EXECUTION VERSION
ASSET PURCHASE AGREEMENT
dated as of September 24, 2001
by and among
RHYTHMS NETCONNECTIONS INC.
RHYTHMS LINKS INC.
RHYTHMS LINKS INC. - VIRGINIA
RHYTHMS LEASING INC.
AND
MCI WORLDCOM NETWORK SERVICES, INC.
TABLE OF CONTENTS
PAGE
I. DEFINITIONS................................................................ 2
1.1. Defined Terms......................................................... 2
1.2. Other Defined Terms................................................... 4
1.3. Other Definitional Provisions......................................... 6
II. TRANSFER OF ASSETS AND LIABILITIES......................................... 6
2.1. Assets to be Sold..................................................... 6
2.2. Excluded Assets....................................................... 7
2.3. Liabilities to be Assumed by Buyer.................................... 8
2.4. Excluded Liabilities.................................................. 10
2.5. Assumed Real Property Leases, Assumed Equipment Leases and Assumed
Contracts............................................................. 10
III. CLOSING.................................................................... 11
3.1. Closing; Transfer of Possession; Certain Deliveries................... 11
3.2. Purchase Price........................................................ 12
3.3. Allocation of Purchase Price.......................................... 13
IV. REPRESENTATIONS AND WARRANTIES OF SELLERS.................................. 13
4.1. Existence, Good Standing and Power.................................... 14
4.2. Authority............................................................. 14
4.3. Execution and Binding Effect.......................................... 14
4.4. No Violation.......................................................... 14
4.5. Third Party Approvals................................................. 14
4.6. Brokers and Finders................................................... 15
4.7. FCC/State PUC Matters................................................. 15
4.8. Environmental Matters................................................. 16
4.9. Employee Benefits; Labor Matters...................................... 16
4.10. Real Property......................................................... 17
4.11. Title to and Use of Property.......................................... 17
4.12. Intellectual Property................................................. 18
4.13. Network Equipment Assets.............................................. 19
4.14. Assumed Contracts and Equipment Leases................................ 19
4.15. Limitation on Seller's Representation and Warranties.................. 19
V. REPRESENTATIONS AND WARRANTIES OF BUYER.................................... 20
5.1. Existence, Good Standing and Power.................................... 20
5.2. Authority............................................................. 20
5.3. Execution and Binding Effect.......................................... 20
5.4. No Violation.......................................................... 20
5.5. Third Party Approvals................................................. 20
5.6. Brokers and Finders................................................... 21
5.7. No Continuation of Business........................................... 21
5.8. Financing............................................................. 21
VI. COVENANTS OF THE PARTIES................................................... 21
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.1. Conduct of Business by Sellers Pending the Closing.................... 21
6.2. Access and Information................................................ 22
6.3. Public Announcements; Third Party Contacts............................ 22
6.4. HSR................................................................... 23
6.5. Entry of Approval Order............................................... 23
6.6. Reasonable Efforts.................................................... 23
6.7. Notification of Certain Matters....................................... 24
6.8. Employees............................................................. 24
6.9. Payment of Transfer Taxes and Tax Filings............................. 26
6.10. Utilities............................................................. 27
6.11. Proration of Taxes and Certain Charges................................ 27
6.12. Communications Licenses............................................... 28
6.13. Rejected Contracts.................................................... 28
6.14. Competing Transaction................................................. 28
6.15. Disclosure Supplements................................................ 29
6.16. FCC Applications/State PUC Applications............................... 29
6.17. Use of Name........................................................... 30
VI-A. ADDITIONAL POST-CLOSING COVENANTS......................................... 31
6A.1 Alternative Tax Procedure............................................. 31
6A.2. Further Assurances.................................................... 31
6A.3. Further Agreements.................................................... 31
6A.4. Removal of Excluded Assets............................................ 31
6A.5. Post-Closing Access to Records and Personnel.......................... 31
6A.6. Continued Cooperation................................................. 32
VII. CONDITIONS TO OBLIGATIONS OF THE PARTIES.................................. 32
7.1. Conditions Precedent to Obligations of the Sellers and Buyer.......... 32
7.2. Conditions Precedent to Obligations of Buyer.......................... 33
7.3. Conditions Precedent to the Obligations of the Sellers................ 34
VIII. TERMINATION............................................................... 34
8.1. Termination of Agreement.............................................. 34
8.2. No Liabilities in Event of Termination................................ 35
IX. OPERATING EXPENSES........................................................ 36
X. GENERAL PROVISIONS........................................................ 36
10.1. Expenses.............................................................. 36
10.2. Assignment............................................................ 36
10.3. Parties in Interest................................................... 36
10.4. Notices............................................................... 37
10.5. Choice of Law......................................................... 38
10.6. Non-Survival of Representations, Warranties and Agreements............ 38
10.7. Entire Agreement; Amendments and Waivers.............................. 38
10.8. Counterparts.......................................................... 39
10.9. Severability; Invalidity.............................................. 39
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.10. Headings............................................................. 39
10.11. Exclusive Jurisdiction............................................... 39
10.12. Waiver of Right to Trial by Jury..................................... 39
10.13. Beneficiaries........................................................ 39
10.14. Specific Performance................................................. 39
10.15. Counting............................................................. 40
10.16. Service of Process................................................... 40
10.17. Amendment............................................................ 40
10.18. Time of Essence...................................................... 40
10.19. Waiver............................................................... 40
10.20. Schedules............................................................ 40
10.21. Interpretation....................................................... 40
10.22. Preparation of this Agreement........................................ 41
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ASSET PURCHASE AGREEMENT
This
ASSET PURCHASE AGREEMENT (this "AGREEMENT") is dated as of September
24, 2001 by and among Rhythms NetConnections Inc., a Delaware corporation,
Rhythms Links Inc., a Delaware corporation, Rhythms Links Inc. - Virginia, a
Virginia corporation and Rhythms Leasing, Inc., a Nevada corporation
(collectively with Rhythms, "SELLERS"), and MCI WorldCom Network Services, Inc.,
a Delaware corporation ("BUYER").
WITNESSETH:
WHEREAS, the Sellers are engaged in the business of providing high speed
data transmission through digital subscriber line technology;
WHEREAS, Sellers commenced cases (collectively the "CASE") under chapter 11
of title 11 of the United States Code, 11 U.S.C. Sections 101 ET SEQ. (the
"BANKRUPTCY CODE") on August 1, 2001 by filing voluntary petitions with the
United States Bankruptcy Court for the Southern District of
New York (the
"BANKRUPTCY COURT");
WHEREAS, the sale of assets and liabilities of the business are subject to
the supervision and control of Sellers subject to the approval of the Bankruptcy
Court;
WHEREAS, on August 8, 2001, the Bankruptcy Court entered an order
authorizing, among other things, procedures for a proposed auction sale of all
or substantially all of the debtors' assets (the "PROCEDURE ORDER");
WHEREAS, the Buyer and the Sellers have entered into that certain Credit
and Security Agreement, pursuant to which the Buyer has agreed to provide
Post-Petition Financing (as defined below) to the Sellers through the Closing
Date on the terms and subject to the conditions set forth therein;
WHEREAS, Sellers wish to sell to Buyer and Buyer wishes to purchase from
Sellers certain tangible and intangible assets necessary to provide high speed
data transmission to customers through digital subscriber line technology in
markets served by the 710 central offices identified in SCHEDULE 2.1(e) herein
(the "ASSUMED CENTRAL OFFICE LOCATIONS") and the network operations center
("NETWORK OPERATIONS CENTER") located at Sellers' headquarters in Englewood,
Colorado (the "BUSINESS"), and to assume from Seller certain Liabilities of the
Business, all in the manner and subject to the terms and conditions set forth
herein, and pursuant to, INTER ALIA, Sections 105, 363, 364 and 365 of the
Bankruptcy Code and the applicable Federal Rules of Bankruptcy Procedure.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the terms and conditions hereof, the parties, intending to be legally
bound, hereby agree as follows:
I. DEFINITIONS
1.1. DEFINED TERMS. As used herein, the terms below shall have the
following respective meanings:
"AFFILIATE" shall have the meaning set forth in (i) Rule 12b-2 of the
General Rules and Regulations of the Securities Exchange Act of 1934, as
amended, or (ii) Section 101 of the Bankruptcy Code.
"AGREEMENT" shall mean this
Asset Purchase Agreement (together with all
Schedules and exhibits referenced herein).
"APPROVAL ORDER" shall have the meaning ascribed to such term in Section
7.1(b).
"BREAKUP FEE" shall mean that fee payable to Buyer by Sellers in the event
a Competing Transaction is approved and consummated, such fee shall equal two
percent (2%) of the Purchase Price.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a legal
holiday on which banking institutions in the State of
New York are not required
to open.
"COMMUNICATIONS LICENSES" shall mean the FCC Licenses and the State PUC
Licenses.
"FCC" shall mean the Federal Communications Commission.
"FCC LICENSES" shall mean all licenses, permits, certificates, franchises,
registrations and other authorizations issued by the FCC held by a Seller.
"GOVERNMENTAL ENTITY" shall mean any (i) federal, state, local, municipal,
foreign or other government; (ii) governmental or quasi-governmental authority
of any nature (including any governmental agency, branch, department, official,
or entity and any court or other tribunal); or (iii) body exercising, or
entitled to exercise any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature, including any
arbitral tribunal.
"HSR" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended, and any successor Law and the rules and regulations thereunder or
under any successor law.
"INTERCONNECTION AND COLLOCATION AGREEMENTS" shall mean those executory
contracts between Sellers and Incumbent Local Exchange Carriers that specify,
INTER ALIA, the parties' rights, duties and obligations with respect to
collocation facilities and ancillary services.
"LAW" shall mean any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, principle of common law, judgment
enacted, promulgated, issued, enforced or entered by any Governmental Entity, or
other requirement or rule of law.
"LIABILITIES" shall mean, as to any Person, all debts, adverse claims,
liabilities, commitments, responsibilities, and obligations of any kind or
nature whatsoever, direct, indirect,
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absolute or contingent, of such Person, whether accrued, vested or otherwise,
whether known or unknown and whether or not actually reflected, or required to
be reflected, in such Person's balance sheets or other books and records.
"LIEN" shall mean any claim, pledge, option, charge, hypothecation,
easement, security interest, right-of-way, encroachment, mortgage, deed of trust
or other encumbrance.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
Business, taken as a whole, or any development which could be reasonably
expected to delay or prevent the consummation of the transactions contemplated
hereby or which could be reasonably expected to materially and adversely affect
the value of the Assets, taken as a whole.
"MATERIAL DECISION" shall mean any of the following to the extent the same
may affect the Assets, the Assumed Liabilities, or the Business following the
Closing: (i) any entering into any material contract, including purchase orders
the payment of which shall become due after the Closing, involving in excess of
$10,000; (ii) termination of any executory contract or lease that involves
future payments in excess of $10,000; (iii) material amendment or waiver of any
Seller's rights in respect of any executory contract or lease (for purposes of
the clause (iii), "material" shall mean a value in excess of $10,000); (iv) any
action to respond to any material customer or regulatory complaint outside of
the normal course of business; (v) any communication with customers of the
Business, concerning the transaction contemplated herein and/or the status of
the operation of the Business; or (vi) any material change of any Seller's
methods of collecting accounts receivable or any making or agreeing to make any
settlement concerning an account receivable in excess of $1,000.
"NETWORK EQUIPMENT ASSETS" shall mean all the communications and computer
equipment owned by Sellers, including, without limitation, routers, ATM
switches, digital subscriber line access multiplexers, modems and consumer
premises equipment owned by the Sellers, and in service at the Network
Operations Center or the Assumed Central Office Locations, or held in inventory
or storage at any location other than a discontinued central office location.
"OPERATING EXPENSES" shall mean operating expenses related to the Business
that are incurred by a Seller in the ordinary course of its business, related to
the period after September 24, 2001 at 11:59 p.m. If and to the extent that an
operating expense relates to both (a) the Business and (b) Sellers' other
activities, only that portion of the operating expense that is reasonably
allocable to the Business shall be included as an Operating Expense.
"ORDER" shall mean any judgment, order, injunction, writ, ruling, decree,
stipulation or award of any Governmental Entity or private arbitration tribunal.
"PERSON" shall mean an individual, a partnership, a joint venture, a
corporation, a business trust, a limited liability company, a trust, an
unincorporated organization, a joint stock company, a labor union, an estate, a
Governmental Entity or any other entity.
"POST-PETITION" shall mean any time after the commencement of the Case.
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"POST-PETITION FINANCING" shall mean the financing extended by Buyer or one
of its Affiliates to Sellers, pursuant to Section 364 of the Bankruptcy Code and
as approved by the Bankruptcy Court pursuant to one or more orders entered in
the Case.
"PROCEEDING" shall mean any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Entity or arbitrator.
"REPRESENTATIVE" shall mean, with respect to any Person, such Person's
officers, directors, employees, agents and representatives (including any
investment banker, financial advisor, accountant, legal counsel, agent,
representative or expert retained by or acting on behalf of such Person or its
subsidiaries).
