paid time off accrued up to and
including the Effective Date (not to exceed $38,000) but shall not be
responsible for any severance payments, sales commissions and any other payments
due to such employees under all agreements and/or other arrangements between
Transferor and the employees listed on Schedule 5.06. Transferor shall terminate
any and all sales compensation plans, employment agreements, retention
agreements and the like with respect to such employees listed on Schedule 5.06
so that such employees will be considered "at will" employees of Transferee. The
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Employee Plan,
trust, agreement or loan that will or may directly or indirectly obligate
Transferee to make any payment (whether of severance pay, commissions or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any employee
listed on Schedule 5.06. Schedule 3.07 lists all severance plans, severance
policies, or agreements with such employees listed on Schedule 5.06 that contain
a change in control provision or will otherwise require any payments as a result
of the execution of this Agreement or consummation of the transactions
contemplated hereby.
SECTION 3.08. Ownership of Assets
Except as disclosed on Schedule 3.08, Transferor has good and
marketable title to the Assets, free and clear of all Liens. Transferee shall,
after consummation of the transaction contemplated hereunder, be free to
utilize, sell or otherwise dispose of the Assets in Transferee's sole
discretion.
SECTION 3.09. Taxes
With respect to all federal, state and local Taxes or charges due or
attributable to Transferor, including but not limited to the Business,
Transferor has paid or will pay prior to the Effective Date all Taxes that are
due and payable prior to the Effective Date, and has filed or will file prior to
the Effective Date, all returns for such Taxes required by Law to be filed prior
to the Effective Date.
SECTION 3.10. Environmental
(a) Except as set forth in Schedule 3.10(a) or as would result in a
Material Adverse Change, the Transferor, with respect to the Leased Real
Property, and the Leased Real Property, are, and for the past three years have
been, in compliance with all applicable Environmental Laws (as hereinafter
defined). Except as set forth in Schedule 3.10(a), the Transferor has not,
within the past three years, received any written communication from a
15
governmental or regulatory department or authority, citizens group, or director,
officer, employee, person, or agent, alleging that the Transferor, with respect
to the Leased Real Property, or the Leased Real Property, are not in compliance
with or have violated any applicable Environmental Law.
(b) Except as set forth in Schedule 3.10(b), there is no Environmental
Claim (as hereinafter defined) pending or, to the knowledge of the Transferor,
threatened against the Transferor, with respect to the Leased Real Property, or
against the Leased Real Property.
(c) Except as set forth in Schedule 3.10(c), to the knowledge of the
Transferor, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the handling,
manufacture, treatment, storage, use, generation, release, emission, discharge,
presence, or disposal of any material quantities or concentrations of Hazardous
Materials (as hereinafter defined), that would reasonably be expected to form
the basis of any Environmental Claim against the Transferor, with respect to the
Leased Real Property, or against the Leased Real Property.
(d) Except as set forth in Schedule 3.10(d), there is no asbestos
contained in or forming part of any building, building component, equipment,
structure or office space at any of the Leased Real Property that is friable and
requires, pursuant to applicable Environmental Law, removal or replacement for
the purpose of protecting human health or the environment.
(e) For purposes of this Section 3.10, the following definitions will
apply:
(i) "Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act (42 U.S.C. ss. 9601 et seq.)
and/or the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.) and/or
the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.) and/or
the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss.
136 et seq.) and/or the Clean Air Act (42 U.S.C. ss.7401 et seq.)
and/or the Federal Water Pollution Control Act (33 U.S.C. ss. 1251
et seq.) and/or the Safe Drinking Water Act (42 U.S.C. ss. 3 00f et
seq.) and/or the Emergency Planning and Community Right to Know Act of
1986 (42 U.S.C. ss. I 100 1 et seq.) and/or, in each case, any
equivalent, comparable or complimentary statute of the State of Texas
or any other applicable governmental body or agency, including any
amendments or extensions thereof, in all cases as in effect as of the
Closing Date.
(ii) "Hazardous Material" means any substance:
(A) the presence of which requires investigation or
remediation under any Environmental Law; or
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(B) which is defined as a "hazardous waste," "hazardous
substance," "hazardous material," "toxic substance," "special
waste," "regulated waste," "pollutant" or "contaminant" under any
Environmental Laws; or
(C) which is defined under any Environmental Law as toxic,
explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or hazardous and is restricted or
regulated by any governmental or regulatory authority, agency,
department, commission, board, agency or instrumentality of the
United States, any foreign country or any state or any political
subdivision thereof; or
(D) without limitation, which includes or contains gasoline,
diesel fuel or other petroleum hydrocarbons or byproducts.
(iii) "Environmental Claim" means any claim, order, investigation,
action, suit, proceeding, injunction or demand, in each case in writing, based
upon any Environmental Law, including, without limitation, any claim, order,
investigation, action, suit, proceeding, injunction or demand brought be any
governmental or regulatory authority, agency, department, commission, board,
agency or instrumentality of the United States, any foreign country or any state
or any political subdivision thereof, and any written notice advising the
Transferor of any of the forgoing.
SECTION 3.11. Disclaimer Of Transferor.
