EXHIBIT 2.4
[EXECUTION COPY]
ASSET PURCHASE AGREEMENT
by and among
FLORIDA DIGITAL NETWORK, INC. and
SOUTHERN DIGITAL NETWORK INC., as the Purchasers,
and
MPOWER HOLDING CORPORATION, MPOWER COMMUNICATIONS CORP. and
MPOWER LEASE CORPORATION, as the Seller Companies
Dated as of January 8, 2003
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS........................................................1
1.1 CERTAIN DEFINITIONS................................................1
1.2 INTERPRETATION....................................................11
ARTICLE II - PURCHASE AND SALE OF ASSETS......................................12
2.1 PURCHASE AND SALE OF PURCHASED ASSETS; REGULATED ASSETS;
MANAGEMENT AGREEMENT............................................12
2.2 ASSUMPTION OF LIABILITIES.........................................19
2.3 CONSIDERATION FOR THE PURCHASED ASSETS............................21
2.4 FURTHER ASSURANCES................................................25
2.5 ASSIGNMENT OF ASSUMED CONTRACTS AND BUSINESS LICENSES.............25
2.6 TAMPA SWITCH SITE.................................................26
ARTICLE III - THE CLOSING.....................................................26
3.1 FIRST CLOSING.....................................................26
3.2 SECOND CLOSINGS...................................................29
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE SELLER COMPANIES...........31
4.1 ORGANIZATION......................................................31
4.2 AUTHORITY.........................................................31
4.3 NO VIOLATION; THIRD PARTY CONSENTS................................31
4.4 GOVERNMENT PERMITS AND CONSENTS...................................32
4.5 EQUIPMENT AND TANGIBLE PROPERTY...................................32
4.6 INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS......................32
4.7 CONTRACTS.........................................................33
4.8 PERMITS...........................................................35
4.9 BUSINESS EMPLOYEES................................................36
4.10 EMPLOYEE BENEFIT PLANS............................................36
4.11 FINANCIAL STATEMENTS..............................................37
4.12 REAL PROPERTY.....................................................38
4.13 LITIGATION; GOVERNMENTAL ORDERS...................................39
4.14 COMPLIANCE WITH LAWS..............................................40
4.15 ENVIRONMENTAL MATTERS.............................................40
4.16 INSURANCE.........................................................40
4.17 TRANSACTIONS WITH AFFILIATES......................................41
4.18 TAXES.............................................................41
4.19 ABSENCE OF CERTAIN CHANGES OR EVENTS..............................41
4.20 SUFFICIENCY OF ASSETS; ENCUMBRANCES...............................42
4.21 BROKERS...........................................................43
4.22 INVENTORY.........................................................43
4.23 ACCOUNTS RECEIVABLE...............................................43
4.24 ABSENCE OF UNDISCLOSED LIABILITIES................................43
4.25 BOOKS AND RECORDS.................................................43
4.26 CUSTOMERS AND SUPPLIERS...........................................43
4.27 FIBER NETWORK.....................................................44
4.28 PUBLIC FILINGS....................................................44
4.29 TARIFFS...........................................................44
4.30 NO MATERIAL MISSTATEMENTS OR OMISSIONS............................44
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..................45
5.1 ORGANIZATION......................................................45
5.2 AUTHORITY.........................................................45
5.3 NO VIOLATION; THIRD PARTY CONSENTS................................45
5.4 GOVERNMENTAL CONSENTS.............................................46
5.5 LITIGATION........................................................46
5.6 BROKERS...........................................................46
ARTICLE VI - COVENANTS AND AGREEMENTS.........................................46
6.1 CONDUCT OF BUSINESS...............................................46
6.2 ACCESS AND INFORMATION............................................49
6.3 CONFIDENTIALITY...................................................49
6.4 FURTHER ACTIONS...................................................51
6.5 PUBLICITY.........................................................51
6.6 TRANSACTION COSTS.................................................51
6.7 EMPLOYEES AND EMPLOYEE BENEFIT MATTERS............................52
6.8 COOPERATION IN TAX MATTERS........................................53
6.9 RETENTION OF AND ACCESS TO RECORDS................................53
6.10 INSURANCE.........................................................54
6.11 EXCLUSIVITY.......................................................54
6.12 COVENANT NOT TO COMPETE...........................................55
6.13 EQUITABLE REMEDIES................................................56
6.14 INTELLECTUAL PROPERTY.............................................56
6.15 SUPPLEMENTAL DISCLOSURE...........................................56
6.16 PRORATION OF TAXES AND CERTAIN CHARGES............................56
6.17 SHARED CUSTOMERS..................................................57
ARTICLE VII - CLOSING CONDITIONS..............................................58
7.1 FIRST CLOSING.....................................................58
7.2 SECOND CLOSINGS...................................................61
ARTICLE VIII -INDEMNIFICATION.................................................62
8.1 SURVIVAL..........................................................62
8.2 INDEMNIFICATION BY THE PURCHASERS.................................63
8.3 INDEMNIFICATION BY THE SELLER COMPANIES...........................64
8.4 DEFENSE OF ACTIONS................................................64
8.5 LIMITATIONS.......................................................66
8.6 DISBURSEMENT OF THE INDEMNITY ESCROW AND THE
PURCHASE PRICE HOLDBACK ESCROW..................................66
8.7 INTEREST..........................................................67
8.8 TAX BENEFITS; TAX TREATMENT OF INDEMNITY PAYMENTS.................67
ARTICLE IX - TERMINATION......................................................68
9.1 TERMINATION.......................................................68
9.2 PROCEDURE AND EFFECT OF TERMINATION...............................68
9.3 OTHER PROVISIONS RELATING TO TERMINATION..........................70
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ARTICLE X - MISCELLANEOUS.....................................................70
10.1 BULK TRANSFER LAWS................................................70
10.2 NOTICES...........................................................70
10.3 ATTORNEYS' FEES AND COSTS.........................................72
10.4 ASSIGNMENT........................................................72
10.5 AMENDMENTS AND WAIVER; EXCLUSIVE REMEDIES.........................72
10.6 ENTIRE AGREEMENT..................................................72
10.7 REPRESENTATIONS AND WARRANTIES EXCLUSIVE..........................73
10.8 NO THIRD PARTY BENEFICIARY........................................73
10.9 GOVERNING LAW.....................................................73
10.10 NEUTRAL CONSTRUCTION..............................................73
10.11 SEVERABILITY......................................................73
10.12 HEADING; CONSTRUCTION.............................................73
10.13 WAIVER OF JURY TRIAL..............................................74
10.14 CONSENT TO JURISDICTION...........................................74
10.15 NO SUCCESSOR LIABILITY............................................74
10.16 SPECIFIC PERFORMANCE..............................................75
10.17 COUNTERPARTS......................................................75
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List of Schedules and Exhibits
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Schedules
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1.1 List of Executives - Knowledge of the Seller Companies'
2.1(a)(i) Certain Equipment and Machinery
2.1(a)(v) Assumed Contracts
2.1(a)(xvi) Business Lockbox Accounts
2.1(a)(xviii) Owned Real Property
2.1(b)(i) Shared Assets
2.1(b)(xiii) Vehicles Subject to Capital Leases
2.1(d) Regulated Assets
2.1(g) Contracts to be Delivered by Seller Companies
2.2(a)(ii) Specified Liabilities
2.6 Actions to be taken by Purchasers at Tampa Switch Site
4.3 Third Party Consents - Seller Companies
4.3(b) Regulatory Consents
4.4 Government Consents - Seller Companies
4.6 Intellectual Property Issues
4.7(a) Material Business Contracts
4.7(b) Material Business Contracts - Exceptions to Enforceability
4.8 Permits
4.9(a) Business Employees
4.9(b) Employees Governed by Collective Bargaining Agreements
4.9(c) Labor Issues
4.10(a) Benefit Plans
4.11(a) Financial Statements
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4.11(b) Exceptions to Categorization of Business Interim Statements
4.12(b) Leased Real Property
4.13 Litigation; Governmental Orders
4.14 Compliance with Laws
4.15 Environmental Matters
4.16 Insurance
4.17 Transactions with Affiliates
4.19 Absence of Changes
4.20 Sufficiency of Assets; Encumbrances
4.24 Liabilities to be Released at Closing
4.26 Customers and Suppliers
4.27 Fiber Network
5.3 Third Party Consents - Purchaser
5.4 Government Consents - Purchaser
6.1 Conduct of Business
6.7 Specified Business Employees
Exhibits
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Exhibit A Management Agreement
Exhibit B Xxxx of Sale (Acquired Accounts Receivable and Business Lockbox
Accounts)
Exhibit C Escrow Agreement
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made as of January
8, 2003, by and among Florida Digital Network, Inc., a Delaware corporation
("FDN") and Southern Digital Network, Inc., a Delaware corporation ("Southern"
and, together with FDN, the "Purchasers"); Mpower Holding Corporation, a
Delaware corporation ("Holding") Mpower Communications Corp., a Nevada
corporation ("Communications") and Mpower Lease Corporation, a Nevada
corporation (together with Holding and Communications, the "Seller Companies"
and each individually, a "Seller Company"). The Purchasers and the Seller
Companies are sometimes referred to collectively herein as the "Parties."
Capitalized terms used herein and not otherwise defined are defined in Section
1.1 below.
R E C I T A L S
WHEREAS, the Seller Companies are collectively a competitive local
exchange carrier offering primarily to small and medium-sized business customers
local dial-tone, long distance, high-speed internet access via dedicated
Symmetrical Digital Subscriber Line, Trunk Level 1 ("T1"), Integrated T1 and
Data-only T1 and other voice and data features, as well as payphone and
residential services (such businesses, as conducted in the State of Georgia and
the State of Florida by the Seller Companies and their predecessors in interest
or any Affiliates of any Seller Company, are referred to herein collectively as
the "Business"); and
WHEREAS, the Purchasers desire to purchase from the Seller Companies,
and the Seller Companies desire to sell to the Purchasers, all of the assets
owned, used, useful in or held for use by the Seller Companies with respect to
the Business (other than the Excluded Assets), and in connection therewith, the
Purchasers have agreed to assume certain liabilities of the Seller Companies
relating to the Business, all upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein set forth and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parties hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. The following terms, when used herein, shall
have the respective meanings set forth below:
"Access Line Price Decrease" has the meaning set forth in Section
2.3(b)(i)(A).
"Accounts Receivable Price Decrease" has the meaning set forth in
Section 2.3(b)(i)(B).
"ACNA Holdback" has the meaning set forth in Section 2.1(h)(ii).
"Acquired Accounts Receivable" has the meaning set forth in Section
2.1(a)(viii).
"Action" means any claim, action, suit or proceeding, arbitral
action, governmental inquiry, criminal prosecution or other investigation.
"Adjusted Customer Access Lines" means the number of Customer
Access Lines as of the Management Agreement Date, excluding any Non-Qualified
Lines.
"Affiliate" means, with respect to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
such Person, or (b) or any director, partner, member, officer, manager, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means, with respect to any
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in the preamble hereto.
"Agreement Period" has the meaning set forth in Section
2.3(b)(iii)(C).
"Allocation Method" has the meaning set forth in Section 2.3(c).
"Assigned IP" has the meaning set forth in Section 2.1(a)(vii).
"Assignment and Assumption Agreement" has the meaning set forth in
Section 3.1(b)(i)(C).
"Assignments and Assumptions of Lease" has the meaning set forth in
Section 3.1(b)(i)(A).
"Assignments of Proprietary Rights" has the meaning set forth in
Section 3.1(b)(i)(D).
"Assumed Contracts" has the meaning set forth in Section 2.1(a)(v).
"Assumed Liabilities" has the meaning set forth in Section 2.2(a).
"Assumed Liability Price Decrease" has the meaning set forth in
Section 2.3(b)(i)(C).
"Assumed Real Property Leases" has the meaning set forth in Section
2.1(a)(i).
"Assumed Material Contracts" means the Material Business Contracts
set forth on Schedule 4.7(a) hereto.
"Balance Sheet" has the meaning set forth in Section 4.11.
"Base Price" has the meaning set forth in Section 2.3(a).
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"BellSouth Agreement" means that certain Interconnection Agreement
by and between BellSouth Telecommunications, Inc. ("BellSouth") and MGC
Communications, Inc. (d/b/a Mpower Communications), dated June 21, 2000, as
amended.
"BellSouth/Verizon Agreements" has the meaning set forth in Section
7.1(a)(xii).
"Benefit Plan" means any Plan that is sponsored, maintained or
contributed to or required to be contributed to by the Seller Companies or an
Affiliate of any Seller Company or to which the Seller Companies or an Affiliate
of any Seller Company is a party, or with respect to which the Seller Companies
or an Affiliate of any Seller Company have any other similar or comparable
obligation or liability (fixed, contingent or otherwise), whether written or
oral, for the benefit of Business Employees or former Business Employees and
their dependent beneficiaries.
"Xxxx of Sale" has the meaning set forth in Section 3.1(b)(i)(B).
"Budget" has the meaning set forth in Section 6.1(b)(iv).
"Business" has the meaning set forth in the recitals hereto.
"Business Day" means any day other than Saturday, Sunday or any day
on which banks in Boston, Massachusetts, are required or authorized to be
closed.
"Business Employees" has the meaning set forth in Section 4.9(b).
"Business Insurance Policies" has the meaning set forth in Section
4.16.
"Business Licenses" has the meaning set forth in Section
2.1(a)(iv).
"Business Lockbox Accounts" means any lockbox or similar depository
account of the Seller Companies to or into which customers of the Business or
other Persons deliver or deposit accounts receivable relating to the Business or
other amounts owing to the Seller Companies with respect to the Business
(including the Acquired Accounts Receivable and any accounts receivable relating
to the Business which arise after the Management Agreement Date), which lockbox
and similar depository accounts are listed on Schedule 2.1(a)(xvi) attached
thereto and which shall be assigned to the Purchasers on the date hereof and
controlled by FDN in accordance with the Management Agreement.
"Cap" has the meaning set forth in Section 8.5(a).
"Closing Date Customer List" has the meaning set forth in Section
4.26.
"Closing Payment" has the meaning set forth in Section 2.3(b)(ii).
"Communications" has the meaning set forth in the preamble hereto.
"Communications Act" means the Communications Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
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"Company SEC Reports" means all reports, schedules, forms,
statements and other documents required to be filed by Holding with the SEC
since January 1, 2000, including all exhibits thereto.
"Contract" means any contract, agreement, indenture, note, bond,
instrument, lease, conditional sales contract, mortgage, license, franchise
agreement, concession agreement, insurance policy, security interest, guaranty,
binding commitment or other agreement or arrangement, whether written or oral.
"Customer Access Line" means (i) a POTS line, (ii) a voice grade
equivalent line or trunk if delivered over a T-1 connection line or (iii) a data
connection line, in each case forming a part of the Business.
"Customer Accounts" shall mean all rights in and with respect to
the customers of the Business, including all rights of contract (whether or not
written), all records of customers, including contract information, billing
information, telephone numbers and related files whether maintained
electronically or otherwise, all rights of communication with such customers and
all other contractual rights with respect to such customers including the right
to recover payments, whether directly or indirectly.
"Deposit" has the meaning set forth in Section 2.3(a).
"Domain Name Assignments" has the meaning set forth in Section
3.1(b)(i)(E).
"Encumbrance" means any security interest, pledge, mortgage, lien,
charge, adverse claim of ownership or use, restriction on transfer (such as a
right of first refusal or other similar right but not including any requirement
to obtain third party consents to the assignment of Assumed Contracts to the
Purchasers), defect of title, or other encumbrance of any kind or character
(including any conditional sale or other title retention agreement or lease in
the nature thereof), any sale of receivables with recourse against any Seller
Company, or any subordination agreement in favor of another Person.
"Environmental Law" means any applicable law, order, regulation,
decree, permit, license, ordinance or other federal, state, county, provincial,
local or foreign governmental requirements in effect as of the date hereof or
the Closing Date relating to pollution, the protection of human health and the
environment, or the Release of any Hazardous Substance into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, any successor statute thereto and the rules and regulations
promulgated thereunder.
"Escrow Agent" has the meaning set forth in Section 2.3(a).
"Escrow Agreement" has the meaning set forth in Section 2.3(a).
"Escrow Amount" has the meaning set forth in Section 3.1(c)(i).
"Excluded Assets" has the meaning set forth in Section 2.1(b)(xii).
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"Excluded Liabilities" has the meaning set forth in Section 2.2(b).
"Excluded Long Distance Receivables" means accounts receivable
relating to the Business attributable to long distance services provided to
customers prior to the Management Agreement Date that are either (i) billed by
the Seller Companies prior to the Management Agreement Date or (ii) otherwise
owed to the Seller Companies by such customers.
"Excluded Real Property Leases" has the meaning set forth in
Section 2.1(b).
"Excluded Refund Disputes" has the meaning set forth in Section
2.7.
"Expenses Adjustment" has the meaning set forth in Section
2.3(b)(i)(D).
"FCC" means the Federal Communications Commission.
"FDN" has the meaning set forth in the preamble hereto.
"Final Purchase Price" has the meaning set forth in Section
2.3(b)(iii)(C).
"Financial Statements" has the meaning set forth in Section 4.11.
"First Closing" has the meaning set forth in Section 3.1(a).
"First Closing Date" has the meaning set forth in Section 3.1(a).
"Florida Purchased Assets" has the meaning set forth in Section
2.1(a).
"Florida Second Closing" has the meaning set forth in Section
3.2(a)(i).
"Florida Second Closing Date" has the meaning set forth in Section
3.2(a)(i).
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time, consistently applied.
"Georgia Purchased Assets" has the meaning set forth in Section
2.1(a).
"Georgia Second Closing" has the meaning set forth in Section
3.2(a)(ii).
"Georgia Second Closing Date" has the meaning set forth in Section
3.2(a)(ii).
"Governmental Authority" means any government, any governmental
entity, department, commission, board, agency or instrumentality, and any court,
tribunal or judicial body, in each case whether federal, state, county,
provincial, local or foreign.
"Governmental Order" means any statute, rule, regulation, order,
judgment, injunction, decree, stipulation or determination issued, promulgated
or entered by or with any Governmental Authority of competent jurisdiction.
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"Hazardous Substance" means petroleum, petroleum by-products,
polychlorinated biphenyls, asbestos and any other chemicals, materials,
substances or wastes which are currently defined or regulated as "hazardous
substances," "hazardous materials," "hazardous wastes," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"toxic air pollutants," "hazardous air pollutants," "pollutants," or
"contaminants" under any applicable Environmental Law.
"Indemnified Party" has the meaning set forth in Section 8.4.
"Indemnifying Party" has the meaning set forth in Section 8.4.
"Indemnity Escrow" has the meaning set forth in Section 3.2(c)(i).
"Indemnity Escrow Period" has the meaning set forth in Section 8.6.
"Independent Auditors" has the meaning set forth in Section
2.3(b(iii)(C).
"Intellectual Property" means any (a) patents, patent applications,
patent disclosures and improvements thereto, (b) Marks, (c) copyrights, and any
registrations and applications for registration thereof, and (d) URLs and
Internet web sites, and the hypertext markup language files, graphics, text
files and documentation associated with such Internet websites, if any.
"Interim Statements" has the meaning set forth in Section 4.11.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, any successor statute thereto and the rules and regulations promulgated
thereunder.
"Inventory" means all inventory of the Seller Companies, wherever
located (including in warehouses not included in the Purchased Assets which are
primarily used in connection with the operation by the Seller Companies or their
Affiliates of businesses other than the Business), including raw materials,
works-in-progress, finished goods and supplies.
"IRS" means the United States Internal Revenue Service, and any
successor agency thereto.
"Knowledge of the Seller Companies", "Seller Companies' Knowledge"
and phrases of similar import mean the actual knowledge after reasonable
investigation of the named executives identified on Schedule 1.1 and the
executive officers of the Seller Companies.
"Law" means any federal, state, county, provincial, local or
foreign statute, law, ordinance, regulation, rule, code or rule of common law.
"Leased Real Property" has the meaning set forth in Section
2.1(a)(v).
"Letter Agreement" has the meaning set forth in Section 10.5.
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"Liability" means any indebtedness, obligation or other liability
(whether absolute, accrued, matured, contingent, known or unknown, fixed or
otherwise, or whether due or to become due), including, any fine, penalty,
judgment, award or settlement respecting any judicial administrative or
arbitration proceeding, damage, loss, claim or demand with respect to any Law
and any applicable Environmental Law.
"License" means any franchise, approval, permit, order,
authorization, consent, license, registration or filing, certificate, variance
and any other similar right obtained from or filed with any Governmental
Authority.
"Licensed Tradenames" has the meaning set forth in Section 2.1(f).
"Losses" has the meaning set forth in Section 8.2.
"Management Agreement" has the meaning set forth in Section 2.1(c).
"Management Agreement Date" has the meaning set forth in Section
2.1(c).
"Marks" means all imprints, titles, names, trade name, service
marks, trade dress, logos, trade names, corporate names and domain names, the
goodwill associated therewith, and any registrations and applications for
registration thereof used by the Seller Companies.
"Material Adverse Effect" means any event, fact, circumstance or
effect that, individually or in the aggregate with any other event, fact,
circumstance or effect, has had or could reasonably be expected to have a
materially adverse affect on the business, assets, operation, financial
condition, assets, liabilities, cash flow, net worth, employee, customer or
supplier relations, results of operations or prospects of the Business or the
Purchased Assets, taken as a whole; provided, however, that "Material Adverse
Effect" shall not include any event, fact, circumstance, or effect arising out
of or attributable to events, facts, circumstances or effects caused solely by
(i) federal legal or regulatory changes generally affecting the industries in
which the Business operates, (ii) general economic conditions, events or
circumstances, (iii) actions taken by the Purchasers under the Management
Agreement, including the reduction of prices in response to competitive
pressures, and (iv) changes caused by a material worsening of current conditions
caused by acts of terrorism (other than acts directly affecting the Purchased
Assets or geographic areas in which the Purchased Assets are located).
"Material Business Contracts" has the meaning set forth in Section
4.7(a).
"Non-Qualified Lines" means Customer Access Lines attributable to a
customer of the Business (a) which has not paid any Seller Company at least
seventy-five percent (75%) of its first xxxx as of the Management Agreement
Date, (b) which, as of the Management Agreement Date, has outstanding more than
twenty-five percent (25%) of any xxxx the invoice date of which is at least 60
days prior to the Management Agreement Date, (c) with respect to lines added
after November 30, 2002 at a rate that is subject to a discount that is more
than ten percent (10%) below discounts prevailing for similar customers as of
November 30, 2002, unless such discount has been agreed to by the Purchasers
prior to the granting of such discount or (d) whose service has been, or should
have been, suspended by a Seller Company pursuant to Seller Company's customary
business practices or who has initiated or completed (x) an order to terminate
service
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with a Seller Company or (y) an order to transfer service in whole or in part to
another carrier, in each case, occurring prior to or as of the Management
Agreement Date. Notwithstanding the foregoing, Non-Qualified Lines do not
include any Customer Access Lines which have been neither finally disconnected
nor made the subject of a final order to terminate service on or before the 90th
day following the Management Agreement Date.
"Notice of Claim" has the meaning set forth in Section 8.4.
"November Access Line Count" means 76,126.
"November Customer List" has the meaning set forth in Section 4.26.
"Objection Notice" has the meaning set forth in Section
2.3(b)(iii)(B).
"Operative Agreements" means, collectively, (a) the Assignments and
Assumptions of Lease, (b) the Bills of Sale, (c) the Assignment and Assumption
Agreement, (d) the Assignments of Proprietary Rights, (e) the Domain Name
Assignments, (f) the Management Agreement, (g) the Escrow Agreement and any
other agreements executed in connection with this Agreement or the transactions
contemplated herein.
"Owned Real Property" means all land, together with all buildings,
structures, improvements and fixtures located thereon, including all electrical,
mechanical, plumbing and other building systems, fire protection, security and
surveillance systems, telecommunications, computer, wiring, and cable
installations; utility installations, water distribution systems and
landscaping, together with all easements and other rights and interests
appurtenant thereto (including air, oil, gas, mineral and water rights, owned by
any of the Seller Companies or their Affiliates and located in the State of
Georgia or the State of Florida.
"Parties" has the meaning set forth in the recitals hereto.
"Pending Application" has the meaning set forth in Section
4.8(e)(i).
"Permits" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings with and under all
federal, state, local or foreign laws and Governmental Authorities (including
all pending applications therefor or relating thereto and renewals, extensions
or modifications thereof and any additions thereto between the date hereof and
each Closing hereunder).