"SALE MOTION" shall mean the motion or motions of Sellers, seeking approval
and entry of the Approval Order.
"STATE PUC" shall mean any state and local public service and public
utilities commission having regulatory authority over the Business, as conducted
in any given jurisdiction.
"STATE PUC LICENSES" shall mean all licenses, permits, certificates,
franchises, consents, waivers, registrations or other regulatory authorizations
from the appropriate governmental authority in each applicable jurisdiction
including, without limitation, the State PUCs held by the Sellers.
"TAX" or "TAXES" shall mean any federal, state, county, local, foreign and
other income, profits, gains, net worth, sales and use, ad valorem, gross
receipts, business and occupation, license, estimated, stamp, custom duties,
occupation, property (real or personal), franchise, capital stock, license,
excise, value added, payroll, employees, income withholding, social security,
unemployment or other tax, any penalty, addition to tax and interest on the
foregoing.
"TRANSFER TAX" or "TRANSFER TAXES" shall mean any federal, state, county,
local, foreign and other sales, use, transfer, conveyance, documentary transfer,
recording or other similar tax, fee or charge imposed upon the sale, transfer or
assignment of property or any interest therein or the recording thereof, and any
penalty, addition to tax or interest with respect thereto, but such term shall
not include any tax on, based upon or measured by, the net income, gains or
profits from such sale, transfer or assignment of the property or any interest
therein.
"WARN" shall mean the Worker Adjustment and Retraining Notification Act of
1988, as amended, and any successor Law, and the rules and regulations
thereunder and under any successor Law and/or similar state Law.
1.2. OTHER DEFINED TERMS. The following additional terms shall have the
meanings defined for such terms in the Sections set forth below:
4
TERM SECTION
---- -------
Assets 2.1
Assumed Central Office Locations Recitals
Assumed Contracts 2.1(e)
Assumed Equipment Leases 2.1(b)
Assumed Liabilities 2.3
Assumed Real Property Leases 2.1(a)
Bankruptcy Code Recitals
Bankruptcy Court Recitals
Business Recitals
Buyer Recitals
Case Recitals
Cisco General Unsecured Claim 2.3(i)
Cisco General Unsecured Claim Payment 2.3(i)
Obligation
Cisco General Unsecured Claim Payment 2.3(i)
Obligation Escrow
Claims 2.2(e)
Closing 3.1(a)
Closing Date 3.1(a)
COBRA 2.3(g)
Code 4.9(b)
Competing Transaction 6.14
Cure Amounts 2.5
Cure Amount Purchase Price Adjustment 2.5
DOJ 6.4
▇▇▇▇▇▇▇ Money Deposit 3.2
Employees 6.8
Equipment 2.1(c)
ERISA Affiliate 2.4(f)
Excluded Assets 2.2
Excluded Liabilities 2.4
Expense Reimbursement 6.5(b)
FCC Applications 6.16(a)
Intellectual Property 4.12(b)
Network Operations Center Recitals
Procedure Order Recitals
Purchase Price 3.2
Sellers Recitals
Sellers' Plans 4.9
Software 2.1(j)
State PUC Applications 6.16(b)
5
1.3. OTHER DEFINITIONAL PROVISIONS.
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
Schedule references are to this Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both singular and plural forms of such terms.
II. TRANSFER OF ASSETS AND LIABILITIES
2.1. ASSETS TO BE SOLD. Subject to Section 2.2, the other provisions of
this Agreement and the Approval Order, at Closing, Sellers shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase, acquire, and
accept from Sellers all of Sellers' right, title and interest in and to all of
the assets of Sellers, including all assets comprising or relating to the
Business, other than the Excluded Assets, free and clear of all Liens and
Liabilities, collectively, the "ASSETS," including:
(a) The leases or subleases and all amendments thereto under which
any Seller is a lessor or lessee or sublessor or sublessee of real property
which are used in the operation of the Business as set forth on SCHEDULE 2.1(a)
(collectively, the "ASSUMED REAL PROPERTY LEASES");
(b) The equipment leases which relate to equipment used in the
operation of the Business as set forth on SCHEDULE 2.1(b) (the "ASSUMED
EQUIPMENT LEASES");
(c) The furniture, fixtures, equipment (including customer premises
equipment), machinery, vehicles, computers and associated hardware, supplies,
spare parts, equipment inventory and other tangible personal property owned by
Sellers, including the Network Equipment Assets (collectively, the "EQUIPMENT"),
and all warranties, representations and guarantees if any, express or implied,
existing for the benefit of such Sellers from third parties relating to the
Equipment, to the extent the same are transferable or assignable;
(d) All licenses, permits, franchises, certificates of occupancy,
registrations and approvals and other authorizations of any Governmental Entity
to the extent the same are transferable or assignable, which are used in the
operation of the Business as set forth on SCHEDULE 2.1(d);
(e) The contracts and agreements of the Sellers pertaining to and
necessary for the operation of the Business in the ordinary course as set forth
on SCHEDULE 2.1(e) (collectively, the "ASSUMED CONTRACTS"), subject to the
limitation that the Buyer shall assume the Interconnection and Collocation
Agreements set forth on SCHEDULE 2.1(e) only with respect to the Assumed Central
Office Locations;
(f) Accounts receivable of the Sellers (including all accounts
receivable payable to Sellers by Buyer or any of its Affiliates) existing on the
Closing Date;
6
(g) All books, records, files or papers of Sellers, whether in hard
copy or computer format, relating to the Assets or to the operation of the
Business, including, without limitation, engineering information, sales and
promotional literature, manuals and data, sales and purchase correspondence,
personnel and employment records, customer lists, vendor lists, catalogs,
research material, technical information, trade secrets, technology, know-how,
specifications, designs, drawings, processes and quality control data, if any,
or any other intangible property and applications for the same used in the
operation of the Business as set forth on SCHEDULE 2.1(g);
(h) All of Sellers' Intellectual Property and the rights to ▇▇▇ for,
and remedies against, past, present and future infringements thereof and the
rights of priority and protection of interests therein under applicable laws
used in the operation of the Business as set forth on SCHEDULE 2.1(h), to the
extent the same is transferable or assignable;
(i) Intentionally omitted;
(j) All computer software programs, management information systems,
URLs, source codes and databases used by the Sellers whether owned, licensed,
leased, or internally developed (in each case, subject to applicable
restrictions) used in the operation of the Business as set forth on SCHEDULE
2.1(j) (the "SOFTWARE");
(k) All telephone numbers and electronic mail addresses owned and
used by the Sellers in the conduct of the Business as set forth on SCHEDULE
2.1(k);
(l) All rights, demands, claims and causes of action that Sellers may
have against Buyer or any of its Affiliates, including, but not limited to,
causes of action based on Chapter 5 of the Bankruptcy Code;
(m) All credits, prepaid expenses, advance payments and other prepaid
items related to the operation of the Business as set forth on SCHEDULE 2.1(m);
(n) cash and cash equivalents constituting the proceeds of the
collateral securing the Post-Petition Financing; and
(o) All shares of Series D Preferred Stock of Megapath Networks,
Inc., owned by Rhythms.
2.2. EXCLUDED ASSETS. The Assets shall not include any of Sellers' right,
title or interest in or to any of the following assets, properties and rights
expressly enumerated (collectively, the "EXCLUDED ASSETS"):
(a) Any cash and cash equivalents (other than cash and cash
equivalents that constitute the proceeds of the collateral securing the
Post-Petition Financing), certificates of deposit, Treasury bills and other
marketable securities owned by Sellers as of the Closing Date;
(b) Any security, vendor, utility or other deposits posted or paid by
any Seller other than those set forth on SCHEDULE 2.1(m);
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(c) Any contracts or agreements other than the Assumed Contracts, the
Assumed Central Office Locations, the Assumed Equipment Leases or the Assumed
Real Property Leases;
(d) Any assets and any rights under any plan or any agreement
relating to employee benefits, employment or compensation of any Seller or its
respective employees;
(e) All rights, demands, claims, actions and causes of action
(collectively, the "CLAIMS") that Sellers may have against any third party,
including any Governmental Entity, including, but not limited to, causes of
action based on Chapter 5 of the Bankruptcy Code (subject to the limitation that
Sellers shall waive any such claims that arise from or relate to any Assumed
Contract, any Assumed Equipment Leases or any Assumed Real Property Leases) and
for refund or credit of any type with respect to Taxes accrued with respect to
periods ending on or prior to the Closing Date;
(f) All Claims which Sellers may have against any third Person with
respect to any Excluded Assets, excluding accounts receivable;
(g) All Claims and defenses (other than warranty Claims relating to
Equipment referred to in Section 2.1(c)) which Sellers may have against any
Person with respect to any Contract which has not been expressly assumed;
(h) Any insurance policy, insurance claims, and insurance proceeds
(other than insurance proceeds arising from damages to an Asset, which insurance
proceeds shall constitute an Asset), except as otherwise provided herein;
(i) The capital stock of the Sellers;
(j) Any real property interests, whether owned or leased, of any
Seller, other than the Assumed Real Property Leases, and the Excluded Assets
specifically including, among others, the real property located at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
(k) The shares of Series B Preferred Stock of At Home Network
Solution, Inc, owned by Rhythms; and
(l) The Cisco General Unsecured Claim Payment Obligation Escrow and
the funds contained therein (but subject to Buyer's contingent payment right
under Section 2.3(i)).
2.3. LIABILITIES TO BE ASSUMED BY BUYER. On the terms and subject to the
conditions set forth in this Agreement (including Section 9.1 hereof), at the
Closing, Buyer shall assume and thereafter pay, perform when due and discharge
only the following Liabilities of Sellers (collectively, the "ASSUMED
LIABILITIES"):
(a) Liabilities arising out of the ownership of the Assets and the
operation of the Business by Buyer, including, without limitation, Liability for
personal injury of customers or employees, but only to the extent that the event
or state of facts giving rise to such Liability occurs after the Closing Date;
8
(b) Liabilities under the Assumed Real Property Leases arising from
and related to the period after the Closing Date;
(c) Liabilities under the Assumed Contracts, including with respect
to the Assumed Central Office Locations, arising from and related to the period
after the Closing Date;
(d) Liabilities under the Assumed Equipment Leases arising from and
related to the period after the Closing Date;
(e) Liabilities for Operating Expenses accrued as of the Closing
Date;
(f) Liabilities related to the termination of employment of any Buyer
Hire, including, but not limited to any Liability arising under WARN, with
respect to the termination of any Buyer Hire;
(g) Liabilities under Section 4980B of the Internal Revenue Code or
similar state law ("COBRA") and as otherwise set forth in Section 6.8(e);
(h) To the extent the transfer of the Assets is not exempt pursuant
to Section 1146 of the Bankruptcy Code and the Approval Order, Liabilities for
any and all Transfer Taxes due as a result of the transactions contemplated by
this Agreement; and
(i) With respect to the allowed, general unsecured claim of Cisco
Systems Capital Corporation in the amount of $25,000,000 (the "CISCO GENERAL
UNSECURED CLAIM"), Buyer shall assume the obligation to pay ten percent (10%) of
the distribution otherwise payable by the Sellers under a liquidating plan of
reorganization (or by any chapter 7 trustee appointed for Sellers) on account of
the Cisco General Unsecured Claim, but in no event shall such assumed obligation
exceed the amount of $250,000 (the "CISCO GENERAL UNSECURED CLAIM PAYMENT
OBLIGATION"). To secure its obligation under this Section 2.3(i), Buyer shall
fund an escrow in the amount of $250,000 (the "CISCO GENERAL UNSECURED CLAIM
PAYMENT OBLIGATION ESCROW"), on or before the Closing Date. In the event the
Cisco General Unsecured Claim Payment Obligation is fixed at less than $250,000,
an amount equal to $250,000 minus the Cisco General Unsecured Claim Payment
Obligation shall be released to Buyer from the Cisco General Unsecured Claim
Payment Obligation Escrow.