The Business, including without limitation the Assets are being
contributed on an "as is" "where is" basis" as of the Effective Date and in its
condition as of such Effective Date with "all faults" and, except as set forth
in this Agreement, the Transferor makes no other representations or warranty,
express or implied, at law or in equity, in respect of the Assets or the
Business, including, without limitation, with respect to merchantability or
fitness for any particular purpose, and any such other representations or
warranties are hereby expressly denied.
SECTION 3.12. Investment Intent
(a) The Transferor is acquiring the Membership Interests for its
own account, for investment purposes only, and not with a view to, or in
connection with, any resale or other distribution of such Membership Interests.
(b) The Transferor acknowledges that the Membership Interests have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state by reason of an exemption
or exemptions from registration under
17
the Securities Act and applicable state securities laws in reliance on the
Transferor's representations contained herein, and that Transferee's reliance on
such exemptions is predicated on the accuracy and completeness of the
Transferor's representations, warranties, acknowledgments and agreements herein.
Accordingly, the Transferor acknowledges and agrees that the Membership
Interests may not be offered, sold, transferred, pledged or otherwise disposed
of by the Transferor without an effective registration statement under the
Securities Act and any applicable state securities laws or an opinion of counsel
acceptable to Transferee that the proposed transaction will be exempt from
registration. The Transferor acknowledges that Transferee is not required to
register the Membership Interests under the Securities Act or any applicable
state securities law or to make any exemption from registration available. The
Transferor understands that the Membership Interest will not be certificated.
(c) The Transferor is an "accredited investor" as such term is
defined in Rule 501(a) promulgated under Regulation D of the Securities Act. The
Transferor has such knowledge and experience in financial and business matters
that the Transferor is capable of evaluating the merits and risks of its
investment in Transferee and of protecting its own interests in connection
therewith.
(d) The Transferor has had the opportunity to ask questions of
Transferee's management, which questions, if any, were answered to the
Transferor's satisfaction.
(e) The Transferor acknowledges that an investment in the
Membership Interests involves certain risks and that the Transferor is able to
bear the economic risk of its investment in the Membership Interests for an
indefinite period of time.
SECTION 3.13. Customer Contracts
Transferor has provided Transferee a true and correct list of all
customer information and a schedule of all material services provided to each
customer (i.e., billed transactions) and charges therefor and all revenues with
respect thereto. True and correct copies of all Customer Contracts with such
customers have been delivered to Transferee. No service provided by Transferor
or product sold, leased, distributed, licensed or delivered by Transferor
pursuant to the Customer Contracts is subject to any guaranty, warranty or other
indemnity beyond Transferor's applicable standard terms and conditions of sale
or lease or provision of services or beyond that implied or imposed by
applicable law.
SECTION 3.14. No Undisclosed Liabilities
Neither the Transferor nor the Business has incurred any material
liability, indebtedness, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with GAAP) relating to the Business (and, to
18
the Transferor's knowledge, there is no basis for any present or future action,
suit or proceeding, hearing, investigation, charge, complaint, claim or demand
against it or the Business giving rise to any such liability), which (i) has not
been fully accrued or reflected in the Texas Trended Income Statements prepared
by Transferor and provided to Transferee. Transferor is not subject to any
contract or agreement of any nature that contains any sort of "take-or-pay"
obligation that may impose liability upon Transferee.
SECTION 3.15. General Warranty
No representation by Transferor in this Agreement or in the Ancillary
Agreements nor any schedule, lists, certificate or other written information
heretofore furnished or to be furnished to Transferee, or in connection with the
transaction contemplated hereby, contains or will contain any untrue statement
of material fact, or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE
The Transferee makes the following representations and warranties to
the Transferor, as of the date of this Agreement unless stated otherwise with
respect to a particular representation or warranty:
SECTION 4.01. Formation and Authority of the Transferee
The Transferee is a limited liability company duly formed and validly
existing under the laws of the State of Delaware and has all necessary corporate
power and authority to enter into and carry out its obligations under this
Agreement and the Ancillary Agreements to which it is a party. The execution and
delivery by the Transferee of this Agreement and the Ancillary Agreements to
which it is a party, the performance of its obligations hereunder and thereunder
and the consummation by such Transferee of the transactions contemplated hereby
and thereby have been duly authorized by all requisite corporate action on the
part of such Transferee. This Agreement and any Ancillary Agreement executed on
the date of this Agreement has been duly executed and delivered by the
Transferee, and constitutes a legal, valid and binding obligation of such
Transferee, enforceable against such Transferee in accordance with its terms.
The Ancillary Agreements to which the Transferee is a party shall when duly
executed and delivered by such Transferee, constitute legal, valid and binding
obligations of such Transferee, enforceable against such Transferee in
accordance with their terms.
SECTION 4.02. No Conflict
Except for those consents set forth in Schedule 5.03, the execution,
delivery and performance by each Transferee of this Agreement and the Ancillary
Agreements to which such Transferee is a party do not, and shall not (a) violate
or conflict with the Articles of Formation or Operating Agreement of such
Transferee, as amended, (b) conflict with or violate any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
such Transferee, or (c) except as could not reasonably be expected to
19
have a material adverse effect on the ability of such Transferee to perform its
obligations under this Agreement and the Ancillary Agreements to which it is a
party, result in any breach of, or constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Lien on any of the assets or
properties of such Transferee pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
relating to such assets or properties, to which such Transferee is a party or by
which any of such assets or properties is bound or affected. Except for those
consents set forth in Schedule 5.03, the execution, delivery and performance by
each Transferee of this Agreement and the Ancillary Agreements to which such
Transferee is a party do not, and shall not, conflict with or violate any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to such Transferee.
SECTION 4.03. Consents and Approvals
Except for those consents set forth in Schedule 5.03, the execution,
delivery and performance by each Transferee of this Agreement and the Ancillary
Agreements to which such Transferee is a party do not, and shall not, require
any consent, approval, exemption, authorization or other action by, or filing
with or notification to, any court, administrative agency or other governmental
or regulatory authority.
SECTION 4.04. Absence of Litigation
No Transferee is subject to any order, writ, judgment, injunction,
decree, determination or award that prohibits any action taken or to be taken by
any Transferee pursuant to this Agreement or any Ancillary Agreement and no
claim, action, proceeding or investigation is pending which questions the
validity of this Agreement or any of the Ancillary Agreements to which any
Transferee is a party or any action taken or to be taken by any Transferee
hereunder or thereunder.
SECTION 4.05 General Warranty
No representation by Transferee in this Agreement or in the Ancillary
Agreements nor any schedule, lists, certificate or other written information
heretofore furnished or to be furnished to Transferor, or in connection with the
transaction contemplated hereby, contains or will contain any untrue statement
of material fact, or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading
SECTION 4.06 Financing
The Transferee has all funds necessary to consummate all the
transactions contemplated by the Agreement and any Ancillary Agreements.
20
ARTICLE V. ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to Closing
Except for actions taken with the prior written consent of Transferee,
from the date of this Agreement until the Second Closing, Transferor shall, in
accordance with the terms and conditions of the Management Agreement and
Transition Services Agreement conduct the Business in the ordinary course
consistent with past practices, and shall:
(a) use its commercially reasonable efforts to maintain the
Business intact and to preserve the goodwill of the Business and present
relationships with the employees, customers and suppliers of the Business and
others with whom the Business has business relations;
(b) use its commercially reasonable efforts to maintain its
assets (including the Assets) in good operating condition and repair in the
ordinary course of business and not create, or permit to be created, any new
Lien on any of its assets;
(c) meet the contractual obligations of the Business and perform
and pay its obligations as they mature in the ordinary course of business;
(d) comply in all material respects with all judgments, all laws,
statutes, rules, ordinances and regulations promulgated by any governmental
authority and all permits, authorizations, approvals and consents applicable to
the conduct of the Business or the ownership or operation of Transferor's assets
(including the Assets);
(e) promptly advise the Transferee in writing of the occurrence of
any Material Adverse Change or of any change, condition or event that could
reasonably be expected to result in such a Material Adverse Change;
(f) pay all premiums and effect all renewals necessary to keep
existing insurance policies relating to the Assets or Business in effect;
(g) not take any action, or omit to take any action, that
would result in any of Transferor' representations and warranties made herein
being inaccurate at the time of such action or omission as if made at and as of
such time;
(h) not accelerate the collection of any accounts receivable
with respect to the Business other than collections in the ordinary course of
business and consistent with past practices.
SECTION 5.02. Access to Information
(a) From the date hereof until the Second Closing, Transferor shall
afford the officers, employees, customers (with prior written consent of
Transferor) professional and financial advisors, and authorized agents and
representatives of the Transferee full and free
21
access to the offices, employees, officers, directors, professional advisors
(including financial advisors) provided Transferee pays applicable fees,
properties, contracts, books, records and all other documents and data of the
Transferor relating to the Business, provided, however, that the Transferor
shall not be required to disclose any information which is subject to the
attorney-client privilege. On or promptly following the Closing , Transferor'
shall provide Transferee with copies of all of the Transferor' general,
financial, customer and other records pertaining to the Business as of the date
such records are provided.
(b) In order to facilitate the resolution of any claims made against or
incurred by Transferor for the operation of the Business prior to the Effective
Date or for any other reasonable purpose, for a period of seven years after the
Effective Date, the Transferee shall (i) maintain the books and records relating
to the Business relating to periods prior to the Effective Date in a manner
reasonably consistent with the prior practice of Transferee and (ii) upon
reasonable notice, afford the officers, employees, agents and representatives of
the Transferee reasonable access (including the right to make, at the
Transferee's expense, photocopies), during normal business hours, to such books
and records.
SECTION 5.03. Regulatory and Other Authorizations; Consents
The Transferor and the Transferee shall use commercially reasonable
efforts to obtain all authorizations, consents, orders and approvals of all
federal, state and local regulatory bodies and officials and other third parties
that may be or become necessary for their respective execution and delivery of,
and the performance of their respective obligations pursuant to, this Agreement
and the Ancillary Agreements and shall cooperate fully with each other in
promptly seeking to obtain all such authorizations, consents, orders and
approvals. Such consents and approvals to include those regulatory and third
party consents listed on Schedule 5.03. The parties hereto shall not take any
action that would have the effect of delaying, impairing or impeding the receipt
of any required approvals.