"Permitted Encumbrances" means (a) Encumbrances for Taxes not yet
due and payable (it being understood and agreed that all Taxes of the Seller
Companies covered by Section 2.2(b)(ii) hereof are Excluded Liabilities), or
that are being contested in good faith in proper proceedings, (b) zoning,
entitlement, conservation restriction and other land use and environmental
regulations by Governmental Authorities which do not materially interfere with
the present use of the Purchased Assets, or (c) exceptions, restrictions,
easements, charges, rights-of-way and other Encumbrances set forth in any state,
local or municipal franchise under which the Business is conducted which do not
materially interfere with the present use of the Purchased Assets or the conduct
of the Business.
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"Person" means any individual, general or limited partnership,
firm, corporation, limited liability company, partnership, association, trust,
unincorporated organization or other entity.
"Plan" means any deferred compensation, bonus or other incentive
compensation plan, stock option, stock purchase program, agreement or
arrangement, any severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of Section 3(1) of ERISA), any profit-sharing, stock bonus
or other "pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA), any employment, termination or severance agreement or arrangement, and
any other employee benefit plan, fund, program, agreement or arrangement.
"Predecessor In Interest" means any predecessor to any Seller
Company, any Person with respect to which a Seller Company is a
successor-in-interest (including, without limitation, by operation of law,
merger, liquidation, conversion, consolidation, assignment, assumption or
otherwise), and any other previous owner or operator of any portion of the
Business or Purchased Assets.
"Proprietary Rights" means (a) Intellectual Property, (b) trade
secrets and confidential business information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, research and development information, software,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information), (c) copies and tangible embodiments thereof (in whatever form or
medium), and (d) licenses granting any rights with respect to any of the
foregoing.
"PUC" means a state public utility commission.
"Purchase Price" has the meaning set forth in Section 2.3(a).
"Purchase Price Holdback Escrow" has the meaning set forth in
Section 3.2(c)(i).
"Purchased Assets" has the meaning set forth in Section 2.1(a).
"Purchaser Indemnified Party" has the meaning set forth in Section
8.3.
"Purchasers' Estimate" has the meaning set forth in Section
2.3(b)(ii).
"Purchaser's Final Purchase Price Calculation" has the meaning set
forth in Section 2.3(b)(iii)(A).
"Real Property Leases" has the meaning set forth in Section
2.1(a)(v).
"Recipients" has the meaning set forth in Section 6.3.
"Refund Rights" has the meaning set forth in Section 2.1(b)(iii).
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"Regulated Assets" has the meaning set forth in Section 2.1(d).
"Regulatory Consents" has the meaning set forth in Section 4.3.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Substance into the environment.
"Restricted Activities" has the meaning set forth in Section
6.11(a)(i).
"Restricted Period" has the meaning set forth in Section 6.11(a).
"SEC" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Second Closing" means either the Florida Second Closing or the
Georgia Second Closing.
"Second Closing Date" means either the Florida Second Closing Date
or the Georgia Second Closing Date.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor statute thereto, and the rules and regulations of the SEC
promulgated from time to time thereunder, all as the same shall be in effect at
the time.
"Seller Companies' Estimate" has the meaning set forth in Section
2.3(b)(ii).
"Seller Indemnified Party" has the meaning set forth in Section
8.2.
"Seller Company" and "Seller Companies" have the meanings set forth
in the preamble hereto.
"Shared Assets" has the meaning set forth in Section 2.1(b)(i).
"Shared Customers" has the meaning set forth in Section 6.17.
"Southern" has the meaning set forth in the preamble hereto.
"Specified Liabilities" has the meaning set forth in Section
2.2(a)(ii).
"Specified Representations" has the meaning set forth in Section
8.1.
"Subsidiary" means, with respect to any Person, any corporation,
general or limited partnership, limited liability company, joint venture or
other legal entity of any kind of which such Person (either alone or through or
together with one or more of its other Subsidiaries) owns, directly or
indirectly, more than 50% of the stock or other equity interests, the holders of
which are (a) generally entitled to vote for the election of the board of
directors or other governing body of such legal entity or (b) generally entitled
to share in the profits or capital of such legal entity.
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"Surveys" has the meaning set forth in Section 7.1(a)(xvii).
"T-1" has the meaning set forth in the recitals hereto.
"Tampa Switch Site" means switch site located at 000 Xxxxx Xxxxxxxx
Xxxxxx, Xxxxx 0000 in Tampa Bay, Florida.
"Tax" means any federal, state, county, provincial, local or
foreign income, gross receipts, sales, use, stamp, ad valorem, employment,
severance, utility, transfer, gains, profits, social security, payroll, wage or
other withholding, excise, franchise, property, capital stock, premium, minimum
and alternative minimum or other taxes, fees, levies, duties, assessments or
charges of any kind or nature whatsoever imposed by any Governmental Authority
(whether payable directly or by withholding), together with any interest,
penalties (civil or criminal), deficiencies, additions to or additional amounts
imposed by, any Governmental Authority with respect thereto, whether disputed or
not.
"Tax Return" means a report, return or other information required
to be supplied to a Governmental Authority with respect to any Tax.
"Third Party Claim" has the meaning set forth in Section 8.4.
"Threshold" has the meaning set forth in Section 8.5(a).
"Title Commitments" has the meaning set forth in Section
7.1(a)(xv).
"Title Company" has the meaning set forth in Section 7.1(a)(xv).
"Transferred Employees" has the meaning set forth in Section 6.7.
"Undisputed Specified Liability" has the meaning set forth in
Section 2.2(a)(ii).
"Year-End Statements" has the meaning set forth in Section 4.11.
1.2 Interpretation. For purposes of this Agreement, except as otherwise
expressly provided herein or unless the context otherwise requires: (a) words
using the singular or plural number also include the plural or singular number,
respectively, and the use of any gender herein shall be deemed to include the
other genders, (b) references herein to "Articles," "Sections," "subsections"
and other subdivisions without reference to a document are to the specified
Articles, Sections, subsections and other subdivisions of this Agreement, (c) a
reference to a subsection without further reference to a Section is a reference
to such subsection as contained in the same Section in which the reference
appears, and this rule shall also apply to other subdivisions within a Section
or subsection, (d) the words "herein," "hereof," "hereunder," "hereby" and other
words of similar import refer to this Agreement as a whole and not to any
particular provision, and (e) the words "include," "includes" and "including"
are deemed to be followed by the phrase "without limitation". All accounting
terms used herein and not expressly defined herein shall have the meanings given
to them under GAAP.
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ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Purchased Assets; Regulated Assets; Management
Agreement.
(a) Purchase and Sale. Upon the terms and subject to the conditions
set forth herein, at the First Closing or the Second Closing, as the case may
be, the Purchasers shall purchase from the Seller Companies, and the Seller
Companies shall irrevocably sell, convey, transfer, assign and deliver to the
Purchaser, free and clear of all Encumbrances other than Permitted Encumbrances,
all right, title and interest in and to all of the Seller Companies' tangible
and intangible rights, properties and assets of every kind, nature and
description, wherever located, whether arising by contract, law or otherwise,
primarily used by the Seller Companies or useful in the operation of the
Business including but not limited to all such assets or rights acquired by the
Seller Companies with respect to the Business between the date hereof and the
last to occur of the Second Closings, except for the Excluded Assets,
(collectively, the "Purchased Assets"), as follows: (x) FDN shall purchase from
the Seller Companies those Purchased Assets that are located in or originate
from the State of Florida or are primarily used or useful in the operation of
the Business in the State of Florida (the "Florida Purchased Assets"), and (y)
Southern shall purchase from the Seller Companies those Purchased Assets that
are located in or originate from the State of Georgia or are primarily used or
useful in the operation of the Business in the State of Georgia (the "Georgia
Purchased Assets"). Without limiting the generality of the foregoing, and except
for the Excluded Assets, with respect to both the Florida Purchased Assets and
the Georgia Purchased Assets, the Purchased Assets shall include the following:
(i) machinery, equipment (including without limitation customer
premise equipment and all equipment located at collocations and switching
sites), furniture and fixtures, office equipment, computer equipment (including
all hardware owned or licensed by any Seller Company (including the related
documentation)), facsimile machines, copying machines, communications equipment,
vehicles (but, as to vehicles, only if owned by any Seller Company and not
subject to a capital lease), spare and replacement parts, and other tangible
property (and interests in any of the foregoing) of the Seller Companies,
including without limitation the machinery and equipment listed on Schedule
2.1(a)(i) hereto; provided that prior to the First Closing the Purchasers may
elect to include among the Purchased Assets any vehicle set forth on Schedule
2.1(b)(xiii) provided that the Purchasers either assume the full amount of the
outstanding capital lease obligation to which such vehicle is subject as of the
First Closing or pay the applicable Seller Company on the First Closing Date an
amount sufficient to pay in full such outstanding capital lease obligation, in
which case the applicable Seller Company shall pay in full such capital lease
obligation at the First Closing and obtain the release of any Encumbrances on
such vehicle;
(ii) all Customer Access Lines and Customer Accounts;
(iii) all supplies and items of Inventory to the extent
relating to the Business owned by the Seller Companies as of the First Closing,
whether in possession of the Seller Companies or a third party;
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(iv) all licenses, Permits, registrations, approvals and
authorizations issued by any Governmental Authority or private organization
possessed by the Seller Companies primarily used or useful in the operation of
the Business or required for the use of the Purchased Assets and all rights
thereunder (each, a "Business License" and, collectively, the "Business
Licenses");
(v) all rights under any Contracts primarily relating to the
Business and under any leases of real property ("Leased Real Property")
primarily relating to the Business (the "Real Property Leases") to which any
Seller Company or any of their Affiliates is a party, including any amendments
and supplements thereto, that are specifically identified by the Purchasers and
set forth on Schedule 2.1(a)(v) hereto or that are identified by the Purchasers
in their sole discretion after the date hereof but prior to the First Closing in
which case Schedule 2.1(a)(v) will be updated (each such Contract or Real
Property Lease, an "Assumed Contract" and, collectively, the "Assumed
Contracts");
(vi) all marketing, sales support and promotional literature,
market research studies, books, records, files, documents, financial records,
bills, accounting, internal and audit records, operating manuals, personnel
records, databases, all lists of past, present or prospective customers,
supplier lists and files, in each case relating to the Business and including,
without limitation, customer lists, documents and records relating to past,
present and prospective customers of the Business, whether in printed form or
computer media and including supporting postal data, preprinted materials,
artwork, and other similar items (excluding Tax Returns) and all other
information, files, records, data, plans and recorded knowledge, it being
understood and agreed that if at all practicable the Seller Companies shall
deliver to the Purchasers the original embodiments of each of the foregoing;
otherwise the Seller Companies shall deliver to the Purchasers full and complete
copies of each of the foregoing;
(vii) all Proprietary Rights relating primarily to the Business
and goodwill associated therewith, rights thereunder, remedies against
infringements thereof and rights to protection of interests therein under the
applicable Laws of all jurisdictions (collectively, the "Assigned IP");
(viii) all of the Seller Companies' accounts, accounts
receivable (billed or unbilled, but excluding accounts receivables relating to
the Seller Companies' switched access business and excluding $350,000 of
Excluded Long Distance Accounts Receivables) and notes receivable of the Seller
Companies relating to the Business (including any collateral or security held by
the Seller Companies for payment thereof and accrued but unpaid interest thereon
and proceeds thereof) existing as of the Management Agreement Date
(collectively, the "Acquired Accounts Receivable");
(ix) all of the Seller Companies' rights, claims, credits,
causes of action or rights of set-off against third parties to the extent
relating to the Business or the Purchased Assets as a result of the operation of
the Purchased Assets or the Business after the First Closing Date or, subject to
the provisions of Section 2.1(b), on or prior to the First Closing Date,
including claims pursuant to all warranties, remedies, awards, advances, bonds,
deposits, retentions, representations and guarantees made by suppliers,
manufacturers, contractors and
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other third parties in connection with products or services purchased by or
furnished to the Seller Companies;
(x) all rights to insurance claims, proceeds or awards arising
from events occurring on, prior to or after the Management Agreement Date to the
extent necessary to return the Purchased Assets and the Business to their
condition prior to the occurrence of such events;
(xi) all claims, rights and chooses in action of the Seller
Companies relating to the Business against any Person, whether matured or
unmatured, direct or indirect, known or unknown, absolute or contingent whether
arising before or after the Management Agreement Date as a result of the
operation of the Purchased Assets or the Business after the Management Agreement
Date;
(xii) all of the Seller Companies' right, title and interest in
and to software, software systems, source codes, databases and database systems,
in each case primarily relating to the Business, whether owned, leased, or
licensed by the Seller Companies, to the extent they exist;
(xiii) all advertising copy, films and mechanicals of the
Seller Companies primarily relating to the Business;
(xiv) all accepted bids and outstanding proposals to the extent
relating to the Business;
(xv) all reference materials primarily used or useful in
connection with the Business;
(xvi) the Business Lockbox Accounts;
(xvii) all goodwill to the extent associated with the Business
or the Purchased Assets; and
(xviii) all Owned Real Property listed on Schedule
2.1(a)(xviii).
(b) Excluded Assets. Notwithstanding anything to the contrary herein,
the Purchased Assets shall not include any of the following assets of the Seller
Companies (collectively, the "Excluded Assets"):
(i) the Seller Companies' and their Affiliates' rights, title
and interest in the assets listed on Schedule 2.1(a)(i) (the "Shared Assets"),
which assets the Seller Companies represent and warrant are (A) not primarily
used or useful in the conduct of the Business as currently conducted or as
conducted within the previous twelve months and (B) the only material assets
used or useful in the conduct of the Business as currently conducted or as
conducted within the past twelve months (in either case, to any extent
whatsoever) that are not primarily used or useful in the conduct of the
Business.
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(ii) all cash and cash equivalents and securities held by the
Seller Companies as of the Management Agreement Date (for purposes of clarity,
it being understood and agreed that all cash and cash equivalents relating to
the operation of the Business after the Management Agreement Date are Purchased
Assets and not Excluded Assets for all purposes of this Agreement and shall be
paid over to the Purchasers immediately upon receipt by any Seller Company or
any Affiliate except as otherwise provided hereunder);
(iii) subject to Section 8.4(b) below, all rights, claims and
causes of action with respect to rebates and refunds from all service providers
to the Business (including, but not limited to, BellSouth, Verizon, MCI, Sprint
and AT&T) relating to periods prior to the Management Agreement Date, whether
arising prior to or after the Management Agreement Date (collectively, the
"Refund Rights");
(iv) all rights to insurance claims, proceeds or awards arising
from events occurring prior to the Management Agreement Date other than such
rights that are necessary to return the Purchased Assets and the Business to
their condition prior to the occurrence of such events;
(v) all bank and other depository accounts of the Seller Companies other than
the Business Lockbox Accounts;
(vi) all security deposits made by any Seller Company and all
prepaid assets and expenses and charges paid by the Seller Companies prior to
the Management Agreement Date and pertaining to periods after the Management
Agreement Date;
(vii) all corporate or organizational records and minute books
of the Seller Companies;
(viii) all rights of the Seller Companies under all Contracts
and Real Property Leases that the Purchasers do not specifically elect in
writing to acquire pursuant to Section 2.1(a)(v), including without limitation,
the lease for the sales and service delivery office located in Ft. Lauderdale,
Florida;
(ix) refunds, rebates, abatements or credits for Taxes and Tax
loss carry forwards;
(x) Tax Returns and related schedules, work papers, records and
other documents;
(xi) all Business Insurance Policies or other insurance
policies relating to the Business, any refunds paid or payable in connection
with the cancellation or discontinuance of any insurance policies applicable to
the Business, and any claims made under any such insurance policies (other than
rights to make claims under policies after the date hereof and prior to the
First Closing Date which relate to the Purchased Assets or the Business, and all
proceeds resulting from such claims);
(xii) rights in or any assets associated with or allocated to
the Benefit Plans;
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(xiii) subject to the Purchasers' rights under Section
2.1(a)(i), vehicles primarily used or useful by the Seller Companies in the
conduct of the Business that are subject to capital lease obligations, each of
which vehicles and the amount and terms of the capital lease obligations to
which it is subject are set forth on Schedule 2.1(b)(xiii) hereto; and
(xiv) all rights of the Seller Companies under this Agreement,
the Purchase Price hereunder, any agreement, certificate, instrument or other
document executed and delivered by the Seller Companies or the Purchasers in
connection with the transactions contemplated hereby.
(c) Management Agreement. Other than as provided in Section 2.1(e)
below, legal title to the Purchased Assets shall be retained by the Seller
Companies and not transferred to the Purchasers until the First Closing (in
accordance with Section 3.1, in the case of Purchased Assets which are not
Regulated Assets) or the applicable Second Closing (in accordance with Section
3.2, in the case of Regulated Assets), and no Assumed Liability relating to any
Purchased Asset shall be assumed by the Purchasers until such time as the
Purchased Asset to which it relates is transferred to the Purchasers.
Notwithstanding the foregoing, effective on January 8, 2003 (the "Management
Agreement Date"), the Purchasers shall manage the Business and all of the
Purchased Assets in accordance with the terms and conditions of this Agreement
and that certain Management Agreement, of even date herewith, by and among the
Seller Companies and FDN, which agreement is attached hereto as Exhibit A (the
"Management Agreement"). Any covenants made by the Seller Companies to be
performed by them prior to the First Closing or the applicable Second Closing
with respect to any Purchased Asset shall continue in effect until such time as
such Purchased Asset is legally transferred to the Purchasers at the First
Closing or the applicable Second Closing, except to the extent specifically
provided otherwise in the Management Agreement and to the extent that the Seller
Companies are incapable of performing such covenant because of the Purchasers'
Management of the Business and Purchased Assets under the Management Agreement.
(d) Regulated Assets. The Purchasers and the Seller Companies
acknowledge and agree that legal title to certain of the Purchased Assets cannot
legally be transferred from the Seller Companies to the Purchasers until such
time as the applicable Regulatory Consents are obtained. Such Purchased Assets
are referred to herein as the "Regulated Assets". Notwithstanding anything to
the contrary contained herein, the Regulated Assets and related Assumed
Liabilities shall be retained by the Seller Companies (subject to the Management
Agreement) and not legally transferred to the Purchasers until the occurrence of
the applicable Second Closing, in accordance with Section 3.2 and Section 7.2.
(e) Acquired Accounts Receivable; Business Lockbox Accounts. On the
date hereof, in consideration for the Purchasers' delivering the Deposit
pursuant to Section 2.3(a) and its entering into this Agreement and the
Management Agreement, the Seller Companies shall (i) execute and deliver to the
Purchasers a Xxxx of Sale effecting, as of the date hereof, the sale,
conveyance, assignment and transfer of the Acquired Accounts Receivable to the
Purchasers, which Xxxx of Sale is attached hereto as Exhibit B and (ii) assign
and transfer, as of the date hereof, and, if applicable, cause its Affiliates to
assign and transfer, to the Purchasers all of their rights and interests in the
Business Lockbox Accounts.
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(f) Licenses.
(i) Licenses of Tradenames. The Seller Companies hereby grant
to the Purchasers and their Affiliates the perpetual, non-exclusive,
royalty-free and transferable right to use the tradenames "Accelerator" and
"Velocity" and all marks associated therewith (the "Licensed Tradenames"). After
the First Closing Date, the Seller Companies shall have no obligation to
continue to use or market the Licensed Tradenames in connection with the
operation of their businesses, but in the event that the Seller Companies do
discontinue the use and marketing of the Licensed Tradenames the Seller
Companies shall thereafter use reasonable efforts to cooperate with the
Purchasers, at the Purchasers' expense, and use reasonable efforts to ensure
that the Purchasers continue to have the benefit of the license granted under
this Section 2.1(f), whether by assignment of the Licensed Tradenames to the
Purchasers or otherwise.
(ii) License of MPROV Software. The Seller Companies hereby
grant to the Purchasers and their Affiliates the perpetual, non-exclusive,
royalty-free and transferable right to use the Seller Companies' proprietary
"MPROV" software, including any and all updates with respect thereto that
presently exist; provided; however, that the Purchasers are acquiring the right
to use the software on an "as is" basis, with "all faults" and in its present
condition, with no obligation of the Seller Companies to upgrade or maintain,
and the Seller Companies make no other representations or warranties, express or
implied, at law or in equity, in respect of such license, including, without
limitation, with respect to fitness for any particular purpose, and any other
such representations or warranties are expressly denied.
For purposes the purposes of this Section 2.1(f), "transferable" shall
mean the ability to transfer the respective licenses to Affiliates, and to any
other Person involved in a Change of Control Transaction with the Purchasers.
For the purposes of this Section 2.1(f), a "Change of Control
Transaction" shall mean, with respect to any Person, any of the following,
occurring in a single transaction or as part of a series of related
transactions: (a) the acquisition or swap by another Person not affiliated with
the Purchasers of at least 20% of the assets of the Purchasers and its
subsidiaries, taken as a whole, (b) the acquisition by another Person of more
than thirty percent (30%) of the voting power of the Purchasers then
outstanding, or (c) the merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Purchasers which results in a Person or Persons other than the current
stockholders of the Purchasers owning more than thirty percent (30%) of the
voting power of the surviving entity.
(g) Contracts To Be Delivered by Seller Companies. The Seller Companies
acknowledge that as of the date hereof they have not delivered to the Purchasers
copies of the Contracts listed on Schedule 2.1(g) hereto, and as a result, as of
the date hereof, the Purchasers have not agreed, nor shall in any respect be
deemed to have agreed, to assume any of such Contracts. As soon as practicable
after the date hereof, but in no event later than ten (10) days after the date
hereof, the Seller Companies shall provide the Purchasers with true, complete
and accurate copies of any Contracts listed on Schedule 2.1(g), including any
amendments thereto. In accordance with Section 2.1(a)(v), prior to the First
Closing the Purchasers shall identify in writing those Contracts, if any, listed
on Schedule 2.1(g) that the Purchasers agree in their sole discretion to assume,
and the Parties shall update Schedule 2.1(a)(v) to include any Contract so
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identified and any such Contract shall thereafter be an Assumed Contract for all
purposes of this Agreement. If the Purchasers identify any Contract listed on
Schedule 2.1(g) as an Assumed Contract, and if such Contract requires the
consent of a third party in order to be transferred to the Purchasers, then the
Seller Companies shall be required to obtain such consent to the same extent
that they are required to obtain consent to assignment with respect to other
Assumed Contracts.
(h) Bellsouth Agreement.
(i) Use of ACNA Code. Effective as of the date hereof, the
Seller Companies shall enable the Purchasers to use on a royalty-free and
perpetual basis, solely with respect to the Business and solely in the states of
Florida and Georgia, the ACNA Code currently used by the Seller Companies and
any updates, improvements or changes thereto. The Seller Companies agree that
they shall not, and they shall cause their Affiliates not to, take any action
that would reasonably be expected to jeopardize or interfere with the
Purchasers' right to use such ACNA Code in Florida or Georgia; provided,
however, the Seller Companies shall retain the sole, unfettered and exclusive
right to use the ACNA Code anywhere else, including but not limited to the
remainder of the United States, and the Purchasers agree that they will not, and
shall cause their Affiliates not to, take any action that would reasonably be
expected to jeopardize or interfere with the Seller Companies' right to such use
of the ACNA Code.
(ii) Continued Efforts; Costs and Expenses. After the date
hereof, the Purchasers shall manage and control continued negotiation efforts
(and, if necessary, litigation or other actions) with BellSouth and any other
person (including, if appropriate, Telcordia, the administrator of the ACNA
Code) in order to provide the Purchasers with all necessary rights to continue
to use the ACNA Code and to cause the eventual transfer of the rights stated in
Section 2.1(h)(i) to the Purchasers, and the Seller Companies shall use their
reasonable best efforts to cooperate with the Purchasers in such efforts and
actions. The legal fees and expenses incurred by Purchasers in connection with
such efforts shall be borne solely by the Purchasers. Any separate legal fees
and expenses incurred by the Seller Companies in such cooperation with the
efforts and actions of the Purchasers shall be borne solely by the Seller
Companies. To the extent that a payment of the type described in Section 6.6(c)
is required to be made in connection with the subject matter of this Section
2.1(h), then the amount of such payment shall be borne equally by the Seller
Companies, on the one hand, and the Purchasers, on the other hand, in accordance
with Section 6.6(c). In order to secure the Seller Companies' obligations under
the immediately preceding sentence, $350,000 of the Purchase Price Holdback
Escrow (or, if no Purchase Price Holdback Escrow ever exists under Section 3.2
(c) of this Agreement, of the Closing Payment that would otherwise be paid to
the Seller Companies at such later Second Closing) (in either case, the "ACNA
Holdback") shall continue to be held by the Escrow Agent under the Escrow
Agreement until such time as the use of the ACNA Code as stated in Section
2.1(h)(i) has been permanently assigned or otherwise provided to the Purchasers
to their reasonable satisfaction, at which time the Seller Companies and the
Purchasers shall cause the Escrow Agent to disburse to the Seller Companies the
ACNA Holdback less the amount, if any, required to be paid on behalf of the
Seller Companies pursuant to the immediately preceding sentence, which amount
the Seller Companies and the Purchasers shall cause the Escrow Agent to disburse
to the Person to whom such payment is made or to the Purchasers (in the event
that the Purchasers directly pay such amount on behalf of the Seller Companies),
as the case may be.