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2.4. EXCLUDED LIABILITIES. Notwithstanding anything to the contrary
contained herein, but subject to Section 9.1 hereof, Buyer shall not assume, or
in any way be liable or responsible for, and shall be deemed not to have assumed
any Liabilities except for the Assumed Liabilities (it being understood that
Buyer is expressly disclaiming any express or implied assumption of any
Liabilities of the Sellers of any kind, character or description other than the
Assumed Liabilities), and without limiting the generality of the foregoing,
Sellers shall be solely and exclusively liable with respect to all Liabilities
of Sellers other than the Assumed Liabilities (collectively, the "EXCLUDED
LIABILITIES"), including, but not limited to, those Liabilities set forth below:
(a) Any Liabilities which arise, out of, or in connection with, the
Excluded Assets;
(b) Any Liabilities under the Assumed Contracts that arose or accrued
prior to the Closing Date;
(c) Any Liabilities under the Assumed Equipment Leases and the
Assumed Real Property Leases that arose or accrued prior to the Closing Date;
(d) Any Liabilities arising out of, or in connection with, any
Proceedings arising out of the operation of the Business prior to the Closing
Date;
(e) Any Liabilities arising out of or in connection with any
indebtedness of Sellers to their lenders;
(f) Except for Liabilities set forth in Sections 2.3(f) and 2.3(g)
and as provided in Section 6.8, any Liabilities attributable to, incurred in
connection with, arising from, or relating to, any collective bargaining
agreement, or any bonus, incentive, deferred compensation, medical, health, life
or other insurance, welfare, fringe benefit, severance, termination, retention,
consulting, change of control, employment, stock option, stock appreciation
right, stock purchase, phantom stock or other equity-based, performance,
pension, retirement or any other incentive, compensation or benefit plan,
program, policy, agreement or arrangement (including, but not limited to, any
"employee benefit plan" as defined in Section 3(3) of ERISA), sponsored,
maintained, contributed to or required to be contributed to at any time by
Sellers or any trade or business which together with Sellers would be deemed (or
at any time would have been) a "single employer" within the meaning of section
4001 of ERISA (each, an "ERISA AFFILIATE"), for the benefit of any current or
former employee, officer, director, agent or consultant of Sellers, or any ERISA
Affiliate, whether formal or informal and whether legally binding or not; and
(g) Any Liabilities for income Taxes of Seller and any other Taxes of
Sellers of any kind (other than Transfer Taxes referred to in Section 2.3(h)),
including, but not limited to, all Taxes attributable to, incurred in connection
with or arising out of the operation of the Business or the ownership of the
Assets, prior to the Closing Date, regardless of when due or assessed.
2.5. ASSUMED REAL PROPERTY LEASES, ASSUMED EQUIPMENT LEASES AND ASSUMED
CONTRACTS. At Closing and pursuant to Section 365 of the Bankruptcy Code,
Sellers shall assume
10
and assign to Buyer the Assumed Real Property Leases, the Assumed Equipment
Leases and the Assumed Contracts. The cure amounts, as determined by the
Bankruptcy Court, if any (the "CURE AMOUNTS"), necessary to cure all defaults,
if any, and to pay all actual or pecuniary losses that have resulted from such
defaults under the Assumed Real Property Leases, the Assumed Equipment Leases
and the Assumed Contracts, and payable in order to effectuate the assumption and
assignment of the Assumed Real Property Leases, the Assumed Equipment Leases and
the Assumed Contracts by Sellers to the Buyer under the Approval Order shall be
paid by Sellers from the Purchase Price and, except as set forth in the next
sentence, Buyer shall have no Liability therefor. In the event the sum of (a)
the aggregate Cure Amount PLUS (b) $500,000 exceeds (c) $8,000,000, then in such
event the Purchase Price shall be adjusted upward in the cash amount (the "CURE
AMOUNT PURCHASE PRICE ADJUSTMENT") equal to the difference of ((a) + (b) - (c)),
subject to the limitation that in no event shall the Cure Amount Purchase Price
Adjustment exceed $500,000.
III. CLOSING
3.1. CLOSING; TRANSFER OF POSSESSION; CERTAIN DELIVERIES.
(a) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Article
VIII hereof, the closing of the transactions contemplated herein (the "CLOSING")
shall take place on the second Business Day after the conditions set forth in
Article VII shall have been satisfied or waived or on such other date as the
parties hereto shall mutually agree, such date to be as soon as practicable
following entry of the Approval Order. The Closing shall be held at the offices
of Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m., local time, unless the parties hereto otherwise agree. The actual
time and date of the Closing are herein called the "CLOSING DATE."
(b) At the Closing, Sellers shall deliver to Buyer:
(i) A duly executed ▇▇▇▇ of sale in form and substance
reasonably satisfactory to Buyer;
(ii) A certified copy of the Approval Order;
(iii) The officer's certificates required to be delivered
pursuant to Section 7.2(c) hereof; and
(iv) All other documents, certificates, instruments of conveyance
and transfer, in form and substance reasonably acceptable to Buyer, as may be
reasonably necessary to transfer and convey the Assets to Buyer or Buyer's
designee, free and clear of any Liens and Liabilities thereon including: (i) a
duly executed Assignment and Assumption Agreement in form and substance
reasonably satisfactory to Buyer; and (ii) an assignment of lease, dated as of
the Closing Date, with respect to each Assumed Contract that is a lease, in form
and substance reasonably satisfactory to Buyer.
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(c) At the Closing, Buyer shall deliver to Sellers:
(i) The Purchase Price;
(ii) All certificates required by all relevant taxing authorities
that are necessary to support any claimed exemption from the imposition of
Transfer Taxes;
(iii) The officer's certificate required to be delivered pursuant
to Section 7.3(c) hereof;
(iv) An assumption agreement dated as of the Closing Date, in
form and substance reasonably satisfactory to Sellers pursuant to which Buyer
shall assume all Assumed Liabilities;
(v) All other instruments of transfer, in form and substance
reasonably satisfactory to Sellers, as may be necessary to assume the Assumed
Liabilities; and
(vi) The Cisco General Unsecured Claim Payment Obligation Escrow
agreement.
3.2. PURCHASE PRICE. In consideration for the Assets, and subject to the
terms and conditions of this Agreement, Buyer shall (i) assume the Assumed
Liabilities as provided in Section 2.3; (ii) for itself and on behalf of its
Affiliates, waive all accounts payable owed by any Seller as of the commencement
of the Case to the Buyer and/or its Affiliates; and (iii) at the Closing shall
pay to Sellers in immediately available funds, by wire transfer to an account or
accounts designated by Sellers, an amount in cash equal to $40,000,000 plus the
Cure Amount Purchase Price Adjustment, if any (the "PURCHASE PRICE"); PROVIDED,
HOWEVER, upon the date hereof, Buyer shall tender to Sellers in immediately
available funds, by wire transfer to an account or accounts designated by
Sellers an ▇▇▇▇▇▇▇ money deposit equal to $1,900,000, which sum combined with
the deposit submitted in accordance with the Procedure Order shall be referred
to collectively as the "▇▇▇▇▇▇▇ MONEY DEPOSIT." The ▇▇▇▇▇▇▇ Money Deposit and
the principal amount outstanding under the Post-Petition Financing (in full
satisfaction thereof) on the Closing Date shall be deducted from the total
Purchase Price payable at the Closing. Moreover, the Purchase Price shall be
adjusted downward in an amount equal to any unfunded commitment under the
Post-Petition Financing. The Purchase Price shall be deemed adjusted upward in
an amount equal to the sum released to Sellers from the Cisco General Unsecured
Claim Payment Obligation Escrow, which the Buyer agrees shall be maintained
until such time as the amount of the Cisco General Unsecured Claim has been
fully and finally resolved by a non-appealable decision of a court of competent
jurisdiction or by such other means or arrangement as agreed to by the Sellers,
the Buyer and Cisco. If Sellers terminate this Agreement pursuant to Section
8.1(b) (provided the Closing has not occurred due to a breach by Buyer) or
Section 8.1(e), then Sellers shall be entitled to retain the ▇▇▇▇▇▇▇ Money
Deposit and shall have no further obligations to Buyer. If Buyer terminates this
Agreement pursuant to Section 8.1 hereof, provided that Buyer is not in breach
of this Agreement, or if Sellers terminate this Agreement pursuant to Section
8.1(a), (b) (provided the failure to have a Closing on the date specified is not
due to a breach by Buyer), (c), (h), or (i), then Sellers shall be obligated to
return the ▇▇▇▇▇▇▇ Money Deposit and all accrued interest thereon to Buyer.
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3.3. ALLOCATION OF PURCHASE PRICE. Sellers shall, within 120 days after the
Closing Date, prepare and deliver to Buyer a schedule (the "ALLOCATION
SCHEDULE") allocating the Purchase Price and the Assumed Liabilities among the
Assets in accordance with Treas. Reg. 1.1060-1T (or any comparable provisions of
state or local tax law) or any successor provision. Buyer will have the right to
raise reasonable objections to the Allocation Schedule within 10 days after its
receipt thereof, in which event Buyer and Sellers will negotiate in good faith
to resolve such objections. If Buyer and Sellers cannot mutually resolve Buyer's
reasonable objections to the Allocation Schedule within 10 days after Sellers'
receipt of such objections, such dispute with respect to the Allocation Schedule
shall be presented to an accounting firm to be mutually selected by Buyer and
Sellers, on the next day for a decision that shall be rendered by such
accounting firm within 30 calendar days thereafter and shall be final and
binding upon all of the parties. The fees, costs and expenses incurred in
connection therewith shall be shared in equal amounts by Buyer and Sellers.
Buyer and Sellers each shall report and file all Tax returns (including amended
Tax returns and claims for refund) consistent with the Allocation Schedule, and
shall take no position contrary thereto or inconsistent therewith (including,
without limitation, in any audits or examinations by any taxing authority or any
other proceedings). Buyer and Sellers shall cooperate in the filing of any forms
(including Form 8594) with respect to such allocation, including any amendments
to such forms required with respect to any adjustment to the Purchase Price,
pursuant to this Agreement. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing Date without
limitation. Sellers and Buyer further agree that the payment contemplated by
Section 3.2 may be made to a single Seller that is designated in writing on or
before the second Business Day prior to Closing as being authorized to act as
agent for all entities that are Sellers, whereupon each entity shall be deemed
to have received the Purchase Price allocable to the Assets owned by such Seller
in accordance with the allocation determination herein.
IV. REPRESENTATIONS AND WARRANTIES OF SELLERS
The Buyer specifically acknowledges and agrees to the following with
respect to the representations and warranties of the Sellers:
A. The Buyer will not have any recourse to the Sellers or to any of the
officers or directors of the Sellers in the event any of the representations and
warranties made herein or deemed made are untrue as at any time of expression
thereof. The only remedy for a breach of such representations and warranties
shall be the Buyer's option, under certain circumstances, not to close in
accordance with and subject to the limitations in Article VIII hereof and,
without limiting the foregoing, the Buyer shall have no remedy whatsoever for
any such breach after the Closing.
B. The Buyer has conducted its own due diligence investigations of the
Business or has waived its right to conduct such due diligence, subject to the
qualification that Sellers shall deliver complete copies of SCHEDULES on or
before two Business days prior to the hearing on the Sale Motion, and subject to
Buyer's rights to terminate under Article VIII hereof.
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Sellers hereby represent and warrant to Buyer as follows (it being
understood that each of the following representations and warranties shall apply
only to the extent it relates to the Business):
4.1. EXISTENCE, GOOD STANDING AND POWER. Each Seller is a corporation
validly existing and in good standing under the laws of the State of its
incorporation, and has all requisite power and authority to own, lease and
operate its Assets to be sold hereunder and to carry on its business as it is
now being conducted. Subject to entry of the Approval Order, each Seller has all
requisite power and authority to execute and deliver this Agreement and the
other documents and instruments to be executed and delivered by such Seller and
to perform its obligations hereunder and thereunder.
4.2. AUTHORITY. The execution, delivery and performance of this Agreement
and the consummation by each Seller of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of each
Seller.
4.3. EXECUTION AND BINDING EFFECT. This Agreement has been duly and validly
executed and delivered by each Seller and constitutes, and, following the entry
of the Approval Order, this Agreement and the transaction contemplated hereby
will constitute (assuming in each case the due and valid authorization,
execution and delivery thereof by Buyer), a valid and legally binding obligation
of each Seller enforceable against each Seller in accordance with its terms.
4.4. NO VIOLATION. Except as disclosed in SCHEDULE 4.4, the execution,
delivery and performance by each Seller of this Agreement and the transactions
contemplated hereby, do not and will not conflict with or result in, with or
without the giving of notice or lapse of time or both, any violation of, or
constitute a breach or default, or give rise to any right of acceleration,
payment, amendment, cancellation or termination, under (a) the certificate of
incorporation or bylaws of such Seller or any resolution adopted by the board of
directors of such Seller and not rescinded, (b) subject to entry of the Approval
Order, any material agreement or other instrument to which Seller is a party or
by which such Seller or any of its respective properties or assets is bound, (c)
subject to entry of the Approval Order, any Order to which Seller is bound or
subject, (d) subject to entry of the Approval Order, any Law applicable to each
Seller or any of its respective properties or assets or (e) except as provided
for herein, result in the imposition or creation of any Lien upon or with
respect to any of the Assets.
4.5. THIRD PARTY APPROVALS. Except for (i) any approvals required in order
to comply with the provisions of the HSR, if necessary, (ii) the Approval Order,
(iii) any other third party approvals as are reflected on SCHEDULE 4.5 hereto,
and (iv) any consent or approval of a Governmental Entity in respect to the
transfer of any Communications License and the transfer of the Assets, the
execution, delivery and performance by each Seller of this Agreement and the
transactions contemplated hereby do not require any consents, waivers,
authorizations or approvals of, or filings with, any third Persons which have
not been obtained by Seller.
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4.6. BROKERS AND FINDERS. The Sellers have engaged the firm of Lazard
Freres & Co. LLC to assist them in connection with the matters contemplated by
this Agreement and will be responsible for the fees and expenses of such firm.
4.7. FCC/STATE PUC MATTERS.
(a) SCHEDULE 4.7(a) sets forth each of the FCC Licenses and State PUC
Licenses that are required for the conduct of the Business and for the operation
and holding of the Assets as presently conducted, except where failure to hold
such State PUC Licenses or FCC Licenses would not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect.