SECTION 5.04. Taxes
(a) The Transferor shall be liable for and shall hold Transferee
harmless against any and all sales, use, transfer, value added, business and
occupation, stamp, recording, registration and similar Taxes, levies, charges
and fees incurred as a result of the transactions contemplated by this Agreement
and the Ancillary Agreements. The Transferee and the Transferor shall cooperate
in the filing of all necessary documentation and all Tax returns, reports and
forms with respect to any Taxes, levies, charges and fees required to be filed
as a result of the transactions contemplated hereby, and shall file such
applications and documents as shall permit any such Taxes, levies, charges and
fees to be assessed and paid on or prior to the Effective Date in accordance
with any available pre-sale filing procedure. Transferee shall execute and
deliver all instruments and certificates necessary to enable Transferor to
comply with the foregoing. Transferee shall complete and execute a resale or
other exemption certificate with respect to the inventory items sold hereunder,
and shall provide Transferor with an executed copy thereof.
22
(b) Transferor shall be responsible for all Taxes that may be due after
the Effective Date that are attributable to services rendered prior to the
Effective Date but are not billed and/or collected until after the Effective
Date.
(c) With respect to any taxable period or portion thereof during which
the Transferor holds any Membership Interests, (i) the Transferee shall timely
file such Tax returns as are required by Law to be filed by it; and (ii)
promptly following the end of each fiscal year of the Transferee (and in no
event later than 90 days after the close of such fiscal year, the Transferee
shall provide the Transferor with IRS Schedule K-1 reporting the Transferee's
share of the taxable income or loss of the Transferee and such separately stated
items of income, gain, loss, deduction or credit as required by federal income
Tax law, and such other information as is reasonably required by the Transferee
for purposes of allowing the Transferee to prepare and file its Tax returns.
SECTION 5.05. Further Action
Subject to the terms and conditions provided in this Agreement, each of
the parties hereto shall use commercially reasonable efforts to take promptly,
or cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all governmental consents, necessary waivers, third party consents and approvals
and to effect all necessary registrations and filings and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement. In furtherance of the foregoing, the parties agree to cooperate
to provide all notices required by all applicable regulatory authorities in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement, including all notices to Customers; provided
that no party shall deliver any such notice without the written consent of the
other party, except as required by law.
SECTION 5.06. Schedule of Employees
At any time prior to the First Closing, Transferee shall provide a list
of the Transferor Employees to whom the Transferee intend to extend offers of
employment commencing on the Second Closing, which list shall be attached as
Schedule 5.06. To the extent that service is relevant for the purposes of
eligibility in any benefits provided by Transferee to its employees generally,
Transferee shall recognize the service with the Transferor of such hired
Transferor employees. Effective as of the Second Closing or such earlier time if
such employee is hired by Transferee prior to the Second Closing, the accrued,
unused vacation or paid time off of all Transferor employees hired by Transferee
shall be assumed by Transferee. Transferor shall have no obligation or liability
to pay or provide any vacation payments or paid time off to such employees hired
by Transferee prior to the First Closing Date. Other than the employees hired as
of the First Closing Date, Transferee will not hire any Transferor employees for
a period of 90 days after the First Closing Date unless Transferee reimburses,
23
or causes such employee to reimburse, Transferor for the full value of all
severance or other benefits paid to such employee with respect to any change or
employment resulting from the transactions contemplated by this Agreement.
SECTION 5.07. Cooperation In Tax Matters
Transferor and Transferee shall provide each other with such
cooperation and information as either of them reasonably may request of the
other in filing any Tax return, amended Tax return or claim for refund,
determining a liability for Taxes or a right to a refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes, in each case, to
the extent relating to the Assets or the Business, including using best efforts
to make officers and employees available for such purposes, provided that the
party requiring the participation of such officers or employees shall pay all
reasonable out-of-pocket costs, charges and expenses arising from such
participation. Each of the parties shall retain all Tax returns and related
schedules, work papers, records and other documents in its possession pertaining
to the Business or the Assets until the later of (i) the expiration of the
statute of limitations for the taxable periods to which such Tax returns and
other documents relate, without regard to extensions (except to the extent
notified by the other party in writing of such extensions for the respective Tax
periods), or (ii) six years following the due date (without extension) for such
Tax returns. Any information obtained under this Section 5.07 shall be kept
confidential except as may otherwise be necessary in connection with the filing
of Tax returns or claims for refund or in conducting an audit or other
proceeding.
SECTION 5.08. Transition Services
Following the Effective Date, Transferor shall provide, or cause to be
provided, to the Transferee certain services that are currently provided by
Transferor and its affiliates in the operation of the Business, all as more
fully set forth in the Transition Services Agreement. In addition, each of the
parties hereto shall use commercially reasonable efforts to take promptly, or
cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable to preserve the goodwill of the Business
and maintain all customers of Transferor to provide a smooth transition of the
Business to Transferee.
SECTION 5.09. Agent Agreements
With respect to those agent agreements set forth on Schedule 5.09 (the
"Agent Agreements"), Transferor shall terminate any and all agent compensation
plans, commission plans and the like with respect to such Agent Agreements.
Transferor shall be responsible for all commissions accrued or earned under the
Agent Agreements with respect to products sold and services rendered prior to
the Effective Date. Provided the agents identified in the Agent Agreements
execute and deliver new agent agreements on Transferee's standard agent
agreement forms, Transferee shall be responsible for all commissions accrued or
earned under the Agent Agreements with respect to products sold or services
rendered after the Effective Date. The foregoing notwithstanding, Transferee
shall be responsible for any commissions paid pursuant to the terms of the Agent
Agreements to an agent by Transferor
24
and for any commissions owing to an agent under the Agent Agreements by
Transferor provided that Transferee has received the revenue from which such
commission are based.
SECTION 5.10 Excluded Assets Schedule
Transferor and Transferee shall, within five (5) days of the execution
of this Agreement, use their best efforts to negotiate in good faith and
reasonably agree to a Schedule of Excluded Assets, to be attached hereto as
Schedule 5.10.
ARTICLE VI. CONDITIONS TO CLOSINGS
SECTION 6.01. Conditions to Obligations of the Transferor
The obligations of the Transferor to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or written
waiver by Transferor, at or prior to each Closing, of each of the following
conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Transferee contained in this Agreement shall be true and
correct in all material respects as of the Closing, with the same force and
effect as if made as of the Closing, other than such representations and
warranties as are made as of another date (in which case those representations
and warranties shall be true and correct in all material respects as of such
date), and all the covenants contained in this Agreement and the Ancillary
Agreements to be complied with by the Transferee on or before the Closing shall
have been complied with in all material respects.
(b) No Injunction. As of the Closing Date, there shall not be any
injunction, writ, order or decree of any court or other governmental body that
restrains or prohibits the transactions contemplated by this Agreement.
(c) Regulatory Approvals. The regulatory approvals listed on Schedule
5.03 shall have been obtained on or before the Second Closing.
(d) Ancillary Agreements. The Transferee and Transferor shall have
executed and delivered the Ancillary Agreements to each other.
SECTION 6.02. Conditions to Obligations of the Transferee
The obligation of the Transferee to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or written
waiver by Transferee, at or prior to each Closing, of each of the following
conditions:
(a) Representations and Warranties; Covenants. The representations and
warranties of the Transferor contained in this Agreement shall be true and
correct in all material respects as of the Closing Date, with the same force and
effect as if made as of the Closing Date, other than such representations and
warranties as are made as of another date
25
(in which case those representations and warranties shall be true and correct in
all material respects as of such date), and all the covenants contained in this
Agreement and the Ancillary Agreements to be complied with by the Transferor on
or before the Closing shall have been complied with in all material respects..
(b) No Injunction. As of the Closing Date, there shall not be any
injunction, writ, order or decree of any court or other governmental body that
restrains or prohibits the transactions contemplated by this Agreement
(c) Regulatory Approvals. The regulatory approvals listed on Schedule
5.03 shall have been obtained on or before the Second Closing.
(d) Ancillary Agreements. The Transferor and Transferee shall have
executed and delivered the Ancillary Agreements to each other.
(e) Consents. Transferee and Transferor shall have obtained all
material third party consents necessary to continue the operation of the
Business, own the Assets, transfer the Network Contracts, the Real Property
Leases and Contracts set forth on Schedule 5.03, all on terms satisfactory to
the Transferee in Transferee's sole and absolute discretion.
(f) Leased Assets. Transferor shall have provided those Assets listed
on Schedule 6.02(f) free and clear of any leases and if Transferor is unable to
do so, Transferor shall provide similar equipment of the same quality and
configuration or subject to a lease upon such terms and conditions acceptable to
Transferee in Transferee's sole and absolute discretion.
(g) Material Liability. Transferee shall not be subject to or be
required to incur any material liability relating to the Business that has not
expressly been agreed to be assumed by Transferee under this Agreement or under
any Ancillary Agreement or has otherwise not been disclosed to Transferee by
Transferor prior to the First Closing. For purposes of this section, a "material
liability" shall be deemed to include any liability individually equal to or
greater than $50,000 or in the aggregate $100,000.
ARTICLE VII. SURVIVAL; RIGHT OF SETOFF; POST-CLOSING MATTERS
SECTION 7.01. Transferee's Representations and Warranties
The Transferee's representations and warranties in this Agreement, or
in any certificate or other instrument delivered pursuant to this Agreement,
shall terminate as of the Second Closing, except for Transferee's covenants,
representations and warranties set forth in Section 8.04.
SECTION 7.02. Transferor's Representations and Warranties
The Transferor's representations and warranties in this Agreement, or
in any certificate or other instrument delivered pursuant to this Agreement,
shall terminate as of the
26
Second Closing, except for Transferor's covenants, representations and
warranties set forth in Section 7.04 and 8.04 shall survive.
SECTION 7.03. [This section has intentionally been left blank.]
SECTION 7.04 Restrictive Covenants
As an inducement for Transferee to acquire the Assets and to enter into
this Agreement, Transferor and Transferee agree:
(a) Transferor, for itself and on behalf of its successors, assigns,
officers, directors and employees employed by Transferor will not, directly or
indirectly, as an owner, partner, shareholder, consultant or (without limitation
by the specific enumeration of the foregoing) otherwise engage in any business
which is directly or indirectly competitive with Transferee for a period of
three (3) years in the business of providing integrated voice, video and data
communications services and products within the State of Texas (the "Restricted
Territory"). The foregoing not withstanding, in no event shall this Section 7.04
apply to an unaffiliated Person that conducts a telecommunications business in
the event of a Change of Control Transaction involving Transferor, which is not
designed or intended to establish a market in Texas, (each, a "Transferor
Company"). For the purposes of this section, a "Change of Control Transaction"
shall mean, with respect to any such Person, any of the following, occurring in
a single transaction or as part of a series of related transactions: (a) the
acquisition by such a Person of all or substantially all the assets of a
Transferor Company and its subsidiaries, taken as a whole, (b) the acquisition
by such a Person of more than fifty percent (50%) of the voting power of a
Transferor Company then outstanding, and (c) the merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Transferor Company whereby more than fifty percent(50%) of the
voting power of the surviving entity is owned or controlled by such a Person.
(b) Transferor, for itself and on behalf of its successors, assigns, officers,
directors and employees (each a "Transferor Affiliated Party")will not disclose,
directly or indirectly, as an owner, partner, shareholder, consultant or
(without limitation by the specific enumeration of the foregoing) and agrees to
keep secret and confidential, and not to use or disclose to any third parties,
except as required for Transferor to perform Transferor's responsibilities to
Transferee, any Confidential Information. For purposes of this Agreement, the
term Confidential Information shall mean all information primarily pertaining to
the Transferor's Business (tangible or intangible), including but not limited to
internal business procedures, business plans, technical and engineering data,
financial data, vendor names, customer and marketing information, customer
lists, business forms, third party information in the Transferor's possession,
specialized data, know-how, proposals, cost and pricing information, estimating
and adjusting data but shall not include, however, information which (i) is or
becomes publicly available other than as a result of a disclosure by the
Transferor Affiliated Parties in violation of this letter agreement or other
obligation of confidentiality, (ii) was available to the Transferor Affiliated
Parties on a nonconfidential basis prior to its disclosure by pursuant to such
Person's role with the Transferor, (iii) is or becomes available to the
Transferor Affiliated Parties from a person (other than in their role with
Transferor) who is
27
not prohibited from disclosing such information to a Transferor Affiliated Party
by a legal, contractual or fiduciary obligation to Transferor or any
representative of Transferor, or (iv) information which is independently
developed by a Transferor Affiliated Party, its representatives or on its or
their behalf that is not derived from or based on Confidential Information.
(c) Transferor, for itself and on behalf of its successors, assigns,
officers, directors and employees employed by Transferor will not, directly or
indirectly, as an owner, partner, shareholder, consultant or (without limitation
by the specific enumeration of the foregoing) solicit and will preclude any
solicitation of the customers, prospective customers, resellers, employees and
agents of Transferee for a period of three (3) years after the Second Closing.
(d) In the event of any breach of this Section 7.04 the time period of
the breached covenant shall be extended for the period of such breach. The
parties recognize that the territorial, time and scope limitations set forth in
this Section 7.04 are reasonable and are required for the protection of each
party and in the event that any such territorial, time or scope limitation is
deemed to be unreasonable by a court of competent jurisdiction, Transferor and
Transferee agree to the reduction of either or any of said territorial, time or
scope limitations to such an area, period or scope as said court shall deem
reasonable under the circumstances.
(e) Transferor and Transferee specifically recognizes that any breach
of this Section 7.04 will cause irreparable injury to the non-breaching party
and that actual damages may be difficult to ascertain, and in any event, may be
inadequate. Accordingly (and without limiting the availability of legal or
equitable, including injunctive, remedies under any other provisions of this
Agreement), Transferor and Transferee agree that in the event of any such breach
by Transferor, Transferee shall be entitled to injunctive relief, without the
requirement of posting a bond, in addition to such other legal and equitable
remedies that may be available, including but not limited to reasonable
attorney's fees. Transferor and Transferee recognize that the time limitation in
Section 7.04 is reasonable and properly required for the protection of
Transferee and in the event that the absence of such limitation is deemed to be
unreasonable by a court of competent jurisdiction, the parties agree and submit
to the imposition of such a limitation as said court shall deem reasonable.
ARTICLE VIII. TERMINATION, AMENDMENT, WAIVER and INDEMNIFICATION
SECTION 8.01. Termination
This Agreement may be terminated upon written notice given at any time
prior to the Closing:
(a) by the mutual written consent of the Transferee and the Transferor;
(b) by the Transferee or Transferor, if the First Closing shall not
have occurred prior to February 6, 2003; provided, however, that the right to
terminate this Agreement
28
under this Section 8.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or
shall have resulted in, the failure of the First Closing to occur prior to such
date;
(c) by the Transferor, in the event of a material breach by the
Transferee of any representation, warranty, covenant or agreement of the
Transferee contained herein that, upon 15 days prior written notice by
Transferor to Transferee, has not been cured or is not curable by the applicable
Closing Date; or
(d) by the Transferee in the event of a material breach by any
Transferor of any representation, warranty, covenant or agreement of such party
contained herein that, upon 15 days prior written notice by Transferee to
Transferee, has not been cured or is not curable by the applicable Closing Date.
SECTION 8.02. Effect of Termination
In the event of termination of this Agreement as provided in Section
8.01, the parties agree to work together and use their best efforts to return
the operation of the Assets to the status quo immediately prior to the Effective
Date; this will include Transferor having the benefit of all revenues and
accounts receivable associated with the Assets, and Transferor having the
responsibility for all expenses and liabilities with respect to the Assets
arising from and after the Effective Date and the cancellation of the Membership
Interest effective as of the Effective Date to Transferee or XMC as the case may
be. Upon such return of the operation of the Assets and reimbursement of all
Assumed Liabilities to Transferee, this Agreement shall become void and there
shall be no liability on the part of any party hereto except nothing herein
shall relieve any party from liability for any breach hereof or from their gross
negligence or willful misconduct.
SECTION 8.03. Waiver
At any time prior to the Closing or Closings, the Transferee may (a)
extend the time for the performance of any of the obligations or other acts of
the Transferor, (b) waive any inaccuracies in the representations and warranties
of the Transferor contained herein or in any document delivered pursuant hereto
or (c) waive compliance with any of the agreements or conditions of the
Transferor contained herein. At any time prior to the Closing or Closings, the
Transferor may (a) extend the time for the performance of any of the obligations
or other acts of the Transferee, (b) waive any inaccuracies in the
representations and warranties of the Transferee contained herein or in any
document delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions of the Transferee contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
the applicable party set forth in this Section. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement. The failure of any party to assert any of its
rights hereunder shall not constitute a waiver of any such rights.
29
SECTION 8.04 Indemnification
(a) Transferee and its affiliates, officers, directors, managers,
members, employees, agents, successors and assigns (each a "Transferee
Indemnified Party") shall be indemnified and held harmless by Transferor for and
against all Liabilities, losses, damages, claims, costs and expenses, interest,
awards, judgments and penalties (including, without limitation, reasonable
attorneys' and consultants' fees and expenses) actually suffered or incurred by
them (hereinafter a "Loss"), arising out of or resulting from: (i) the breach of
any representation or warranty made by Transferor contained in this Agreement;
(ii) the breach of any covenant or agreement by Transferor contained in this
Agreement or in any Ancillary Agreement; or (iii) the conduct of the Business
prior to the Effective Date including any Liabilities that are not Assumed
Liabilities. Anything in Section 7.02 to the contrary notwithstanding, no claim
may be asserted nor may any action be commenced against Transferor for breach of
any representation or warranty contained herein, unless written notice of such
claim or action is received by the Transferor describing in reasonable detail
the facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation or warranty on which
such claim or action is based ceases to survive as set forth in Section 8.04,
irrespective of whether the subject matter of such claim or action shall have
occurred before or after such date.
(b) The Transferor and its Affiliates, officers, directors, employees,
agents, successors and assigns (each a "Transferor Indemnified Party", and
together with any Transferee Indemnified Party, an "Indemnified Party" ) shall
be indemnified and held harmless by the Transferee for and against any and all
Losses, arising out of or resulting from: (i) the breach of any representation
or warranty made by the Transferee contained in this Agreement; (ii) the breach
of any covenant or agreement by the Transferee contained in this Agreement or in
any Ancillary Agreement; (iii) the Assumed Liabilites; (iv) the Assets; or (v)
the conduct of the Business by the Transferee following the Effective Date.
Anything in Section 7.01 to the contrary notwithstanding, no claim may be
asserted nor may any action be commenced against the Transferee for breach of
any representation or warranty contained herein, unless written notice of such
claim or action is received by the Transferee describing in reasonable detail
the facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation or warranty on which
such claim or action is based ceases to survive as set forth in Section 8.04,
irrespective of whether the subject matter of such claim or action shall have
occurred before or after such date.
The parties acknowledge that notwithstanding anything in this Agreement
to the contrary, all Third Party Claims and the right to indemnification
hereunder shall survive the Closing.
30
(c) An Indemnified Party shall give the Transferee or Tranferor, as the
case may be (the "Indemnifying Party") notice of any matter which an Indemnified
Party has determined has given or could give rise to a right of indemnification
under this Agreement, within 60 days of such determination, stating the amount
of the Loss, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises. The obligations and liabilities of the
Indemnifying Party under this Section 8.04 with respect to Losses arising from
claims of any third party which are subject to the indemnification provided for
in this Section 8.04 ("Third Party Claims") shall be governed by and be
contingent upon the following additional terms and conditions: if an Indemnified
Party shall receive notice of any Third Party Claim, the Indemnified Party shall
give the Indemnifying Party notice of such Third Party Claim within 30 days of
the receipt by the Indemnified Party of such notice; provided, however, that the
failure to provide such notice shall not release the Indemnifying Party from any
of its obligations under this Section 8.04 except to the extent that the
Indemnifying Party is materially prejudiced by such failure and shall not
relieve the Indemnifying Party from any other obligation or liability that it
may have to any Indemnified Party otherwise than under this Section 8.04. If the
Indemnifying Party acknowledges in writing its obligation to indemnify the
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then the Indemnifying Party shall be entitled to assume and control
the defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the Indemnified Party
within ten days of the receipt of such notice from the Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
Indemnified Party in its sole and absolute discretion for the same counsel to
represent both the Indemnified Party and the Indemnifying Party , then the
Indemnified Party shall be entitled to retain its own counsel in each
jurisdiction for which the Indemnified Party determines, on the advice of
counsel, that counsel is required, at the expense of the Indemnifying Party. In
the event that the Indemnifying Party exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the Indemnified
Party shall cooperate with the Seller in such defense and make available to the
Indemnifying Party , at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably required by the Indemnified
Party. No such Third Party Claim may be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party.
(d) Notwithstanding anything to the contrary contained in this
Agreement: (a) an Indemnifying Party shall not be liable for any claim for
indemnification pursuant to Section 8.04, unless and until the aggregate amount
of indemnifiable Losses which may be
31
recovered from the Indemnifying Party equals or exceeds $25,000; and (b) the
maximum amount of indemnifiable Losses which may be recovered from Transferor
arising out of or resulting from the causes set forth in Section 8.04(a)(i)
shall be an amount equal to $1,750,000 ; and (c) the maximum amount of
indemnifiable Losses which may be recovered from Transferee arising out of or
resulting from the causes set forth in Section 8.04(b)(i) shall be an amount
equal to $1,750,000.
(e) The Transferor and the Transferee acknowledge and agree that (i)
following the Closing, the indemnification provisions of 8.04 shall be the sole
and exclusive remedies of the Transferee and the Transferor for any breach by
the other party of the representations and warranties in this Agreement and for
any failure by the other party to perform and comply with any covenants and
agreements in this Agreement. Each party hereto shall take all reasonable steps
to mitigate its Losses upon and after becoming aware of any event which could
reasonably be expected to give rise to any Losses.
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.01. Fees and Expenses
Unless otherwise indicated in this Agreement or the Ancillary
Agreements, all costs and expenses incurred in connection with this Agreement
and the Ancillary Agreements and the transactions contemplated hereby and
thereby, including fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
whether or not the Closing or Closings shall have occurred.
SECTION 9.02. Notices
All notices, requests, demands, consents, approvals, declarations and
other communications required by this Agreement shall be in writing and shall be
deemed delivered (a) if given by facsimile, when transmitted and the appropriate
telephonic confirmation received, (b) if given by first-class air mail
(certified and return-receipt requested), when delivered, (c) if given
personally, when received, and (d) if given by an internationally recognized
overnight courier, when received or personally delivered, in each case, with all
charges prepaid and addressed as follows, or to such other address as any party
shall specify in a notice delivered to all other parties in accordance with this
Section 9.02:
(a) if to the Transferor: Mpower Holdings Corporation
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
T: (000) 000-0000
F: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
and
32
with a copy (which shall not constitute notice) to:
Shearman & Sterling
000 Xxxxxxxxx Xxx
Xxx Xxxx, XX 00000
T: (000) 000-0000
F: (000) 000-0000
Attn: Xxxx Xxxxxx, Esq.
(b) if to the Transferee: Xspedius Equipment Leasing, LLC
0000 XxxxXxxxx Xxxx, 0xx Xxxxx
X'Xxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile 000-000-0000
T: (000) 000-0000
SECTION 9.03. Headings
The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.04. Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
SECTION 9.05. Entire Agreement
This Agreement and the Ancillary Agreements constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
SECTION 9.06. Assignment
No party shall assign its rights or obligations under this Agreement
without the prior written consent of the other party; provided that the
Transferee may assign their rights and obligations to any affiliate or successor
thereof. This Agreement shall be binding upon and
33
inure to the benefit of the parties hereto and their respective successors,
heirs, legal representatives and permitted assigns.
SECTION 9.07. No Third-Party Beneficiaries
This Agreement is for the sole benefit of the parties hereto and their
successors and permitted assigns, and nothing herein, express or implied, is
intended to or shall confer upon any other person or entity any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.08. Amendment; Waiver
This Agreement may not be amended or modified except by an instrument
in writing duly executed by the Transferee and the Transferor. Waiver of any
term or condition of this Agreement shall only be effective if in writing, duly
executed by the party to be bound thereby, and shall not be construed as a
waiver of any subsequent breach or waiver of the same term or condition, or a
waiver of any other term or condition of this Agreement.
SECTION 9.9. Governing Law; Jurisdiction and Venue
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed and to be
performed in that State.
SECTION 9.10. Counterparts; Facsimile Signatures
This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement. The parties agree that for purposes of
this Agreement and the other documents, agreements, and certificates defined in
connection with the transactions contemplated hereby, delivery via facsimile of
an executed signature page to this Agreement, such document, agreement or
certificate shall be as effective as delivery of a manually signed signature
page to this Agreement, such document, agreement or certificate.
SECTION 9.11. Time of Essence
Time is strictly of the essence.
SECTION 9.12. Bulk Transfers Laws
Transferor warrants and represents that there are no current or past
creditors of Transferor to whom any law, rule or regulation requires the
delivery of notice or from whom any form of consent is required in conjunction
with undertaking the transactions contemplated by this Agreement. Based upon
this representation, Transferee hereby waives compliance by Transferor with any
applicable bulk sale or bulk transfer laws of any jurisdiction in connection
with the sale of the Assets to Transferee hereunder.
34
SECTION 9.13. WAIVER OF JURY TRIAL
THE PARTIES HERETO HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE PARTIES HERETO
(A) CERTIFY THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE,
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
9.13.
IN WITNESS WHEREOF, the parties hereto have caused this Asset
Contribution Agreement to be duly executed as of the date first written above.
Transferee:
Xspedius Equipment Leasing, LLC
By: /s/ Xxxxx Xxxxxx III
------------------------------
Name: Xxxxx Xxxxxx III
Title: Manager
Transferor:
Mpower Holding Corporation
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President and
General Counsel
With respect to Section 2.03(c)
as it relates only to XCC
Xspedius Communications, LLC
35
By: /s/ Xxxx X. Xxxxx
------------------------------
Name: Xxxx X. Xxxxx
----------------------------
Title: President & CEO
---------------------------
36