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2.2 Assumption of Liabilities.
(a) Assumption. Upon the terms and subject to the conditions set
forth herein, at the First Closing or the applicable Second Closing, as the case
may be, the Purchasers shall assume from the Seller Companies the following
liabilities and obligations of the Seller Companies and no others (collectively,
the "Assumed Liabilities"):
(i) all Liabilities and obligations of the Seller Companies
that arise and are to be performed from and after the First Closing Date under
(A) the Assumed Contracts and (B) Contracts entered into with respect to the
Business either prior to or after the date hereof that the Purchasers agree in
writing to assume after the date hereof in accordance with this Agreement and
the Management Agreement, except in each case under clause (A) and (B), to the
extent such Liabilities and obligations (1) but for a breach or default by the
Seller Companies, would have been paid, performed or otherwise discharged on or
prior to the First Closing or (2) arise out of any breach or default by the
Seller Companies, including without limitation any failure of the applicable
Seller Company to obtain an approval or consent necessary to assign an Assumed
Contract to the Purchasers or otherwise arising out of the assignment of an
Assumed Contract to the Purchasers;
(ii) the specific amount of Liabilities and obligations of the
Seller Companies that, prior to the First Closing, the Purchasers elect in
writing in their sole discretion to assume, as set forth on Schedule 2.2(a)(ii)
attached hereto, as updated by the Parties as of the First Closing Date to
reflect all Liabilities and obligations assumed by the Purchasers in accordance
with this Section 2.2(a)(ii) (collectively the "Specified Liabilities"). Each
Specified Liability shall be deemed to be an Undisputed Specified Liability for
all purposes of this Agreement unless prior to the First Closing the Seller
Companies provide the Purchasers with written evidence to the contrary, in which
case the Purchasers in their sole discretion may elect to assume or not assume
such disputed Specified Liability. "Undisputed Specified Liability" means a
Specified Liability to the extent that the applicable Seller Company has not
delivered a written notice or claim to the Person to whom such Seller Company is
liable or obligated asserting that the amount of such Specified Liability is
other than the amount set forth on Schedule 2.2(a)(ii);
(iii) transfer Taxes allocated to the Purchasers pursuant to
Section 6.6(b) hereof;
(iv) the amount of commissions owing by the Seller Companies
from time to time with respect to sales made prior to the First Closing Date
under representation or agency agreements relating to the sale of the Business'
services, but only to the extent consistent in amount with the Interim
Statements (it being understood and agreed that only the obligations of the
Seller Companies to pay commission under such agreements, and not the agreements
themselves, are Assumed Liabilities for purposes of this Agreement); and
(v) any obligations of the Seller Companies to return customer
deposits to the customers of the Business, but only to the extent that the
Purchase Price was decreased under Section 2.3(b)(i)(C) of this Agreement on
account of customer deposits.
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(b) Excluded Liabilities. Except for the Assumed Liabilities, the
Purchaser shall not assume or be obligated to pay, perform, discharge or in any
way be responsible for any Liabilities of the Seller Companies or their
Affiliates, and the Seller Companies shall indemnify the Purchaser from and
against all such Liabilities. Without limiting the foregoing, and
notwithstanding anything in Section 2.2(a) to the contrary, the Assumed
Liabilities will not include and the Purchaser will not assume any liability of
the Seller Companies or any of their Affiliates with respect to:
(i) any Liabilities of the Seller Companies (and/or their
Affiliates) in respect of any Excluded Assets;
(ii) any Liabilities with respect to (A) Taxes arising out of,
related to or otherwise in respect of the Purchased Assets or the Business
relating to any period or portion thereof ending prior to the First Closing Date
or, as applicable, any Second Closing, except as provided in the Management
Agreement, and (B) transfer Taxes allocated to the Seller Companies pursuant to
Section 6.6(b) hereof;
(iii) any Liabilities or responsibilities relating to the
employment or termination of employment by the Seller Companies or their
Affiliates of any Business Employee or Person attributable to any actions or
inactions by the Seller Companies or their Affiliates on or prior to the First
Closing Date, including with respect to any Benefit Plan or arrangement of the
Seller Companies or their Affiliates or any severance, retention, stay bonus or
similar obligations owed by the Seller Companies or any of their Affiliates to
any Business Employees or Persons (including the Transferred Employees), any
accrued vacation pay or accrued bonus and including any and all Liabilities
arising from any Seller Company's conduct relating to its operations and
employees at its facilities and any liability under the Worker Adjustment
Retraining Notification Act (or any state or other applicable law) derived from
employee terminations occurring on or before the First Closing Date (for the
purpose of clarity, any amounts owed by the Seller Companies and/or their
Affiliates as a result of a Business Employee's ceasing to be employed by any
Seller Company and/or the occurrence of the First Closing or any Second Closing
shall be Excluded Liabilities) except as provided in the Management Agreement;
(iv) any Liabilities, the existence of which constitutes a
breach of a representation and warranty or covenant of any Seller Company
hereunder (without regard to the survival period, if any, associated therewith);
(v) any Liability of the Seller Companies under Section 6.6 of
this Agreement, under any Operative Agreement or otherwise for legal, accounting
or broker's fees, or other transaction costs of the Seller Companies relating to
the consummation of the transactions contemplated hereby;
(vi) any capital leases and Liability or intercompany debt
owing by any Seller Company to any stockholder or former stockholder of any
Seller Company or to any Affiliate or former Affiliate of any Seller Company;
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(vii) any Liabilities of the Seller Companies resulting from
any lawsuit, judgment, claim or Action with respect to the Purchased Assets and
the operation and ownership of the Business prior to the First Closing Date
(whether or not pending or threatened on the date hereof), including, (A) any
claim related to noncompliance by any Seller Company with any applicable Law or
(B) the failure of any Seller Company to comply with or the breach of or default
by any Seller Company under any Contract, including without limitation the
Actions set forth on Schedule 4.13;
(viii) any Liabilities for indebtedness of borrowed money other
than Assumed Liabilities which the Purchasers may elect to assume pursuant to
Section 2.2(a)(ii) hereof;
(ix) any Liabilities relating to the Business, the Purchased
Assets or the Seller Companies under any applicable Environmental Law with
respect to the period prior to and including the First Closing Date;
(x) any other Liabilities not relating to the Business or the
Purchased Assets;
(xi) any Liabilities for any breach, act or omission by any
Seller Company under any Contract, including any Assumed Contract; and
(xii) any other Liability arising out of or relating to the
conduct of the Business prior to the First Closing Date that is not expressly
assumed by the Purchasers hereunder.
Liabilities of the Seller Companies and their Affiliates other than the
Assumed Liabilities are herein referred to collectively as the "Excluded
Liabilities". The Seller Companies will (and will cause their Affiliates to)
discharge when due all of their respective Liabilities relating to or arising in
connection with the Business or the Purchased Assets that are not assumed by the
Purchasers hereunder.
2.3 Consideration for the Purchased Assets.
(a) Consideration. The aggregate purchase price (the "Purchase
Price") for the Purchased Assets shall be (i) $13,250,000 in cash (the "Base
Price"), subject to adjustment as provided in Section 2.3(b), and (ii) the
assumption by the Purchasers of the Assumed Liabilities pursuant to Section 2.2.
Within three Business Days after the date hereof, in order to secure the
Purchasers' obligations to consummate the transactions contemplated hereby
(subject to the terms and conditions contained herein and in the Operative
Agreements) and as a delivery of a portion of the Base Price, the Purchasers
shall deliver to the Escrow Agent by wire transfer of immediately available
funds to an account designated by the Escrow Agent in accordance with the terms
and conditions of that certain Escrow Agreement, of even date herewith, by and
among the Seller Companies, the Purchasers and the escrow agent named therein
(the "Escrow Agent"), which agreement is attached hereto as Exhibit C (the
"Escrow Agreement"), the amount of $1,000,000 (the "Deposit"). The Deposit shall
be credited and disbursed in accordance with the terms and conditions of this
Agreement and the Escrow Agreement.
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(b) Purchase Price Adjustments.
(i) Purchase Price Adjustments. The Base Price shall be
decreased (or, in the case of clause (D) below, increased or decreased, as the
case may be), as follows:
(A) the Base Price shall be decreased by the product of (X)
$150.00 and (Y) the amount (if any) by which the number of Adjusted Customer
Access Lines is less than the November Access Line Count. Any decrease to the
Base Price under this Section 2.3(b)(i)(A) shall be referred to herein as an
"Access Line Price Decrease".
(B) the Base Price shall be decreased by the amount (if
any) that (1) the average dollar amount of Seller Companies' accounts
receivables for Customer Accounts in accordance with GAAP less than 60 days old
(measured from the date of invoice) included in the Purchased Assets (not
including for purposes of the calculation accounts receivable attributable to
long distance customers) for the five (5) Business Days immediately preceding
the Management Agreement Date (net of reserves, including reserves for setoffs,
recoupment and doubtful accounts as determined in accordance with GAAP) is less
than (2) the average dollar amount of Seller Companies' accounts receivable in
accordance with GAAP for Customer Accounts less than 60 days old (measured from
the date of invoice) (not including for purposes of the calculation accounts
receivable attributable to long distance customers) for the same five (5)
Business Days of the month immediately prior to the month of the Management
Agreement Date (net of reserves, including reserves for setoffs, recoupment,
doubtful accounts, etc., as determined in accordance with GAAP). (For purposes
of clarity and by way of example only, if the Management Agreement Date is
January 9, 2003, then the measurement period referred to in clause (1) above is
the five (5) Business Days prior to January 9, 2003, and the measurement period
referred to in clause (2) above is the five (5) Business Days prior to December
9, 2002.) Any adjustment to the Base Price under this Section 2.3(b)(i)(B) shall
be referred to herein as an "Accounts Receivable Price Decrease".
(C) The Base Price shall be further decreased by the
aggregate amount of (1) any Undisputed Specified Liabilities assumed by Buyer
and (2) the aggregate amount as of the Management Agreement Date of any deposits
made by existing customers of the Business (it being understood and agreed that
any cash held by the Seller Companies on account of such deposits is an Excluded
Asset under Section 2.1(b)(ii)). Any decrease to the Base Price under this
Section 2.3(b)(i)(C) shall be referred to herein as an "Assumed Liability Price
Decrease".
(D) The Base Price shall be increased or decreased based on
the agreed-upon allocations under Section 6.16 of this Agreement. Any adjustment
to the Base Price under this Section 2.3(b)(i)(D) shall be referred to herein as
an "Expenses Adjustment".
(ii) Purchase Price Estimate at the First Closing. The
Purchasers shall submit to the Seller Companies with reasonable documentation
not later than ten (10) days prior to the First Closing, an estimate of the
Purchase Price based on the Purchasers' good faith estimates of the Estimate
Access Line Price Decrease, the Accounts Receivable Price Decrease, the Assumed
Liability Price Decrease, and the Expenses Adjustment (such estimated
calculation of the adjusted Purchase Price, the "Purchasers' Estimate"). At
least five (5) days prior to the
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First Closing, the Seller Companies shall advise the Purchasers in writing with
specificity as to any dispute the Seller Companies' have with the Purchasers'
Estimate and provide the Purchasers with Seller Companies' calculation of the
Base Price taking into account its good faith estimates of the Access Line Price
Decrease, the Accounts Receivable Price Decrease, the Assumed Liability Price
Decrease, and the Expenses Adjustment ("Seller Companies' Estimate"), and prior
to the First Closing, the Purchasers and the Seller Companies shall attempt to
resolve any disputes between the Seller Companies and the Purchasers with
respect to the Purchasers' Estimate. In the event Purchasers' Estimate is less
than $500,000 less than the Seller Companies' Estimate, the First Closing shall
proceed with the Purchase Price based upon the Purchasers' Estimate. In the
event the Purchasers' Estimate is greater than $500,000 less than the Seller
Companies' Estimate, then the mid-point between the Seller Companies' Estimate
and Purchasers' Estimate shall be used to determine the Purchase Price for
purposes of the First Closing and the First Closing shall proceed, subject only
to Section 3.1 and Section 7.1. The Base Price, as estimated as of the First
Closing in accordance with this Section 2.3(b)(ii) is referred to in this
Agreement as the "Closing Payment". At the First Closing, the Purchasers shall
deliver an amount equal to the Closing Payment, less the Deposit, to the Escrow
Agent pursuant to Section 3.1(c)(i).
(iii) Adjustments to the Purchase Price After the First
Closing. After the First Closing, the Base Price shall be adjusted, if at all,
as set forth below:
(A) Purchasers' Final Purchase Price Calculation. The
Purchasers shall prepare and deliver to the Seller Companies within one hundred
twenty (120) calendar days after the Management Agreement Date a calculation of
each of the Access Line Price Decrease, the Accounts Receivable Price Decrease,
the Assumed Liability Price Decrease, and the Expenses Adjustment and the
adjusted Base Price as of the First Closing resulting therefrom (the
"Purchasers' Final Purchase Price Calculation"). During such one hundred twenty
(120) day period and thereafter so long as the Final Purchase Price remains
unresolved, each party will provide the other party with reasonable access to
its books and records that relate to the determination of the Purchasers' Final
Purchase Price Calculation.
(B) Seller Companies' Review of Purchasers' Final Purchase
Price Calculation. If on or prior to the twentieth day following Purchasers'
delivery of the Purchasers' Final Purchase Price Calculation, the Seller
Companies do not deliver a written notice (an "Objection Notice") stating with
specificity the Seller Companies' objections to Purchasers' Final Purchase Price
Calculation and including the Seller Companies' determination of the Purchase
Price, as finally adjusted to account for any Access Line Price Decrease,
Accounts Receivable Price Decrease, Assumed Liability Price Decrease, and
Expenses Adjustment, then the Purchasers' Final Purchase Price Calculation shall
be final, conclusive and binding on the Parties for all purposes of this
Agreement, including without limitation clause (D) below. Any Objection Notice
shall specify the dollar amount of any objection and a detailed basis therefor
(including supporting documents). Any determination expressly set forth on the
Purchaser's Final Purchase Price Calculation which is not specifically objected
to in the Objection Notice in accordance with the two preceding sentences shall
be deemed final and binding upon the Parties. If the Seller Companies timely
deliver an adequate Objection Notice in accordance with this Clause (B) then the
Purchasers and the Seller Companies shall discuss the Purchasers' Final Purchase
Price Calculation and the Objection Notice and endeavor in good
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faith to agree upon the Final Purchase Price after taking into account all of
the adjustments under this Section 2.3.
(C) Audit Review. In the event that the Seller Companies
and the Purchasers fail to agree on the Final Purchase Price within 15 calendar
days after the date of the Objection Notice, (1) the Seller Companies and the
Purchasers shall promptly retain either PricewaterhouseCoopers or KPMG chosen
randomly by lot (the "Independent Auditors") to make the final determination of
the Purchase Price in accordance with the terms of this Agreement, and (2) the
Purchasers and the Seller Companies each shall provide the Independent Auditors
with all data and documents relevant to such determination. The Independent
Auditors shall make an independent determination of the Purchase Price and the
Purchase Price resulting therefrom (the "Final Purchase Price") as soon as
practicable, but in no event later than the seventy-fifth day following the
Parties' submission of the dispute to the Independent Auditors and such
determination shall be final and binding on the Seller Companies and the
Purchasers. The fees, costs and expenses of the Independent Auditors shall be
borne equally by the Seller Companies, on the one hand, and the Purchasers, on
the other hand.
(D) Adjustment. If the Final Purchase Price is less than
the Closing Payment, the Seller Companies will, within three (3) Business Days,
after the determination of the Final Purchase Price, make payment of the amount
of such difference to the Purchasers, by wire transfer in immediately available
funds to an account or accounts designated by the Purchasers, provided that if
either the Florida Second Closing or the Georgia Second Closing has not yet
occurred at such time as such amount is due and owing to the Purchasers, then,
in lieu of making a payment directly to the Purchasers, the Seller Companies may
cause the Escrow Agent to disburse such amount from the Escrow Amount to an
account of the Purchasers set forth in the Escrow Agreement. If the Final
Purchase Price is greater than the Closing Payment, than the Purchasers will,
within three (3) Business Days after the date on which the determination of the
Final Purchase Price becomes final and binding on the Parties, make payment of
such difference to the Seller Companies, by wire transfer in immediately
available funds to an account designated by the Seller Companies, provided, that
if the both the Florida Second Closing and the Georgia Second Closing have not
yet occurred at such time as such amount is due and owing to the Seller
Companies, the Purchasers will make payment of such difference to the Escrow
Agent for inclusion with the Escrow Amount and the Deposit by wire transfer in
immediately available funds. Without duplication, all amounts owed pursuant to
this clause (D) shall bear and be accompanied by interest, from and excluding
the First Closing to and including the date of actual payment, at a rate of
twelve percent (12%) per annum, compounded monthly.
(c) Allocation of Purchase Price. The Purchase Price shall be
allocated among the Purchased Assets as agreed upon between the Purchasers and
the Seller Companies (the "Allocation Method"), provided that the Allocation
Method shall provide that sixty percent (60%) of the Purchase Price is allocated
to the Florida Purchased Assets and forty percent (40%) of the Purchase Price is
allocated to the Georgia Purchased Assets. The Parties shall use their
reasonable best efforts to reach agreement on the Allocation Method prior to the
First Closing. If the Purchasers and the Seller Companies reach such agreement,
the Purchasers and the Seller Companies (i) shall execute and file all Tax
Returns in a manner consistent with the Allocation Method determined pursuant to
this Section 2.3(c) and (ii) shall not take any position in any
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refund claim, before any Governmental Authority, in any judicial proceeding or
otherwise that is inconsistent with such Allocation Method. The Seller Companies
and the Purchasers each agree to cooperate with the other Party in preparing IRS
Form 8594 and shall each timely file such Form with the IRS in accordance with
the requirements of Section 1060 of the Internal Revenue Code. In the event that
the Parties do not agree to an Allocation Method, prior to the Closing, the
Parties shall submit the dispute for resolution to an independent accounting
firm of international reputation mutually acceptable to the Purchasers and the
Seller Companies (the "Accounting Firm") which shall promptly, after such
submission, determine an Allocation Method that shall be final, binding and
conclusive on the Parties. The fees and disbursements of the Accounting Firm
shall be shared equally between the Purchasers and the Seller Companies. Any
subsequent adjustments to the Purchase Price shall be reflected in the
Allocation Method in a manner consistent with Section 1060 of the Internal
Revenue Code.
2.4 Further Assurances. At and after the First Closing, and without
further consideration therefor, each party shall execute and deliver to any
other party which so requests such further instruments and certificates of
conveyance and transfer as such requesting party may reasonably request in order
more effectively to convey and transfer the Purchased Assets from the Seller
Companies to the Purchasers and to put the Purchasers in operational control of
the Business (both during and after the term of the Management Agreement), for
aiding, assisting, collecting and reducing to possession any of the Purchased
Assets and exercising rights with respect thereto or to effect the assumption of
the Assumed Liabilities. In the event that the Purchasers receive accounts
receivable relating to the Business which are clearly designated as Excluded
Long Distance Receivables, the Purchasers shall remit such Excluded Long
Distance Receivables to the Seller Companies as soon as practicable after the
end of each calendar month, provided that the Purchasers shall not be obligated
to remit to the Seller Companies and shall be entitled to retain all Excluded
Long Distance Receivables in excess of $350,000, and, notwithstanding anything
in this Agreement or in any Operative Agreement to the contrary, such excess
amounts shall be deemed to be Purchased Assets hereunder and under any Operative
Agreement.
2.5 Assignment of Assumed Contracts and Business Licenses. To the
extent that transfer or assignment hereunder by the Seller Companies to the
Purchasers of any Assumed Contract or Business License included in the Purchased
Assets is not permitted or is not permitted without notification or the consent
or approval of another Person, this Agreement shall not be deemed to constitute
an assignment, an attempted assignment or an undertaking to assign such Assumed
Contract or Business License if such consent or approval is not given or if such
an assignment, attempted assignment or undertaking otherwise would constitute a
breach thereof or cause a loss of benefits thereunder. The Seller Companies
(and, subject to Section 6.4 of this Agreement, the Purchasers where required)
shall use their commercially reasonable efforts to obtain any and all such third
party consents or approvals under all Assumed Contracts and Business Licenses.
If any such third party consent or approval is not obtained before the First
Closing, the Seller Companies shall cooperate with the Purchasers in any
reasonable arrangement designed to provide for the Purchasers after the First
Closing the benefits intended to be assigned to the Purchasers under the
applicable Business License or Assumed Contract including enforcement at the
cost and for the account of the Purchasers of any and all rights of the Seller
Companies against the other party thereto arising out of the breach or
cancellation thereof by such other party or otherwise; provided that the
Purchasers shall undertake to pay or
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satisfy the corresponding Liabilities for the enjoyment of such benefit to the
extent that the Purchasers would have been responsible therefor hereunder if
such consent, waiver or approval had been obtained. The Seller Companies shall,
without consideration therefor, pay, assign and remit to the Purchasers promptly
all monies, rights and other consideration received in respect of such
performance. The Seller Companies shall exercise or exploit their rights in
respect of such Purchased Assets only as reasonably directed by the Purchasers
and at the Purchasers' expense. Subject to and in accordance with Section 6.4,
the Parties shall continue to use their commercially reasonable efforts to
obtain all such unobtained consents or approvals at the earliest practicable
date. If and when any such consents or approvals shall be obtained, then the
Seller Companies shall promptly assign their rights and obligations thereunder
to the Purchasers without payment of consideration and the Purchasers shall,
without the payment of any consideration therefor other than as set forth in
Section 6.6(c), assume such rights and obligations to the same extent as the
Seller Companies had prior to such assignment. The Parties shall execute such
good and sufficient instruments as may be necessary to evidence such assignment
and assumption. Nothing in this Section 2.5 shall limit the closing conditions
set forth in Article VII for the benefit of the Purchasers.
2.6 Tampa Switch Site. The Purchasers shall not assume the lease to the
Tampa Switch Site but shall be provided with full access to such site for such
time period as is reasonably necessary for the Purchasers to remove all
Purchased Assets from the Tampa Switch Site to other locations being used in
connection with the Business or to a new location selected by the Purchasers, in
the Purchasers' sole discretion, and the Purchasers shall at their sole expense
take the actions set forth on Schedule 2.6.
ARTICLE III
THE CLOSING
3.1 First Closing.
(a) Time and Place. The transfer of the Purchased Assets (other
than the Regulated Assets, the Acquired Accounts Receivable and the Business
Lockbox Accounts) and the assumption of the Assumed Liabilities (other than
Assumed Liabilities relating to Regulated Assets) shall take place at a closing
(the "First Closing") to be held at 10:00 a.m., local time, on a date specified
by the Purchasers that is not later than the third Business Day following the
satisfaction and fulfillment or, if permissible pursuant to the terms hereof,
waiver of the conditions set forth in Section 7.1 (other than those conditions
to be satisfied simultaneously at the First Closing), at the offices of Xxxxxxx
& Xxxxxx, LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, unless another time, date
or place is mutually agreed upon in writing by the Seller Companies and the
Purchasers (the date on which the First Closing occurs hereunder, the "First
Closing Date").
(b) Closing Deliveries of the Seller Companies. At the First
Closing upon satisfaction or waiver of the conditions set forth in Section
7.1(b), the Seller Companies shall deliver, or cause to be delivered, to the
Purchasers the following instruments, certificates and other documents in order
to consummate the transactions contemplated hereby, including the transfer of
the Purchased Assets (other than the Regulated Assets) to the Purchasers
pursuant to Section 2.1:
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(i) Instruments of Transfer and Assignment.