(b) Other than Communications Licenses the loss of which would not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect and except to the extent excused by or unenforceable as
a result of the commencement or pendency of the Case or the application of any
provision of the Bankruptcy Code (but only to the extent such excuse, lack of
enforceability or application of law will continue to apply in favor of Buyer
and its successors and assigns following Closing), each of the Communications
Licenses was duly issued, is valid and in full force and effect, has not been
suspended, canceled, revoked, or modified in any adverse manner other than in a
manner which is immaterial, and is not subject to conditions or requirements
that are not generally imposed on such authorizations.
(c) (i) Each holder of a Communications License has operated in all
material respects in compliance with all terms thereof; and (ii) each holder of
a Communications License is in all material respects in compliance with, and the
conduct of its businesses have been and are in compliance with, the
Communications Act and any applicable state or local regulations, and each such
holder has filed all registrations and reports and paid all required fees,
including any renewal applications, required by the Communications Act or any
applicable state or local regulations. Except as would not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect and except to the extent excused by or unenforceable as a result of the
commencement or pendency of the Case or the application of any provision of the
Bankruptcy Code (but only to the extent such excuse, lack of enforceability or
application of law will continue to apply in favor of Buyer and its successors
and assigns following Closing), (x) there is no pending or, to the knowledge of
the Sellers, threatened action by or before the FCC or any State PUC to revoke,
cancel, suspend, modify, or refuse to renew any of the Communications Licenses,
and (y) there is not now issued, outstanding or, to the knowledge of the
Sellers, threatened any notice by the FCC or any State PUC of violation or
complaint, or any application, complaint, or proceeding (other than
applications, proceedings, or complaints that generally affect the Sellers'
industry as a whole) relating to the Business.
(d) Except as set forth in SCHEDULE 4.7(d) or as would not reasonably
be expected to, individually or in the aggregate, result in a Material Adverse
Effect and except to the extent excused by or unenforceable as a result of the
commencement or pendency of the Case or the application of any provision of the
Bankruptcy Code (but only to the extent such excuse, lack of enforceability or
application of law will continue to apply in favor of Buyer and its successors
and assigns following Closing), no event has occurred which permits the
revocation or termination of any of the Communications Licenses or the
imposition of any restriction
15
thereon, or that would prevent any of the Communications Licenses from being
renewed on a routine basis or in the ordinary course. There are no facts that
would disqualify any of the Sellers, under either the Communications Act or any
applicable state or local regulations, as an assignor in connection with the
approval of any Governmental Entity.
4.8. ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 4.8 and except
as would not reasonably be expected to, individually or in the aggregate, result
in a Material Adverse Effect, (a) each Seller has all permits required by or
under all federal, state, and local laws governing the pollution or protection
of the environment ("ENVIRONMENTAL LAWS") and is, and for the past 12 months has
been, in compliance with such permits and is otherwise in compliance with all
applicable Environmental Laws, (b) no Seller has received any written notice not
subsequently resolved with respect to the business of, or any property owned or
leased by the Sellers from any governmental entity or third party alleging that
any Seller or any aspect of the Business is not in compliance with any
Environmental Law and no such condition of non-compliance exists, (c) there has
been no release of a hazardous substance, as these terms are defined under
Environmental Laws, in excess of a reportable quantity on any real property that
is used in the Business and (d) there is no obligation under Environmental Laws
to perform remedial action relating to any release of a hazardous substance,
waste, pollutant or contaminant.
4.9. EMPLOYEE BENEFITS; LABOR MATTERS.
(a) SCHEDULE 4.9 contains a true and complete list of each "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), that is sponsored, maintained, or
contributed to or required to be contributed to by any Seller or by any trade or
business, whether or not incorporated (an "ERISA AFFILIATE"), that together with
any Seller would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, or to which the Sellers or an ERISA Affiliate is party, for
the benefit of any employee of each Seller engaged in the Business
(individually, a "SELLER PLAN," and collectively, the "SELLERS' PLANS"). The
Buyer is not assuming and shall have no liability in connection with any Seller
Plan.
(b) No Seller Plan is (i) subject to Title IV of ERISA; (ii) a
multiemployer plan within the meaning of Section 3(37) of ERISA, (iii)
maintained in connection with any trust described in Section 501(c)(9) of the
Internal Revenue Code (the "CODE") or (iv) subject to the minimum funding
standards of ERISA Section 302 or Code Section 412. Further, neither the Sellers
nor any ERISA Affiliate have ever contributed to or been obligated to contribute
to a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.
(c) Except as set forth in SCHEDULE 4.9(c), the Sellers and each
ERISA Affiliate are in material compliance with, and each Seller Plan has been
operated in accordance with, the provisions of such Seller Plan, and the Sellers
and each ERISA Affiliate are in material compliance with ERISA, the Code and all
legal requirements governing each such Seller Plan, including but not limited to
rules and regulations promulgated by the Department of Labor, the Pension
Benefit Guaranty Corporation and the Department of the Treasury pursuant to the
provisions of ERISA and the Code.
16
(d) None of the Sellers nor any ERISA Affiliate is a party to any
collective bargaining agreements and there are no labor unions or other
organizations representing, purporting to represent, or attempting to represent,
any employee of the Sellers.
(e) Except as set forth in SCHEDULE 4.9(e), no Seller has, with
respect to employees engaged in the Business, violated any provision of federal
or state law or any governmental rule or regulation, or any order, decree,
judgment arbitration award of any court, arbitrator or any government agency
regarding the terms and conditions of employment of employees, former employees
or prospective employees or other labor related matters, including, without
limitation, laws, rules, regulations, orders, rulings, decrees, judgments and
awards relating to discrimination, fair labor standards and occupational health
and safety, wrongful discharge or violation of the person rights of employees,
former employees or prospective employees.
(f) There are no pending claims or lawsuits by, against, or relating
to any Seller Plan that would, if successful, result in liability of any Seller,
any ERISA Affiliate or the Buyer, and no claims or lawsuits have been asserted,
instituted or, to the knowledge of each Seller, threatened in writing by,
against, or relating to any Seller Plan, against the assets of any trust or
other funding arrangement under any such Seller Plan, by or against any Seller
with respect to any Seller Plan, or by or against the plan administrator or any
fiduciary of any Seller Plan, and the Sellers do not have knowledge of any fact
that could form the basis for any such claim or lawsuit. The Sellers' Plans are
not presently under audit or examination (nor has notice been received of a
potential audit or examination) by the IRS, the Department of Labor, or any
other governmental agency or entity, and no matters are pending with respect to
any Seller Plan under the IRS's Voluntary Compliance Resolution program, its
Closing Agreement Program, or other similar programs.
4.10. REAL PROPERTY. The Sellers have delivered to the Buyer a true,
correct and complete copy of the lease for premises containing the Network
Operations Center located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The
lease is in full force and effect, and no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification
or acceleration thereunder.
4.11. TITLE TO AND USE OF PROPERTY.
(a) At the Closing, Buyer will acquire all of each Seller's right,
title and interest in, to and under all of the Assets, in each case free and
clear of Liens and Liabilities (including, without limitation, any and all
claims that may arise by reason of the execution, delivery or performance by
Sellers of this Agreement);
(b) Except for any assets that are Excluded Assets, and except with
respect to the equipment that is leased from Cisco Systems Capital Corporation,
the Assets include, without limitation, all personal property of the Sellers,
both tangible and intangible, materially necessary to conduct the Business, and
none of such Assets are owned by any subsidiary or Affiliate of Rhythms that is
not identified as one of the Sellers or any unrelated third party.
17
4.12. INTELLECTUAL PROPERTY.
(a) "INTELLECTUAL PROPERTY" shall mean all of the following as they
exist in all jurisdictions throughout the world, in each case, to the extent
used in the conduct of the Business and owned by, licensed to, or otherwise used
by the Sellers:
(i) patents, patent applications, and other patent rights
(including any divisions, continuations, continuations-in-part, substitutions,
or reissues thereof, whether or not patents are issued on any such applications
and whether or not any such applications are modified, withdrawn, or
resubmitted);
(ii) trademarks, service marks, trade dress, trade names, brand
names, designs, logos, or corporate names, whether registered or unregistered,
and all registrations and applications for registration thereof;
(iii) copyright registrations and applications for registration
thereof and non-registered copyrights;
(iv) trade secrets, designs, research, processes, procedures,
techniques, methods, know-how, data, mask works, inventions, and other
proprietary rights (whether or not patentable or subject to copyright, mask
work, or trade secret protection); and
(v) computer software programs, including, without limitation,
all source codes, object codes, and material documentation related thereto (the
"SOFTWARE").
(b) Intellectual Property Disclosure. SCHEDULE 4.12(b) sets forth all
United States and foreign patents and patent applications, trademark and service
▇▇▇▇ registrations and applications, and copyright registrations and
applications owned or licensed by any Seller, specifying as to each owned item,
as applicable: (i) the nature of the item, including the title; (ii) the owner
of the item; (iii) the jurisdictions in which the item is issued or registered
or in which an application for issuance or registration has been filed; and (iv)
the issuance, registration, or application numbers and dates.
(c) Ownership. Except as would not reasonably be expected to, individually
or in the aggregate, result in a Material Adverse Effect, each Seller will own
or have the right to use as of the Closing Date and transfer to the Buyer, free
and clear of Liens and Liabilities, and as of the Closing Date will have the
unrestricted right to use, sell, or license, all Intellectual Property used in
the conduct of the Business to the maximum extent permissible by operation of
Section 363 of the Bankruptcy Code.
(d) Claims. Except as would not reasonably be expected to, individually or
in the aggregate, result in a Material Adverse Effect, no Seller has been,
during the three (3) years preceding the date hereof, a party to any claim or
action, nor, to the knowledge of any Seller, is any claim or action threatened
that challenges the validity, enforceability, ownership, or right to use, sell,
or license any Intellectual Property. Except as would not reasonably be expected
to, individually or in the aggregate, result in a Material Adverse Effect, to
the knowledge of any Seller, no third party is infringing upon any Intellectual
Property.
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(e) Administration and Enforcement. Except as would not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect, the Sellers have taken all necessary and desirable action to maintain
and protect each item of Intellectual Property owned by the Sellers.
(f) Software. All Software set forth on SCHEDULE 2.1(j) is, to the best
knowledge of Sellers, held by the Sellers legitimately, is fully and freely
transferable to the Purchaser without any third party consent (except as set
forth in SCHEDULE 2.1(j)), and to the best knowledge of Sellers is free from any
significant software defect, performs in conformance with its documentation, and
does not contain any bugs or viruses or any code or mechanism that may be
reasonably likely to materially interfere with the operation of such Software.
4.13. NETWORK EQUIPMENT ASSETS.
(a) To the best knowledge of Sellers and except as would not result
in Material Adverse Effect, the Sellers have good and marketable title to all of
the Network Equipment Assets that they own. To the best knowledge of each
Seller, except as set forth on SCHEDULE 4.13, each of the material Network
Equipment Assets owned by such Seller: (i) is free and clear of any Lien or
Liabilities (or will be conveyed, pursuant to the Approval Order, free and clear
of any Lien or Liabilities); (ii) is not subject to any pending lawsuits or
administrative actions relating to any such property, (iii) has received all
approvals of Governmental Authorities (including franchises, licenses and
permits) required in connection with the ownership or operation thereof and has
been operated and maintained in accordance with applicable laws; and (iv) is not
subject to any lease, sublease, license, concession, or other agreement, written
or oral, granting to any party or parties the right of use or occupancy of any
portion of the Network Equipment Assets.
4.14. ASSUMED CONTRACTS AND EQUIPMENT LEASES. As of the date hereof, no
Seller has received written notice, nor does it otherwise have knowledge, that
any party to the Assumed Contracts or Assumed Equipment Leases intends to
cancel, terminate or refuse to renew such contract or equipment lease or to
exercise or decline to exercise any option or right thereunder and each such
contract or equipment lease is valid and binding upon such parties in accordance
with its terms except (x) as set forth in SCHEDULE 4.14, (y) to the extent
excused by or unenforceable as a result of the commencement or pendency of the
Case or the application of any provision of the Bankruptcy Code, or (z) to the
extent that the failure of such Contracts to be valid and binding would not have
a Material Adverse Effect.
4.15. LIMITATION ON SELLER'S REPRESENTATIONS AND WARRANTIES. Buyer
represents and hereby covenants and shall accept the Assets "AS IS," "WHERE IS"
and "WITH ALL FAULTS" on the date hereof and on the Closing Date, subject to the
terms and conditions of this Agreement. Except for the representations and
warranties contained in this Agreement, the Sellers make no other express or
implied representation or warranty, including, without limitation,
representations or warranties as to the condition of the Assets, their contents,
the income derived or potentially to be derived from the Assets or the Business,
or the expenses incurred or potentially to be incurred in connection with the
Assets or the
19
Business. Each Seller is not, and will not be, liable or bound in any manner by
express or implied warranties, guarantees, statements, promises, representations
or information pertaining to the Assets or the Business, made or furnished by
any broker, agent, employee, servant or other person representing or purporting
to represent any Seller, unless and to the extent the same is expressly set
forth in this Agreement.
V. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.1. EXISTENCE, GOOD STANDING AND POWER. Buyer is a corporation validly
existing and in good standing under the laws of the State of Georgia and has all
requisite power and authority to own, lease and operate the property it now
owns, leases and operates. Buyer has all requisite power and authority to
conduct its business as presently conducted, to execute and deliver this
Agreement and the other documents and instruments to be executed and delivered
by Buyer pursuant hereto and to perform its obligations hereunder and
thereunder. Buyer is duly authorized to transact business as a foreign
corporation, and is in good standing, in the states in which the Business is
conducted.
5.2. AUTHORITY. The execution, delivery and performance of this Agreement
and the consummation by Buyer of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Buyer.
5.3. EXECUTION AND BINDING EFFECT. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes, and (assuming, in each case,
the due and valid authorization, execution and delivery thereof by the other
parties thereto), a valid and legally binding obligation of Buyer, enforceable
against it in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
5.4. NO VIOLATION. Except as disclosed in SCHEDULE 5.4, the execution,
delivery and performance by Buyer of this Agreement and the transactions
contemplated hereby, do not and will not conflict with or result in, with or
without the giving of notice or lapse of time or both, any violation of or
constitute a breach or default, or give rise to any right of acceleration,
payment, amendment, cancellation or termination, under (a) the certificate of
incorporation or bylaws of Buyer or any resolution adopted by the board of
directors of Buyer and not rescinded, (b) any agreement or other instrument to
which Buyer is a party or by which Buyer or any of its respective properties or
assets is bound, (c) any Order to which Buyer is bound or subject or (d) any Law
applicable to Buyer or any of its respective properties or assets.
5.5. THIRD PARTY APPROVALS. Except for (i) any approvals required in order
to comply with the provisions of HSR, if necessary; (ii) the consent or approval
of Governmental Entities with respect to the Communication Licenses and the
transfer of the Assets, and (iii) any other third party approvals as are
reflected on SCHEDULE 5.5 hereto, the execution, delivery and performance by
Buyer of this Agreement and the transactions contemplated hereby do not require
any consents, waivers, authorizations or approvals of, or filings with, any
third Persons which have not been obtained by the Buyer.
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5.6. BROKERS AND FINDERS. Buyer has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions, finders, or similar
fees in connection with the transactions contemplated by this Agreement.
5.7. NO CONTINUATION OF BUSINESS. Buyer's business is neither a
continuation of, nor is it related to, the business of the Sellers, and Buyer
covenants that it will not, in any way, represent that its business is a
continuation of or related to the business of the Sellers.
5.8. FINANCING. On the Closing Date, Buyer will have sufficient
unrestricted funds on hand or committed lines of credit to consummate the
transactions contemplated by this Agreement.
VI. COVENANTS OF THE PARTIES
6.1. CONDUCT OF BUSINESS BY SELLERS PENDING THE CLOSING. From and after the
date hereof and until the Closing Date, and subject to any obligations of any
Seller as a debtor in possession under the Bankruptcy Code, each of the Sellers
shall use commercially reasonable efforts in the context of the Case to cause
the Business to be conducted in the ordinary course and consistent with the
present conduct of the Business (except for the suspension of services from
collocation sites other than the Assumed Central Office Locations), including
meeting its Post-Petition Liabilities as they become due (with respect to all
contract obligations between the parties accruing during the period from the
commencement of the Case through the entry of the Approval Order, and promptly
after the entry of the Approval Order, the Sellers and the Buyer and its
Affiliates shall reconcile all such accruals, and Sellers shall promptly remit
to Buyer the net amount owed, if any); PROVIDED, HOWEVER, that from and after
the date of the entry of the Approval Order and the interim order approving the
Post-Petition Financing, the Sellers shall only use funds made available to them
by Buyer either under the Post-Petition Financing (including proceeds of the
Collateral) or Section 9.1 hereof to fund the operations of the Business and the
Sellers' obligations under this Agreement shall be subject to this proviso.
Sellers shall also use all commercially reasonable efforts to preserve intact
their Business relationships with third parties (other than in respect of
contracts that expire by their terms prior to Closing and except for the
suspension of services from collocation sites other than the Assumed Central
Office Locations) and to keep available the services of its key employees, who
work in the Business, subject to the terms of this Agreement; provided, that the
foregoing shall not prevent any Seller from rejecting contracts that are not
contracts being assumed by Buyer hereunder, so long as such rejection will not
interrupt, in any material respect, the operation of the Assets and/or the
Business prior to Closing or otherwise prevent, in any material respect, an
orderly transfer of the Business to Buyer. Without limiting the generality of
the foregoing, and except with respect to immaterial delays, each Seller shall
pay when due its obligations to vendors, in connection with the Business, as
permitted by the Bankruptcy Code. Except as otherwise contemplated under this
Agreement or ordered by the Bankruptcy Court, from the date hereof until the
Closing Date, without the prior written consent of the Buyer, which consent will
not be unreasonably withheld or delayed:
(a) other than as a result of asset transfers solely among or between
the Sellers, no Seller shall merge or consolidate with any other Person;
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(b) no Seller shall lease, license, or otherwise surrender,
relinquish, encumber, or dispose of any material Assets other than the
disposition of obsolete or damaged immaterial Assets in the ordinary course of
its business;
(c) no Seller shall establish or increase the benefits under, or
promise to establish, modify or increase the benefits under, any agreement, plan
or policy relating to employees or employment matters, including but not limited
to any Seller Plan or any consulting, severance, change in control or similar
agreements, or otherwise increase the compensation payable to any directors,
officers, or employees of such Seller, or establish, adopt or enter into any
collective bargaining agreement, except (i) in accordance with existing plans
and agreements or consistent with past practice, and (ii) for benefits and
compensation payable to any directors, officers, or employees of such Seller
established, modified or increased after commencement of the Case in order to
retain such directors, officers, or employees through the pendency of the Case;
(d) no Seller shall make a Material Decision;
(e) no Seller shall agree or commit to do any of the foregoing; and
(f) except to the extent necessary to comply with the requirements of
applicable Laws or Bankruptcy Court Orders, Sellers shall not (i) take, agree,
or commit to take, any action that would make any representation or warranty of
the Sellers hereunder materially inaccurate in any respect at, or as of any time
prior to, the Closing Date, (ii) omit, or agree or commit to omit, to take any
action necessary to prevent any such representation or warranty from being
materially inaccurate in any respect on the Closing Date, or (iii) take, agree,
or commit to take, any action that would result in, or is reasonably likely to
result in, any of the conditions set forth in Article VII not being satisfied,
in all material respects.
6.2. ACCESS AND INFORMATION. Prior to the Closing Date, each Seller shall
allow Buyer's employees, agents and Representatives during regular business
hours to make such investigation of the Business and Sellers' books and records
related thereto, as Buyer reasonably deems necessary or advisable, and each
Seller shall instruct its employees to cooperate in any such investigation,
including to provide such financial, operational or other information concerning
the Business as the Purchaser may reasonably request; provided no such
investigation shall affect any representations or warranties made herein or the
conditions to the obligations of the parties to consummate the transactions
contemplated by this Agreement.
6.3. PUBLIC ANNOUNCEMENTS; THIRD PARTY CONTACTS.
(a) No party shall issue a press release or respond in writing to any
press inquiry with respect to this Agreement or the transaction contemplated
hereby or otherwise make any public statements with respect to the transactions
contemplated hereby, except as may be required by Law, by obligations pursuant
to any listing agreement with any national securities exchange or
over-the-counter market or with respect to filings to be made with the
Bankruptcy Court in connection with this Agreement (in which case the party
required to make such public statement shall notify the other party prior to
making such public statement), without the prior consent of the others, which
consent shall not be unreasonably withheld.
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(b) Sellers acknowledge and agree that after the entry of the
Approval Order Buyer is entitled to enter into direct communication with
Sellers' vendors, suppliers, lessors and existing customers regarding existing
or replacement contracts, Assumed Equipment Leases and Assumed Real Property
Leases
6.4. HSR. If necessary, each party shall make an appropriate filing of a
notification and report form pursuant to HSR with respect to the transactions
contemplated hereby within five (5) Business Days after the date hereof and to
supply promptly any additional information and documentary material that may be
requested pursuant to HSR. In addition, each party shall promptly make any other
filing that may be required under any other antitrust law or by any antitrust
authority. All such filings shall comply in all material respects with the
requirements of the respective Laws pursuant to which they are filed. Each party
hereto shall promptly inform the other of any communication from the Department
of Justice (the "DOJ") regarding any of the transactions contemplated by this
Agreement. If any party or Affiliate thereof receives a request for additional
information or documentary material from the DOJ with respect to the
transactions contemplated by this Agreement, then such party will use its
reasonable efforts to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request. Each party shall bear its respective filing
fees associated with the HSR filings. Neither the Buyer nor any Affiliate of
Buyer shall be required to divest itself of any business operations, assets or
properties or agree to limit its freedom to conduct or expand any such business
operations in order to obtain any clearance, approval or waiver.
6.5. ENTRY OF APPROVAL ORDER.
(a) As soon as practicable after the date hereof, the Sellers shall
file a copy of this Agreement and a form of Approval Order with the Bankruptcy
Court.
(b) In connection with the entry of the Approval Order, Sellers shall
use their reasonable, good faith efforts to obtain prompt Bankruptcy Court
approval of reimbursement of Buyer's actual fees and expenses incurred in
connection with the transaction contemplated by this Agreement in an amount not
to exceed $250,000 (the "EXPENSE REIMBURSEMENT"), payable to Buyer in cash, by
wire transfer of immediately available funds to an account designated by Buyer,
promptly after Buyer has provided notice that it has terminated the Agreement in
accordance with Section 8.1(e).
(c) Buyer and the Sellers shall cooperate with prosecuting the Sale
Motion and obtaining entry of the Approval Order, and the Sellers shall deliver
to Buyer prior to filing, and as early in advance as is practicable to permit
adequate and reasonable time for Buyer and its counsel for review and comment,
the proposed form of Approval Order and copies of all proposed pleadings,
motions, notices, statements, schedules, applications, reports and other papers
to be filed by the Sellers in connection with the Sale Motion and the relief
requested therein.
6.6. REASONABLE EFFORTS. Upon the terms and subject to the conditions
herein provided, each of the parties hereto shall use its respective reasonable,
good faith efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with
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the other parties hereto in doing, all things necessary, proper or advisable
under applicable Laws to ensure that the conditions set forth in this Agreement
are satisfied and to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the parties hereto shall furnish to
each other such necessary information and reasonable assistance, as each may
request in connection with Sellers' preparation and filing of applications and
motion papers, including the Sale Motion needed to obtain Bankruptcy Court
approval of the transactions contemplated by this Agreement and shall execute
any additional instruments necessary to consummate the transactions contemplated
hereby, whether before or after the Closing.
6.7. NOTIFICATION OF CERTAIN MATTERS. Each Seller shall give prompt notice
to Buyer, and Buyer shall give prompt notice to each Seller, of (i) any notice
or other communication from any Person alleging that the consent of such Person
is or may be required in connection with the transactions contemplated by this
Agreement; (ii) any written objection, litigation or administrative proceeding
that challenges the transactions contemplated hereby or the entry of the
Approval Order; and (iii) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty to be materially untrue or inaccurate; and (iv) any
failure of Sellers or Buyer, as the case may be, to comply materially or satisfy
materially any covenant, condition or agreement to be complied with or satisfied
hereunder.
6.8. EMPLOYEES.
(a) Subject to the limitations in Section 6.1(c), Sellers shall use
their commercially reasonable efforts to retain such employees engaged in the
Business as are necessary and/or desirable to perform the Sellers' obligations
hereunder, and to maintain in good standing through the Closing all
relationships and agreements with employees, independent contractors, or
consultants necessary to the Business, in each case from the date hereof through
the Closing Date and to cooperate with the Buyer in hiring employees engaged in
the Business who are offered employment by the Buyer; provided, that the
foregoing shall not require (i) that any Seller offer, nor shall it prevent any
Seller from offering any compensation or other incentives in addition to the
compensation and benefits being provided or required to be provided as of the
date of this Agreement, and (ii) that any Seller shall be required to retain any
employee who is no longer necessary or desirable to perform Sellers' obligations
hereunder, in the sole discretion of the Sellers.
(b) The Sellers will terminate all Buyer Hires (as defined below) as
of the Closing Date. It is the intention of the Buyer to hire some, and perhaps
all, of the persons employed by Sellers in the Business as of the Closing Date.
Sellers agree that the Buyer retains sole and complete discretion with respect
to which employees of the Sellers the Buyer shall offer employment. From the
date hereof through the Closing, the Sellers shall permit the Buyer to
communicate in writing with the Sellers' employees and consultants, at
reasonable times and upon reasonable notice, concerning the Buyer's plans,
operations, business, customer relations, and general personnel matters and to
interview the Sellers' employees and consultants and review the personnel
records and such other information concerning the Sellers' employees and
consultants as the Buyer may reasonably request (subject to obtaining any
legally required written permission of any affected employee or consultant and
to other applicable law). The
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Sellers shall be solely responsible for any notification and liability under
WARN relating to any termination of any of Sellers' employees occurring on or
after the date of this Agreement. Employees hired by the Buyer effective on or
after the Closing Date shall be referred to herein as a "BUYER HIRE." The
Sellers shall indemnify and hold Buyer harmless from any and all damages,
liabilities, claims or expenses incurred by the Buyer as a result of the failure
of the Sellers to comply with any of the requirements of WARN, including
applicable notice requirements. Sellers will provide Buyer with copies of all
notices it proposes to give to employees regarding the transactions contemplated
by this Agreement as promptly as practicable (and in the case of notices
required by WARN or other statutes, at least five (5) Business Days) in advance
of giving such notice to employees.
(c) Sellers will be responsible for all liabilities for employee or
agent compensation and benefits accrued or otherwise arising out of services
rendered prior to Closing or arising by reason of actual, constructive or deemed
termination at Closing. Without limitation of the preceding sentence, on the
Closing Date Sellers shall pay all of the Buyer Hires engaged in the Business
the full amount, if any, to which they may be entitled for any compensation or
accrued benefits, including but not limited to vacation, sick leave or other
leave, accrued bonuses and commissions, and for severance benefits. No accrued
vacation, sick leave or other leave shall carry over to any employment of such
employees by Buyer.
(d) The Buyer will recognize all years of service of the Buyer Hires
with the Sellers for purposes of eligibility to participate in and to vest under
those employee benefit plans, within the meaning of Section 3(3) of ERISA, of
the Buyer in which the Buyer Hires are eligible to participate in after the
Closing Date. The Buyer shall recognize all years of service of the Buyer Hires
with the Sellers for purposes of vacation accrual under the Buyer's vacation
policies. The Buyer shall cause all pre-existing condition exclusions under any
medical and dental plans made available by the Buyer to Buyer Hires to be waived
in respect of such employees and dependents, but only to the extent Sellers'
medical and dental plans recognize such Buyer Hires and their dependents as
having satisfied any pre-existing conditions exclusion under Sellers' medical
and dental plans. The Buyer shall take commercially reasonable efforts to ensure
that the medical and dental plans made available by Buyer to Buyer Hires credit
such Buyer Hires' and their dependents with the amount of deductibles satisfied
under the Sellers' medical and dental plans in the same plan year.
(e) Prior to the Closing Date, so long as Sellers provide their
employees with coverage under any group health plan of any Seller, Sellers shall
be responsible for providing continuation coverage as required by COBRA, under a
group health plan maintained by the Seller(s) ("Continuation Coverage"), to all
COBRA Eligible Beneficiaries who have, or have had, prior to the Closing Date, a
COBRA qualifying event due to termination of employment with any Seller, or
otherwise ("Event"). From and after the Closing Date, the Buyer shall be
responsible for providing Continuation Coverage as required by COBRA, under a
group health plan maintained by Buyer, to (i) all COBRA Eligible Beneficiaries
who had an Event prior to the Closing Date and (ii) those persons who become
COBRA Eligible Beneficiaries due to the occurrence of Event at any time
following the Closing Date. To the extent any COBRA Eligible Beneficiary who is
described in (ii) of the immediately proceeding sentence and who would be
entitled to Continuation Coverage under both the Sellers' plan and the Buyer's
plan simultaneously, such coverage shall be provided under the Sellers' plan
until
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such coverage is no longer available, and under the Buyer's plan thereafter.
Buyer shall indemnify and hold Sellers harmless from any and all damages,
liabilities, claims or expenses incurred by Sellers as a result of the failure
of Buyer to comply with any of the requirements of COBRA, including applicable
notice requirements. The term "COBRA Eligible Beneficiaries" shall mean any
current or former employee of any of Sellers and all other qualified
beneficiaries under COBRA with respect to such employee (and former employee).
(f) As soon as is practical after the Closing Date, Sellers shall (i)
take all actions as are necessary or appropriate to fully vest, as of the
Closing Date, the interests of the Buyer Hires under Sellers' defined
contribution retirement plan(s); (ii) provide such employees an election to roll
over their vested interests to Buyer's defined contribution retirement plan,
including appropriate arrangements for loans provided to them under Sellers'
plan; and (iii) roll over the full amount of the vested interests which the
employees have elected to roll over, as soon as possible but not later than six
(6) months after the Closing Date, to the accounts of such employees under
Buyer's defined contribution retirement plan, in accordance with Section 402 of
the Internal Revenue Code, Buyer shall reasonably cooperate with Sellers in
respect of the foregoing actions and shall accept such rollovers and have no
liability for any discontinuance, termination or other charges that may be due
to any investment option or management providers or to any plan record keeping
or other agents with respect to such termination and rollover of such employees'
interests from Sellers' retirement plan(s) to Purchaser's retirement plan.
(g) Notwithstanding Sections 2.3(e) and 2.3(f) of this Agreement,
Sellers and Buyer shall reasonably cooperate and use commercially reasonable
efforts to give any notices required under applicable Law to mitigate Sellers'
liability for COBRA and WARN obligations to Sellers' employees. Sellers shall
provide Buyer with copies of all notices required to be given to the employees
regarding the transaction contemplated herein by WARN or other statutes at least
five business days in advance of giving such notice to employees.
(h) No provision of this Section 6.8 shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of the Sellers or of any of its subsidiaries
in respect of continued employment (or resumed employment) with either the
Business, the Buyer any of its Affiliates and no provision of this Section 6.8
shall create any such rights in any such Persons in respect of any benefits that
may be provided, directly or indirectly, under any of Sellers' Plans or any plan
or arrangement which may be established by the Buyer or any of its Affiliates.
No provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any such plans or arrangements of the
Buyer or any of its Affiliates.
6.9. PAYMENT OF TRANSFER TAXES AND TAX FILINGS.
(a) In the event, notwithstanding the operation of Section 1146 of
the Bankruptcy Code, Transfer Taxes arising out of the transfer of the Assets
are assessed, any Transfer Taxes required to effect any recording or filing with
respect thereto shall be borne by Buyer. The Transfer Taxes shall be calculated
assuming that no exemption from Transfer Taxes is available, unless otherwise
indicated in the Approval Order or, at Closing, Buyer shall provide an
appropriate resale exemption certificate or other evidence acceptable to the
Sellers of exemption from such Transfer Taxes. The Sellers and Buyer shall
cooperate to timely prepare
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and file any returns or other filings relating to such Transfer Taxes, including
any claim for exemption or exclusion from the application or imposition of any
Transfer Taxes.
(b) Each party shall furnish or cause to be furnished to the others,
upon request, as promptly as practicable, such information and assistance
relating to the Assets and the Business as is reasonably necessary for filing of
all Tax returns, including any claim for exemption or exclusion from the
application or imposition of any Taxes or making of any election related to
Taxes, the preparation for any audit by any taxing authority and the prosecution
or defense of any claim, suit or proceeding relating to any Tax return. Each
Seller shall prepare all of its Tax returns for all periods and shall be
responsible for paying all of its Taxes for all periods (or portions thereof)
ending on or prior to the Closing Date.
6.10. UTILITIES. To the extent practicable, the parties shall notify the
gas, water, telephone and electric utility companies that Buyer shall be
responsible for the payment of all obligations incurred for utility services on
or after the Closing Date with respect to the operation of the Business. Sellers
shall request the gas, water and electric utility companies to cause meters to
be read as of the Closing Date, and the Sellers shall be responsible for the
payment of all charges for such services incurred and provided through the
Closing Date. Each Seller shall cause the telephone companies to render a ▇▇▇▇
for telephone service incurred through the Closing Date, and each Seller shall
be responsible for the payment of such bills.
6.11. PRORATION OF TAXES AND CERTAIN CHARGES.
(a) Except as provided in Section 6.9, all real property Taxes,
personal property Taxes or similar ad valorem obligations levied with respect to
the Assets for any taxable period that includes the day before the Closing Date
and ends after the Closing Date, whether imposed or assessed before or after the
Closing Date, shall be prorated between the Sellers and Buyer as of 12:01 A.M.
on the Closing Date. If any Taxes subject to proration are paid by Buyer, on the
one hand, or the Sellers, on the other hand, the proportionate amount of such
Taxes paid (or in the event a refund of any portion of such Taxes previously
paid is received, such refund) shall be paid promptly by (or to) the other after
the payment of such Taxes (or promptly following the receipt of any such
refund).
(b) Except as provided in Section 6.10, all installments of special
assessments or other charges on or with respect to the Assets payable by the
Sellers for any period in which the Closing Date shall occur, including, without
limitation, base rent, common area maintenance, royalties, all municipal,
utility or authority charges for water, sewer, electric or gas charges, garbage
or waste removal, and cost of fuel, shall be apportioned as of the Closing Date
and each party shall pay its proportionate share promptly upon the receipt of
any ▇▇▇▇, 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 Closing 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 Closing
Date.
(c) 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 Closing shall occur shall be prorated so
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that any Seller shall be entitled to that portion of any such installment
applicable to the period up to but not including the Closing Date and Buyer
shall be entitled to that portion of any such installment applicable to any
period from and after the Closing Date, and if Buyer or any Seller, as the case
may be, shall receive any such payments after the Closing Date, they shall
promptly remit to such other parties their share of such payments.
(d) The prorations pursuant to this Section may be calculated after
the Closing 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 of such item.
6.12. COMMUNICATIONS LICENSES. Except as otherwise directed by the
Bankruptcy Court or any other court of competent jurisdiction, each Seller shall
use its reasonable, good faith efforts not by any act or omission to surrender,
or to permit an adverse modification of, forfeiture of, or failure to renew
under regular terms, any of the Communications Licenses, cause the FCC or any
other governmental authority to institute any proceeding for the revocation,
suspension, or modification of any such authorization, or to fail to prosecute
with due diligence any pending applications with respect to Communications
Licenses, including any renewals thereof. The Sellers shall make all filings and
reports and pay all fees necessary or reasonably appropriate for the continued
operation of the Business, as and when such approvals, consents, permits,
licenses, filings, or reports or other authorizations are necessary or
appropriate.
6.13. REJECTED CONTRACTS. Sellers shall not reject any Assumed Contract,
Assumed Equipment Lease or Assumed Real Property Lease in any bankruptcy
proceeding following the date hereof unless this Agreement is terminated in
accordance with its terms. Notwithstanding the foregoing, Sellers shall be
entitled to reject the Interconnection and Collocation agreements identified on
SCHEDULE 2.1(e) to the extent they pertain to the provision and operation of
central offices that are not identified on SCHEDULE 2.1(e), and the Sellers
shall be entitled to reject the Enterprises Solutions Agreement with Cisco on
the terms and subject to the conditions set forth in the Order Resolving the
Contracts and Claims of the Cisco Companies, dated September 25, 2001.
6.14. COMPETING TRANSACTION. From the date hereof (and any prior time) and
until the Approval Order is entered, Seller is permitted to cause its
Representatives and Affiliates to initiate contact with, solicit or encourage
submission of any inquiries, proposals or offers by, any Person (in addition to
Buyer and its Affiliates, agents and Representatives) in connection with any
sale or other disposition of the Assets (a "COMPETING TRANSACTION"). In
addition, the Seller shall have the responsibility and obligation to respond to
any inquiries or offers to purchase all or any part of the Assets and perform
any and all other acts related thereto which are required under the Bankruptcy
Code or other applicable law, including, without limitation, supplying
information relating to the Business and Assets to prospective buyers. Seller
shall promptly notify Buyer of the existence of any proposal received by Seller,
with respect to any Competing Transaction, and Seller shall communicate to Buyer
the material terms of any proposal that it may receive with respect to any
Competing Transaction.
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6.15. DISCLOSURE SUPPLEMENTS. From time to time prior to the Closing,
Sellers shall promptly supplement the Schedules hereto with respect to any
matter hereafter arising or any information obtained after the date hereof of
which, if existing, occurring or known at or prior to the date of this
Agreement, would have been required to be set forth or described in the
Schedules, or which is necessary to complete or correct any information in such
schedule or in any representation and warranty of the Sellers which has been
rendered inaccurate thereby. For purposes of determining the satisfaction of the
conditions set forth in Article VII hereof, no such supplement or amendment
shall be considered.
6.16. FCC APPLICATIONS/STATE PUC APPLICATIONS.
(a) As promptly as practicable after the execution and delivery of
this Agreement and in any event within five Business Days thereafter, the Buyer
shall prepare and deliver to the Sellers, the Buyer's completed portion of all
appropriate applications for FCC approval, and such other documents as may be
required, with respect to the assignment of each of the Sellers' FCC Licenses
set forth in SCHEDULE 4.7(a) hereto to the Buyer (collectively, the "FCC
APPLICATIONS"). As promptly as practicable thereafter and in any event within
five Business Days thereafter, each Seller shall prepare and deliver to the
Buyer, the Seller's completed portion of all appropriate FCC Applications. As
soon as practicable after the execution and delivery of this Agreement, the
parties shall file, or cause to be filed, the FCC Applications. If the Closing
shall not have occurred for any reason within any applicable initial
consummation period relating to the FCC's grant of the FCC Applications, and
neither the Sellers nor the Buyer shall have terminated this Agreement pursuant
to Article VIII, the Buyer and the Sellers shall jointly request one or more
extensions of the consummation period of such grant.