(A) Assignments and Assumptions of Lease, in form and
substance reasonably acceptable to the Purchasers, duly executed by each Seller
Company (the "Assignments and Assumptions of Lease"), assigning the Real
Property Leases other than the Excluded Real Property Leases;
(B) a Xxxx of Sale, in form and substance reasonably
acceptable to the Purchasers, duly executed by each Seller Company (the "Xxxx of
Sale");
(C) an Assignment and Assumption Agreement, in form and
substance reasonably acceptable to the Purchasers, duly executed by each Seller
Company (the "Assignment and Assumption Agreement");
(D) to the extent that any Proprietary Rights are included
in the Purchased Assets, Assignments of Proprietary Rights, in form and
substance reasonably acceptable to the Purchasers, duly executed by each Seller
Company (the "Assignments of Proprietary Rights");
(E) to the extent that any domain names are included in the
Purchased Assets, domain name assignments in form and substance reasonably
acceptable to the Purchasers, duly executed by each Seller Company (the "Domain
Name Assignments");
(F) copies of any documents and filings required in
connection with the payment of transfer Taxes by the Seller Companies under
Section 6.6(b);
(G) payoff letters, in a form reasonably acceptable to the
Purchasers, executed by the obligees of the capital leases and Liabilities
described in Section 2.2(b)(vi) and (ix) of any and all Seller Companies which
set forth the amount necessary to satisfy in full such Liabilities as of the
Closing Date;
(H) With respect to each Real Property Lease which is an
Assumed Contract, the Seller Companies shall have obtained and delivered to the
Purchasers a letter of estoppel in form and substance reasonably satisfactory to
the Purchasers and the Purchasers' lenders, stating (i) that the applicable Real
Property Lease is in full force and effect, (ii) that there is no default by the
lessee thereunder, (iii) the date through which the rent has been paid, (iv) the
expiration date of the Real Property Lease, and (v) such other statements
reasonably requested by the Purchasers and their lenders and that are of a type
customarily included in estoppel letters signed by lessors. Each such letter of
consent and estoppel shall also consent to the assignment of the Real Property
Lease by the applicable Seller Company to the applicable Purchaser; and
(I) Such other deeds and instruments as may be reasonably
requested by the Purchasers.
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(ii) Closing Certificates.
(A) An officer's certificate, in form and substance
reasonably acceptable to the Purchasers, duly executed by each Seller Company,
which shall certify as to the satisfaction of the conditions set forth in
Sections 7.1(a); and
(B) a secretary's or assistant secretary's certificate, in
a form reasonably acceptable to the Purchasers, duly executed by each Seller
Company (x) certifying and attaching copies of the resolutions or consents of
the board of directors of each Seller Company authorizing the execution,
delivery and performance of this Agreement and the Operative Agreements by
Seller Companies and all instruments and documents to be delivered in connection
herewith and the transactions contemplated hereby and (y) certifying as to the
genuineness of the signatures of the officers of each Seller Company authorized
to take certain actions or execute any certificate, document, instrument or
agreement to be delivered pursuant to this Agreement and including the true
signatures of such officers.
(iii) Final Tax Clearance Certificates. A tax clearance
certificate from the State of Georgia and the State of Florida, for all periods
through the First Closing Date, indicating that all tax returns required to have
been filed by Seller Companies through and including such date have been filed
and that all Taxes required to be paid by Seller Companies, as shown on such
returns, have been paid.
(c) Closing Deliveries of the Purchasers. At the First Closing,
upon satisfaction or waiver of the conditions set forth in Section 7.1(a), the
Purchasers shall make the payments and deliver, or cause to be delivered, to the
Seller Companies the following instruments, certificates and other documents in
order to pay for the Purchased Assets and effect the assumption of all Assumed
Liabilities from the Seller Companies pursuant to Section 2.2:
(i) Delivery of the Closing Payment. On the First Closing Date,
the Closing Payment less any Taxes the Purchasers are required by Law to
withhold or remit to any taxing authority on account of the transactions
contemplated hereby less the Deposit (such amount, the "Escrow Amount") shall be
delivered by the Purchasers by wire transfer to an account designated by the
Escrow Agent in accordance with the Escrow Agreement.
(ii) Instruments of Assumption.
(A) The Assignments and Assumptions of Lease, duly executed
by the Purchaser(s);
(B) the Assignment and Assumption Agreement, duly executed
by the applicable Purchaser(s);
(C) the Domain Name Assignments, duly executed by the
applicable Purchaser(s); and
(D) all other instruments and certificates of assumption as
the Seller Companies may reasonably request in order to effectively make the
Purchasers responsible for all Assumed Liabilities.
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(iii) Closing Certificates.
(A) From each Purchaser an officer's certificate, in form
and substance reasonably acceptable to the Seller Companies, duly executed by
such Purchaser, which shall certify as to the satisfaction of the conditions set
forth in Sections 7.1(b); and
(B) From each Purchaser, a secretary's or assistant
secretary's certificate, in a form reasonably acceptable to the Seller
Companies, duly executed by such Purchaser (x) certifying and attaching copies
of the resolutions or consents of such Purchaser authorizing the execution,
delivery and performance of this Agreement by such Purchaser and all instruments
and documents to be delivered in connection herewith and the transactions
contemplated hereby and (y) certifying as to the genuineness of the signatures
of the officer of such Purchaser authorized to take certain actions or execute
any certificate, document, instrument or agreement to be delivered pursuant to
this Agreement and including the true signatures of such officers; and
(C) Such other instruments as may be reasonably requested
by the Seller Companies.
(d) Delivery of Earnings on the Deposit. On the First Closing Date,
the Purchasers and the Seller Companies shall deliver a joint written notice to
the Escrow Agent instructing the Escrow Agent to calculate as soon as
practicable the amount of earnings on the Deposit as of the First Closing Date
and to promptly thereafter deliver such amount by wire transfer of immediately
available funds to the Purchasers to an account designated by the Purchasers.
3.2 Second Closings.
(a) Time and Place.
(i) Florida Second Closing. The acquisition of the Regulated
Assets that are Florida Purchased Assets and the assumption of the Assumed
Liabilities relating thereto shall take place at a closing (the "Florida Second
Closing") to be held at 10:00 a.m., local time, on a date specified by the
Purchasers that is not later than the third Business Day following the
satisfaction and fulfillment or, if permissible pursuant to the terms hereof,
waiver of the conditions set forth in Section 7.2 with respect to such Regulated
Assets (other than those conditions to be satisfied simultaneously at the
Florida Second Closing), at the offices of Xxxxxxx & Xxxxxx, LLP, 000 Xxxxxxx
Xxxxxx, Xxxxxx, XX 00000, unless another time, date or place is mutually agreed
upon in writing by the Seller Companies and the Purchasers (the date on which
the Florida Second Closing occurs hereunder, the "Florida Second Closing Date").
(ii) Georgia Second Closing. The acquisition of the Regulated
Assets that are Georgia Purchased Assets and the assumption of the Assumed
Liabilities relating thereto shall take place at a closing (the "Georgia Second
Closing") to be held at 10:00 a.m., local time, on a date specified by the
Purchasers that is not later than the third Business Day following the
satisfaction and fulfillment or, if permissible pursuant to the terms hereof,
waiver of the conditions set forth in Section 7.2 with respect to such Regulated
Assets (other than those conditions to be satisfied simultaneously at the
Georgia Second Closing), at the offices of
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Xxxxxxx & Xxxxxx, LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000, unless another
time, date or place is mutually agreed upon in writing by the Seller Companies
and the Purchasers (the date on which the Georgia Second Closing occurs
hereunder, the "Georgia Second Closing Date").
(b) Closing Deliveries of the Seller Companies. At the applicable
Second Closing, upon satisfaction or waiver of the conditions set forth in
Section 7.2(b), the Seller Companies shall deliver or cause to be delivered to
the Purchasers substantially the same instruments, certificates and other
documents that the Seller Companies are required under Section 3.1(b) above to
deliver to the Purchasers at the First Closing with respect to the Purchased
Assets which are not Regulated Assets, provided that such instruments,
certificates and other documents shall pertain to the Regulated Assets being
transferred at the Florida Second Closing or the Georgia Second Closing, as the
case may be, and shall be modified as necessary or appropriate to reflect the
provisions of this Section 3.2, Section 7.2 and Section 2.1(d).
(c) Closing Deliveries of the Purchasers.
(i) Delivery of the Escrow Amount. As further payment of the
Purchase Price (as adjusted pursuant to Section 2.3), at the Florida Second
Closing and the Georgia Second Closing as provided below, FDN and Holding shall,
by joint written instructions to the Escrow Agent in accordance with the Escrow
Agreement, cause the Escrow Agent to wire transfer to an account designated by
the Seller Companies an aggregate amount (the "Second Closing Payment") equal to
the Escrow Amount plus the Deposit minus (A) $1,325,000 (the "Indemnity Escrow")
and minus (B) if the amount of any adjustments to the Purchase Price
contemplated by Section 2.3(b) of this Agreement remains in dispute or is
otherwise not finalized as of the first to occur of the Florida Second Closing
and the Georgia Second Closing, $3,600,000 (together with earnings thereon after
the first Second Closing to occur, the "Purchase Price Holdback Escrow"), as
follows:
(A) Sixty percent (60%) of the Second Closing Payment shall
be so delivered to the Seller Companies upon the occurrence of the Florida
Second Closing; and
(B) Forty percent (40%) of the Second Closing Payment shall
be so delivered to the Seller Companies upon the occurrence of the Georgia
Second Closing.
The Purchase Price Holdback Escrow and the Indemnity Escrow shall continue to be
held by the Escrow Agent in accordance with the Escrow Agreement and shall be
disbursed by the Escrow Agent in accordance with Section 8.6 of this Agreement.
(ii) Instruments and Certificates. At the applicable Second
Closing, upon satisfaction or waiver of the conditions set forth in Section
7.2(a), the Purchasers shall deliver, or cause to be delivered, to the Seller
Companies substantially the same instruments, certificates and other documents
that the Purchasers are required under Section 3.1(b) above to deliver to the
Seller Companies at the First Closing with respect to the Florida Purchased
Assets and the Georgia Purchased Assets, as the case may be, that are not
Regulated Assets, provided that such instruments, certificates and other
documents shall pertain to the Regulated Assets being transferred at the Florida
Second Closing or the Georgia Second Closing, as the case may
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be, and shall be modified as necessary or appropriate to reflect the provisions
of this Section 3.2, Section 7.2 and Section 2.1(d).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER COMPANIES
As a material inducement to the Purchasers to enter into this Agreement and
purchase the Purchased Assets hereunder, the Seller Companies hereby jointly and
severally represent and warrant to the Purchasers as follows:
4.1 Organization. Each Seller Company is a corporation duly organized,
validly existing and in good standing (other than in the case of Communications,
which shall be in good standing as of January 20, 2003) under the Laws of the
jurisdiction of its incorporation, with all requisite organizational authority
to own, operate or lease the Purchased Assets as now owned, operated or leased
by it, and to conduct the business as presently conducted by it and as presently
proposed to be conducted by it. The Seller Companies have furnished to the
Purchasers true and complete copies of the Certificate of Incorporation, bylaws
and other governance documents of each Seller Company, each as amended and in
effect as of the date hereof.
4.2 Authority. Each Seller Company has all requisite corporate power
and authority to enter into and deliver this Agreement and the Operative
Agreements to which it is a party, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by each Seller Company of this Agreement and the
Operative Agreements to which it is a party, the performance by each Seller
Company of its obligations hereunder and thereunder and the consummation by each
Seller Company of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of such Seller
Company. This Agreement has been duly executed and delivered by each Seller
Company. Assuming the due authorization, execution and delivery of this
Agreement and the Operative Agreements by the Purchasers, this Agreement
constitutes, and each of the Operative Agreements to which each Seller Company
is a party when so executed and delivered will constitute, a legal, valid and
binding obligation of each Seller Company enforceable against it in accordance
with its terms.
4.3 No Violation; Third Party Consents. The execution and delivery by
each Seller Company of this Agreement and the Operative Agreements to which it
is a party, the performance by each Seller Company of its obligations hereunder
and thereunder and the consummation by each Seller Company of the transactions
contemplated hereby and thereby will not conflict with or violate, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, give rise to any right of termination, amendment,
modification, acceleration or cancellation of any obligation or loss of any
benefit under, result in the creation of any Encumbrance (other than a Permitted
Encumbrance) on any of the Purchased Assets pursuant to, or require it to obtain
any consent, waiver, approval or action of, make any filing with, or give any
notice to any Person as a result or under, the terms and provisions of (a) the
Certificate of Incorporation, bylaws or other organizational or governance
documents of any Seller Company, (b) any Contract to which any Seller Company is
a party or by which any of the Purchased Assets are bound or (c) any Law
applicable to any Seller Company or any of the Purchased Assets, or any
Governmental Order issued by a
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Governmental Authority by which any Seller Company or any of the Purchased
Assets is in any way bound or obligated, other than (i) filings with and
approvals or consents of the FCC as required under the Communications Act as
listed and described on Schedule 4.3 and (ii) filings with and approvals or
consents of any PUC or similar regulatory body as required by applicable Laws,
in each case as listed and described on Schedule 4.3 (the consents or approvals
described in clauses (i) and (ii), collectively, the "Regulatory Consents").
4.4 Government Permits and Consents. No consent, waiver, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any Governmental Authority is required on the part
of any Seller Company in connection with the execution and delivery by such
Seller Company of this Agreement and the Operative Agreements to which it is a
party, the performance by each Seller Company of its obligations hereunder and
thereunder and the consummation by each Seller Company of the transactions
contemplated hereby and thereby, except (i) as set forth in Schedule 4.4 or (ii)
as may be necessary as a result of any facts or circumstances relating solely to
the Purchasers or any of their Affiliates.
4.5 Equipment and Tangible Property. Schedule 2.1(a)(i) contains a list
of all equipment and tangible personal property (except for non-capitalized
leased equipment) of the Seller Companies included in the Purchased Assets that,
individually, has a net book value or fair market value in excess of $3,000.00
All such property is in good operating condition and repair, normal wear and
tear excepted. The Seller Companies' switches are (x) fully installed, (y)
interconnected to the incumbent telephone company's local network and (z)
capable of carrying commercial traffic. The Seller Companies' collocation sites
possess all of the necessary equipment to carry commercial traffic and are
linked, directly or indirectly, via leased or owned transmission cable to a
switch owned by a Seller Company.
4.6 Intellectual Property and Proprietary Rights.
(a) Schedule 2.1(a)(vii) contains a complete and accurate list of
each category of Intellectual Property of the Seller Companies included in the
Purchased Assets. There is no reasonably foreseeable or, to the Knowledge of the
Seller Companies, threatened loss of any Assigned IP. The Seller Companies have
taken commercially reasonable and appropriate actions to maintain and protect
the Assigned IP. The consummation of the transactions contemplated hereby shall
not result in the expiration or loss of any material Assigned IP.
(b) The Seller Companies have good and marketable title to, or
valid and continuing licenses to use, all Proprietary Rights and other
intangible assets used in their operation of the Business. The Seller Companies
will assign as of the First Closing such ownership of, or such rights by license
or other agreement to use, all of the Assigned IP as is necessary to permit the
Purchaser to conduct the Business as currently conducted. None of the Assigned
IP is subject to any Encumbrances.
(c) The Business and the Purchased Assets do not infringe upon the
Proprietary Rights or other rights or interests of any Person and there are no
present or, to the Knowledge of the Seller Companies, threatened infringements
relating to the Intellectual Property and the Intangible Assets by any Person.
Except as set forth in Schedule 4.6, there are
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no pending or, to the Knowledge of the Seller Companies, threatened Actions by
any Person against the Seller Companies relating to their use of any
Intellectual Property. Except as listed on Schedule 4.6, to the Knowledge of the
Seller Companies, no Person has or is currently infringing or diluting any of
the Seller Companies' rights in or to the Assigned IP. Except as set forth on
Schedule 4.6, none of the Marks included in the Purchased Assets has been
abandoned and none of the Marks included in the Purchased Assets, nor any
copyright included in the Purchased Assets is subject to any outstanding order,
decree, judgment, stipulation, injunction, written restriction or agreement
restricting the scope of use thereof, in any case which would reasonably be
expected to have a Material Adverse Effect. Each of the registered Marks and
copyrights set forth on Schedule 4.6 has been duly registered and such
registrations remain in full force and effect. Except as set forth on Schedule
4.6, to the Knowledge of the Seller Companies, there are no material infringing
or diluting uses of the Marks. Except as set forth on Schedule 4.6, the Seller
Companies have not granted any license (other than such licenses and permissions
for one-time or limited use granted in the ordinary course of business) to any
Person to use any of the Marks.
4.7 Contracts.
(a) Schedule 4.7(a) contains a list of the following Contracts of
the Seller Companies which relate to the Business (each, a "Material Business
Contract" and, collectively, the "Material Business Contracts"):
(i) interconnection agreements;
(ii) agency or representation agreements;
(iii) Contracts relating to any Customer Account;
(iv) Real Property Leases;
(v) capital or operating leases or conditional sales agreements
relating to any Purchased Assets, in each case involving annual payments in
excess of $1,000;
(vi) Contracts with any Person which purport to restrict the
business activities of any Seller Company or use of information in the Business
in any location, including without limitation any covenant not to compete or any
Contracts imposing exclusive dealing obligations;
(vii) employment, collective bargaining, severance, stay
bonuses, retention, consulting, employee benefit and similar plans and
agreements;
(viii) Contracts under which any Seller Company is obligated to
indemnify or hold harmless, or entitled to indemnification from, any other
Person, or agreements under which any Seller Company is obligated to pay
liquidated damages;
(ix) Contracts between any Seller Company and any stockholder,
director, officer or employee or other Affiliate of any Seller Company nor its
Affiliates relating to the Business or the Purchased Assets;
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(x) marketing, agency, advertising, sales representative,
broker, subscription, list management, printing, distribution, fulfillment or
similar Contracts that require the expenditure of, or involve the receipt of,
more than $1,000 in any consecutive twelve month period after the date hereof;
(xi) Contracts under which the amount payable by any Seller
Company is dependent on the revenues or income or similar measure of the
Business, or in which any Seller Company is obligated to pay royalties,
commissions or similar payments to any person or entity;
(xii) pledges, security agreements, sale/leaseback arrangements
and equipment leases;
(xiii) license and other similar arrangements in which any
Seller Company is either licensee or licensor with respect to any Proprietary
Rights or any databases;
(xiv) Contracts to which any Seller Company is a party relating
to the borrowing of money, the capital lease or purchase on an installment basis
of any asset, or the guarantee of any of the foregoing, in each case relating to
the Business or the Purchased Assets;
(xv) joint venture, partnership or similar agreements;
(xvi) any Contracts relating to the lease or rental of any
data, information or lists, whether any Seller Company is the provider or
consumer of such information;
(xvii) any settlement agreements pursuant to which any Seller
Company is entitled to future payments (whether lump sum or by installment), in
each case relating to the Business or the Purchased Assets;
(xviii) any other Contracts, instruments, commitments, plans or
arrangements of any Seller Company involving in excess of $1,000 per annum; and
(xix) to the extent not covered above, any other Contract
material to any Seller Company with respect to the Business.
Schedule 4.7(a) includes with respect to each Material Business
Contract (other than as provided in Section 2.1(g) and other than Contracts that
do not relate primarily to the Business) and all Assumed Contract the correct
names of the parties, the date thereof, and its title or other general
description. The Seller Companies have furnished to the Purchasers true and
correct copies of all Material Business Contracts (other than as provided in
Section 2.1(g) and other than Contracts that do not relate primarily to the
Business) and all Assumed Contracts (or written summaries of all material terms,
in the case of Material Business Contracts or Assumed Contracts which are oral)
and all amendments, modifications or waivers thereto and any further information
that the Purchasers have reasonably requested in connection therewith.
(b) Except as set forth in Schedule 4.7(b), as of the date hereof,
(i) each Contract identified by the Purchasers as an Assumed Contract and set
forth on Schedule 2.1(a)(v)
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hereto represents a valid, binding and enforceable obligation of the Seller
Company that is a party thereto in accordance with the respective terms thereof
and, to the Knowledge of the Seller Companies, represents a valid, binding and
enforceable obligation of each of the other parties thereto, (ii) there have
been no amendments, modifications or supplemental arrangements to or in respect
of any Assumed Contract, except as identified on Schedule 4.7(a) and provided to
the Purchasers and (iii) to the Knowledge of the Seller Companies, there is no
event which has occurred or existing condition (including the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby) which constitutes or which, with notice, the happening of an event
and/or the passage of time, would constitute a default or breach under any
Assumed Contract by any Seller Company or Predecessor In Interest or would cause
the acceleration of any obligation of any Seller Company, give rise to any right
of termination or cancellation by any party other than any Seller Company or
Predecessor In Interest or cause the creation of any Encumbrance on any of the
Purchased Assets. There is no provision in any switched access agreement to
which a Seller Company is a party and which relates to the Business that would
prohibit the Purchasers from changing the switched access rates charged to
customers thereunder after the Customer Access Lines and Customer Accounts are
transferred to the Purchasers as contemplated by this Agreement.
4.8 Permits.
(a) The Seller Companies hold or possess all Permits that are
required by applicable Law in connection with the ownership of the Purchased
Assets and the operation of the Business.
(b) Schedule 4.8 sets forth all of the Permits issued by the FCC or
any PUC with respect to the Business. The Business has been operated in
accordance with the terms of such Permits. There are no Actions pending with
respect to the Purchased Assets or the Business or, to any Seller Company's
Knowledge, threatened with respect to Seller Company's ownership or operation of
any such Permit which reasonably may be expected to result in the revocation,
material adverse modification, nonrenewal, or suspension of any such Permit, the
denial of any pending applications for any such Permit with respect to the
Purchased Assets and the operation of the Business, the issuance against any
Seller Company of any cease and desist order with respect to the Purchased
Assets and the operation of the Business, or the imposition of any
administrative actions (which shall include the proposed assessment of any fines
or penalties) by the FCC or PUC against any Seller Company which could adversely
affect the Business' ability to operate as currently operated after each of the
First Closing Date and the Second Closing Date.
(c) Each Permit with respect to the Purchased Assets or the
Business held by any Seller Company (i) is valid and currently in effect, (ii)
is free from conditions (except for conditions typically associated with such
authorizations), (iii) has been issued by the FCC or any PUC to the holder
thereof, (iv) authorizes the holder thereof to offer telecommunications
services, and (v) is unimpaired by any acts or omissions of any Seller Company
or any of their officers, employees or agents. There are no conditions to the
continued effectiveness of the Permits that require action on the part of any
Seller Company on or prior to the date hereof that have not been satisfied by
any Seller Company. No Seller Company is in violation in any material respect of
any term or condition of any such Permit.
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(d) No application or Action for the renewal or modification of any
Permit is required and, to any Seller Company's knowledge, there is not now
before the FCC or PUC any investigation, proceeding, notice of violation, order
of forfeiture or complaint against the Company or any Subsidiary relating to
such Permits.
(e) To each Seller Company's Knowledge,
(i) each pending application for a new authorization or a
modification to an authorization (each a "Pending Application") with respect to
the Purchased Assets or the Business was timely filed with the FCC or PUC on the
appropriate form (if required), has been certified by the applicant in
compliance with applicable requirements and has been accepted for filing by the
FCC or any PUC;
(ii) no such Pending Application has been dismissed, denied or
returned by the FCC or PUC; and
(iii) there are no pending or threatened petitions to deny,
informal objections, comments, petitions for reconsideration, petitions for
review, waiver requests or other similar filings relating to such Pending
Applications.
4.9 Business Employees.
(a) Schedule 4.9(a) lists all employees of the Seller Companies or
any Affiliate who is engaged in the conduct of the Business (each a "Business
Employee" and collectively, the "Business Employees"), including (and
designating as such) any such employee who is an inactive employee on paid or
unpaid leave of absence, short-term disability or long-term disability, and
indicating the date and location of employment, current title, compensation and
other benefits accrued as of a recent date. The information set forth on
Schedule 4.9(a) is accurate and complete and identical in all material respects
as the information previously provided to the Purchasers for purposes of
completing Schedule 6.7.
(b) Except as set forth on Schedule 4.9(b), there are presently no,
and during the past five years there have not been any, union or collective
bargaining agreements relating to any Business Employees with respect to their
employment by the Seller Companies or any Predecessor In Interest.