(b) The Buyer and the Sellers shall cooperate to determine a plan to
expeditiously obtain applicable governmental approvals, clearances, consents and
authorizations necessary to effectuate the transaction contemplated hereby.
Subject to the determination of such plan, as promptly as practicable after the
execution and delivery of this Agreement, the Buyer shall prepare and deliver to
the Sellers, the Buyer's portions of all required applications for approval by
State PUCs, and such other documents as may be required, with respect to the
assignment of the Seller's State PUC Licenses set forth in SCHEDULE 4.7(a)
hereto (collectively, the "STATE PUC APPLICATIONS"). As promptly as practicable
thereafter and in any event within five Business Days thereafter, the Sellers
shall prepare and deliver to the Buyer the State PUC Applications. Subject to
the first sentence of this SECTION 4.7(a), as soon as practicable after the
execution and delivery of this Agreement, the parties shall file, or cause to be
filed, the State PUC Applications. If the Closing shall not have occurred for
any reason within any applicable consummation period relating to any State PUCs
grant of any State PUC Application, and neither the Buyer nor any of the Sellers
shall have terminated this Agreement pursuant to Article VIII, the Buyer and the
Sellers shall jointly request one or more extensions of the consummation period
of such grant.
(c) Each of the Buyer and the Sellers shall bear its own expenses in
connection with the preparation and prosecution of the FCC Applications and
the State PUC Applications. The Buyer and the Sellers shall each use their
commercially reasonable efforts to prosecute the FCC Applications and the State
PUC Applications in good faith and with due
29
diligence before the FCC and the State PUCs and in connection therewith shall
take such action or actions as may be necessary or reasonably required in
connection with the FCC Applications and the State PUC Applications, including
furnishing to the FCC and the State PUCs any documents, materials, or other
information requested by the FCC and the State PUCs in order to obtain such
approvals as expeditiously as practicable. No party hereto shall knowingly take,
or fail to take, any action if the intent or reasonably anticipated consequence
of such action or failure to act is, or would be, to cause the FCC, any State
PUC, or other regulatory authority not to grant approval of any FCC Application
or of any State PUC Application or materially delay either such approval or the
consummation of the assignment of Communications Licenses of the Sellers.
6.17. USE OF NAME. Each Seller covenants that at the Closing, or as soon as
practicable thereafter, it will not use any name, ▇▇▇▇, logo, tradename or
trademark incorporating "Rhythms NetConnections Inc.", "Rhythms Net" or
"Rhythms" in any business activity except as is necessary for the administration
of the Case.
30
VI-A ADDITIONAL POST-CLOSING COVENANTS
6A.1 ALTERNATIVE TAX PROCEDURE. Pursuant to the "Alternative Procedure"
provided in section 5 of Revenue Procedure 96-60, 1996-2 C.B. 399, (i) Buyer and
Sellers shall report on a predecessor/successor basis as set forth therein, (ii)
Sellers will be relieved from filing a Form W-2 with respect to each Buyer Hire
and (iii) Buyer will undertake to file (or cause to be filed) a Form W-2 for
each such Buyer Hire for the year that includes the Closing Date (including the
portion of such year that such employee was employed by such Seller). Sellers
shall provide Buyer on a timely basis with all payroll and employment-related
information with respect to each employee of each Seller who accepts employment
with Buyer.
6A.2 FURTHER ASSURANCES. On and after the Closing Date, the parties shall
take all appropriate action and shall execute and deliver all documents,
instruments or conveyances of any kind that may be reasonably necessary or
advisable to carry out any of the provisions hereof, including the conveyance
and transfer of the Assets.
6A.3 FURTHER AGREEMENTS. Each Seller authorizes and empowers Buyer on and
after the Closing Date to receive and to open all mail received by Buyer
relating to the Assets, the Business or the Assumed Liabilities and to deal with
the contents of such communications in any proper manner. Each Seller shall
promptly deliver to Buyer any mail or other communication received by such
Seller after the Closing Date pertaining to the Assets, the Business or the
Assumed Liabilities and shall remit all payments received on or after the
Closing Date with respect to any account receivable. Buyer shall promptly
deliver to Sellers any mail or other communication received by it after the
Closing Date pertaining to the Excluded Assets or any Excluded Liabilities and
any cash, checks or other instruments of payment in respect thereof. From and
after the Closing Date, the Sellers shall refer all inquiries with respect to
the Business, the Assets and the Assumed Liabilities to Buyer, and Buyer shall
refer all calls with respect to the Excluded Assets and the Excluded Liabilities
to the Sellers.
6A.4 REMOVAL OF EXCLUDED ASSETS. Within a reasonable period of time after
the Closing, Sellers shall remove all Excluded Assets from the locations used by
Buyer in the operation of the Business.
6A.5 POST-CLOSING ACCESS TO RECORDS AND PERSONNEL. Buyer hereby
acknowledges that it shall grant to each Seller, from and after the Closing
Date, reasonable access during regular business hours, as promptly as
practicable but in no event no later than five days after receiving notice, to
any records related to Sellers' operation of the Business prior to the Closing
Date upon Sellers' written request. Buyer shall keep such records in a manner
consistent with Buyer's past practice and such records shall not be destroyed
until the later of three years from the Closing Date or the conclusion of all
bankruptcy proceedings related to the Business. Sellers shall have the right to
make copies of any such records, provided that any such access or copying shall
be had or done (i) at Sellers' expense, (ii) in such a manner not to interfere
with the normal conduct of the Buyer's business, and (iii) Sellers shall not
disclose or divulge confidential or proprietary information about the Business
without Buyer's written consent.
31
6A.6 CONTINUED COOPERATION. If the Closing occurs at a time when not all
regulatory approvals have been obtained, the parties shall (i) continue to abide
by their obligations hereunder to obtain all regulatory approvals and (ii)
cooperate in continuing to operate the Business, to the extent commercially
reasonable, in the ordinary course in the states with respect to which
regulatory approvals have not been obtained, with Buyer receiving the economic
benefits of such operation.
VII. CONDITIONS TO OBLIGATIONS OF THE PARTIES
7.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS AND BUYER. The
respective obligations of each party to close under this Agreement shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) NO INJUNCTION OR STAY. No preliminary or permanent injunction or
other order issued by, and no Proceeding or Order nor any Law or Order
promulgated or enacted by any United States Governmental Entity shall be in
effect or pending which materially delays, restrains, enjoins or otherwise
prohibits or seeks to restrain, enjoin or otherwise prohibit the transactions
contemplated hereby.
(b) THE APPROVAL ORDER. The Approval Order shall have been entered by
the Bankruptcy Court and shall not have been reversed, stayed, modified or
amended in any manner materially adverse to Buyer. The "APPROVAL ORDER" shall be
an order or orders of the Bankruptcy Court in form and substance reasonably
acceptable to the Sellers and Buyer approving this Agreement and all of the
terms and conditions hereof, and approving and authorizing the Sellers to
consummate the transactions contemplated hereby. Without limiting the generality
of the foregoing, such order shall find and provide, among other things, that
(i) the Assets sold to Buyer pursuant to this Agreement shall be transferred to
Buyer free and clear of all Liens and Liabilities of any Person, such Liens and
Liabilities to attach to the Purchase Price payable pursuant to Section 3.2;
(ii) Buyer has acted in good faith within the meaning of Section 363(m) of the
Bankruptcy Code and, as such, is entitled to the protections afforded thereby;
(iii) this Agreement was negotiated, proposed and entered into by the parties
without collusion, in good faith and from arm's length bargaining positions;
(iv) Buyer is not acquiring or assuming any of Sellers' or any other Person's
Liabilities except as expressly provided in this Agreement; (v) all Assumed
Contracts, Assumed Equipment Leases and Assumed Real Property Leases (and any
additional executory contracts and unexpired leases that Buyer designates for
assumption and assignment) shall be assumed by the Sellers and assigned to Buyer
pursuant to Section 365 of the Bankruptcy Code and, as required by this
Agreement, the Sellers shall be obligated to pay all Cure Amounts in respect
thereof, and Buyer shall have no obligation to pay, or any Liability for, such
Cure Amounts and, thereafter shall have no further Liability under such Assumed
Contracts, the Assumed Equipment Leases and the Assumed Real Property Leases
pursuant to Section 365(k) of the Bankruptcy Code; (vi) Buyer is entitled to
assume the Interconnection and Collocation Agreements and perform post-closing
obligations thereunder only with respect to the Assumed Central Office Locations
listed on SCHEDULE 2.1(e) that Buyer will operate after the Closing Date; (vii)
the Sellers are authorized and directed to discontinue active Business
operations in the event that this Agreement is terminated; (viii) the Bankruptcy
Court shall retain jurisdiction to resolve any controversy or claim arising out
of or relating to this Agreement, or the breach hereof as provided in Section
10.11 hereof; (ix) this Agreement and the transactions
32
and instruments contemplated hereby shall be specifically performable and
enforceable against and binding upon, and not subject to rejection or avoidance
by, Seller or any chapter 7 or chapter 11 trustee of any Seller and its estate;
and (x) from and after the date of the entry of the Approval Order and the
interim order approving the Post-Petition Financing, the Sellers shall only use
funds made available to them by Buyer either under the Post-Petition Financing
(including proceeds of the Collateral) or Section 9.1 hereof to fund the
operations of the Business and the Sellers' obligations under this Agreement
shall be subject to the foregoing limitation.
(c) HSR. Any waiting period applicable to the consummation of the
transaction contemplated by this Agreement under the HSR Act shall have expired
or shall have been terminated.
(d) CONSENTS RELATED TO COMMUNICATIONS LICENSES. All consents
(including consents to assignments of permits and rights of way), waivers,
approvals, certificates, and other authorizations required to be obtained with
respect to the Communications Licenses and the transfer of the Assets shall have
been obtained by a Final Order (or either (i) waived in whole or in part in a
writing executed by the parties hereto, unless such a waiver is prohibited by
law, or (ii) if applicable, the Buyer shall have received adequate assurances
satisfactory to it that all such approvals, clearances, consents, and
authorizations will be given) and all parties shall have complied with the
conditions, if any, imposed in connection therewith.
(e) CONSENTS AND APPROVALS. All consents, waivers, authorizations and
approvals of third Persons as are necessary in connection with the transactions
contemplated by this Agreement shall have been obtained, except for such
consents, waivers, authorizations and approvals which would not have a Material
Adverse Effect and such consents and approvals which are not required due to the
entry by the Bankruptcy Court of the Approval Order.
7.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligation of Buyer
to close under this Agreement is subject to the satisfaction (or waiver by
Buyer) at or prior to the Closing Date of each of the following additional
conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Sellers contained herein shall be true and correct in all
material respects on the date hereof and on and as of the Closing Date, with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects as of such date.
(b) PERFORMANCE OF AGREEMENTS. Sellers shall have performed in all
material respects all obligations and agreements contained in this Agreement
required to be performed by them prior to or at the Closing Date.
(c) OFFICER'S CERTIFICATE. Buyer shall have received a certificate,
dated the Closing Date, of an officer of the Sellers to the effect that the
conditions specified in Sections 7.2(a) and (b) above have been fulfilled.
33
(d) SUPPLEMENTAL NOTICE OF SALE MOTION AND HEARING. Sellers shall
have given good and sufficient published notice of the Sale Motion to all
creditors and parties in interest, which notice shall refer specifically to the
proposed assumption of the Interconnection and Collocation Agreements with
respect to the Assumed Central Office Locations and the discontinuance of the
operations of the Business in the event that the Agreement is terminated.
(e) Buyer shall have entered into an agreement with Cisco Systems
Capital Corporation to acquire all or substantially all of the network equipment
assets leased to the Sellers by Cisco Systems Capital Corporation, which
agreement shall be satisfactory to Buyer in its sole and absolute discretion, on
or before the date of the hearing on the Sale Motion.
(f) Buyer shall have entered into new contracts with Sellers'
existing customers, excluding Buyer and its Affiliates, that shall result in
40,000 digital subscriber lines, which contracts shall be in service effective
as of the Closing Date.
7.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The obligation
of the Sellers to close under this Agreement is subject to the satisfaction (or
waiver by the Sellers) at or prior to the Closing Date of each of the following
additional conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Buyer contained herein shall be true and correct in all
material respects on the date hereof and on and as of the Closing Date, with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except to the extent that any such
representations or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such date.
(b) PERFORMANCE OF AGREEMENTS. Buyer shall have performed in all
material respects all obligations and agreements contained in this Agreement and
the agreements evidencing the Post-Petition Financing required to be performed
by it prior to or at the Closing Date.
(c) OFFICER'S CERTIFICATE. Sellers shall have received a certificate,
dated the Closing Date, of an officer of Buyer to the effect that the conditions
specified in subsections (a) and (b) above have been fulfilled.