(c) Except as set forth in Schedule 4.9(c), as of the date hereof,
(i) no Business Employees are represented by a labor organization, (ii) there
are no existing, pending or threatened strikes, work stoppages or lockouts
related to the Business Employees, (iii) there are no union organizational
campaigns in progress with respect to the Business Employees or any questions
concerning representation with respect to such Business Employees and (iv) there
are no unfair labor practice charges or complaints pending against the Seller
Companies or any Predecessor In Interest with the National Labor Relations
Board.
4.10 Employee Benefit Plans.
(a) Schedule 4.10(a) contains a true and complete list of all
Benefit Plans. The Seller Companies have delivered to the Purchaser a copy of
each Benefit Plan, a summary
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plan description for each Benefit Plan, the most recent Form 5500 filed with the
IRS with respect to each Benefit Plan and each trust agreement, group annuity
contract or other funding or financing vehicle relating to any Benefit Plan (or
if unwritten, a reasonably detailed description of such Benefit Plan).
(b) No Benefit Plan is subject to Title IV of ERISA (including any
multiemployer plan within the meaning of Sections 3(37) and 4001(a)(3) of ERISA)
or 302 of ERISA or the minimum funding rules of Section 412 of the Code or any
multiple employer plan within the meaning of Section 4063 and 4064 of ERISA or
Section 413(c) of the Code, and neither the Seller Companies nor any Affiliate
of the Seller Companies has ever contributed to, sponsored or maintained, or
ever been obligated to sponsor, maintain or contribute to, any such plan. Seller
has not incurred, and does not reasonably expect to incur, any material
liability under Title IV of ERISA.
(c) Except as set forth on Schedule 4.10(c), the execution of this
Agreement and consummation of the transactions contemplated by this Agreement
will not, either alone or in combination with another event, (i) entitle any
Person to any bonus, severance pay, unemployment compensation or any other
payment, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such Person.
(d) Each Benefit Plan has been established and administered in
material compliance with its terms and the applicable provisions of ERISA, the
Code, and other applicable laws, rules and regulations.
4.11 Financial Statements. Set forth on Schedule 4.11(a) are the
audited consolidated balance sheet and related audited combined statements of
income and retained earnings and of cash flows of the Seller Companies for each
of the fiscal years ended December 31, 2000 and December 31, 2001, together with
the report thereon of Xxxxxx Xxxxxxxx LLP (the "Year-End Statements"), and the
unaudited combined balance sheet for the Seller Companies as at November 30,
2002 (the "Balance Sheet") and related combined statement of income and retained
earnings for the period then ended and the unaudited income statements for the
Business for the months of August, September, October and November, 2002 and for
the period of January 1, 2002 through November 30, 2002 (collectively, the
"Interim Statements" and, collectively with Year-End Statements and the Balance
Sheet, the "Financial Statements"). The Financial Statements (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and fairly presents the
consolidated financial condition of the Seller Companies as of such dates and
the results of the operations of the Seller Companies and the Business, as
applicable, for the periods specified; provided, however, that the Interim
Statements are subject to normal year-end adjustments, none of which would, to
the Knowledge of the Seller Companies, alone or in the aggregate, be material.
With respect to those Interim Statements relating to the Business, the amounts
set forth in the various line items are accurately categorized in all material
respects except as specified on Schedule 4.11(b), it being acknowledged by the
Seller Companies that the Purchasers have relied upon the accuracy of such
Interim Statements (including the various line items thereof) in entering into
this Agreement and in agreeing to be responsible for expenses of the Business
pursuant to the Management Agreement.
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4.12 Real Property.
(a) Owned Real Property. The only Owned Real Property is the
property described on Schedule 2.1(a)(xviii) hereto. With respect to the Owned
Real Property:
(i) the owner identified on Schedule 4.12(a) has good title to
the parcel of real property, free and clear of any Encumbrance, easement,
covenant, or other restrictions, except Permitted Encumbrances and those
encumbrances listed on Schedule 4.20 which will be removed prior to the transfer
of such real property hereunder;
(ii) there are no pending or, to the Knowledge of the Seller
Companies, threatened, condemnation, expropriation, or other eminent domain
proceedings, lawsuits or administrative actions relating to the Owned Real
Property or other matters adversely affecting the current use, occupancy or
value thereof;
(iii) the legal description for the parcel contained in the
deed describes such parcel fully and adequately; the buildings and improvements
are located within the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, zoning laws, and ordinances
(and none of the properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming structure"
classifications), and do not encroach on any easement which may burden the land;
the land does not serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
(iv) all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
ownership or operation thereof and have been operated and maintained in
accordance with applicable laws, rules and regulations;
(v) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the parcel of Owned Real Property, other than
tenants under any leases disclosed on Schedule 4.12(a) who are in possession of
space to which they are entitled;
(vi) there are no outstanding options or rights of first
refusal to purchase the parcel of Owned Real Property, or any portion thereof or
interest therein;
(vii) there are no parties (other than the Seller Companies) in
possession of the parcel of Owned Real Property, other than tenants under any
leases disclosed in Schedule 4.12(a) who are in possession of space to which
they are entitled;
(viii) all facilities located on the parcel of Owned Real
Property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules and regulations and are
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provided via public roads or via permanent, irrevocable, appurtenant easements
benefiting the parcel of Owned Real Property; and
(ix) the Owned Real Property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real property, and
access to the property is provided by paved public right-of-way with adequate
curb cuts available.
(b) Leased Real Property. Schedule 4.12(b) sets forth each interest
in Leased Real Property. True and correct copies of each Real Property Lease
listed in Schedule 4.12(b) and all amendments thereto have been delivered to the
Purchasers. With respect to the Leased Real Property: (i) the Seller Company is
the sole tenant for the space leased, does not share any space with or sublet
any space to any other Person and enjoys peaceful and quiet possession of the
Leased Real Property; (ii) each Real Property Lease listed on the Schedule
4.12(b) is legal, valid, binding, enforceable on the Seller Company that is a
party to such Real Property Lease and on the other party thereto, and is in full
force and effect; (iii) no Seller Company is in default under any such Real
Property Lease nor has been informed that the lessor under any of such lease has
taken action or threatened to terminate the lease before the expiration date
specified in the lease; (iv) each parcel is free and clear of Encumbrances
except Permitted Encumbrances; (v) all facilities have received all approvals of
Governmental Authorities (including Licenses) required in connection with the
ownership or operation thereof and have been operated and maintained in
accordance with applicable Laws; (vi) all facilities located on such Leased Real
Property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable Laws and are provided via public roads or via
permanent, irrevocable, appurtenant easements benefiting such Leased Real
Property; (vii) such Leased Real Property abuts on and has direct vehicular
access to a public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel, and access to the
Leased Real Property is provided by paved public right-of-way with adequate curb
cuts available; (viii) except as set forth on the Schedule 4.12(b), no Person
has leased or otherwise granted to any Person the right to use or occupy such
Leased Real Property; and (ix) except as set forth on the Schedule 4.12(b),
there are no outstanding options, rights of first offer, rights of first refusal
or Contracts to purchase such Leased Real Property or any portion thereof.
4.13 Litigation; Governmental Orders.
(a) Except as set forth in Schedule 4.13, there are no pending or,
to the Knowledge of the Seller Companies, threatened, Actions by any Person or
Governmental Authority against, relating to or otherwise affecting any Seller
Company (with respect to the Purchased Assets or the Business) or the Business
or to which any of the Purchased Assets are subject, and there is no reasonable
basis for any such Action.
(b) Except as set forth in Schedule 4.13, no Seller Company, any
Predecessor In Interest is subject to or bound by any Governmental Order with
respect to the Purchased Assets or the Business.
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4.14 Compliance with Laws. The Business has been conducted in
compliance with all applicable Laws and all Governmental Orders applicable to
it, except for such failures to comply that would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in Schedule 4.14,
each Seller Company is in compliance with, and has not received any claim or
notice that it is not in compliance with, each Law or Governmental Order
applicable to the Business. Without limiting the generality of the foregoing,
with respect to the Business each Seller Company is in compliance with all
applicable FCC and state regulatory agency rules, including but not limited to,
tariffing requirements, reporting requirements, universal service requirements
and telecommunications relay service, number portability, North American Number
Plan Administrator, funding and reporting obligations. There are no proceedings
pending, or to the Seller Companies' Knowledge, threatened, before the FCC or
any state regulatory agency directed specifically at any Seller Company (with
respect to the Business or the Purchased Assets), the Purchased Assets or, in
the case of matters of general applicability to the telecommunications industry,
in which any Seller Company (with respect to the Business) or the Business is
identified for possible disparate treatment or whose outcome may have a
disparate impact on the Business.
4.15 Environmental Matters. Except as disclosed on Schedule 4.15:
(a) each Seller Company's use of the Leased Real Property and
occupancy and operation thereof and the conduct of each Seller Company's
operations are in compliance in all material respects with all Environmental
Laws applicable to the Business as presently conducted;
(b) each Seller Company holds and is in compliance in all material
respects with all Licenses required under Environmental Laws applicable to the
conduct of the Business as presently conducted;
(c) no Seller Company has received any written notice of any Action
by any Person or Governmental Authority alleging a violation of or Liability
under any Environmental Law arising from the conduct of the Business;
(d) during such time that the Seller Companies have leased or owned
any Leased Real Property or any Owned Real Property, there has been no Release
of any quantities or concentrations of Hazardous Substance at, on or under any
Leased Real Property or Owned Real Property that is in material violation of any
Environmental Law and, to the Seller Companies' Knowledge, prior to the time
that the Seller Companies owned or leased any Leased Real Property or Owned Real
Property, there were no such Releases; and
(e) no Seller Company or Predecessor In Interest has transported or
arranged for the treatment, storage, or disposal of any quantities or
concentrations of Hazardous Substances to any off-site location in connection
with the Business that has resulted in a material Liability to any Seller
Company under applicable Environmental Laws.
4.16 Insurance. The Seller Companies maintain insurance in respect of
the Purchased Assets of the Seller Companies and the Business, covering such
risks, in such amounts, with such terms and with such insurers as the Seller
Companies have determined is appropriate in
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light of the Business and consistent with industry practice (such insurance, the
"Business Insurance Policies"). Schedule 4.16 contains a list and brief
description of all Business Insurance Policies or binders of insurance held by
or on behalf of any Seller Company (in each case specifying the insurer, the
amount of coverage, and the type of insurance). All premiums due under the
Business Insurance Policies have been paid and all of the Business Insurance
Policies are in full force and effect. All liability insurance policies are on
an "occurrence" basis. The Business Insurance Policies are in amounts adequate
to cover losses on physical assets, and in amounts sufficient to avoid the
operation of any coinsurance provision. No Seller Company is in default with
respect to any material provision contained in any such Business Insurance
Policy held by or on behalf of any Seller Company. No Seller Company has
received any notice of cancellation or non-renewal of, or proposed material
increase in the premiums payable for coverage under, any such Business Insurance
Policy. There are no outstanding surety or performance bonds with respect to the
Business.
4.17 Transactions with Affiliates. Except as set forth in Schedule
4.17, no stockholder, officer, director or employee of any Seller Company or any
of its Affiliates, or any immediate family member of any of the foregoing, (a)
has borrowed money from, or loaned money to, the Business which remains
outstanding, (b) has any interest in any of the Purchased Assets, (c) with
respect to the Business, provides any services to any Seller Company or
purchases or sells any property to, or (d) is a party with a Seller Company to
any Assumed Contract.
4.18 Taxes.
(a) Except as would not have a Material Adverse Effect, the Seller
Companies have filed or will have filed on a timely basis all Tax Returns in
connection with any federal, state or local Tax with respect to the Business
required to be filed by them prior to the First Closing, and each Seller Company
has or will have timely paid all material Taxes due and payable by them for all
periods ending on or prior to the First Closing.
(b) There are, and will not be at Closing, any Encumbrances on the
Purchased Assets with respect to Taxes, other than Permitted Encumbrances.
(c) None of the Assumed Liabilities is an obligation to make a
payment that will not be deductible under Internal Revenue Code Section 280G or
that will not be fully deductible under Internal Revenue Code Section 162(m).
(d) To the Knowledge of the Seller Companies there is no action,
suit, proceeding, audit, investigation or claim now pending or threatened
regarding any material Taxes or any material Tax Return of the Seller Companies
by any Governmental Authority, and no examination of any material Tax Return of
the Seller Companies is currently in progress.
4.19 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.19, since September 30, 2002, each Seller Company and each
Predecessor In Interest has operated the Business only in the usual and ordinary
course consistent with past practice, there has not occurred any event,
circumstance or condition which has had or which would reasonably be expected to
have a Material Adverse Effect and no Seller Company or Predecessor In Interest
has (or has committed to) with respect to the Business or the Purchased Assets
(a) suffered any
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damage, destruction or casualty loss, whether covered by insurance or not, which
individually or in the aggregate exceeds $25,000, (b) sold, transferred, leased,
assigned or otherwise disposed of assets other than sales of Inventory in the
ordinary course of business consistent with past practice, (c) except as
expressly contemplated by this Agreement, entered into any Contract or
transaction (including, any borrowing or capital financing) by any Seller
Company or Predecessor In Interest which is material to the Business or
operations of the Purchased Assets, except Contracts or transactions in the
ordinary course of business consistent with past practices, (d) made any
increase in the base compensation, bonuses, benefits or paid vacation time
allowed or made any other change in employment terms, for any Business
Employees, except for normal periodic increases in base compensation for
employees and officers made pursuant to established compensation policies of
Seller Companies or Predecessors In Interest applied on a basis consistent with
that of prior years; (e) adopted, amended, modified or terminated any Plan,
Contract or commitment for the benefit of any Business Employees; (f) entered
into any employment Contract or collective bargaining agreement, written or
oral, or modified the terms of any existing Contract or agreement; (g) suffered
any material change in the business relationship with any of its material
customers, distributors or suppliers of the Business; (h) made any commitments
for capital expenditures, additions or improvements of the Purchased Assets,
except those which do not exceed $20,000 in the aggregate; (i) made any material
change in its cash management practices or in any method of accounting
procedures or practices; (j) mortgaged or pledged any of its properties or
assets, tangible or intangible, or subjected them to any Encumbrance, except
Permitted Encumbrances; (k) made any loan to, or entered into any other
transaction or Contract with, any of its equity holders, directors, officers,
employees and consultants; (l) disposed of or permitted to lapse any rights to
the use of any material Intellectual Property owned by or licensed to it with
respect to the Business; (m) made any capital investment in, any loan to or any
acquisition of the securities or assets of any other Person (or series of
related capital investments, loans and acquisitions); (n) issued any note, bond
or other debt security or created, incurred, assumed or guaranteed any Liability
or capitalized lease obligation; (o) discharged or satisfied any Encumbrance or
paid any Liability, other than current liabilities paid in the ordinary course
of business; (p) delayed or postponed the payment of any accounts payable or
commissions or any other Liability or agreed or negotiated with any Person to
extend the payment date of any accounts payable or commissions or any other
Liability or accelerated the collection of (or discounted) any accounts or notes
receivable with respect to the Business; or (q) taken any action that would have
been prohibited under Section 6.1 of this Agreement had this Agreement been in
effect.
4.20 Sufficiency of Assets; Encumbrances. Except as expressly set forth
on Schedule 2.1(b)(i), the Purchased Assets include all assets primarily used in
or necessary for the current conduct of the Business (in the manner operated
during the 12-month period preceding the date of the Agreement) and are
sufficient to conduct the operations of the Business as currently conducted
(including an amount of Customer Premise T-1 IAD equipment sufficient to fulfill
the current backlog of sales orders as of the date hereof and other reasonable
levels of Inventory). Each Seller Company has good and marketable title to or a
valid leasehold or license interest in each item of personal property used by it
in the Business and included in the Purchased Assets, free and clear of any
Encumbrances other than Permitted Encumbrances and other than the other
Encumbrances listed on Schedule 4.20. The delivery to the Purchasers of the
instruments of transfer of ownership contemplated by this Agreement will, upon
such delivery, vest good and marketable title to or a valid leasehold or license
interest in the Purchased Assets in the
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Purchasers, free and clear of any Encumbrances, other than Permitted
Encumbrances. Without limiting the foregoing, (i) one or more Seller Companies
owns all Purchased Assets and is a party to each Assumed Contract, (ii) no
Affiliate of any Seller Company (other than another Seller Company) has any
rights in any Purchased Assets or any rights under any Assumed Contract, and
(iii) except as disclosed on Schedule 4.17, no assets used in the Business are
owned by any Affiliates of the Seller Companies.
4.21 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Seller Companies
directly with the Purchasers without the intervention of any Person on behalf of
the Seller Companies in such manner as to give rise to any valid claim by any
Person against the Purchasers for a finder's fee, brokerage commission or
similar payment.
4.22 Inventory. The Inventory is, and will be on the First Closing
Date, at a normal and customary level based on each Seller Company's past
practice, is in quantity and quality useable or saleable in the ordinary course
of business, and the amount of such Inventory is sufficient to conduct the
Business consistent with the past practices of the Seller Companies. To the
Knowledge of the Seller Companies, there is no adverse condition affecting or
likely to affect the supply of materials available to the Purchasers with
respect to the Business.
4.23 Accounts Receivable. The Seller Companies have no reason to
believe that the accounts receivable included in the computation of the Final
Purchase Price (net of any reserves reflected therein) are not enforceable or
are subject to any set-off or counterclaims that could be reasonably expected to
materially affect the collectibility of the aggregate amount of such accounts
receivable, it being understood that the Seller Companies are not warranting
that any such accounts receivable will, in fact, be collected.
4.24 Absence of Undisclosed Liabilities. The Seller Companies have no
material Liabilities, including any Liability for Taxes (and there is no basis
for any present or future Action for the same), except (i) for such Liabilities
which are set forth on the face of the Balance Sheet (rather than in any notes
thereto), (ii) for such Liabilities which have arisen after the date of the
Balance Sheet in the ordinary course of business in accordance with this
Agreement, including Section 6.1 (none of which result from, arise out of,
relate to, are in the nature of, or were caused by any breach of contract,
breach of warranty, tort, infringement or violation of Law, or which
individually or in the aggregate has had a Material Adverse Effect) and (iii) as
specifically disclosed on the Schedule 4.24, which Liabilities will be released
by the First Closing.
4.25 Books and Records. All books, records, bills and accounting,
internal and audit records relating to the Business included in the Purchased
Assets were prepared in the ordinary course of business and consistent with the
Seller Companies' normal practice and are accurate in all material respects.
4.26 Customers and Suppliers. Schedule 4.26 sets forth a true and
complete list of all suppliers of any Seller Company with respect to the
Business who supplied goods or services to any Seller Company in an amount in
excess of $15,000 during the twelve-month period ended December 31, 2001 and in
excess of $15,000 during the period from January 1, 2002 through
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November 30, 2002. Also attached to Schedule 4.26 is a true and complete list of
all customers of the Business (i) as of December 31, 2001 and (ii) as of
November 30, 2002 (the "November Customer List"). Schedule 4.26 shall be
supplemented by the Seller Companies at the First Closing by attaching to such
schedule a list of the customers of the Business as of the Business Day
immediately prior to the First Closing Date (the "Closing Date Customer List").
Except as set forth on Schedule 4.26, the relationship of the applicable Seller
Company with each customer set forth on both the Closing Date Customer List and
the November Customer List and each supplier listed on any Schedule is a good
commercial working relationship. Since January 1, 2002, no supplier listed on
Schedule 4.26 has canceled or otherwise terminated, or, to the Knowledge of the
Seller Companies, has threatened, to cancel or otherwise terminate, its
relationship with any Seller Company or has decreased materially, or to the
Knowledge of the Seller Companies, threatened to decrease materially, its
provision of services, supplies or materials to any Seller Company.
4.27 Fiber Network. Schedule 4.27 sets forth a map of fiber network
used or useful in the conduct of the Business that is either owned, leased or
swapped by the Seller Companies or their Affiliates.
4.28 Public Filings. Except as set forth in Schedule 4.28, Holding has
filed all required Company SEC Reports. None of Holding's Subsidiaries is
required to file any form, report or other document with the SEC. None of the
Company SEC Reports, as of their respective dates (and, if amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
filing), contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the financial statements (including the related notes)
included in the Company SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of operations and
cash flows of Holding and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to normal
and recurring year-end adjustments that have not been and are not expected to be
material in amount. Since January 1, 2000 there has been no material change in
Holding's accounting methods or principles except as described in the notes to
the consolidated financial statements of Holding contained in the Company SEC
Reports. All of such Company SEC Reports, as of their respective dates (and as
of the date of any amendment to the respective Company SEC Report), complied as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
4.29 Tariffs. All tariffs on file with the State of Florida and the
State of Georgia accurately represent the terms and conditions of sale of
services to the customers of the Business.
4.30 No Material Misstatements or Omissions. Neither this Agreement,
the Schedules or Exhibits hereto, nor any certificate or document furnished by
any Seller Company pursuant to this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state any material
fact necessary to make the statements contained herein or therein not
misleading. All documents and records provided by any Seller Company to the
Purchasers were
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maintained in the ordinary course of business. There is no fact of which any
Seller Company has Knowledge that has not been disclosed to the Purchasers in
writing that would have a Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally and not jointly with any other Purchaser
represents and warrants to the Seller Companies with respect to itself as
follows:
5.1 Organization. Such Purchaser is a corporation, validly existing and
in good standing under the Laws of Delaware is duly licensed or qualified to do
business and is in good standing in each jurisdiction which the properties owned
or leased by it as the operation of its business makes such licensing or
qualification necessary.
5.2 Authority. Such Purchaser has all requisite corporate power and
authority to enter into and deliver this Agreement and the Operative Agreements
to which it is a party, to perform its obligations hereunder and thereunder, to
consummate the transactions contemplated hereby and thereby and to assume and
perform the Assumed Liabilities. The execution and delivery by such Purchaser of
this Agreement and the Operative Agreements to which it is a party, the
performance by such Purchaser of its obligations hereunder and thereunder, the
consummation by such Purchaser of the transactions contemplated hereby and
thereby and the assumption and performance of the Assumed Liabilities have been
duly authorized by all necessary corporate action on the part of such Purchaser.
This Agreement has been, and the Operative Agreements to which such Purchaser is
a party shall be, duly executed and delivered by such Purchaser. Assuming the
due authorization, execution and delivery of this Agreement and the Operative
Agreements by the other parties hereto and thereto, this Agreement constitutes,
and each of the Operative Agreements to which such Purchaser is a party when so
executed and delivered will constitute, a legal, valid and binding obligation of
such Purchaser, enforceable against such Purchaser in accordance with its terms.
5.3 No Violation; Third Party Consents. Assuming that all consents,
waivers, approvals, orders and authorizations set forth in Schedule 5.4 or
otherwise required of the Seller Companies under applicable Law or Contracts
have been obtained and all registrations, qualifications, designations,
declarations or filings with any Governmental Authorities set forth in Schedule
5.4 have been made, and except as set forth in Schedule 5.3, the execution and
delivery by such Purchaser of this Agreement and the Operative Agreements to
which it is a party, the performance by such Purchaser of its obligations
hereunder and thereunder, the consummation by such Purchaser of the transactions
contemplated hereby and thereby and the assumption and performance of the
Assumed Liabilities will not conflict with or violate, constitute a default (or
event which with the giving of notice or lapse of time, or both, would become a
default) under, give rise to any right of termination, amendment, modification,
acceleration or cancellation of any obligation or loss of any benefit under,
result in the creation of any Encumbrance (other than a Permitted Encumbrance)
on any of the assets or properties of such Purchaser pursuant to, or require
such Purchaser to obtain any consent, waiver, approval or action of, make any
filing with, or give any notice to any Person as a result or under, the terms or
provisions of (a) the organizational documents of such Purchaser, (b) any
Contract to which such
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Purchaser is a party or is bound or (c) any Law applicable to the Purchaser or
any Governmental Order issued by a Governmental Authority by which the Purchaser
is in any way bound or obligated, except, in the case of clauses (b) and (c) of
this Section 5.3, as would not have a material adverse effect on the ability of
such Purchaser to perform its obligations under this Agreement and the Operative
Agreements to which it is a party, to assume and perform the Assumed Liabilities
or to consummate on a timely basis the transactions contemplated hereby or
thereby and other than (i) filings with and approvals of the FCC as required
under the Communications Act and as listed and described on Schedule 5.3 and
(ii) filings with and approvals of PUC or similar regulatory body as required by
applicable Laws, in each case as listed and described on Schedule 5.3.
5.4 Governmental Consents. No consent, waiver, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of such
Purchaser in connection with the execution and delivery by such Purchaser of
this Agreement and the Operative Agreements to which it is a party, the
performance by the Purchaser of its obligations hereunder and thereunder, the
consummation by such Purchaser of the transactions contemplated hereby and
thereby and the assumption and performance of the Assumed Liabilities, except
(a) as set forth in Schedule 5.4 and (b) where the failure to obtain such
consent, waiver, approval, order or authorization, or to make such registration,
qualification, designation, declaration or filing, would not have a material
adverse effect on the ability of such Purchasers to perform its obligations
under this Agreement and the Operative Agreements to which it is a party, to
assume and perform the Assumed Liabilities or to consummate on a timely basis
the transactions contemplated hereby or thereby.
5.5 Litigation. There are no pending or, to the knowledge of such
Purchaser, threatened Actions by any Person or Governmental Authority against or
relating to such Purchaser (or any Affiliate of such Purchaser) or by which the
Purchaser or its assets or properties are or may be bound which, if adversely
determined, would have a material adverse effect on the ability of such
Purchaser to perform its obligations under this Agreement and the Operative
Agreements to which it is a party, to assume and perform the Assumed Liabilities
or to consummate on a timely basis the transactions contemplated hereby or
thereby.
5.6 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchasers.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 Conduct of Business.
(a) Required Conduct. At all times during the period commencing
upon the date hereof and terminating upon the latest to occur of the Florida
Second Closing and the Georgia Second Closing or the termination of this
Agreement pursuant to and in accordance with the terms of Section 9.1, except to
the extent the Purchasers shall otherwise consent in writing or shall take
actions at variance pursuant to the Management Agreement, the Seller Companies
shall conduct the operations of the Business and operate the Purchased Assets in
the ordinary
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course of business and consistent with its past practices. Without limiting the
foregoing, each Seller Company shall, pursuant and subject to the terms of the
Management Agreement, prior to the First Closing or the applicable Second
Closing, as the case may be:
(i) use its reasonable best efforts to maintain the Purchased
Assets and any other assets which the Seller Companies or their Affiliates will
utilize to provide services to the Purchasers in accordance with the Management
Agreement or under Section 2.7 of this Agreement in good operating condition and
repair in accordance with past practices;
(ii) maintain its corporate existence;
(iii) use its reasonable best efforts to (w) preserve the
organization of the Business intact, and (x) preserve intact the goodwill of the
Business, (y) retain all Business Licenses, and (z) preserve the existing
contracts, business and goodwill of the customers, suppliers, personnel and
others having business relations with the Business;
(iv) use its reasonable best efforts to protect the
Intellectual Property and Proprietary Rights included in the Purchased Assets or
licensed to the Purchasers under Section 2.1(f) in a manner consistent with past
practice;
(v) maintain the books, accounts and records of the Business in
accordance with prior practice;
(vi) pursuant and subject to the Management Agreement, maintain
in effect all Business Insurance Policies held by them or on their behalf
relating to the Business or the Purchased Assets, naming the Purchasers as
additional insureds thereunder;
(vii) use its best efforts pursuant and subject to the terms of
this Agreement to obtain all consents from third parties which are required to
consummate the transactions contemplated by this Agreement;
(viii) pursuant and subject to the Management Agreement, pay
and discharge when due all Taxes, assessments and governmental charges (other
than those contested in good faith by appropriate proceedings) imposed upon any
of the Purchased Assets or the Business, or upon the income or profit therefrom;
(ix) pursuant and subject to the Management Agreement, perform
all obligations under and comply in all respects with all Material Business
Contracts and any other obligations under Contracts to be included as an Assumed
Liability;
(x) pursuant and subject to the Management Agreement, comply in
all respects with applicable Laws including, with respect to any conduct related
to its employees;
(xi) pursuant and subject to the Management Agreement, pay all
trade payables (other than those contested in good faith by appropriate
proceedings) consistent with past practice;
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(xii) notify the Purchasers in writing promptly after learning
of (A) the institution of any material Action against any Seller Company in any
court or before any governmental agency and upon receipt of any administrative
or court order relating to the Purchased Assets and (B) any fact, event or
condition that causes or could reasonably be likely to cause a Material Adverse
Effect;
(xiii) pursuant and subject to the Management Agreement,
continue in the ordinary course of business in accordance with past practice all
marketing and promotions relating to the Business;
(xiv) pursuant and subject to the Management Agreement,
continue in the ordinary course of business consistent with past practice to
provide service delivery to customers of the Business, including without
limitation providing new features to customers (at no cost to the Purchasers);
(xv) pursuant and subject to the Management Agreement, continue
in the ordinary course of business consistent with past practice to xxxx
customers and collect accounts receivables from customers; and
(xvi) pursuant and subject to the Management Agreement, use all
commercially reasonable efforts to keep available the services of the Business
Employees and all agents of the Business and provide prompt written notice to
the Purchasers of any Business Employee who shall have given notice of his or
her intention to terminate employment with the Seller Companies.
(b) Prohibited Conduct. Without limiting the generality of the
foregoing, and, except as otherwise expressly provided in this Agreement and
except to the extent that the Purchasers shall take actions, or cause the Seller
Companies or their Affiliates to take actions at variance with this Section
6.1(b) under the Management Agreement, prior to the First Closing Date, without
the prior written consent of the Purchasers, with respect to the Business, no
Seller Company shall:
(i) create, incur or assume any indebtedness for borrowed
money, make any loans or advances, assume, guarantee or endorse or otherwise
become responsible for the obligation of any other Person that could or would
constitute an Assumed Liability, or subject any of the Purchased Assets to any
Encumbrance other than Permitted Encumbrances;
(ii) increase the compensation, benefits or severance
arrangements of the Business Employees, or pay or agree to pay any bonus or
similar payment;
(iii) sell, transfer, or otherwise dispose of, or agree to
sell, transfer or otherwise dispose of, any of the Purchased Assets other than
sales, transfers or disposals of, or enter into agreements to sell, transfer or
otherwise dispose of, Inventory in the ordinary course of business consistent
with past practice;
(iv) enter into any agreement that would constitute an Assumed
Contract or a Material Contract;
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(v) amend, modify or terminate any Material Business Contract
or Assumed Contract other than with the Purchasers' prior written approval;
(vi) terminate or suspend customers without the prior consent
of the Purchasers;
(vii) modify its accounting and business policies, including
with respect to its working capital procedures and its management of prepaid
postage and customers' advance postage payments, other than in the ordinary
course of business consistent with past practice;
(viii) terminate any Business Employee other than pursuant to
the terms of the Management Agreement;
(ix) do any other act which would cause any representation or
warranty of any Seller Company in this Agreement to be or become untrue in any
material respect or intentionally omit to take any action necessary to prevent
any representation or warranty from being untrue in any material respect at such
time; or
(x) take any other action which would materially adversely
affect or detract from the value of the Purchased Assets or the Business or
would reasonably be expected to delay the First Closing or any Second Closing.
(c) Conversion of Billing System. Pursuant to the Management
Agreement, the Seller Companies shall cooperate with the Purchasers and use
their reasonable best efforts to cause, as soon as practicable and in any event
prior to the First Closing Date, the smooth, complete and successful migration
of the Seller Companies' customers from the Seller Companies' billing system to
the Purchasers' billing system.
6.2 Access and Information. At all times during the period commencing
upon the execution and delivery hereof by each of the Parties and terminating
upon the later of (i) the last Second Closing (ii) the date on which the Final
Purchase Price becomes final and binding on the Parties, and (iii) the
termination of this Agreement pursuant to and in accordance with the terms of
Section 9.1, each Party shall permit the other Party and their authorized agents
and representatives to have reasonable access at reasonable times to the
Purchased Assets, the Seller Companies' employees, and all of the books, records
and documents of or relating to the Business and the Purchased Assets, and shall
furnish to the other Party such information and data, financial records and
other documents in their possession relating to the Business and the Purchased
Assets as the other Party may reasonably request. Each Party shall permit the
other Party and their agents and representatives reasonable access to its
accountants for reasonable consultation or verification of any information
obtained by such Party during the course of any investigation conducted pursuant
to this Section 6.2. No investigation or findings of any Party shall diminish or
affect the representations and warranties of the other Party hereunder or
relieve such Party of any obligation hereunder.
6.3 Confidentiality.
(a) From the date hereof and until two years after the latest to
occur of the Florida Second Closing and the Georgia Second Closing (except for
trade secrets relating to the
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Business and any information regarding Customer Access Lines or Customer
Accounts, with respect to which there shall be no expiration of the Seller
Companies' obligations under this Section 6.3), the Seller Companies shall, and
shall cause their Affiliates and their respective officers, directors, employees
and advisors (collectively, the "Recipients") to, keep confidential any
information relating to the Business, except for any such information that (i)
is available to the public on the date hereof, (ii) thereafter becomes available
to the public other than as a result of a disclosure by the Seller Companies or
any of their respective Recipients, or (iii) after the last to occur of the
Second Closings, is or becomes available to the Seller Companies or any of their
respective Recipients on a non-confidential basis from a source that is not
prohibited from disclosing such information to the Seller Companies or such
Recipient by a legal, contractual or fiduciary obligation to any other Person;
provided, that nothing contained in this Section 6.3 shall prohibit the Seller
Companies from disclosing any information should the Seller Companies or any
such Recipient be required, in the good faith determination of the Seller
Companies, or their Recipient, at such Seller Company's or Recipient's sole
discretion, to disclose any such information in response to a Governmental Order
or as otherwise required by Law or administrative process; provided, that in any
such case it shall inform the Purchasers in writing of such request or
obligation as soon as possible after the Seller Companies determine or are
informed of it and, if possible, before any information is disclosed, so that a
protective order or other appropriate remedy may be obtained by the Purchasers.
If any Seller Company or such Recipient is obligated to make such disclosure, it
shall only make such disclosure to the extent to which it is so obligated, but
not further or otherwise.
(b) From the date hereof and until two years after the latest to
occur of the Florida Second Closing and the Georgia Second Closing (except for
trade secrets relating to the Seller Companies and any information regarding (x)
customer access lines or (y) customer accounts, as the case may be, not
purchased by the Purchasers pursuant to this Agreement, with respect to which
there shall be no expiration of the Purchasers' obligations under this Section
6.3(b)), the Purchasers shall, and shall cause their Recipients to, keep
confidential any information relating to the Seller Companies (other than with
respect to the Business, the Purchased Assets or any Shared Assets) that has
become available as a result of the diligence activities or negotiations
involved in, and/or the execution of the transactions contemplated by, this
Agreement and the Operative Agreements and the services provided hereto and
thereto, including, but not limited to, confidential information made available
to the Purchasers in the provision of Transitional Services pursuant to the
Management Agreement and any and all CMS access granted to representatives of
the Purchasers thereto, except for any such information that (i) is available to
the public on the date hereof, (ii) thereafter becomes available to the public
other than as a result of a disclosure by the Purchasers or any of their
respective Recipients, or (iii) after the last to occur of the Second Closings,
is or becomes available to the Purchasers or any of their respective Recipients
on a non-confidential basis from a source that is not prohibited from disclosing
such information to the Purchasers or such Recipient by a legal, contractual or
fiduciary obligation to any other Person; provided, that nothing contained in
this Section 6.3 shall prohibit the Purchasers from disclosing any information
should the Purchasers or any such Recipient be required, in the good faith
determination of the Purchasers, or their Recipient, at such Purchasers' or
Recipient's sole discretion, to disclose any such information in response to a
Governmental Order or as otherwise required by Law or administrative process;
provided, that in any such case it shall inform the Seller Companies in writing
of such request or obligation as soon as possible after the Purchasers determine
or are informed of it and, if possible, before any
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information is disclosed, so that a protective order or other appropriate remedy
may be obtained by the Seller Companies. If any Purchaser or such Recipient is
obligated to make such disclosure, it shall only make such disclosure to the
extent to which it is so obligated, but not further or otherwise.
6.4 Further Actions.
(a) Generally. Upon the terms and subject to the conditions set
forth in this Agreement, the Seller Companies and the Purchasers shall each act
in good faith and use their commercially reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done, and
to assist and cooperate with the other parties hereto in doing, all things
necessary, proper or advisable under applicable Laws to consummate the
transactions contemplated hereby, including: (i) obtaining all necessary
Licenses, actions or nonactions, waivers, consents or approvals, authorizations,
qualifications and other orders of any Governmental Authorities with competent
jurisdiction over the transactions contemplated hereby, (ii) subject to Section
6.6(c) below, obtaining all necessary consents, approvals or waivers from third
parties, including without limitation the Regulatory Consents, (iii) defending
any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have vacated or reversed any stay or temporary
restraining order entered by any Governmental Authority prohibiting or otherwise
restraining the consummation of the transactions contemplated hereby, and (iv)
executing and delivering any additional instruments, certificates and other
documents necessary or advisable to consummate the transactions contemplated
hereby and to fully carry out the purposes of this Agreement.
(b) The Purchasers and Seller Companies hereby covenant and agree
to use all commercially reasonable efforts to satisfy, or assist the other party
in satisfying, the closing conditions applicable to the Parties in Article VII
prior to the First Closing Date and each Second Closing Date.
6.5 Publicity. The Seller Companies, on the one hand, and the
Purchasers, on the other hand, shall cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the transactions contemplated by this Agreement. Neither the Seller
Companies nor the Purchasers shall issue or make, or allow to be issued or made,
any press release or public announcement concerning the transactions
contemplated by this Agreement without the consent of the other Party, such
consent not to be unreasonably withheld, except as otherwise required by
applicable Law, but in any event only after giving the other Party a reasonable
opportunity to comment on such release or announcement in advance, consistent
with such applicable legal requirements.
6.6 Transaction Costs.
(a) General Expenses and Professional Fees.
(i) Other than as expressly set forth in this Agreement, the
Seller Companies shall pay all transaction costs and expenses (including legal,
accounting and other professional fees and expenses) that they incur in
connection with the negotiation, execution and
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performance of this Agreement and the consummation of the transactions
contemplated hereby, whether or not the transactions contemplated hereby are
consummated.
(ii) Other than as expressly set forth in this Agreement, the
Purchasers shall pay all transaction costs and expenses (including legal,
accounting and other professional fees and expenses) that they incur in
connection with the negotiation, execution and performance of this Agreement and
the consummation of the transactions contemplated hereby, whether or not the
transactions contemplated hereby are consummated.
(b) Transfer Taxes. The Seller Companies and the Purchasers shall
cooperate in the preparation, execution and filing of all Tax Returns regarding
any transfer Taxes which become payable as a result of the transfer of the
Purchased Assets from the Seller Companies to the Purchasers pursuant to this
Agreement or shall cooperate to seek an available exemption from such Taxes; it
being understood and agreed that the Seller Companies, on the one hand, and the
Purchasers, on the other hand, shall each pay fifty percent (50%) of any and all
transfer Taxes (including sales, use and personal property transfer Taxes) and
the fees and costs of recording or filing all applicable conveyancing
instruments associated with the transfer of the Purchased Assets from the Seller
Companies to the Purchasers pursuant to this Agreement, if any, which are
imposed solely and directly by reason of the sale and delivery of the Purchased
Assets from Seller Companies to Purchasers pursuant to this Agreement. For
clarity, the Purchasers shall not be responsible in any manner for the payment
of any Taxes on any gross or net income, gross or net receipts or gain which
Seller Companies may realize as a result of the sale of the Purchased Assets or
otherwise related to the transactions contemplated by this Agreement.
(c) Payments to Contract Parties. Notwithstanding anything herein
to the contrary, if and to the extent it is necessary to make any payment to one
or more unaffiliated third parties in order to (i) obtain consents from any such
third party to the assignment of the Assumed Contracts from the Seller Companies
to the Purchasers, (ii) cause any such third party to enter into a new contract
with the Purchasers or to otherwise provide the Purchasers with the benefits of
any existing contractual arrangement between any Seller Company and such third
party that does not constitute an Assumed Contract, including without
limitation, the consents required from Nortel, BellSouth and Verizon (other
than, in the case of clause(i) and clause (ii), a payment that would be owed
irrespective of such assignment, which shall be borne solely by the party owing
such payment), and (iii) upon the written agreement of the Seller Companies and
the Purchasers, otherwise affect the transfer of the Purchased Assets and the
assumption of the Assumed Liabilities, shall be borne equally by the Seller
Companies, on the one hand, and the Purchasers, on the other hand. The
Purchasers and the Seller Companies shall use commercially reasonably efforts to
minimize the amount of any such costs and expenses and shall cooperate with one
another and keep each other informed as to the status of any negotiations with
the Persons from whom required consents are being sought.
6.7 Employees and Employee Benefit Matters. Set forth on Schedule 6.7
hereto is a list of each Business Employee which, assuming the truth and
accuracy of the information set forth on Schedule 4.9(a), the Purchasers intend
to hire as of the First Closing Date, it being understood and agreed that
Business Employees who are not set forth on Schedule 6.7 shall not be engaged in
the conduct of the Business after the date hereof except as otherwise provided
in
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the Management Agreement. The Seller Companies and the Purchasers acknowledge
and agree that no Business Employee (including any Business Employee set forth
on Schedule 6.7) shall be employed by the Purchasers or deemed to be employed by
the Purchasers for any purposes prior to the First Closing Date, notwithstanding
the fact that each Business Employee set forth on Schedule 6.7 shall be managed
by FDN and/or its Affiliates until the First Closing Date in accordance with the
terms and conditions of the Management Agreement. On the First Closing Date, the
Seller Companies shall pay to each Business Employees listed on Schedule 6.7
that the Purchasers hire as of the First Closing Date the full amount of such
Business Employee's accrued salary, vacation pay and other amounts owed to such
Business Employees as of the First Closing Date. To the extent that service is
relevant for the purposes of eligibility in any benefits provided by the
Purchasers to their employees, the Purchasers shall recognize (to the same
extent recognized by the Purchasers with respect to their other employees) all
service of the Business Employees listed on Schedule 6.7 with the Seller
Companies or any Affiliate or predecessor thereof. The Purchasers will not hire
any Business Employees not listed on Schedule 6.7 for a period of 90 Days after
the First Closing Date unless the Purchasers reimburse, or cause such Business
Employee to reimburse, the Seller Companies for the full value of all severance
or other benefits paid to such Business Employee with respect to any change of
employment resulting from the Transactions contemplated by this Agreement and
the Operative Agreements.
6.8 Cooperation in Tax Matters. The Seller Companies and the Purchasers
shall provide each other with such cooperation and information as either of them
reasonably may request of the other in preparing, executing and filing any Tax
return, amended Tax return or claim for refund, determining a liability for
Taxes or a right to a refund of Taxes or in conducting any audit or other
proceeding in respect of Taxes, in each case, to the extent relating to the
Purchased Assets or the Business.
6.9 Retention of and Access to Records. For the period ending on the
later of (i) six years following the last Second Closing Date, (ii) six years
following the due date for any applicable Tax Returns, or (iii) the expiration
of the statute of limitations for the taxable periods to which any such Tax
Returns relate (in any case, without regard to extensions except to the extent
notified by the other party in writing of such extensions), each Party shall
retain all books and records (including all tax Returns, customer records,
regulatory applications and approvals and all related schedules, work papers,
records and other documents) in its possession that relate to the Business or
the Purchased Assets. Upon the expiration of such period, each Party shall
provide the other Party reasonable opportunity to obtain copies, at such other
Party's expense, of any of such books and records. In addition to the foregoing,
from and after the First Closing, each Party shall afford the other Party and
its counsel, accountants and other authorized agents and representatives, during
normal business hours, reasonable access to its officers, employees, and any
books, records and other data relating to the Business, the Purchased Assets,
the Assumed Liabilities, the Business Employees and the Excluded Liabilities in
its possession and the right to make copies and extracts therefrom, to the
extent that such access may be reasonably required by the requesting Party (i)
to facilitate the investigation, litigation and final disposition of any claims
which may have been or may be made against or by any such party or Person, or
its Affiliates, and (ii) for the preparation of Tax Returns and audits provided
that the requesting Party shall pay all reasonable out-of-pocket costs, charges
and expenses arising therefrom. Any information obtained under this Section 6.9
shall be kept confidential in accordance with Section
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6.3 hereof except as may otherwise be necessary in connection with the filing of
Tax Returns or claims for refunds or in conducting an audit or other proceeding.
6.10 Insurance. Subject to the Management Agreement, the Seller
Companies shall and, if applicable shall cause their Affiliates to, keep in full
force and effect all insurance policies covering the Business and each Purchased
Asset until such time as such Purchased Asset is sold and transferred to the
Purchasers (i.e., at either the First Closing Date or any Second Closing Date).
6.11 Exclusivity. From the date hereof until the First Closing or until
the date that this Agreement is terminated pursuant to Section 9.1, neither any
Seller Company, nor any of its Affiliates will (and shall cause their respective
agents, and direct and indirect stockholders not to) directly or indirectly, (a)
sell or agree to sell, or solicit any proposal from, or initiate or engage in
discussions or negotiations with, any Person or group of Persons other than the
Purchasers and their Affiliates and representatives, concerning any proposal to
acquire, directly or indirectly, and through an asset or stock acquisition,
merger or other structure, the Business, the Purchased Assets or any portion
thereof other than dispositions of Inventory in the ordinary course of business
consistent with past practice, (b) provide confidential information concerning,
the Business or the Purchased Assets to any such person or group for use in the
evaluation of a potential acquisition of, all or a material portion of the
Purchased Assets, or (c) otherwise cooperate in any way with, or assist or
participate, facilitate or encourage, any effort or attempt by any other Person
to do or seek any of the foregoing. The obligations of the Seller Companies
pursuant to this Section 6.11 shall be binding upon their successors or assigns
pursuant to Section 10.3.
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6.12 Covenant Not to Compete. Each Seller Company covenants and agrees
that for a period of two years after the First Closing Date (the "Restricted
Period") it will not, and will cause its Affiliates not to, directly or
indirectly (including by licensing or other partial rights transfers) engage or
participate in, acquire, manage, operate, control or participate in the
management, operation or control of, either alone or jointly, any Person that
engages in any business similar to the Business in the State of Florida or the
State of Georgia (the "Restricted Activities"). However, it will not be a
Restricted Activity for any Seller Company or its Affiliates to enter into a
Change of Control Transaction with any Person, if after giving effect to such
Change of Control Transaction, the business of the Seller Companies immediately
prior to such Change of Control Transaction accounts for at no more than 70% of
the consolidated revenues of the surviving or successor entity after giving
effect to such Change of Control Transaction. In addition, the proposed sale of
certain assets to Xspedius that was announced on the date hereof shall not be a
Restricted Activity. For the purposes of this section, a "Change of Control
Transaction" shall mean, with respect to any Person, any of the following,
occurring in a single transaction or as part of a series of related
transactions: (a) the acquisition by another Person not affiliated with any
Seller Company of all or substantially all the assets of a Seller Company and
its subsidiaries, taken as a whole, (b) the acquisition by another Person of
more than fifty percent (50%) of the voting power of a Seller Company then
outstanding, or (c) the merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving any
Seller Company which results in a Person or Persons other than the current
stockholders of such Seller Company owning more than fifty percent (50%) of the
voting power of the surviving entity.
(a) The Seller Companies and their respective Affiliates covenant
and agree that they will not, directly or indirectly, for a period from the date
hereof until two years after the First Closing Date solicit to hire or hire, any
Business Employee employed by any Purchaser or its Affiliates as of the First
Closing Date or any employee currently employed by any Purchaser or its
Affiliates as of the date hereof or employed by the Purchasers or their
Affiliates prior to the Closing Date; provided, however, that the foregoing will
not prohibit a general solicitation to the public of general advertising and
that nothing in this Section 6.12 shall prohibit the Seller Companies or any of
their Affiliates from employing any person who contacts them on his or her own
initiative (including in response to a general solicitation) and without any
direct or indirect solicitation by the Seller Companies or any of their
Affiliates.
(b) The Parties agree that the restrictive covenants contained
herein are reasonable under the circumstances and further agree that the
covenants contained in this Section 6.12 should be interpreted in such a manner
as to be effective and valid under applicable Law. In the event any provision of
this Section 6.12 or portion thereof shall be held to be illegal or
unenforceable, the remainder of this Section 6.12 or such provision shall remain
in full force and effect. If any one or more of the provisions contained in this
Section 6.12 shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by limiting or reducing it so as to be enforceable to the maximum
extent compatible with applicable Law.
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(c) For purposes of this Section 6.12, the term "Seller Companies"
shall include their successors and assigns other than a successor or assign
pursuant to the second sentence of Section 6.12(a) above.
6.13 Equitable Remedies. The Seller Companies and the Purchasers each
acknowledge that any breach or threatened breach of either of the provisions of
Sections 6.11 and 6.12 will cause irreparable injury to the Purchasers, for
which an adequate monetary remedy does not exist. Accordingly, in the event of
any such breach or threatened breach, the Purchasers shall be entitled, in
addition to the exercise of other remedies, to seek and (subject to court
approval) obtain injunctive relief, without necessity of posting a bond,
restraining the Seller Companies and their Affiliates from committing such
breach or threatened breach.
6.14 Intellectual Property. If the Seller Companies, any of their
respective Affiliates and/or any Person owned or controlled by them own or shall
at any time hereafter acquire any rights in any trademarks, trade names or other
intellectual property relating primarily to the Business and any goodwill
relating thereto or symbolized thereby, such party shall promptly cause such
property to be transferred or licensed as the case may be to the Purchasers.
Such party shall transfer or license any such property (a) for no additional
consideration and (b) through the execution and delivery of such instruments and
documents as the Purchasers shall reasonably request.
6.15 Supplemental Disclosure. Each Party shall, in each case as soon as
possible upon becoming aware, from time to time prior to the First Closing Date,
supplement in writing the Schedules hereto with respect to any matter hereafter
arising that, if existing or known as of the date of this Agreement, would have
been required to be set forth or described in the Schedules hereto; provided,
however, that none of such disclosures shall be deemed to modify, amend or
supplement the representations and warranties of the such Party or the Schedules
hereto for the purposes of this Agreement (including Article VII and Article
VIII), unless the other Party shall have consented thereto in writing. During
the same period, the such Party shall also promptly notify the such Party of the
occurrence of any breach of any covenant of the each Party contained herein, or
of any event that may make the satisfaction of the conditions set forth in
Article VII of this Agreement impossible or unlikely.
6.16 Proration of Taxes and Certain Charges.
(a) Except as provided in Section 6.6(c), all real property,
personal property Taxes or similar ad valorem Taxes levied with respect to the
Purchased Assets for any taxable period (or portion thereof) ending prior to the
First Closing Date, whether imposed or assessed before or after the First
Closing Date, shall be prorated (on a per diem basis) between the Seller
Companies and the Purchasers as of 12:01 A.M. on the First Closing Date. If any
such Taxes are paid by the Purchasers, on the one hand, or the Seller Companies,
on the other hand, the proportionate amount of such Taxes allocable to the other
Party pursuant to the first sentence hereof shall be paid promptly by such other
Party to the Purchasers or the Seller Companies, as the case may be, after
receipt by such other Party of written notice of the payment of such Taxes. If a
refund of any such Taxes is received by the Purchasers, on the one hand, or the
Seller Companies, on the other hand, the proportionate amount of such refund
attributable to Taxes
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allocable to the other Party pursuant to the first sentence hereof shall be paid
over to such other party.
(b) All installments of special assessments or other charges on or
with respect to the Purchased Assets payable by the Seller Companies for any
period in which the First 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 First Closing
Date and each party shall pay its proportionate share promptly upon the receipt
of any xxxx, statement or other charge with respect thereto. If such charges or
rates are assessed either based upon time or for a specified period, such
charges or rates shall be prorated as of 12:01 A.M. on the First 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
First 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 First Closing shall occur shall be prorated so that the Seller
Companies shall be entitled to that portion of any such installment applicable
to the period up to but not including the First Closing Date and the Purchasers
shall be entitled to that portion of any such installment applicable to any
period from and after the First Closing Date, and if the Purchasers or the
Seller Companies, as the case may be, shall receive any such payments after the
First Closing Date, they shall promptly remit to such other parties their share
of such payments.
(d) All prepayments made by the Seller Companies with respect to
the Purchased Assets or the Business, including but not limited to insurance
premiums, advance payments or maintenance agreements and deposits, shall be
prorated so that the Seller Companies shall be entitled to that portion of any
such payment applicable to the period after and including the First Closing
Date, and in the case of deposits, the full amount of the deposit shall be the
amount of the adjustment.
(e) The prorations pursuant to this Section 6.16 may be calculated
after the First 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.
6.17 Shared Customers. The Seller Companies and the Purchasers
acknowledge that there are certain customers of the Business that are also
customers of the Seller Companies' other businesses (collectively the "Shared
Customers"). As soon as practicable after the date hereof, the Seller Companies
and the Purchasers shall negotiate in good faith to enter into an agreement or
agreements providing for the allocation of revenue and expenses with respect to
the Shared Customers. If the Seller Companies and the Purchasers do not reach an
agreement as to such allocation, then the parties shall engage the Independent
Auditors (selected in accordance with Section 2.3(b)(iii)(C) of this Agreement)
or such other arbitrator selected by the Purchasers and
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Seller Companies. Notwithstanding anything in this Section 6.17 to the contrary,
Customer Accounts and Customer Access Lines relating to Shared Customers are
Purchased Assets under Section 2.1(a)(iii) for all purposes of this Agreement.
ARTICLE VII
CLOSING CONDITIONS
7.1 First Closing.
(a) Conditions to Obligations of the Purchasers. The obligations of
the Purchasers to Purchase the Purchased Assets (other than the Regulated
Assets) are subject to the satisfaction or fulfillment at or prior to the First
Closing of the following conditions, any of which may be waived in whole or in
part by the Purchasers in writing:
(i) The Seller Companies shall have provided the Purchasers
with reasonable evidence that the number or Adjusted Customer Access Lines as of
the First Closing is equal to or greater than the product of (i) the November
Access Line Count and (ii) seventy-five percent (75%).
(ii) Each of the representations and warranties made by the
Seller Companies contained in this Agreement and the Management Agreement (A)
that are not qualified as to "materiality" shall be true and correct in all
material respects as of the First Closing Date and (B) that are qualified as to
"materiality" shall be true and correct in all respects as of the First Closing
Date, except to the extent such representations and warranties are expressly
stated to be limited to another date, in which case such representations and
warranties shall be true and correct in all material respects or true and
correct in all respects, as the case may be, as of that date, except to the
extent that any such representation and warranty is not true and correct in all
material respects or in all respects, as the case may be on the First Closing
Date, or such other specified date, solely as a result of acts or omissions by
FDN or its Affiliates in connection with their management of the Business and
the Purchased Assets under the Management Agreement.
(iii) The Seller Companies shall have performed and complied in
all material respects with all the covenants and agreements required by this
Agreement and each Operative Agreement to be performed or complied by them at or
prior to the First Closing.
(iv) There shall be in effect no Law making illegal or
otherwise prohibiting or restraining the consummation of the material
transactions contemplated by this Agreement and no suit, action or other
proceeding, or injunction or final judgment relating thereto, shall be
threatened or be pending before any court, arbitrator or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit the consummation of the material transactions contemplated hereby or to
obtain damages or other relief in connection with this Agreement or any
Operative Agreement or the consummation of the transactions contemplated hereby
or thereby and no investigation that might result in any such suit, action or
proceeding shall be pending or threatened.
(v) Since September 30, 2002, no event shall have occurred
which has had or could reasonably be expected to have a Material Adverse Effect.
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(vi) The Seller Companies shall have delivered to the
Purchasers all of the certificates, instruments and other documents required to
be delivered by them at or prior to the First Closing pursuant to Section
3.1(b).
(vii) Seller Companies' Legal Opinion. The Purchasers shall
have received an opinion of Shearman & Sterling, corporate legal counsel to the
Seller Companies, dated as of the First Closing, reasonably satisfactory to the
Purchasers covering matters (excluding FCC and telecommunications regulatory
matters) of the type customarily covered in legal opinions involving similar
transactions.
(viii) Seller Companies' FCC Legal Opinion. The Purchasers
shall have received an opinion of FCC counsel to the Seller Companies, dated as
of the First Closing reasonably satisfactory to the Purchasers covering FCC and
telecommunications regulatory matters of the type customarily covered in legal
opinions involving similar transactions.
(ix) The Seller Companies shall have provided the Purchasers
with evidence that they have obtained releases of all Encumbrances (other than
Permitted Encumbrances) encumbering any of the Purchased Assets being
transferred to the Purchasers at the First Closing (A) that are identified by
Purchasers and marked with an asterisk (*) on Schedule 4.20 hereto and (B) all
other Encumbrances (other than Permitted Encumbrances) except an aggregate
maximum amount of $50,000 of other Encumbrances which, if allowed to persist
after the First Closing, could not reasonably be expected to result in a
Material Adverse Effect.
(x) The Purchasers shall be reasonably satisfied that each
material vendor and supplier shall continue after the First Closing to provide
the Purchasers with goods and services in materially the same manner in which it
provided goods and services to the Seller Companies and the Business prior to
the Management Agreement Date.
(xi) The customers of the Business shall have been migrated to
the Purchasers' billing system in a manner and to the extent reasonably
satisfactory to the Purchasers.
(xii) The Seller Companies shall have obtained on terms
reasonably satisfactory to the Purchasers, and delivered to the Purchasers
evidence thereof, all waivers, consents and approvals necessary to transfer the
Purchased Assets (other than the Regulated Assets) to the Purchasers that are
identified by Purchasers and marked with an asterisk (*) on Schedule 4.3(b) and
Schedule 4.3(c) hereto.
(xiii) The Purchasers shall have obtained the consents required
from each of BellSouth and Verizon with respect to the transfer to the
Purchasers of the Seller Companies' interconnection agreements with each of
BellSouth and Verizon included in the Purchased Assets (collectively, the
"BellSouth/Verizon Agreements"), provided that this condition shall be deemed to
be satisfied if (x) upon commercially reasonable efforts, the Purchasers are
able to enter into new interconnection agreements with respect to the Purchased
Assets and such agreements provide for services to customers of the Business as
of and after the First Closing on terms, conditions, tariffs and prices that are
substantially similar to those
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contained in the BellSouth/Verizon Agreements or are otherwise acceptable to the
Purchasers in their sole and absolute discretion and (y) the Purchasers are
reasonably satisfied that their entering into such new interconnection
agreements will not subject the Purchasers or the Business to any risk of
successor liability, setoff, recoupment, chargeback or similar claims by
BellSouth or Verizon.
(xiv) The Seller Companies shall have delivered to the
Purchasers reasonable evidence that the Purchased Assets to be transferred to
the Purchasers on the First Closing Date include an amount of customer premise
T-1 IAD equipment that is sufficient to install such premise equipment at the
number of customers equal to the current backlog of sales orders as of the date
hereof, which the Purchasers and Seller Companies acknowledge and agree is
approximately 130.
(xv) Provided that the Purchasers shall have used reasonable
efforts with respect to the subject matter of this clause, the Purchasers shall
have obtained a commitment for a 1992 ALTA Owner's Title Insurance Policy or
other form of policy acceptable to the Purchasers with respect to each Owned
Real Property and each Licensed Real Property included in the Purchased Assets,
issued by a title insurance company satisfactory to the Purchasers (the "Title
Company"), together with a copy of all documents referenced therein (the "Title
Commitments").
(xvi) Provided that the Purchasers shall have used reasonable
efforts with respect to the subject matter of this clause, the Purchasers shall
have obtained title insurance policies from the Title Company (which may be in
the form of a xxxx-up of a pro forma of the Title Commitments) in accordance
with the Title Commitments, insuring the Purchasers' fee simple title to each
Owned Real Property or the Purchasers' legal, valid, binding and leasehold
interest in each Leased Real Property (as the case may be), as of the First
Closing Date, in each case in form and substance and including such endorsements
as are acceptable to the Purchasers.
(xvii) Provided that the Purchasers shall have used reasonable
efforts with respect to the subject matter of this clause, the Purchasers shall
have obtained, at its own cost and expense, no later than ten days prior to the
First Closing, a survey for each Owned Real Property and Leased Real Property,
dated no earlier than the date of this Agreement, prepared by a surveyor
licensed in the jurisdiction where the real property is located, satisfactory to
the Purchasers, and conforming to 1999 ALTA/ACSM Minimum Detail Requirements for
Land Title Surveys, including Table A Items Nos. 1, 2, 3, 4, 6, 7(a), 7(b)(1),
7(c), 8, 9, 10, 11(b)(2), 13, 14, 15 and 16, and such other standards as the
Title Company and the Purchasers require as a condition to the removal of any
survey exceptions from the Title Policies, and certified to the Purchasers, the
Purchasers' lender and the Title Company, in a form and with a certification
satisfactory to each of such parties (the "Surveys"); the Surveys shall not
disclose any encroachment from or onto any of the real property included in the
Purchased Assets or any portion thereof or encroachment from or onto any of the
real property or any portion thereof or any other survey defect which has not
been cured or insured over to the Purchasers' reasonable satisfaction prior to
the First Closing.
(b) Conditions to Obligations of the Seller Companies. The
obligations of the Seller Companies to consummate the transactions contemplated
by this Agreement are subject to
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the satisfaction or fulfillment at or prior to the First Closing of the
following conditions, any of which may be waived in whole or in part by the
Seller Companies in writing:
(i) Each of the representations and warranties made by the
Purchasers contained in this Agreement shall be true and correct in all material
respects at and as of the First Closing with the same effect as though such
representations and warranties were made at and as of the First Closing except
that any representation or warranty that is expressly made as of a specified
date shall be true and correct in all material respects as of such specified
date only.
(ii) The Purchasers shall have performed and complied in all
material respects with the covenants and agreements required by this Agreement
and each Operative Agreement to be performed or complied with at or prior to the
First Closing.
(iii) There shall be in effect no Law making illegal or
otherwise prohibiting or restraining the consummation of the transactions
contemplated by this Agreement and no suit, action or other proceeding, or
injunction or final judgment relating thereto, shall be threatened or be pending
before any court, arbitrator or governmental or regulatory official, body or
authority in which it is sought to restrain or prohibit the consummation of the
transactions contemplated hereby or to obtain damages or other relief in
connection with this Agreement or any Operative Agreement or the consummation of
the transactions contemplated hereby or thereby and no investigation that might
result in any such suit, action or proceeding shall be pending or threatened.
(iv) The Purchasers shall have delivered to the Seller
Companies the Closing Payment and all of the certificates, instruments and other
documents required to be delivered by the Purchasers at or prior to the First
Closing pursuant to Section 3.1(c).
7.2 Second Closings.
(a) Conditions to Obligations of the Purchasers.
The obligations of the Purchasers to consummate any Second
Closing are subject to the satisfaction or fulfillment at or prior to such
Second Closing of the following conditions, any of which may be waived in whole
or in part, by the Purchasers in writing:
(i) Each of the conditions precedent set forth in Section
7.1(a) (other than the conditions precedent set forth in clauses (i), (v), (ix),
(xi), (xii), (xiii), (xiv), (xv), (xvi), and (xvii) of Section 7.1(a), which
shall not apply to the Second Closing) shall apply to the transfer of the
Regulated Assets and the assumption of related Assumed Liabilities at such
Second Closing and is hereby incorporated into this Section 7.2(a) by reference,
modified as necessary to reflect the provisions of Section 3.2 and Section
2.1(d);
(ii) All Regulatory Consents shall have been obtained on terms
reasonably satisfactory to the Purchasers;
(iii) With respect to each of the Florida Second Closing and
the Georgia Second Closing, the Seller Companies shall have provided the
Purchasers with evidence that they have obtained releases of all Encumbrances
(other than Permitted Encumbrances) other
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than an aggregate maximum amount of $50,000 of Encumbrances, which if allowed to
persist, could not reasonably be expected to result in a Material Adverse Effect
(A) encumbering any of the Purchased Assets being transferred to the Purchasers
at any Second Closing and (B) encumbering any of the Purchased Assets that were
transferred to the Purchasers at the First Closing but that were not obtained as
of the First Closing (whether or not marked with an asterisk (*) on Schedule
4.20 hereto); provided, however, that in the event that any such Encumbrances
(other than Permitted Encumbrances) exist on the Purchased Assets after the last
to occur of the Second Closings, then an amount equal to three (3) times the
aggregate amount of such Encumbrances (but in no event less than $50,000) shall
be retained by the Escrow Agent and not disbursed to the Seller Companies under
Section 3.2(c)(i) until such time as all such Encumbrances shall have been
removed and the Seller Companies shall have provided the Purchasers with
evidence of such removal reasonably satisfactory to the Purchasers; provided
further that if any such Encumbrances remain outstanding for more than one
calendar year after the last to occur of the Second Closings, then, upon the
Purchasers' election thereafter, the Seller Companies and the Purchasers shall
provide the Escrow Agent with written instructions to disburse to the Purchasers
in accordance with the terms of the Escrow Agreement the amount retained by the
Escrow Agent pursuant to the immediately preceding proviso; and
(iv) To the extent any of the conditions to the Purchasers'
obligations to consummate the First Closing may not have been fulfilled at or
prior to the First Closing but the Purchasers shall have nonetheless proceeded
with the First Closing, then the fulfillment of such condition shall thereby
become a condition to the Purchasers' obligation to consummate each Second
Closing, and to the extent that any of the conditions to the Purchasers'
obligation to consummate the first to occur of the Florida Second Closing and
the Georgia Second Closing may not have been fulfilled at or prior to such
Second Closing but the Purchasers shall have nonetheless proceeded with such
Second Closing, then the fulfillment of such condition shall thereby become a
condition to the Purchasers' obligation to consummate the later to occur of the
Florida Second Closing and the Georgia Second Closing.
(b) Conditions to Obligations of the Seller Companies. Each of the
conditions precedent set forth in Section 7.1(b) with respect to the First
Closing shall apply to the transfer of the Regulated Assets at the Second
Closing and is hereby incorporated into this Section 7.2(b) by reference,
modified as necessary to reflect the provisions of Section 3.2 and Section
2.1(d).
ARTICLE VIII
INDEMNIFICATION
8.1 Survival. The representations, warranties and covenants contained
herein or in any certificate or other document delivered pursuant to this
Agreement by or on behalf of any Party hereto shall survive the execution and
delivery of this Agreement, the Closing and any investigation made by or on
behalf of the Purchasers or the Seller Companies. No action for a breach or
inaccuracy of the representations and warranties made or deemed made herein or
in any certificate delivered pursuant to this Agreement shall be brought more
than two years following the latest Second Closing Date, except for (a) claims
arising out of the representations and warranties in Sections 4.1
(Organization), 4.2 (Authority), 4.7(b) (Contracts), 4.15 (Environmental
Matters), 4.18 (Taxes), 5.1 (Organization) and 5.2 (Authority), may be brought
within (90) days after the expiration of the applicable statute of limitations
(such representations
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are referred to herein as the "Specified Representations") and (b) claims of
which the indemnifying party has been notified by the claiming party within such
two-year period. It is understood that a claim may be made prior to such time as
the exact amount thereof shall have been determined.
8.2 Indemnification by the Purchasers. Each of the Purchasers agrees,
jointly and severally, to indemnify the Seller Companies and their Affiliates,
officers, directors, employees, attorneys, agents, representatives, successors
and assigns (each, a "Seller Indemnified Party") against, defend and hold them
harmless from and reimburse them for all claims, demands, or suits (by any
Person), losses, deficiency, diminution in value, damages, liabilities
(including consequential, incidental and punitive damages), obligations,
payments, penalties, fines, costs and expenses (including, the costs and
expenses of any and all actions, suits, proceedings, assessments, judgments,
settlements, compromises, fines and interest relating thereto and reasonable
attorneys' fees and reasonable disbursements in connection therewith)
(collectively, "Losses") asserted against, sustained, incurred or suffered by
such Seller Indemnified Party at any time relating to, as a result of or arising
out of:
(a) the inaccuracy in, or the breach of, any representation or
warranty of the Purchasers contained herein or in any certificate or document
delivered pursuant hereto by the Purchasers;
(b) the breach of any agreement or covenant of the Purchasers
contained herein or the failure by the Purchasers or any of its Affiliates to
perform any of their obligations contained herein or in any of the Operative
Agreements including those in any Schedule or Exhibit hereto, or thereto other
than such breaches resulting solely from the Seller Companies' or their
Affiliates' breach of the Management Agreement;
(c) except as expressly provided herein, any Liability or
obligation to brokers retained by or on behalf of the Purchasers or their
Affiliates in connection with the transactions contemplated hereby;
(d) the Assumed Liabilities;
(e) the operation by the Purchasers, after the First Closing Date,
of any Purchased Assets theretofore transferred to the Purchasers;
(f) any Taxes to the extent arising out of or related to the
Purchasers or the ownership or operation of the Purchased Assets after their
transfer to the Purchasers; and
(g) any liabilities under the FCC and Florida Public Service
Commission slamming rules (47 CFR ss.64.1100 et seq. and Rule 25-4.118
respectively) which may arise as the result of the Purchasers' transfer of
customers from Seller Companies to Purchasers upon the Second Closing, except
where, on a case by case basis, Seller Companies' customer information is
inaccurate or incomplete, thereby causing an error in Purchasers' properly
notifying said customers or Seller Companies fail to timely communicate to
Purchasers the receipt of any customer request regarding the transfer.
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8.3 Indemnification by the Seller Companies. Each of the Seller
Companies agrees, jointly and severally, to indemnify the Purchasers and their
Affiliates, officers, directors, employees, attorneys, agents, representatives,
successors and assigns (each, a "Purchaser Indemnified Party") against and hold
them harmless from and reimburse them for all Losses asserted against,
sustained, incurred or suffered by such Purchaser Indemnified Party may at any
time relating to, as a result of or arising out of:
(a) the inaccuracy in or breach of any representation or warranty
of the Seller Companies contained herein or in any certificate or document
delivered hereto by the Seller Companies other than such inaccuracies or
breaches resulting solely from acts or omissions by FDN and/or its Affiliates in
connection with their management of the Business and the Purchased Assets under
the Management Agreement.
(b) the breach of any covenant or agreement of any Seller Company
contained herein or any failure of any Seller Company or any of its Affiliates
to perform any of its obligations contained herein or in any of the Operative
Agreements, including those in any Schedule or Exhibit hereto or thereto other
than breaches resulting solely from acts or omissions by FDN and/or its
Affiliates in connection with their management or the Business and the Purchased
Assets under the Management Agreement;
(c) except as expressly provided herein, any Liability or
obligation to brokers retained by or on behalf of any Seller Company or their
respective Affiliates in connection with the transactions contemplated hereby;
(d) the Excluded Liabilities;
(e) notwithstanding the Purchasers' waiver of compliance of bulk
sale or similar Laws under Section 10.1 hereof, the violation of any applicable
bulk sales or similar Laws;
(f) the ownership or operation of a Purchased Asset prior to the
transfer of such Purchased Asset to the Purchasers; and
(g) any Tax arising out of, related to or otherwise in respect of
the Seller Companies or the ownership or operation of the Purchased Assets prior
to their transfer to the Purchasers.
8.4 Defense of Actions.
(a) General. A party seeking indemnification pursuant to Section
8.2 or 8.3 (the "Indemnified Party") of any Loss, including any Loss arising
from a claim asserted by a third party ("Third Party Claim"), shall give written
notice ("Notice of Claim") to the party from whom indemnification is sought
("Indemnifying Party"). An Indemnified Party shall give the Indemnifying Party
notice of any matter which an Indemnified Party has determined has given or
could give rise to a right of indemnification under this Agreement, within 60
days of such determination, stating the amount of the Loss, if known, the method
of computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and liabilities of the Indemnifying Party
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under this Section 8.4 with respect to Losses arising from Third Party Claims
shall be governed by and be contingent upon the following additional terms and
conditions: if an Indemnified Party shall receive notice of any Third Party
Claim, the Indemnified Party shall give the Indemnifying Party notice of such
Third Party Claim within 30 days of the receipt by the Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this Article
VIII except, with respect to the particular Third Party Claim in question, to
the extent and only to the extent that the Indemnifying Party is materially
prejudiced by such failure and shall not relieve the Indemnifying Party from any
other obligation or liability that it may have to any Indemnified Party under
this Section 8.4. If the Indemnifying Party acknowledges in writing its
obligation to indemnify the Indemnified Party hereunder against any Losses that
may result from such Third Party Claim and waives the applicability of and any
Threshold with respect to such Third Party Claim, then the Indemnifying Party
shall be entitled to assume and control the defense of such Third Party Claim at
its expense and through counsel of its choice if it gives notice of its
intention to do so to the Indemnified Party within ten days of the receipt of
such notice from the Indemnified Party; provided, however, that if there exists
or is reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Indemnified Party in its sole and absolute
discretion for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, then the Indemnified Party shall be entitled to retain its
own counsel in each jurisdiction for which the Indemnified Party determines, on
the advice of counsel, that counsel is required, at the expense of the
Indemnifying Party provided, further, that the Indemnifying Party shall not be
entitled to assume and control the defense of a Third Party Claim if (x) the
Indemnified Party reasonably believes that there is substantial possibility that
the Indemnifying Party does not have sufficient financial or other resources to
vigorously defend the Third Party Claim and to pay its obligations hereunder
with respect to such claim, (y) the Indemnified Party reasonably believes that
an adverse determination with respect to the Third Party Claim would be
materially detrimental to or injure the Indemnified Party's reputation or future
business prospects or (z) the Third Party Claim seeks an injunction or equitable
relief against the Indemnified Party. In the event that the Indemnifying Party
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the Indemnified Party shall cooperate with the Seller
in such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense and at reasonable hours and upon reasonable notice,
all witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating thereto as
are reasonably required by the Indemnifying Party. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party,
at the Indemnifying Party's expense, at reasonable times and upon reasonable
notice all such witnesses, records, materials and information in the
Indemnifying Party's possession or under the Indemnifying Party's control
relating thereto as are reasonably required by the Indemnified Party. No such
Third Party Claim may be settled by the Indemnifying Party without the prior
written consent of the Indemnified Party.
(b) Excluded Refund Disputes. The Seller Companies acknowledge that
the exercise of their Refund Rights could cause a disruption of the Purchasers'
relationship with service providers with whom the Purchasers will continue to do
business after the Management Agreement Date. The Seller Companies further
acknowledge that to the extent that a service
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provider disputes the Seller Companies' assertions with respect to Refund Right
(an "Excluded Refund Dispute"), such service providers may claim that the Seller
Companies or the Purchasers, as the new owners of the Business and the Purchased
Assets, owe amounts to such service provider because the Seller Companies
set-off or otherwise did not pay amounts otherwise owing to such service
provider. If any such service provider threatens to terminate or materially
alter the services provided to the Business under such Assumed Contract unless a
payment is made to the service provider on account of any Excluded Refund
Dispute and such alteration or termination of service is imminent, in the good
faith determination of the Purchasers, the Purchasers shall have the right to
make a payment to such service provider to avoid a termination or alteration of
service and, in recognition that the amount of such payment is a Loss for which
the Purchaser Indemnified Parties are entitled to indemnification under Section
8 of this Agreement, the Purchasers shall be entitled to deliver a written
notice to the Escrow Agent instructing the Escrow Agent to disburse to the
Purchasers from the Escrow Fund an amount equal to the amount that the
Purchasers will pay or did pay to the service provider, and the Seller Companies
shall cause such disbursement to be made; provided that the Purchasers (i)
promptly notify the Seller Companies of such a claim, (ii) reasonably cooperate
with the Seller Companies (at the Seller Companies' sole expense) in order to
assess, to the extent practicable, the merit of such service provider's claim
for payment, (iii) help the Seller Companies protect and preserve any and all
rights with respect to any such claims, including such actions as formally
"paying under protest", obtaining injunctive relief from a court of competent
jurisdiction or obtaining relief from any other appropriate Governmental
Authority, to prevent such alteration of service, and (iii) if so requested by
Seller, delay making any payment with respect to such Excluded Refund Dispute as
long as commercially reasonable. The provisions of this Article 8 shall be apply
to any Excluded Refund Dispute. In the event that the Excluded Refund Dispute is
later settled or adjudged in favor of the Seller Companies and the applicable
service provider returns to the Purchasers all or a portion of the amount paid
by the Purchasers to the service provider on account of such Excluded Refund
Dispute, then the Purchasers shall immediately return the amount so returned by
the service provider to the Escrow Agent for inclusion in the Escrow Fund.
8.5 Limitations. No Indemnifying Party hereto shall be required to
indemnify or hold harmless any Indemnified Party (i) with respect to any claim
for indemnification, until the aggregate amount of Losses of the Indemnified
Parties, as the case may be exceeds $25,000 (the "Threshold"); provided,
however, that once the Threshold is exceeded, the Indemnifying Party shall be
liable for all such Losses, including those comprising the Threshold. The
foregoing limitations shall not apply to claims with respect to the Specified
Representations. Absent fraud, in no event shall the cumulative indemnification
obligation of the Purchasers, on the one hand, and the Seller Companies, on the
other hand, with respect to any claim for indemnification pursuant to Sections
8.2(a) or 8.3(a), respectively, exceed the Final Purchase Price (the "Cap").
8.6 Disbursement of the Indemnity Escrow and the Purchase Price
Holdback Escrow.
(a) Disbursement of the Purchase Price Holdback Escrow. In the
event that there is a Purchase Price Holdback Escrow in accordance with Section
3.2(c)(i) of this Agreement, then, subject to Section 2.1(h) of this Agreement,
promptly upon the determination of the Final Purchase Price in accordance with
Section 2.3(b), the Seller Companies and the Purchasers shall, by joint written
instructions delivered to the Escrow Agent, cause the Purchase
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Price Holdback Escrow to be disbursed to either the Seller Companies or the
Purchasers or both, depending on the determination of the Final Purchase Price
in accordance with Section 2.3 of this Agreement, provided that if (i) the
amount of funds remaining on deposit with the Escrow Agent (after subtracting
the portion, if any, of the Purchase Price Holdback Escrow disbursed to the
Purchasers in accordance with this Section 8.6(a)), is less than (ii) the
Indemnity Escrow minus the amount of any disbursements of the Indemnity Escrow
made to the Purchasers under Section 8.6(b), then a portion of the Purchase
Price Holdback Escrow equal to such deficiency shall continue to be held by the
Escrow Agent under the terms of the Escrow Agreement and not be disbursed to the
Seller Companies under this Section 8.6(a), and such amount shall be considered
part of the Indemnity Escrow for all purposes of this Agreement.
(b) Disbursement of Indemnity Escrow. The Indemnity Escrow shall be
retained by the Escrow Agent for one hundred eighty (180) days after the latest
Second Closing Date (the "Indemnity Escrow Period") in order to secure the
Seller Companies' obligations under Section 8.3 to indemnify the Purchaser
Indemnified Parties for Losses. In the event of a valid claim of Losses by a
Purchaser Indemnified Party under Section 8.3, the Seller Companies shall either
pay the amount of such Losses to such Purchaser Indemnified Party with separate
immediately available funds or, no later than ten (10) days after the date such
valid claim for Losses was made to the Seller Companies, the Seller Companies
shall deliver written instructions to the Escrow Agent in accordance with the
Escrow Agreement instructing the Escrow Agent to promptly deliver immediately
available funds in the amount of such Losses to the Purchasers to the account or
accounts specified in the Escrow Agreement. At the expiration of the Indemnity
Escrow Period, the Purchasers and the Seller Companies shall deliver joint
written instructions to the Escrow Agent, instructing the Escrow Agent to
promptly distribute the amount of any remaining Indemnity Escrow and any
earnings thereon to the Seller Companies to an account or accounts specified in
the Escrow Agreement less the amount of any claims of Losses by the Purchaser
Indemnified Parties which have been made as of such date but which have not been
paid in full (including all accrued interest thereon in accordance with Section
8.7 of this Agreement) by the Seller Companies, which amount shall be retained
by the Escrow Agent until it has received joint written instructions from the
Seller Companies and the Purchasers or an order of a court of competent
jurisdiction to disburse such amount.
8.7 Interest. If all or part of any indemnification obligation under
this Agreement is not paid within ten (10) days of a claim made by the
Indemnified Party, then the Indemnifying Party shall pay the Indemnified Party,
on demand, interest on the unpaid amount of the obligation for each day from the
date the claim was made by the Indemnified Party until payment in full at the
rate per annum of twelve percent (12%), compounded on a monthly basis.
8.8 Tax Benefits; Tax Treatment of Indemnity Payments.
(a) Any indemnification obligation hereunder shall be reduced by
the Tax Benefit realized by the Indemnified Party. For this purpose, "Tax
Benefit" shall mean the net present value of any Tax savings attributable to any
deduction, expense, loss, credit or refund to the Indemnified Party, when
incurred or received.
(b) The Parties agree to treat all payments made by either to or
for the benefit of the other under any indemnity provisions of this Agreement
and for any misrepresentations or
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breach of warranties or covenants as adjustments to the Purchase Price or as
capital contributions for Tax purposes and that such treatment shall govern for
purposes hereof.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned:
(a) at any time prior to the Second Closing by mutual written
consent of the Purchasers and the Seller Companies;
(b) by either the Seller Companies or the Purchasers if the First
Closing has not occurred on or prior to 5:00 p.m., Boston time, on March 5, 2003
(or, in the case of a termination by the Seller Companies, such later date as is
five Business Days following the date that all Encumbrances required to be
discharged on or prior to the First Closing shall have been discharged and the
Purchasers shall have received evidence thereof reasonably satisfactory to
them), provided that the terminating Party is not in material breach of its
material covenants or representations and warranties set forth in this Agreement
and any Operative Agreement.
(c) by either the Seller Companies or the Purchasers if any
Governmental Authority with jurisdiction over such matters shall have issued a
final and nonappealable Governmental Order permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement; provided, however, that neither the Seller Companies nor the
Purchasers may terminate this Agreement pursuant to this Section 9.1(c) unless
the party seeking so to terminate this Agreement has used all commercially
reasonable efforts to oppose any such Governmental Order or to have such
Governmental Order vacated or made inapplicable to the transactions contemplated
by this Agreement;
(d) by the Seller Companies, if the Purchasers shall have breached,
in any material respect, any representation, warranty or any covenant or other
agreement to be performed by it contained herein, and such breach is (i)
incapable of being cured or is not cured or waived within twenty days of receipt
of written notice thereof from the Seller Companies and (ii) no Seller Company
is in material breach of this Agreement or any Operative Agreement;
(e) by the Purchasers, if the Seller Companies shall have breached,
in any material respect, any representation or warranty or any covenant or other
agreement to be performed by it contained herein, and such breach is (i)
incapable of being cured or is not cured or waived within twenty days of receipt
of written notice thereof from the Purchasers and (ii) no Purchaser is in
material breach of this Agreement or any Operative Document;
(f) The date in which this Agreement is terminated in accordance
with this Section 9.1 is referred to herein as the "Termination Date".
9.2 Procedure and Effect of Termination.
(a) If this Agreement is terminated (i) under Sections 9.1(a), (b)
or (c), all further obligations of the Seller Companies to the Purchasers, and
of the Purchasers to the Seller
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Companies, will terminate without further liability of any party hereto (other
than the provisions contained herein regarding the treatment of confidential and
proprietary information), and the Parties shall cause the Escrow Agent to
promptly, but in no event later than five (5) days after such termination,
deliver the Deposit and any earnings thereon to the Purchasers in immediately
available funds to an account designated by the Purchasers.
(b) If this Agreement is terminated under Section 9.1(e), (i) all
further obligations of the Purchasers shall terminate, (ii) the Seller Companies
shall remain liable for their breaches under this Agreement and any Operative
Agreement; provided however, that in no event shall the Seller Companies'
aggregate liability following such termination for any breach of this Agreement
or any Operative Agreement exceed $1,000,000 plus an amount equal to the
earnings on the Deposit (it being understood and agreed that, subject to clause
(iii) and the last sentence of this Section 9.2(b), the receipt by the
Purchasers of such amount shall constitute liquidated damages with respect to
all breaches by the Seller Companies of this Agreement and any Operative
Agreement and no Purchaser or Purchaser Indemnified Party shall have, and each
Purchaser hereby waives on behalf of itself and the other Purchaser Indemnified
Parties, any other remedy available to it at law or in equity with respect to
such breaches or any other matter pertaining to this Agreement or the subject
matter thereof), and (iii) the Parties shall cause the Escrow Agent to promptly,
but in no event later than five (5) days after such termination, deliver the
Deposit and any earnings thereon to the Purchasers in immediately available
funds to an account designated by the Purchasers. If this Agreement is
terminated under Section 9.1(e) under circumstances in which all conditions to
the Seller Companies ' obligations to consummate the First Closing or Second
Closing, as applicable, would reasonably be expected to be able to be timely
fulfilled or satisfied, then, in addition to the Seller Companies' obligations
under clause (iii) above, the Seller Companies shall promptly, but in no event
later than five (5) days after such termination, deliver (in addition to the
release of the Deposit and any earnings thereon) $1,000,000 plus an amount equal
to the earnings on the Deposit to the Purchasers in immediately available funds
to an account designated by the Purchasers. If the Purchasers do not elect to
terminate this Agreement, they shall have all remedies available to them
hereunder or under applicable law for any breach of this Agreement, including
the right of specific performance and injunctive relief under Section 10.16 and
the right to xxx for money damages; provided however, that the Seller Companies
shall not be liable for money damages for such breach in excess of $1,000,000
plus an amount equal to earnings accrued on the Deposit.
(c) If this Agreement is terminated under Section 9.1(d), (i) all
further obligations of the Seller Companies shall terminate, and (ii) the
Purchasers shall remain liable for their breaches under this Agreement and any
Operative Agreement; provided however, that in no event shall the Purchasers'
aggregate liability for any breach of this Agreement or any Operative Document
exceed the Deposit and any earnings thereon. If this Agreement is terminated
under Section 9.1(d) under circumstances in which all conditions to the
Purchasers' obligations to consummate the First Closing or Second Closing, as
applicable, would reasonably be expected to be able to be timely fulfilled or
satisfied, then the Parties shall cause the Escrow Agent to promptly, but in no
event later than five (5) days after such termination, deliver the Deposit and
any earnings thereon to the Seller Companies in immediately available funds to
an account designated by the Seller Companies, it being understood and agreed
that the receipt by the Seller Companies of the Deposit and any earnings thereon
shall constitute liquidated damages with respect to all breaches by the
Purchasers of this Agreement and any Operative
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Agreement and that no Seller Company or Seller Indemnified Party shall have, and
each Seller Company hereby waives on behalf of itself and the other Seller
Indemnified Parties, any other remedy available to it at law or in equity with
respect to such breaches or any other matter pertaining to this Agreement or the
subject matter thereof.
(d) Upon the consummation of the First Closing, none of the
limitations on liability of the parties set forth in this Section 9.2 shall
apply in any respect.
9.3 Other Provisions Relating to Termination.
(a) Survival Of Certain Provisions. The obligations of the parties
under Sections 6.3, 6.5, and Articles IX and X shall survive any termination of
this Agreement and remain in full force and effect.
(b) Notice. In the event of termination of this Agreement and
abandonment of the transactions contemplated hereby by either or both of the
parties pursuant to Section 9.1, written notice thereof shall forthwith be given
by the terminating party to the other party.
(c) Withdrawal of Filings, etc.; Return of the Business. If this
Agreement is terminated as provided herein, all filings, applications and other
submissions made pursuant to this Agreement, to the extent practicable, shall be
withdrawn from the agency or other person to which they were made. In addition,
in the event of any termination of this Agreement pursuant to Section 9.1, the
Seller Companies and the Purchasers shall work together in good faith and use
their best efforts to return the operation and control of the Purchased Assets
(or, if applicable, to Georgia Purchased Assets or Florida Purchased Assets) and
the Business to the Seller Companies in substantially the same condition as they
existed immediately prior to the Management Agreement Date in accordance with
the terms and conditions of the Management Agreement, to provide to Seller
Companies with the economic results of the operation by the Purchasers of the
Regulated Assets under the Management Agreement, including the Purchasers'
transfer of the revenues and account receivable during the period during which
the Purchasers operated the Purchased Assets and the Seller Companies'
assumption of expenses and liabilities incurred in connection with the operation
of the Purchased Assets during such period, including all expenses and
liabilities incurred in the Purchasers' or their Affiliates' names other than
liabilities caused by the negligence or willful misconduct of the Purchasers.
ARTICLE X
MISCELLANEOUS
10.1 Bulk Transfer Laws. The Purchasers hereby waive compliance by the
Seller Companies with all applicable bulk sale or bulk transfer laws of any
jurisdiction in connection with the sale of the Purchased Assets to the
Purchasers hereunder, it being understood and agreed that, in accordance and
Section 8.3(e) above, the Seller Companies shall indemnify and hold the
Purchaser Indemnified Parties harmless against, all Losses incurred by them as a
result of the Seller Companies' failure to comply with any such Laws.
10.2 Notices. All notices, requests, demands, claims and other
communications that are required or may be given pursuant to this Agreement must
be in writing and delivered personally against written receipt, by reputable
overnight courier, by telecopy or facsimile or by
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registered or certified mail, return receipt requested, postage prepaid, to the
Parties at the following addresses (or to the attention of such other Person or
at such other address as any party may provide to the other party by notice in
accordance with this Section 10.2):
if to any Purchaser, to:
Florida Digital Network, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
M/C Venture Partners
00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxx X.X. Claudy
Facsimile: (000) 000-0000
and
Xxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
and
if to any Seller Company, to:
Mpower Holding Corporation
000 Xxxxx'x Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to:
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
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Any such notice or other communication will be deemed to have been given (a) if
personally delivered, when so delivered, against written receipt, (b) if sent by
reputable overnight courier, three Business Days after being so sent, (c) if
given by telecopier or facsimile, once such notice or other communication is
transmitted to the facsimile number specified above and the appropriate answer
back or telephonic confirmation is received; provided that such notice or other
communication is promptly thereafter delivered in accordance with the provisions
of clauses (a), (b) or (d) hereof, or (d) if mailed by registered or certified
mail, return receipt requested, postage prepaid and addressed to the intended
recipient as set forth above, five Business Days after being so mailed. Any
notice, request, demand, claim or other communication given hereunder using any
other means (including ordinary mail or electronic mail) shall not be deemed to
have been duly given unless and until such notice, request, demand, claim or
other communication actually is received by the individual for whom it is
intended.
10.3 Attorneys' Fees and Costs. In connection with any dispute between
the Parties under this Agreement or any of the Operative Agreement (other than
as specified in Article VIII with respect to claims made there under), each
party shall pay its own attorneys' fees and costs incurred in connection
therewith.
10.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned or delegated by the Parties
without the prior written consent of the other parties and any purported
assignment or delegation in violation hereof shall be null and void except that,
without the Seller Companies' consent, the rights of the Purchaser hereunder may
be transferred to an Affiliate of the Purchaser and the Purchaser (or such
Affiliate) may collaterally assign its rights hereunder to its lender or
lenders.
10.5 Amendments and Waiver; Exclusive Remedies. This Agreement may not
be modified or amended except in writing signed by the party or parties against
whom enforcement is sought. The terms of this Agreement may be waived only by a
written instrument signed by the party or parties waiving compliance. No waiver
of any provision of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise provided. No delay on the part
of any party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
Whenever this Agreement requires or permits consent by or on behalf of a party,
such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 10.5. The
rights and remedies herein provided shall be the exclusive rights and remedies
available to the Parties at law or in equity.
10.6 Entire Agreement. This Agreement and the related documents
contained as Exhibits and Schedules hereto or expressly contemplated hereby
(including the Operative Agreements) contain the entire understanding of the
Parties relating to the subject matter hereof and supersede all prior written or
oral and all contemporaneous oral agreements and understandings relating to the
subject matter hereof, including without limitation that certain letter
agreement, dated December 7, 2002 by and between Holding and FDN, as amended
(the "Letter Agreement"). The Exhibits and Schedules to this Agreement are
hereby incorporated by reference into and made a part of this Agreement for all
purposes.
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10.7 Representations and Warranties Exclusive. The representations,
warranties, covenants and agreements set forth in this Agreement and the
Operative Agreements constitute all of the representations, warranties,
covenants and agreements of the Parties and their respective shareholders,
directors, officers, employees, affiliates, advisors (including financial, legal
and accounting), agents and representatives and upon which the Parties have
relied.
10.8 No Third Party Beneficiary. This Agreement is made for the sole
benefit of the Parties and their respective successors, executors and permitted
assigns, and nothing contained herein, express or implied, is intended to or
shall confer upon any other Person any third-party beneficiary right or any
other legal or equitable rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement (except to the extent that any Affiliates
of the Seller Companies or the Purchaser are expressly covered by an indemnity
herein).
10.9 Governing Law. This Agreement will be governed by and construed
and interpreted in accordance with the substantive Laws of the State of
Delaware, without giving effect to any choice of law or conflicts of Law
provision or rule that would cause the application of the Laws of a jurisdiction
other than Delaware.
10.10 Neutral Construction. The Parties hereto agree that this
Agreement was negotiated fairly between them at arms' length and that the final
terms of this Agreement are the product of the Parties' negotiations. Each party
represents and warrants that it has sought and received legal counsel of its own
choosing with regard to the contents of this Agreement and the rights and
obligations affected hereby. The Parties hereto agree that this Agreement shall
be deemed to have been jointly and equally drafted by them, and that no
provisions of this Agreement should be construed against either party on the
grounds that such party drafted or was more responsible for drafting such
provision.
10.11 Severability. In the event that any one or more of the provisions
or parts of a provision contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or part of a provision of this Agreement or any other jurisdiction, but this
Agreement shall be reformed and construed in any such jurisdiction as if such
invalid or illegal or unenforceable provision or part of a provision had never
been contained herein and such provision or part shall be reformed so that it
would be valid, legal and enforceable to the maximum extent permitted in such
jurisdiction, provided that any such reform or construction does not affect the
economic or legal substance of the transactions contemplated hereby in a manner
adverse to any party.
10.12 Heading; Construction. The descriptive headings of the Articles
and Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement. It is understood and agreed that neither
the specifications of any dollar amount in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items, are
or are not material, and no party shall use the fact of setting of such amounts
or the fact of the inclusion of such item in the Schedules or Exhibits in any
dispute or controversy between the Parties as to whether any obligation, item or
matter is or is not material for purposes hereof.
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10.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (B) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.13.
10.14 CONSENT TO JURISDICTION.
(a) EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION OF ALL STATE AND FEDERAL COURTS LOCATED IN THE STATE OF DELAWARE,
AS WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN
FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OPERATIVE
AGREEMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY
HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO BRING ANY SUIT, ACTION OR OTHER
PROCEEDING IN OR BEFORE ANY COURT OR TRIBUNAL OTHER THAN THE COURTS DESCRIBED
ABOVE AND COVENANTS THAT IT SHALL NOT SEEK IN ANY MANNER TO RESOLVE ANY DISPUTE
OTHER THAN AS SET FORTH IN THIS SECTION 10.14 OR TO CHALLENGE OR SET ASIDE ANY
DECISION, AWARD OR JUDGMENT OBTAINED IN ACCORDANCE WITH THE PROVISIONS HEREOF.
(b) EACH OF THE PARTIES HERETO HEREBY EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, EACH OF THE
PARTIES CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE OR ANY MANNER IN
WHICH NOTICES MAY BE DELIVERED HEREUNDER IN ACCORDANCE WITH SECTION 10.2 OF THIS
AGREEMENT.
10.15 No Successor Liability. It is expressly understood that the
Parties intend that the Purchasers shall not be considered a successor to the
Seller Companies or any of their Affiliates by reason of any theory of law or
equity, and that the Purchasers shall have no Liability except as otherwise
provided in this Agreement for any obligation or liability of the Seller
Companies or any of their Affiliates.
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10.16 Specific Performance. Each of the Parties acknowledges and agrees
that Purchasers would be damaged irreparably in the event the First Closing or
either Second Closing is not consummated in accordance with the terms and
conditions of this Agreement. Accordingly, each of the Parties agrees that
Purchasers shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court in the
United States or in any state having jurisdiction over the parties and the
matter in addition to any other remedy to which it may be entitled pursuant
hereto.
10.17 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the Parties, each of which shall be deemed
an original and all of which together will constitute one and the same
instrument.
[Signature page follows]
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the Parties as of the day and year first above written.
SELLER COMPANIES:
MPOWER HOLDING CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President & General
Counsel
MPOWER COMMUNICATIONS CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President & General
Counsel
MPOWER LEASE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Senior Vice President & General
Counsel
PURCHASERS:
FLORIDA DIGITAL NETWORK, INC.
By: Xxxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President
SOUTHERN DIGITAL NETWORK, INC.
By: Xxxxxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title:
[Signature Page to Asset Purchase Agreement]