(d) All claims of Cisco Systems Capital Corporation and its
Affiliates against Sellers shall have been fixed as to amount and priority, and
allowed by an Order of the Bankruptcy Court, in a manner reasonably satisfactory
to Sellers on or before the date of the hearing on the Sale Motion.
VIII. TERMINATION
8.1. TERMINATION OF AGREEMENT. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing:
(a) By mutual written consent of Buyer and Sellers;
34
(b) By any party if the Closing shall not have occurred on or before
December 31, 2001; PROVIDED, HOWEVER, that, if the Closing shall not have
occurred due to the failure of the Bankruptcy Court to enter the Approval Order
on or before September 25, 2001, then Buyer may terminate this Agreement;
PROVIDED, FURTHER, HOWEVER, that if the Closing shall not have occurred on or
before December 31, 2001 due to a breach of this Agreement by Buyer or the
Sellers, the breaching party may not terminate this Agreement pursuant to this
Section 8.1(b).
(c) By any party not in breach of this Agreement, if there shall be
any Law or regulation that makes the consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final Order;
(d) By Buyer, if the Bankruptcy Court approves a Competing
Transaction, subject to Buyer's right to payment of the Breakup Fee in cash, by
wire transfer of immediately available funds to an account designated by Buyer,
on the Business Day following the date of the consummation of any Competing
Transaction; or
(e) By the Sellers, on the one hand, or Buyer, on the other, (i) if
Buyer or the Sellers, as the case may be, materially breach any of its
obligations under this Agreement, unless such breach shall be cured within ten
(10) Business Days after such other party shall have received notice of such
breach in accordance with the terms hereof; or (ii) if Buyer or the Sellers, as
the case may be, materially breach any of its obligations under the documents
evidencing the Post-Petition Financing.
(f) By Buyer, if Sellers shall not have delivered completed Schedules
to this Agreement pursuant to Article IV.B. and on or before the date of the
Sale Hearing, the Buyer, in its sole and absolute discretion, determines that it
is not satisfied with such Schedules and is terminating this Agreement pursuant
to this Section 8.1(f).
(g) By Buyer, if the condition to Closing in Section 7.2(e) is not
satisfied within the time period stated therein.
(h) By Buyer, if the condition to Closing in Section 7.2(f) is not
satisfied or waived prior to, or within ten (10) Business Days of, the date of
the entry of the Approval Order. In the event Buyer does not exercise its
termination right as prescribed herein, then in such event, the condition to
Closing in Section 7.2(f) shall be deemed waived.
(i) By Sellers, if the condition to Closing in Section 7.3(d) is not
satisfied within the respective time period stated therein.
8.2. NO LIABILITIES IN EVENT OF TERMINATION. Subject to Section 9.1 hereof,
in the event of any termination of the Agreement pursuant to Section 8.1,
written notice thereof shall as promptly as practicable be given to the other
party specifying the provision hereof pursuant to which such termination is
made, this Agreement shall terminate and be of no further force and effect, and
there shall be no liability on the part of Buyer or the Sellers, except that if
(i) this Agreement shall be terminated pursuant to Section 8.1(d) the Break-Up
Fee shall be payable to Buyer; (ii) this Agreement shall be terminated by
Sellers pursuant to Section 8.1(e)
35
hereof, the ▇▇▇▇▇▇▇ Money Deposit shall be retained by the Sellers as liquidated
damages, and (iii) this Agreement shall be terminated by Buyer pursuant to
Section 8.1(e) hereof, the Sellers shall pay the Expense Reimbursement to Buyer.
IX. OPERATING EXPENSES
9.1. BUYER'S OBLIGATION TO FUND OPERATING EXPENSES. Notwithstanding any
provision to the contrary contained herein or in that certain Credit and
Security Agreement, dated as of September 24, 2001, by and among Buyer and the
Sellers (the "CREDIT AND SECURITY AGREEMENT"), and regardless of the termination
of this Agreement or the Credit and Security Agreement, Buyer shall, subject to
the entry of the Approval Order and the entry of the interim order approving the
Post-Petition Financing, fund all Operating Expenses incurred by Sellers in the
operation of the Business that accrue through the later to occur of (i) the
effective date of the termination of this Agreement, and (ii) the date that the
Sellers obtain authority, under applicable law, to discontinue active operations
of the Business provided that such authority shall not have expired or be
revoked or rescinded (including pursuant to any appeal of a decision granting
discontinuance authority); provided, however, that to the extent such expenses
are paid by Sellers using advances made to Sellers under the Credit and Security
Agreement, then such expenses shall be deemed to be paid pursuant to this
Section 9.1. For the avoidance of doubt, Buyer acknowledges and agrees that (i)
it shall be obligated to pay all Operating Expenses of the Business that accrue
prior to the effective date of the termination of this Agreement regardless of
when such expenses become payable, and (ii) that Buyer's obligations under this
Section 9.1 are absolute and shall not be subject to any rights, defenses,
conditions or claims of Buyer against the Sellers including the right of setoff
and any counterclaims.
X. GENERAL PROVISIONS
10.1. EXPENSES. Except as set forth in this Agreement and whether or not
the transactions contemplated hereby are consummated, each party shall bear all
costs and expenses incurred or to be incurred by such party in connection with
this Agreement and the consummation of the transactions contemplated hereby.
10.2. ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by the Sellers without the prior written
consent of Buyer, or by Buyer without the prior written consent of Sellers;
PROVIDED, HOWEVER, that, Buyer may assign its rights and obligations hereunder,
in whole or in part, to any Affiliate of Buyer, provided that no such assignment
shall relieve Buyer of its Liabilities and obligations hereunder if such
assignee does not perform such obligations and PROVIDED, FURTHER that this
Agreement may be assigned to one or more trustees appointed by the Bankruptcy
Court to succeed to the rights of the Sellers. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and except as otherwise expressly
provided herein, no other Person shall have any right, benefit or obligation
hereunder.
10.3. PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of the Sellers and Buyer, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement. Without limiting the foregoing, no direct or
36
indirect holder of any equity interests or securities of either the Sellers or
Buyer (whether such holder is a limited or general partner, member, stockholder
or otherwise), nor any Affiliate of either the Sellers or Buyer, nor any
director, officer, employee, representative, agent or other controlling person
of each of the parties hereto and their respective Affiliates shall have any
liability or obligation arising under this Agreement or the transactions
contemplated thereby.
10.4. NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to any other
party shall be in writing and shall be delivered in person or by courier or
facsimile transmission or mailed by certified mail, postage prepaid, return
receipt requested and shall be deemed given upon (a) confirmation of receipt of
a facsimile transmission, (b) confirmed delivery by hand or standard overnight
mail or (c) upon the expiration of three (3) business days after the day mailed
by certified mail, as follows:
If to Sellers: Rhythms NetConnections, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇, III
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and: ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and: Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
37
If to Buyer: WorldCom, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WorldCom, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other party. Rejection, any refusal to
accept or the inability to deliver because of changed address of which no notice
was given shall be deemed to be receipt of the notice as of the date of such
rejection, refusal or inability to deliver.
10.5. CHOICE OF LAW. This Agreement shall be governed and construed, and
the rights of the parties shall be determined, in accordance with the Bankruptcy
Code and the substantive laws of the State of
New York, except that any
provisions contained herein relating to the conveyance of interests in real
property shall be governed by the substantive laws of the State in which the
Real Property is located, in each case without regard to the conflict of law
principles thereof or of any other jurisdiction.
10.6. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and (except as set forth in the following sentence)
covenants set forth in this Agreement or in any certificate, document or other
instrument delivered in connection herewith other than those covenants and
agreements set forth in Article X hereof, shall terminate at the earlier of (i)
the Closing and (ii) termination of this Agreement in accordance with Article
VIII hereof. Only those covenants that contemplate actions to be taken or
obligations in effect after the Closing or termination of this Agreement, as the
case may be, including in respect of Article IX, and the obligations of the
parties to the Cisco General Unsecured Claim Payment Obligation Escrow
agreement, shall survive Closing in accordance with their terms and to the
extent so contemplated.
10.7. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement (including
the Schedules hereto) constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations, and discussions, whether oral or written, of the
parties. Except as set forth herein or in any certificate delivered pursuant
hereto, no party (or any employee or agent thereof) makes any representation
38
or warranty, express or implied, to any other party with respect to this
Agreement or the transactions contemplated hereby. No supplement, modification
or waiver of this Agreement (including, without limitation, any schedule hereto)
shall be binding unless the same is executed in writing by all parties. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), and
no such waiver shall constitute a continuing waiver unless otherwise expressly
provided.
10.8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by telecopy shall be as
effective as delivery of a manually executed counterpart of this Agreement. In
proving this Agreement, it shall not be necessary to produce or account for more
than one such counterpart signed by the party against whom enforcement is
sought.
10.9. SEVERABILITY; INVALIDITY. If any one or more of the provisions
contained in this Agreement (other than any of the provisions contained in
Article II or Article III hereof), unless waived by the party benefited thereby
or in any other instrument referred to herein, shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, the remainder of this
Agreement shall not be affected thereby, and to such end, the provisions of this
Agreement are agreed to be severable.
10.10. HEADINGS. The table of contents and the headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of, or to affect the meaning or interpretation of, this
Agreement.
10.11. EXCLUSIVE JURISDICTION. Without limiting any party's right to appeal
any order of the Bankruptcy Court, (a) the Bankruptcy Court shall retain
exclusive jurisdiction to enforce the terms of this Agreement and to decide any
claims or disputes which may arise or result from, or be connected with, this
Agreement, any breach or default hereunder, or the transactions contemplated
hereby, and (b) any and all claims, actions, causes of action, suits and
proceedings related to the foregoing shall be filed and maintained only in the
Bankruptcy Court, and the parties hereby consent to and submit to the
jurisdiction and venue of the Bankruptcy Court and shall receive notices at such
locations as indicated in Section 10.4 hereof.
10.12. WAIVER OF RIGHT TO TRIAL BY JURY. Each party to this Agreement
waives any right to trial by jury in any action, matter or proceeding regarding
this Agreement or any provision hereof.
10.13. BENEFICIARIES. Nothing in this Agreement, expressed or implied, is
intended to confer upon any other Person any rights or remedies of any nature
under or by reason of this Agreement, except as expressly provided in herein.
10.14. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges that
the other party hereto would be irreparably damaged in the event any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, each of the parties
hereto shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically this
39
Agreement and the terms and provisions thereof in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which the parties may be
entitled, at law, in equity or pursuant to this Agreement.
10.15. COUNTING. If the due date for any action to be taken under this
Agreement (including, without limitation, the delivery of notices) is not a
Business Day, then such action shall be considered timely taken if performed on
or prior to the next Business Day following such due date.
10.16. SERVICE OF PROCESS. Each party irrevocably consents to the service
of process in any action or proceeding by receipt of mailed copies thereof by
national courier service or registered United States mail, postage prepaid,
return receipt requested, to its address as specified in or pursuant to Section
10.4 hereof. However, the foregoing shall not limit the right of a party to
effect service of process on the other party by any other legally available
method.
10.17. AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto.
10.18. TIME OF ESSENCE. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
10.19. WAIVER. At any time prior to the Closing Date, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
10.20. SCHEDULES. The Schedules attached to, delivered with and identified
to this Agreement are a part of this Agreement the same as if fully set forth
herein and all references herein to any Section of this Agreement shall be
deemed to include a reference to any Schedule named therein.
10.21. INTERPRETATION.
(a) Whenever the words "include," "includes" or "including" are used
in this Agreement they shall be deemed to be followed by the words "without
limitation."
(b) Words denoting any gender shall include all genders. Where a word
or phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.
(c) A reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
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(d) A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all regulations and statutory
instruments issued thereunder or pursuant thereto.
(e) All references to "$" and dollars shall be deemed to refer to
United States currency unless otherwise specifically provided.
(f) All references to any financial or accounting terms shall be
defined in accordance with United States Generally Accepted Accounting
Principles.
10.22. PREPARATION OF THIS AGREEMENT. Buyer and Sellers hereby acknowledge
that (i) Buyer and Sellers jointly and equally participated in the drafting of
this Agreement and all other agreements contemplated hereby, (ii) both Buyer and
Sellers have been adequately represented and advised by legal counsel with
respect to this Agreement and the transactions contemplated hereby, and (iii) no
presumption shall be made that any provision of this Agreement shall be
construed against either party by reason of such role in the drafting of this
Agreement and any other agreement contemplated hereby.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of Sellers and Buyer as of the date first above
written.
RHYTHMS NETCONNECTIONS, INC.
By:
------------------------------------
Name:
Title:
RHYTHMS LINKS INC.
By:
------------------------------------
Name:
Title:
RHYTHMS LINKS - VIRGINIA INC.
By:
------------------------------------
Name:
Title:
RHYTHMS LEASING, INC.
By:
------------------------------------
Name:
Title:
MCI WORLDCOM NETWORK SERVICES, INC.
By:
------------------------------------
Name:
Title:
