Exhibit 2.1
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Execution Copy
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
FiberNet Telecom Group, Inc.
FiberNet Holdco, Inc.
FiberNet Merger Sub, Inc.
Devnet Merger Sub, LLC
Devnet L.L.C.
and
FP Enterprises L.L.C.
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TABLE OF CONTENTS
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Article I The Merger............................................................................ 3
1. The Merger......................................................................... 3
1.1 The Merger; Filing and Effective Time.............................................. 3
1.2 Closing............................................................................ 3
1.3 Effects of the Merger.............................................................. 3
1.4 Certificate of Incorporation of the Surviving Corporation.......................... 3
1.5 Bylaws of the Surviving Corporation................................................ 4
1.6 Directors and Officers of the Surviving Corporation................................ 4
1.7 Further Assurances................................................................. 5
Article II Effect of the Merger on the Capital Stock of the Constituent Corporations............. 5
2. Effect of Capital Stock............................................................ 5
2.1 Conversion of Merger Sub Shares.................................................... 5
2.2 Conversion of FiberNet Shares...................................................... 5
2.3 Notification of Transfer Agent..................................................... 7
2.4 Stock Certificates................................................................. 7
Article III Additional Merger Agreements.......................................................... 8
3. Additional Merger Agreements....................................................... 8
3.1 Directors and Officers of Holdco Upon the Effective Time........................... 8
3.2 Holdco Certificate of Incorporation................................................ 8
3.3 Holdco Bylaws...................................................................... 8
3.4 No FiberNet Stockholder Meeting; Merger Sub Stockholder Written Consent............ 8
3.5 Employee and Director FiberNet Stock Options....................................... 9
3.6 FiberNet Warrants.................................................................. 9
3.7 Outstanding Holdco Common Shares................................................... 9
3.8 Other Agreements................................................................... 10
3.9 Holdco as Successor Registrant to FiberNet......................................... 10
3.10 Filings............................................................................ 10
Article IV Devnet Merger......................................................................... 10
4. Devnet Merger...................................................................... 10
4.1 The Devnet Merger.................................................................. 10
4.2 Conversion of Units................................................................ 11
4.3 The Effective Time................................................................. 11
4.4 Devnet Merger Consideration........................................................ 11
4.5 Certificate of Formation and Operating Agreement................................... 11
4.6 Officers........................................................................... 12
4.7 Effects of the Merger.............................................................. 12
4.8 Payment of the Devnet Merger Consideration......................................... 12
4.9 Options............................................................................ 15
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4.10 Lost Certificates......................................................................... 15
Article V Representations and Warranties of Devnet..................................................... 15
5. Representations and Warranties of Devnet.................................................. 15
5.1 Description and Lists..................................................................... 16
5.2 Limited Liability Company Organization; Authority......................................... 18
5.3 Capitalization............................................................................ 18
5.4 Subsidiaries.............................................................................. 19
5.5 No Violation.............................................................................. 19
5.6 Consents and Approvals of Governmental Authorities........................................ 19
5.7 Financial Statements of Devnet............................................................ 20
5.8 Contractual Arrangements with Members, the Managing Member or Employees................... 20
5.9 Absence of Certain Changes................................................................ 22
5.10 Title to Property; Leases; Encumbrances................................................... 24
5.11 Patents, Trademarks, Trade Names.......................................................... 24
5.12 Litigation; Compliance with Laws.......................................................... 24
5.13 Environmental Matters..................................................................... 25
5.14 Taxes and Tax Returns..................................................................... 25
5.15 Benefit Plans............................................................................. 26
5.16 Labor Matters............................................................................. 26
5.17 Insurance................................................................................. 27
5.18 Contracts................................................................................. 27
5.19 Finders and Investment Bankers............................................................ 27
5.20 Licenses, Permits and Authorizations...................................................... 27
5.21 Entire Business........................................................................... 28
5.22 Disclosure................................................................................ 28
Article VI Representations and Warranties of Holdco, Fibernet, Merger Sub and Devnet Merger Sub......... 28
6. Representations and Warranties of Holdco, FiberNet, Merger Sub and Devnet Merger Sub...... 28
6.1 Organization; Etc......................................................................... 28
6.2 Authorization; Etc........................................................................ 28
6.3 Capitalization............................................................................ 29
6.4 No Violation.............................................................................. 30
6.5 Reports................................................................................... 30
6.6 Consents and Approvals of Governmental Authorities........................................ 31
6.7 Finders and Investment Bankers............................................................ 31
6.8 Litigation................................................................................ 31
6.9 Taxes and Tax Returns..................................................................... 31
6.10 Merger Sub and Devnet Merger Sub.......................................................... 33
6.11 Additional Tax Representations, Warranties and Covenants.................................. 33
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Article VII Conduct of Business Pending Closing........................................................ 32
7. Conduct of Business Pending Closing..................................................... 32
7.1 Conduct of Business..................................................................... 32
7.2 Communications with Members............................................................. 34
Article VIII Additional Agreements..................................................................... 34
8. Additional Agreements.................................................................. 34
8.1 Advice of Change....................................................................... 34
8.2 Access to Properties and Records; Confidentiality...................................... 34
8.3 Books and Records...................................................................... 35
8.4 Consents and Approvals................................................................. 36
8.5 Satisfaction of Closing Conditions..................................................... 36
8.6 Litigation............................................................................. 36
8.7 Tax Covenants.......................................................................... 37
8.8 No Solicitation........................................................................ 38
8.9 Additional Instruments; Further Assurances............................................. 40
8.10 Estoppel Certificates.................................................................. 40
8.11 Registration Rights Agreement.......................................................... 40
8.12 Tax Cooperation and Consistent Reporting............................................... 40
8.13 Tax Adjustment Payments................................................................ 42
8.14 Section 754 Election................................................................... 42
8.15 Disclosure Supplement.................................................................. 43
8.16 Director............................................................................... 43
8.17 Escrow Agreement....................................................................... 43
8.18 Employment Agreements.................................................................. 43
8.19 Surviving Rights....................................................................... 43
8.20 Operating Agreement Amendment.......................................................... 43
8.21 Schedules.............................................................................. 43
8.22 Knowledge.............................................................................. 43
8.23 Holdco Disclaimer as to Post-Closing Arrangements Among the Members.................... 44
8.24 Management Arrangements................................................................ 44
Article IX Conditions to Obligations of Each Party................................................... 44
9. Conditions to Obligations of Each Party................................................ 44
9.1 No Action or Proceeding................................................................ 44
9.2 Compliance with Law.................................................................... 45
9.3 Escrow Agreement....................................................................... 45
9.4 Nasdaq................................................................................. 45
Article X Conditions To Fibernet's, Holdco's, Merger Sub's and Devnet Merger Sub's Obligations...... 45
10. Conditions to FiberNet's Obligations................................................... 45
10.1 Statutes............................................................................... 45
10.2 Representations and Warranties......................................................... 45
10.3 Performance............................................................................ 45
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10.4 Authority............................................................................. 45
10.5 Opinion of Counsel.................................................................... 46
10.6 Tax Opinion........................................................................... 46
10.7 Approvals and Filings................................................................. 46
10.8 Certificates.......................................................................... 46
10.9 Resignation........................................................................... 46
10.10 Signature Authority................................................................... 46
10.11 Waiver of Rights...................................................................... 46
10.12 Members Agreements.................................................................... 47
10.13 Consent............................................................................... 47
10.14 Employment Agreement.................................................................. 47
Article XI Conditions to Obligations of Devnet...................................................... 47
11. Conditions to Devnet's Obligations.................................................... 47
11.1 Statutes.............................................................................. 47
11.2 Representations and Warranties........................................................ 47
11.3 Performance........................................................................... 47
11.4 Authority............................................................................. 47
11.5 Opinion of FiberNet's Counsel......................................................... 48
11.6 Tax Opinion........................................................................... 48
11.7 Approvals and Filings................................................................. 48
11.8 Certificates.......................................................................... 48
11.9 Fairness Opinion...................................................................... 48
11.10 Offer of Employment................................................................... 48
Article XII Termination.............................................................................. 48
12. Termination........................................................................... 48
12.1 Termination........................................................................... 48
12.2 Effect of Termination................................................................. 49
Article XIII Nature and Survival of Representations and Warranties; Escrow; Indemnification, Etc...... 50
13. Nature and Survival of Representations and Warranties; Indemnification, Etc........... 50
13.1 Survival of Representations, Warranties, Etc.......................................... 50
13.2 Escrow Fund........................................................................... 50
13.3 Damage Threshold...................................................................... 51
13.4 Escrow Period......................................................................... 51
13.5 Claims upon Escrow Fund............................................................... 52
13.6 Objections to Claims.................................................................. 52
13.7 Resolution of Conflicts............................................................... 53
13.8 Actions of the Managing Member........................................................ 53
13.9 FiberNet's Agreement to Indemnify..................................................... 53
13.10 Third Party Claims.................................................................... 54
13.11 Tax Claims............................................................................ 56
13.12 Effect of Taxes and Insurance......................................................... 57
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13.13 Purchase Price Adjustment.............................................................. 58
13.14 Interest............................................................................... 58
13.15 Managing Member Joinder................................................................ 58
13.16 Relationship to Section 12.2........................................................... 59
Article XIV Miscellaneous Provisions.................................................................. 59
14. Miscellaneous Provisions............................................................... 59
14.1 Amendment and Modification............................................................. 59
14.2 Waiver................................................................................. 59
14.3 Notices................................................................................ 59
14.4 Binding Nature; Assignment............................................................. 60
14.5 Governing Law; Submission to Jurisdiction.............................................. 61
14.6 Public Announcements................................................................... 61
14.7 Expenses............................................................................... 61
14.8 Counterparts........................................................................... 61
14.9 Headings............................................................................... 62
14.10 Entire Agreement....................................................................... 62
14.11 Remedies Exclusive..................................................................... 62
14.12 Arbitration............................................................................ 62
14.13 Third Party Beneficiaries.............................................................. 63
Article XV Glossary.................................................................................. 64
15. Glossary............................................................................... 64
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LIST OF SCHEDULES
Schedule A - Ownership of Units
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Schedule 4.4(b) - Distribution Schedule
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Schedule 4.6 - Officers of the Surviving LLC
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Schedule 4.9(a) - Adjustment Shares Schedule
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Schedule 4.9(b) - Option Schedule
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Schedule 5.1(a) - Real Property
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Schedule 5.1(b) - Intangible Property
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Schedule 5.1(c) - Contracts and Agreements
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Schedule 5.1(d) - Employee Matters
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Schedule 5.1(e) - Indebtedness
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Schedule 5.1(f) - Accounts
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Schedule 5.1(g) - Capital Expenditure
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Schedule 5.1(h) - Operating Agreements
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Schedule 5.1(i) - Powers of Attorney
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Schedule 5.1(j) - Insurance
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Schedule 5.1(k) - Approvals
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Schedule 5.1(l) - Agreements Related to Distribution of Products
--------------- or Services
Schedule 5.1(m) - Other Material Agreements
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Schedule 5.2 - Foreign Qualifications
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Schedule 5.3 - Devnet Capitalization
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Schedule 5.4 - Subsidiaries
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Schedule 5.5 - No Violation
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Schedule 5.6 - Consents and Approvals of Governmental
------------ Authorities
Schedule 5.7 - Liabilities
------------
Schedule 5.8 - Contractual Arrangements with Members, Managing
------------ Member, Employees
Schedule 5.9(a) - Absence of Certain Changes
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Schedule 5.9(b) - Absence of Certain Changes
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Schedule 5.10(a)(i) - Title to Property
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Schedule 5.10(a)(ii) - Liens
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Schedule 5.10(b)(i) - Real Property Leased
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Schedule 5.10(b)(ii) - Interests in Real Property
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Schedule 5.10(c) - Status of Leases and Contracts
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Schedule 5.10(d) - Assets
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Schedule 5.10(e) - Encumbrances
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Schedule 5.11 - Patents, Trademarks, Trade Names
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Schedule 5.12 - Litigation; Compliance with Laws
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Schedule 5.13 - Environmental Permits, Licenses and Other
------------- Authorizations
Schedule 5.14 - Taxes and Tax Returns
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Schedule 5.15 - Benefit Plans
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Schedule 5.16 - Devnet Labor Matters
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Schedule 5.18 - Contracts
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Schedule 5.19 - Finders and Investment Bankers
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Schedule 5.20 - Licenses, Permits, and Authorizations
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Schedule 6.3 - FiberNet Capitalization
------------
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Schedule 6.4 - FiberNet No Violation
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Schedule 6.5(a) - FiberNet SEC Reports
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Schedule 6.6 - FiberNet Consents and Approvals of Governmental
------------ Authorities
Schedule 6.9 - Taxes and Tax Returns
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Schedule 7.1 - Conduct of Business
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Schedule 8.10 - Estoppel Certificates
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Schedule 8.22(a) - Key Persons of FiberNet
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Schedule 8.22(b) - Key Persons of Devnet
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Schedule 8.24 - Management Arrangements
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Schedule 10.12 - Members Agreements
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Schedule 11.7 - Approvals, Consents and Authorizations
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Schedule 14.12(a) - Notice to Members
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Schedule 14.12(b) - Notice to Optionees
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LIST OF EXHIBITS
Exhibit A-1 - Form of Joinder to Registration Rights Agreement and
----------- Lock-Up Agreement
Exhibit A-2 - Form of Joinder to Registration Rights Agreement and
----------- Stockholders Agreement
Exhibit B - Registration Rights Agreement
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Exhibit C - Form of Escrow Agreement
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Exhibit D - Form of Opinion of Xxxxx Xxxxxxxxxx LLP
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Exhibit E - Form of Consulting Agreement with Xxxx X. Xxxxxx
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Exhibit F - Form of Amendment to the Operating Agreement
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Exhibit G - Form of Opinion of Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx and
--------- Popeo PC
Exhibit H - Intra-Member Escrow Provisions
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Exhibit I - Form of Employment Agreement with Xxxxxx X. XxXxxxxxx
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Exhibit J - Press Release
---------
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is entered
into this 2/nd/ day of June, 2000, by and among FiberNet Telecom Group, Inc., a
Delaware corporation ("FiberNet" or, with regard to the period upon and after
the Effective Time (as defined herein), the "Surviving Corporation"), FiberNet
Holdco, Inc., a Delaware corporation ("Holdco"), which is a direct wholly-owned
subsidiary of FiberNet, FiberNet Merger Sub, Inc., a Delaware corporation
("Merger Sub"), which is a direct wholly-owned subsidiary of Holdco and an
indirect wholly-owned subsidiary of FiberNet (Holdco and Merger Sub,
collectively the "Constituent Corporations" and each, a "Constituent
Corporation"), Devnet Merger Sub, LLC, a Delaware limited liability company
("Devnet Merger Sub"), which is a direct wholly-owned subsidiary of Holdco and
an indirect wholly-owned subsidiary of FiberNet, Devnet L.L.C., a Delaware
limited liability company ("Devnet"), and FP Enterprises L.L.C., a Delaware
limited liability company and the managing member of Devnet (exclusively for the
purposes set forth in Section 13.15) (the "Managing Member").
WHEREAS, the Board of Directors of FiberNet and the Managing Member have
each determined that it is in the best interests of their respective
stockholders and members for FiberNet and Devnet to combine;
WHEREAS, FiberNet is a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "DGCL") and is authorized to issue
a total of 170,000,000 shares, consisting of: (i) 150,000,000 shares of common
stock, $.001 par value per share ("FiberNet Common Stock") and (ii) 20,000,000
shares of preferred stock, $.001 par value per share ("FiberNet Preferred
Stock"), of which (A) 133,333 shares have been designated Series C Preferred
Stock, $.001 par value per share ("FiberNet Series C Preferred Stock"), (B)
500,000 shares have been designated Series D Preferred Stock, $.001 par value
per share ("FiberNet Series D Preferred Stock"), (C) 750,000 shares have been
designated Series E Preferred Stock, $.001 par value per share ("FiberNet Series
E Preferred Stock"), and (D) 500,000 shares have been designated Series F
Preferred Stock, $.001 par value per share ("FiberNet Series F Preferred
Stock"). As of the close of business on May 24, 2000, there were (i) 28,509,009
shares of FiberNet Common Stock issued and outstanding (the "Outstanding
FiberNet Common Shares"); (ii) (A) 83,688 shares of FiberNet Series C Preferred
Stock issued and outstanding (the "Outstanding FiberNet Series C Preferred
Shares"); (B) 310,173 shares of FiberNet Series D Preferred Stock issued and
outstanding (the "Outstanding FiberNet Series D Preferred Shares"); (C) 293,872
shares of FiberNet Series E Preferred Stock issued and outstanding (the
"Outstanding FiberNet Series E Preferred Shares"); and (D) 347,819 shares of
FiberNet Series F Preferred Stock issued and outstanding (the "Outstanding
FiberNet Series F Preferred Shares"); (iii) 10,000,000 shares of FiberNet Common
Stock reserved for issuance upon exercise of stock options of FiberNet
outstanding or which may be granted pursuant to employee stock option and
similar plans; (iv) 9,602,328 shares of FiberNet Common Stock reserved for
issuance upon the conversion of FiberNet Preferred Stock; and (v) 10,296,260
shares of FiberNet Common Stock reserved for issuance upon the exercise of
FiberNet Warrants (as herein after defined) outstanding.
WHEREAS, Holdco is a corporation organized and existing under the DGCL and
is authorized to issue a total of 170,000,000 shares, consisting of: (i)
150,000,000 shares of common stock, par value $.001 per share ("Holdco Common
Stock") and (ii) 20,000,000 shares
of preferred stock, par value $.001 per share ("Holdco Preferred Stock"), of
which, prior to the Effective Time, (A) 133,333 shares will constitute a series
of Holdco Preferred Stock identical to FiberNet Series C Preferred Stock
("Holdco Series C Preferred Stock"), (B) 500,000 shares will constitute a series
of Holdco Preferred Stock identical to FiberNet Series D Preferred Stock
("Holdco Series D Preferred Stock"), (C) 750,000 shares will constitute a series
of Holdco Preferred Stock identical to FiberNet Series E Preferred Stock
("Holdco Series E Preferred Stock"), and (D) 500,000 shares will constitute a
series of Holdco Preferred Stock identical to FiberNet Series F Preferred Stock
("Holdco Series F Preferred Stock"). As of the date hereof, there are 100 shares
issued and outstanding of Holdco Common Stock (the "Outstanding Holdco Common
Shares");
WHEREAS, Merger Sub is a corporation organized and existing under the DGCL
and is authorized to issue a total of 100 shares, in a single class of common
stock, $.001 par value per share ("Merger Sub Common Stock"), of which, as of
the date hereof, 100 shares are issued and outstanding (the "Outstanding Merger
Sub Common Shares");
WHEREAS, as of the date hereof, Holdco holds of record all of the
Outstanding Merger Sub Common Stock and no shares of Merger Sub Common Stock are
issued but not outstanding;
WHEREAS, as of the date hereof, FiberNet holds of record all of the
Outstanding Holdco Common Shares and no shares of Holdco Common Stock are issued
but not outstanding;
WHEREAS, the respective Boards of Directors of FiberNet, Merger Sub and
Holdco have determined that it is advisable and in the best interests of each of
FiberNet, Merger Sub and Holdco and their respective stockholders that Merger
Sub be merged with and into FiberNet, with FiberNet continuing as the Surviving
Corporation, in accordance with the terms and conditions of this Agreement (the
"Merger"), and accordingly the Boards of Directors of each of FiberNet, Merger
Sub and Holdco have approved and authorized this Agreement and the transactions
contemplated hereby, including the Merger;
WHEREAS, Devnet is a limited liability company organized and existing under
the Delaware Limited Liability Company Act (the "DLLCA"), of which (i) 77.109%
of the issued and outstanding membership interests have been designated Class A
Units (the "Class A Units"), (ii) 19.277% of the issued and outstanding
membership interests have been designated Class B Units (the "Class B Units" and
together with the Class A Units, the "Units") and (iii) 3.614% of the issued and
outstanding membership interests have been designated Class C Units (the "Class
C Units"). The Units are held by the Members as set forth on Schedule A hereto.
----------
The Class C Units are held by FiberNet;
WHEREAS, Devnet Merger Sub is a limited liability company organized and
existing under the DLLCA, the sole member of which is Holdco;
WHEREAS, the Managing Member and Holdco have determined that it is
advisable and in the best interest of Devnet, the members of Devnet other than
FiberNet (the "Members"), Devnet Merger Sub and Holdco that Devnet Merger Sub
merge with and into Devnet with Devnet continuing as the surviving entity (the
"Devnet Merger"), in accordance with the terms and conditions of this Agreement,
and accordingly the Managing Member of Devnet, the Board of Directors of Holdco,
and Holdco as the sole member of Devnet Merger Sub have approved
2
and authorized this Agreement and the transactions contemplated hereby,
including the Devnet Merger;
WHEREAS, for federal income tax purposes, it is intended that (i) the
Merger, when taken together with the Devnet Merger, will qualify as an exchange
under the provisions of Section 351(a) of the Code and (ii) the Devnet Merger,
when taken together with the Merger, will qualify as an exchange under the
provisions of Section 351(b) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
THE MERGER
1. The Merger.
----------
1.1 The Merger; Filing and Effective Time. Subject to and in accordance
-------------------------------------
with the terms and conditions of this Agreement and the DGCL, at or as soon as
practicable after the Closing (as defined below), on the Closing Date, FiberNet
and Merger Sub shall file with the Secretary of State of the State of Delaware
(the "Delaware Secretary of State") a certificate of merger (the "FiberNet
Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the FiberNet Certificate of
Merger is duly filed with the Delaware Secretary of State. The Devnet Merger (as
defined below, and together with the Merger, the "Transaction") shall become
effective at such time as the Devnet Merger Certificate (as defined below) is
duly filed with the Delaware Secretary of State (the "Effective Time").
1.2 Closing. Subject to and in accordance with the terms and conditions of
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this Agreement, the closing of the Transaction (the "Closing") shall take place
as soon as practicable after satisfaction of the latest to occur of the
conditions set forth in Articles IX, X, and XI hereof (the "Closing Date"), at
the office of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Chrysler
Center, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, unless another date or place is
agreed to in writing by the parties hereto.
1.3 Effects of the Merger. The Merger shall have the effects set forth in
---------------------
Section 259 of the DGCL.
1.4 Certificate of Incorporation of the Surviving Corporation. The
---------------------------------------------------------
Restated Certificate of Incorporation of FiberNet, as in effect immediately
prior to the Effective Time (the "FiberNet Charter"), shall be the certificate
of incorporation of the Surviving Corporation (the "Surviving Corporation
Charter"), except that the following amendments thereto are to be effected by
the Merger upon the Effective Time:
3
(a) The Surviving Corporation Charter shall be amended by deleting
Article FIRST thereof in its entirety and inserting in lieu thereof the
following: "FIRST: The name of the Corporation is FiberNet Operations, Inc.
(hereinafter called, the "Corporation");"
(b) The Surviving Corporation Charter shall be amended by deleting
Article FOURTH thereof in its entirety and inserting in lieu thereof the
following: "FOURTH: The total number of shares of stock which the Corporation
has authority to issue is 100 shares of Common Stock, par value $0.01 per share
(the "Common Stock");" and
(c) The Surviving Corporation Charter shall be amended by adding and
inserting, immediately following Article TENTH thereof, a new Article ELEVENTH
thereof, to read in its entirety as follows:
"ELEVENTH: Any act or transaction by or involving the Corporation that
requires for its adoption under the DGCL or this Restated Certificate of
Incorporation the approval of stockholders of the Corporation shall,
pursuant to subsection (g) of Section 251 of the DGCL, require, in
addition, the approval of the stockholders of FiberNet Telecom Group, Inc.,
a Delaware corporation, or any successor thereto by merger, by the same
vote as if required by the DGCL and/or this Restated Certificate of
Incorporation."
1.5 Bylaws of the Surviving Corporation. The Bylaws of FiberNet as in
-----------------------------------
effect immediately prior to the Effective Time (the "FiberNet Bylaws"), shall be
and continue in full force and effect as the bylaws of the Surviving Corporation
upon and after the Effective Time, unless and until duly amended, altered,
changed, repealed, and/or supplemented in accordance with the DGCL (which power
and right to amend, alter, change, repeal, and/or supplement, at any time and
from time to time after the Effective Time, are hereby expressly reserved).
1.6 Directors and Officers of the Surviving Corporation
---------------------------------------------------
(a) The respective members constituting the whole Board of Directors
of FiberNet (the "FiberNet Board") immediately prior to the Effective Time shall
be and continue as the respective members constituting the whole Board of
Directors of the Surviving Corporation upon and after the Effective Time, until
such members' respective successors are duly elected and qualified or until such
members' earlier death, resignation, disqualification or removal and unless and
until the number of members of such Board of Directors shall be duly increased
or decreased in accordance with the DGCL (which power and right to increase and
decrease, at any time and from time to time after the Effective Time, are hereby
expressly reserved).
(b) Each person serving as an officer of FiberNet immediately prior
to the Effective Time shall be and continue as an officer of the Surviving
Corporation, holding the same office or offices, upon and after the Effective
Time, until such person's successor is chosen and qualified or until such
person's earlier death, resignation, disqualification, or removal (which power
and right to remove are hereby expressly reserved).
1.7 Further Assurances. At any time and from time to time upon and after
------------------
the Effective Time, as and when required or deemed desirable by the Surviving
Corporation or its successors or assigns, there shall be executed, acknowledged,
certified, sealed, delivered, filed,
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and/or recorded, in the name and on behalf of any and each Constituent
Corporation, such deeds, contracts, consents, certificates, notices, and other
documents and instruments, and there shall be done or taken or caused to be done
or taken, in the name and on behalf of any and each Constituent Corporation,
such further and other things and actions as shall be appropriate, necessary, or
convenient to acknowledge, vest, effect, perfect, conform of record, or
otherwise confirm the Surviving Corporation's (or its successors' or assigns')
right, title, and interest in kind to, and possession of, all the property,
interests, assets, rights, privileges, immunities, powers, franchises, and
authority of each Constituent Corporation held immediately prior to the
Effective Time, and otherwise to carry out and effect the intent and purposes of
this Agreement and the Merger. The officers and directors of the Surviving
Corporation (or its successors or assigns), and each of them, upon and after the
Effective Time, are and shall be fully authorized, in the name and on behalf of
each Constituent Corporation, to do and take and cause to be done and taken any
and all such things and actions, and to execute, acknowledge, certify, seal,
deliver, file, and/or record any and all such deeds, contracts, consents,
certificates, notices, and other documents and instruments.
ARTICLE II
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
2. Effect of Capital Stock. Upon and as of the Effective Time, by virtue of
-----------------------
the Merger and without any action on the part of the holders of the respective
shares:
2.1 Conversion of Merger Sub Shares. Each Outstanding Merger Sub Common
--------------------------------
Share shall be converted into one validly issued, fully paid and nonassessable
share of common stock, par value $0.001 per share (the "Surviving Corporation
Common Stock"), of the Surviving Corporation, to be issued and deemed to have
been issued by the Surviving Corporation automatically and immediately upon and
as of the Effective Time; the capital of the Surviving Corporation in respect of
each share of Surviving Corporation Common Stock to be an amount equal to the
par value thereof as permitted under the DGCL and such Outstanding Merger Sub
Common Shares shall be canceled and cease to exist.
2.2 Conversion of FiberNet Shares.
-----------------------------
(a) Each of the Outstanding FiberNet Common Shares shall be converted
into the right to receive one validly issued, fully paid and nonassessable share
of Holdco Common Stock and the Outstanding FiberNet Common Shares shall be
canceled and cease to exist.
(b) Each of the Outstanding FiberNet Series C Preferred Shares shall
be converted into the right to receive one validly issued, fully paid and
nonassessable share of Holdco Series C Preferred Stock (with rights to accrued,
accumulated and unpaid dividends, if any, on each Outstanding Series C Preferred
Share (the "Series C Accumulated Dividends") being preserved, unimpaired,
unchanged, and unaffected by such conversion in the Merger, such Series C
Accumulated Dividends carrying over and pertaining to and being accrued,
accumulated, and unpaid dividends on each such share of Holdco Series C
Preferred Stock) and such Outstanding FiberNet Series C Preferred Shares shall
no longer be outstanding and shall automatically be canceled and cease to exist.
5
(c) Each of the Outstanding FiberNet Series D Preferred Shares shall
be converted into the right to receive one validly issued, fully paid and
nonassessable share of Holdco Series D Preferred Stock (with rights to accrued,
accumulated and unpaid dividends, if any, on each Outstanding Series D Preferred
Share (the "Series D Accumulated Dividends") being preserved, unimpaired,
unchanged, and unaffected by such conversion in the Merger, such Series D
Accumulated Dividends carrying over and pertaining to and being accrued,
accumulated, and unpaid dividends on each such share of Holdco Series D
Preferred Stock) and such Outstanding FiberNet Series D Preferred Shares shall
no longer be outstanding and shall automatically be canceled and cease to exist.
(d) Each of the Outstanding FiberNet Series E Preferred Shares shall
be converted into the right to receive one validly issued, fully paid and
nonassessable share of Holdco Series E Preferred Stock (with rights to accrued,
accumulated and unpaid dividends, if any, on each Outstanding Series E Preferred
Share (the "Series E Accumulated Dividends") being preserved, unimpaired,
unchanged, and unaffected by such conversion in the Merger, such Series E
Accumulated Dividends carrying over and pertaining to and being accrued,
accumulated, and unpaid dividends on each such share of Holdco Series E
Preferred Stock) and such Outstanding FiberNet Series E Preferred Shares shall
no longer be outstanding and shall automatically be canceled and cease to exist.
(e) Each of the Outstanding FiberNet Series F Preferred Shares shall
be converted into the right to receive one validly issued, fully paid and
nonassessable share of Holdco Series F Preferred Stock (with rights to accrued,
accumulated and unpaid dividends, if any, on each Outstanding Series F Preferred
Share (the "Series F Accumulated Dividends") being preserved, unimpaired,
unchanged, and unaffected by such conversion in the Merger, such Series F
Accumulated Dividends carrying over and pertaining to and being accrued,
accumulated, and unpaid dividends, if any, on each such share of Holdco Series F
Preferred Stock) and such Outstanding FiberNet Series F Preferred Shares shall
no longer be outstanding and automatically shall be canceled and cease to exist.
(f) Each additional share of FiberNet Common Stock or FiberNet
Preferred Stock or other convertible security of FiberNet issued and outstanding
at the Effective Time, if any, ("FiberNet New Stock") shall be converted into
the right to receive one validly issued, fully paid and nonassessable share of
Holdco Common Stock or Holdco Preferred Stock or other convertible security of
Holdco, as the case may be, ("Holdco New Stock") which share of Holdco New Stock
shall be identical to the FiberNet New Stock (with the rights to accrued,
accumulated and unpaid dividends, if any, on each such share of FiberNet New
Stock (the "New Stock Accumulated Dividends") being preserved, unimpaired,
unchanged and unaffected by such conversion in the Merger, such New Stock
Accumulated Dividends carrying over and pertaining to and being accrued,
accumulated, and unpaid dividends, if any, on each share of FiberNet New Stock)
and such FiberNet New Stock shall no longer be outstanding and automatically be
cancelled and cease to exist.
2.3 Notification of Transfer Agent. Prior to the Closing Date, Merger Sub
------------------------------
and FiberNet shall notify their respective transfer agents of the conversions of
shares of FiberNet stock and of shares of Merger Sub stock and the cancellation
of shares of FiberNet stock and Merger Sub stock pursuant to Sections 2.1 and
2.2 hereof.
6
2.4 Stock Certificates. Upon and as of the Effective Time, by virtue of
------------------
the Merger and without any action on the part of either of the Constituent
Corporations, Holdco, the holders of the respective shares, or any other person:
(a) Holdco. The shares of Holdco Common Stock and the shares of
Holdco Preferred Stock into which the Outstanding FiberNet Common Shares, the
Outstanding FiberNet Series C Shares, the Outstanding FiberNet Series D Shares,
the Outstanding FiberNet Series E Shares and the Outstanding FiberNet Series F
Shares shall have been converted pursuant to Section 2.2 hereof shall be
represented and evidenced by the same stock certificates that previously
represented and evidenced such Outstanding FiberNet Common Shares, such
Outstanding FiberNet Series C Shares, such Outstanding FiberNet Series D Shares,
such Outstanding FiberNet Series E Shares and such Outstanding FiberNet Series F
Shares; and
(b) FiberNet. Holdco, as the holder of the certificate (the "Merger
Sub Common Stock Certificate") that immediately prior to the Effective Time
evidences the Outstanding Merger Sub Common Shares may, at Holdco's option,
surrender the same to the Surviving Corporation for cancellation, and Holdco
shall be entitled to receive from the Surviving Corporation in exchange therefor
a certificate representing and evidencing the shares of Surviving Corporation
Common Stock into which Holdco's Outstanding Merger Sub Common Shares shall have
been converted; until surrendered, the Merger Sub Common Stock Certificate shall
represent and evidence the shares of Surviving Corporation Common Stock into
which the Outstanding Merger Sub Common Shares theretofore represented and
evidenced thereby shall have been converted pursuant to Section 2.2 hereof.
ARTICLE III
ADDITIONAL MERGER AGREEMENTS
3. Additional Merger Agreements
----------------------------
3.1 Directors and Officers of Holdco Upon the Effective Time.
--------------------------------------------------------
(a) Directors. As of the Effective Time: (i) the number of members
---------
constituting the whole Board of Directors of Holdco (the "Holdco Board") shall
be equal to the number of members constituting the whole FiberNet Board
immediately prior to the Effective Time; and (ii) the Holdco Board shall consist
of all the persons serving as members of the FiberNet Board immediately prior to
the Effective Time.
(b) Officers. As of the Effective Time, the officers of Holdco shall
--------
be the persons serving as officers of FiberNet immediately prior to the
Effective Time.
3.2 Holdco Certificate of Incorporation. As of the Effective Time, the
-----------------------------------
certificate of incorporation of Holdco shall contain provisions identical to the
FiberNet Charter immediately prior to the Effective Time, which provisions
shall, among other things, reflect an amendment to the FiberNet Charter changing
Holdco's name to "FiberNet Telecom Group, Inc." (the "Holdco Charter").
7
3.3 Holdco Bylaws. As of the Effective Time, the bylaws of Holdco shall
-------------
contain provisions identical to the FiberNet Bylaws immediately prior to the
Effective Time (the "Holdco Bylaws"). To that end, prior to the Effective Time,
to the extent necessary to give effect to the intent of the preceding sentence,
Holdco shall take all requisite action to cause the Holdco Bylaws, as the same
theretofore may have been amended, altered, changed and/or supplemented, to be
duly amended and restated in accordance with the DGCL to contain provisions
identical to the FiberNet Bylaws immediately prior to the Effective Time, and as
so amended and restated such Holdco Bylaws shall be and remain the Holdco Bylaws
upon and after the Effective Time, unless and until thereafter duly amended,
altered, changed, repealed and/or supplemented in accordance with the DGCL
(which power and right to amend, alter, change, repeal, and/or supplement, at
any time and from time to time after the Effective Time, are hereby expressly
reserved).
3.4 No FiberNet Stockholder Meeting; Merger Sub Stockholder Written
---------------------------------------------------------------
Consent. The parties understand and acknowledge that it is contemplated that
-------
the Merger will be effected in accordance with Section 251(g) of the DGCL and
that no vote of FiberNet's stockholders adopting, approving or authorizing this
Agreement and the transactions contemplated hereby, including the Merger, will
be required under the DGCL. Holdco, in its capacity as the sole stockholder of
Merger Sub, as promptly as practicable on or after the date hereof, shall
execute and deliver to Merger Sub a written consent in lieu of a stockholder
meeting adopting, approving and authorizing this Agreement and the transactions
contemplated hereby, including the Merger, in accordance with Section 228 of the
DGCL.
3.5 Employee and Director FiberNet Stock Options. Upon and as of the
--------------------------------------------
Effective Time, to the fullest extent permitted by applicable law, Holdco shall
assume all of FiberNet's obligations, and FiberNet shall have no further
obligations, with respect to any then-outstanding option (each, a "FiberNet
Option," which shall become property of Holdco upon the Merger) to acquire
shares of FiberNet Common Stock issued under any employee or non-employee
director stock option plan, agreement or similar arrangement of FiberNet (the
"FiberNet Option Plans") and the due exercise of rights under any such FiberNet
Option shall entitle the holder thereof to acquire, upon the same terms and
conditions that were applicable under the corresponding FiberNet Option, a
number of shares of Holdco Common Stock identical to the class and number of
shares of FiberNet Common Stock that were subject to such corresponding FiberNet
Option (a "Holdco Option"). FiberNet and Holdco agree to take all corporate and
other action as shall be necessary to effectuate the foregoing, and FiberNet
shall use its best efforts to obtain, if required, prior to the Closing Date,
such consent of each holder of a FiberNet Option as shall be necessary to
effectuate the foregoing. Holdco shall take all corporate and other action
necessary to reserve and make available for issuance upon the due exercise of
rights under the Holdco Options a sufficient number of shares of Holdco Common
Stock, and as soon as practicable following the Effective Time, shall provide to
each record holder of the Holdco Options appropriate notice of such holder's
rights thereunder. Upon and as of the Effective Time, Holdco shall assume all of
FiberNet's rights and obligations under the FiberNet Option Plans, including
with respect to shares that are reserved for future issuance thereunder.
3.6 FiberNet Warrants. Upon and as of the Effective Time and in connection
-----------------
with the Merger, Holdco shall assume FiberNet's obligations to issue securities
deliverable upon the exercise of any then-outstanding warrants to acquire shares
of FiberNet Common Stock (each a "FiberNet Warrant") and accordingly, the due
exercise of rights under any such FiberNet
8
Warrant shall entitle the holder thereof to acquire, upon the same terms and
conditions that were applicable under the corresponding FiberNet Warrant, a
number of shares of Holdco Common Stock identical to the class and number of
shares of FiberNet Common Stock that were subject to such corresponding FiberNet
Warrant. FiberNet and Holdco agree to take all corporate and other action as
shall be necessary to effectuate the foregoing, including the execution of
supplemental warrant agreements as required. Holdco shall take all corporate and
other action necessary to reserve and make available for issuance upon the due
exercise of rights under the FiberNet Warrants a sufficient number of shares of
Holdco Common Stock, and as soon as practicable following the Effective Time,
shall provide to each record holder of the FiberNet Warrants appropriate notice
of such holder's rights thereunder.
3.7 Outstanding Holdco Common Shares. Upon and as of the Effective Time,
--------------------------------
FiberNet shall surrender to Holdco the certificate representing the Outstanding
Holdco Common Shares, and the Outstanding Holdco Common Shares shall be retired
as permitted under the DGCL and resume the status of authorized and unissued
shares of Holdco Common Stock.
3.8 Other Agreements. At the Effective Time, Holdco shall assume any
----------------
obligation of FiberNet to deliver or make available shares of FiberNet Common
Stock under any instrument, agreement or employee benefit plan not referred to
in this Article III to which FiberNet or any of its subsidiaries is a party. Any
reference to FiberNet Common Stock under any such instrument, agreement or
employee benefit plan shall be deemed to be a reference to Holdco Common Stock
and one share of Holdco Common Stock shall be issuable in lieu of each share of
FiberNet Common Stock required to be issued by any such instrument, agreement or
employee benefit plan, subject to subsequent adjustment as provided in any such
instrument, agreement or employee benefit plan.
3.9 Holdco as Successor Registrant to FiberNet. It is the intent of the
------------------------------------------
parties hereto that Holdco, as of the Effective Time, be deemed a "successor
issuer" for purposes of Rule 12g - 3(a) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), so that Holdco Common Stock shall be
deemed registered under Section 12 of the Exchange Act.
3.10 Filings. At the Effective Time, the Surviving Corporation shall cause
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the FiberNet Certificate of Merger to be executed and filed with the Delaware
Secretary of State. At the Effective Time, to the extent necessary to effectuate
the amendments to the Surviving Corporation Charter and the Holdco Charter
contemplated by this Agreement, each of the Surviving Corporation and Holdco
shall cause to be filed with the Delaware Secretary of State such certificates
or documents required to give effect thereto.
ARTICLE IV
DEVNET MERGER
4. Devnet Merger
-------------
4.1 The Devnet Merger. Subject to and in accordance with the terms and
-----------------
conditions of this Agreement and in accordance with the DLLCA, at or as soon as
practicable after the Closing (as defined in Section 1.2 hereof), on the Closing
Date, Devnet Merger Sub and Devnet shall file with the Delaware Secretary of
State a certificate of merger (the "Devnet Merger
9
Certificate") in accordance with the relevant provisions of the DLLCA and shall
make all other filings or recordings required under the DLLCA. Upon and after
the Closing Date, the separate existence of Devnet Merger Sub shall cease and
Devnet shall be the surviving entity in the Devnet Merger (the "Surviving LLC").
In accordance with the DLLCA, all of the rights, privileges, powers, purposes
and immunities of Devnet and Devnet Merger Sub shall vest in the Surviving LLC
and all of the liabilities and duties of Devnet and Devnet Merger Sub shall
become the liabilities and duties of the Surviving LLC.
4.2 Conversion of Units. At the Effective Time, by virtue of the Devnet
-------------------
Merger and without any action on the part of the holder of any Units or any
limited liability company interests of Devnet Merger Sub (the "Devnet Merger Sub
Units"):
(a) Effect on Devnet Merger Sub Units. All of the issued and
outstanding Devnet Merger Sub Units shall be converted into and become issued
and outstanding limited liability company interests of the Surviving LLC.
(b) Conversion of Units. All of the Units issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive the Devnet Merger Consideration (as defined in Section 4.4(a) below).
(c) The Class C Units issued and outstanding immediately prior to the
Effective Time shall remain outstanding as Class C Units of the Surviving LLC.
4.3 The Effective Time. Subject to and in accordance with the terms and
------------------
conditions of this Agreement and the DLLCA, at or as soon as practicable after
the Closing, on the Closing Date, the Surviving LLC shall deliver and file a
certificate of merger (the "Devnet Certificate of Merger") with the Delaware
Secretary of State in accordance with the relevant provisions of the DLLCA and
shall make all other filings or recordings required in connection herewith under
the DLLCA.
4.4 Devnet Merger Consideration.
---------------------------
(a) The aggregate consideration for all of the Units (the "Devnet
Merger Consideration") is equal to 3,610,000 (such number of shares, and any
other share and per share numbers used in this Agreement shall be adjusted
equitably for stock splits, stock dividends, combinations, etc.) shares of
Holdco Common Stock less the Adjustment Shares (as defined in Schedule 4.9(a))
(the "Devnet Merger Securities") and an amount in cash equal to fifteen million
dollars ($15,000,000) less the Members' Fees (as defined in Section 14.7) (the
"Cash Consideration," and together with the Devnet Merger Securities, the
"Devnet Merger Consideration").
(b) In the Merger, the Units shall be converted into the right to
receive the Devnet Merger Consideration except that, with respect to the Escrow
Shares (as defined in Section 13.2), which are hereby directed by and on behalf
of the holders of Units to be placed in the Escrow Fund, the right to physically
receive such Escrow Shares from the Escrow Fund shall be contingent to the
extent such Shares may be subject to claims (including claims relating to FP
Escrow Costs as defined in Section 13.4) as contemplated by Article XIII. The
Devnet Merger
10
Consideration shall be allocated among the Members in the manner set forth on
Schedule 4.4(b) hereto (the "Distribution Schedule").
4.5 Certificate of Formation and Operating Agreement. The Certificate of
------------------------------------------------
Formation of Devnet Merger Sub in effect at the Effective Time shall be the
Certificate of Formation of the Surviving LLC until amended in accordance with
its terms and applicable law; provided, however, that at the Effective Time,
Article I of such Certificate of Formation shall be amended by virtue of this
Agreement to read as follows:
"ARTICLE I The name of the limited liability company (hereinafter called
the "limited liability company") is Devnet L.L.C."
The Operating Agreement of Devnet Merger Sub in effect at the Effective
Time shall be the Operating Agreement of the Surviving L.L.C. until amended in
accordance with its terms and applicable law.
4.6 Officers. As of the Effective Time, the officers of the Surviving LLC
--------
shall be as set forth in Schedule 4.6 hereto.
4.7 Effects of the Merger. The Merger shall have the effects set forth in
---------------------
Sections 18-209 and 18-210 of the DLLCA.
4.8 Payment of the Devnet Merger Consideration.
------------------------------------------
(a) Exchange Agent. Prior to the Effective Time, FiberNet shall
--------------
designate United States Trust Company of New York ("US Trust") (or such other
bank or trust company as is reasonably acceptable to Devnet) to act as exchange
agent in the Devnet Merger (the "Exchange Agent") for purposes of effecting the
exchange of the Units for the Devnet Merger Consideration. At the Effective
Time, Holdco shall deposit with the Exchange Agent, for the benefit of the
holders of the Units, (i) the shares of Holdco Common Stock comprising the
Devnet Merger Securities less the Escrow Shares (as defined in Section 13.2) to
be deposited into an escrow fund (the "Escrow Fund") pursuant to the
requirements of Article XIII and (ii) an amount in cash in immediately available
funds equal to the Cash Consideration (the "Initial Merger Consideration").
FiberNet agrees to cause Holdco to make available to the Exchange Agent from
time to time as needed, cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 4.8(e) and any dividends or other distributions pursuant to
Section 4.8(b). For purposes of this Agreement, the Initial Merger Consideration
and any cash in lieu of fractional shares with respect thereto and any dividends
or distributions with respect thereto are hereinafter referred to as the
"Exchange Fund." The Exchange Agent shall, pursuant to irrevocable instructions,
deliver the Devnet Merger Consideration (less the Escrow Shares) in accordance
with Section 4.8(b).
(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, Holdco and the Surviving LLC shall instruct the Exchange Agent
to mail to each holder of record of a Devnet Certificate or Certificates whose
Units were converted into the right to receive the Devnet Merger Consideration
(less the Escrow Shares) pursuant to Section 4.8(a) (i) a letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to the
Units shall pass, only upon delivery of the certificates evidencing the Units
(the "Devnet
11
Certificates") to the Exchange Agent, in such form and with other provisions as
Holdco and the Surviving LLC may reasonably specify and (ii) instructions for
use in effecting the surrender of the Devnet Certificates in exchange for the
Initial Merger Consideration and any cash in lieu of fractional shares. Upon
surrender of a Devnet Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, and such other
documents as reasonably may be required by the Exchange Agent, and acceptance
thereof by the Exchange Agent, each holder of a Devnet Certificate shall be
entitled to receive in exchange therefor (A) a certificate representing the
number of whole shares of Holdco Common Stock comprising the Devnet Merger
Securities that such holder has the right to receive pursuant to the provisions
of this Article IV less the number of Escrow Shares to be deposited on such
holder's behalf pursuant to Article XIII hereof and (B) a check in the amount
equal to the cash that such holder has the right to receive pursuant to the
provisions of this Article IV, including the Cash Consideration and cash in lieu
of fractional shares pursuant to Section 4.8(e) and dividends and other
distributions pursuant to this Section 4.8(b). The Exchange Agent shall accept
such Devnet Certificates upon compliance with such reasonable terms and
conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices, and the Devnet Certificate
so surrendered shall forthwith be canceled. After the Effective Time, there
shall be no further transfer of Devnet Certificates on the books and records of
the Surviving LLC or its transfer agent and, if such Devnet Certificates are
presented to the Surviving LLC or its transfer agent for transfer, they shall be
canceled against delivery of the Initial Merger Consideration and any cash
payable pursuant to this Section 4.8(b) or Section 4.8(e) that such holder has
the right to receive pursuant to the provisions of this Article IV, and the
Devnet Certificate so surrendered shall forthwith be canceled. If any
certificates for shares of Holdco Common Stock are to be issued in a name other
than that in which the Devnet Certificate surrendered for exchange is
registered, it shall be a condition of such exchange that the Devnet Certificate
so surrendered shall be properly endorsed, with the signature guaranteed, or
otherwise in proper form for transfer and that the Person requesting such
exchange shall pay to Holdco or its transfer agent any transfer or other taxes
required by reason of the issuance of certificates representing such shares of
Holdco Common Stock in a name other than that of the registered holder of the
Devnet Certificate surrendered, or establish to the satisfaction of Holdco or
its transfer agent that such tax has been paid or is not required to be paid
under the applicable law. Until surrendered as contemplated by this Section
4.8(b), each Devnet Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender certificates
representing the shares of Holdco Common Stock to which such holder is entitled
and cash and other dividends, distributions or payments as contemplated by this
Article IV. Subject to applicable law, following surrender of any such Devnet
Certificate, there shall be paid to the record holder thereof, the certificates
representing the shares of Holdco Common Stock issued in exchange therefor, as
well as, (x) at the time of such surrender, the amount of cash payable pursuant
to this Article IV, including the Cash Consideration and cash in lieu of
fractional shares pursuant to Section 4.8(e) and (y) at the time of such
surrender, the amount of dividends or other distributions or payments with a
record date after the Effective Time theretofore paid (or to be paid) with
respect to shares of Holdco Common Stock. In no event shall Persons entitled to
receive such Cash Consideration or other dividends, distributions or payments be
entitled to receive any interest thereon.
(c) Distributions with respect to Unexchanged Units. No dividends or
-----------------------------------------------
other distributions or payments declared or made after the Effective Time with
respect to Holdco Common Stock, with a record date after the Effective Time, and
no cash payment in lieu of
12
fractional shares shall be paid to the holder of any unsurrendered Devnet
Certificate with respect to the shares of Holdco Common Stock represented
thereby until the holder of record of such Devnet Certificate has surrendered
such Devnet Certificate.
(d) No Further Ownership Rights. The Devnet Merger Consideration paid
---------------------------
upon the surrender for exchange of Devnet Certificates in accordance with the
terms of this Article IV, together with any cash in lieu of fractional shares
and dividends, distributions or payments contemplated by Section 4.8(b) shall be
deemed to have been issued (and paid) in full satisfaction of all rights in
respect of the Units theretofore represented by such Devnet Certificates. If,
after the Effective Time, Devnet Certificates are presented to Holdco, the
Surviving LLC or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article IV.
(e) No Fractional Shares of Holdco Common Stock.
(i) No certificates or script of shares of Holdco Common Stock
representing fractional shares of Holdco Common Stock shall be issued upon
the surrender for exchange of Devnet Certificates and such fractional share
interests will not entitle the owner thereof to vote or to have any rights
of a stockholder of Holdco or a holder of shares of Holdco Common Stock.
(ii) Notwithstanding any other provision of this Agreement, each
holder of Units exchanged pursuant to the Devnet Merger who would otherwise
have been entitled to receive a fraction of a share of Holdco Common Stock
(determined after taking into account all Devnet Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to the product of (A) such fractional part of a share of
Holdco Common Stock, multiplied by (B) the closing bid price for a share of
Holdco Common Stock as reported on The Nasdaq Stock Market, Inc. ("Nasdaq")
on the first trading day following the date on which the Effective Time
occurs. As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional interests, the Exchange
Agent shall so notify Holdco, and Holdco shall deposit such amount with the
Exchange Agent and shall cause the Exchange Agent to forward payments to
such holders of fractional interests subject to and in accordance with the
terms hereof.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed for six months after the Effective Time shall be
delivered to Holdco, upon demand, and any former holders of the Units who have
not theretofore complied with this Article IV shall thereafter look only to
Holdco for payment of their claim for any Devnet Merger Consideration and any
cash in lieu of fractional shares of Holdco Common Stock to which such holders
are entitled pursuant to Section 4.8(e) and any dividends or distributions or
other payments with respect to shares of Holdco Common Stock to which such
holders are entitled pursuant to Section 4.8(b).
(g) No Liability. None of Holdco, the Surviving LLC, the Exchange
------------
Agent or any other Person shall be liable to any Person in respect of any shares
of Devnet Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
13
(h) Investment of the Exchange Fund. The Exchange Agent shall invest
-------------------------------
any cash included in the Exchange Fund in high quality money market investments
as directed by Holdco on a daily basis; provided that no such investment or loss
thereon shall affect the amount payable to holders of Units pursuant to this
Article IV. Any interest or other income resulting from such investments shall
be promptly paid to Holdco and any loss shall be reimbursed by Holdco.
4.9 Options. At the Effective Time, Holdco shall grant Options (as defined
-------
in Schedule 4.9(a) hereto) to the Persons identified in the Option Schedule
attached hereto as Schedule 4.9(b) (the "Optionees") in accordance with both
such Schedules and upon the terms and conditions set forth in such Schedules,
including, without limitation, a lapsing right of repurchase that will allow
Holdco to repurchase any shares of Holdco Common Stock acquired upon the
exercise of any Option at the exercise price of such Option in the event of
termination of the Optionee's employment prior to the second anniversary of the
Closing Date. If an Optionee is terminated without cause (an "Optionee
Termination") at a time when Xxxxxx X. XxXxxxxxx is a full time employee with
Holdco, such Optionee's Options shall only be subject to the aforementioned
lapsing right of repurchase if (i) Xx. XxXxxxxxx, in his capacity as a full time
employee of Holdco, has, prior to any Optionee Termination, received reasonable
written notice of the Optionee Termination and (ii) Xx. XxXxxxxxx shall have
failed to object in writing to such Optionee Termination within five business
days of his having received such written notice. If an Optionee Termination
occurs at a time when Xx. XxXxxxxxx is not a full time employee with Holdco,
such lapsing right of repurchase shall not apply if Xx. XxXxxxxxx'x employment
with Holdco shall have been terminated by Holdco without cause (within the
meaning of such phrase as defined in the employment agreement between Xx.
XxXxxxxxx and Holdco, a form of which is attached hereto as Exhibit I). Holdco's
lapsing right of repurchase set forth above shall not apply to Carolina
Financial Securities, LLC.
4.10 Lost Certificates. If any Devnet Certificate shall not have been
-----------------
issued or shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Devnet Certificate to be
unissued, lost, stolen or destroyed, including indemnity against any claim that
may be made against Holdco with respect to such Devnet Certificate, the Exchange
Agent will pay, in exchange for such affidavit claiming such Devnet Certificate
is lost, stolen or destroyed, the Devnet Merger Consideration, to be paid in
respect of the Units represented by such Devnet Certificate, any cash in lieu of
fractional shares of Holdco Common Stock and any unpaid dividends and
distributions on shares of Holdco Common Stock deliverable in respect thereof,
each as contemplated by this Article IV.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DEVNET
5. Representations and Warranties of Devnet
----------------------------------------
Devnet hereby represents and warrants to FiberNet, Holdco, Merger Sub and
Devnet Merger Sub as follows:
5.1 Description and Lists. Schedules 5.1(a) through 5.1(m) hereto contain
---------------------
the following information and all such information is true, correct and
complete:
14
(a) Schedule 5.1(a) sets forth a list of all interests in real
property owned, leased, subleased or otherwise used by Devnet, stating the
location of such property;
(b) Schedule 5.1(b) sets forth a list of all Intangible Property (as
hereinafter defined in Section 5.11 hereof) including all United States and
foreign patents and patent applications, invention disclosures, trademarks,
trade names, service marks and copyrights (including any registration or
applications for registration of any of the foregoing) or any similar type of
proprietary intellectual right owned by Devnet, indicating any applications,
registrations, or filings associated therewith and indicating whether such
Intangible Property is owned or licensed and also stating the expiration dates
of the patent or license underlying such Intangible Property;
(c) Schedule 5.1(c) sets forth a list of each contract and agreement:
(i) under which Devnet is lessee of or holds personal property, which provides
for a period of performance which extends beyond twenty-four (24) months from
the date of this Agreement or involves any obligation to make payments or right
to obtain receipts, after the date of this Agreement, in each case in excess of
$25,000; (ii) to which Devnet is a party or to which, to Devnet's knowledge,
Devnet is or may be bound or subject (other than those contracts and agreements
giving rise to Landlord Encumbrances, as defined in Section 5.10(e)), relating
to any merger, reorganization, bankruptcy proceeding, business acquisition,
transaction or transactions for the acquisition of all or any substantial
portion of the stock, securities, assets or business of any person or involving
the assumption of the liability of any person; (iii) in each case to which
Devnet is a party or to which, to Devnet's knowledge, Devnet may be bound or
subject (other than those contracts and agreements giving rise to Landlord
Encumbrances, as defined in Section 5.10(e)), which provide for performance by
Devnet, or to Devnet's knowledge, any Person for a term of more than 180 days
from the date hereof or involves any obligation by Devnet to make, or any right
for Devnet to receive, payments, after the date of this Agreement, in each case
in excess of $25,000; (iv) between Devnet and any telecommunication provider
that is material to the operation of Devnet's business; (v) between Devnet and
any owners or property managers of office building properties relating to
telecommunications access rights to the real property owned or controlled by
such property manager; (vi) establishing or providing for any partnership, joint
venture or other similar agreement or arrangement between Devnet and any other
person; (vii) to which Devnet is a party and contains covenants not to compete
on the part of Devnet; (viii) to which Devnet is a party and which limits the
freedom of Devnet to own, operate, sell, transfer, pledge or otherwise dispose
of or encumber any assets or which would so limit the freedom of Holdco,
FiberNet or their Affiliates after the Closing Date; or (ix) pursuant to which
any Person acts as agent, salesman, broker or in a similar representative
capacity or as a subcontractor for Devnet.
(d) Schedule 5.1(d) sets forth a list of: (i) the job title, current
annual salary rates and required bonuses of all present officers, employees and
agents of Devnet having an annual compensation in excess of $25,000 per year
(including commissions, benefits and bonuses); and (ii) all employment or
compensation agreements with each officer and employee of Devnet (including all
severance, "stay-put" and similar agreements and all agreements which result in
the creation or incurrence of any right, duty or obligation based upon, or as a
result of, any change of control of Devnet or its assets but excluding
arrangements as to advances for, and reimbursements of, business expenses
incurred in the ordinary course of business);
15
(e) Schedule 5.1(e) sets forth a list of each agreement, indenture,
contract, commitment, mortgage or other instrument, regarding money borrowed, or
third party obligations guaranteed by Devnet, or any letter of credit issued at
the request or on behalf of Devnet;
(f) Schedule 5.1(f) sets forth: (i) the name of every bank in which
Devnet has an account or safe deposit box; (ii) the identifying numbers of all
such accounts and safe deposit boxes; and (iii) the names of all persons having
power to borrow, discount debt obligations, cash or draw checks or otherwise act
on behalf of Devnet in any dealings with such banks;
(g) Schedule 5.1(g) sets forth a list of each of Devnet's approved
capital expenditure projects (including without limitation, each construction
project) in excess of $50,000 including: (i) projects which have been commenced
but are not yet completed; (ii) projects which have not been commenced and (iii)
projects which have been completed in respect of which payment has been made,
within the past twelve (12) months. For the period from December 31, 1999 to
April 30, 2000 the aggregate amount expended for capital expenditure projects
has been approximately $116,545;
(h) Schedule 5.1(h) hereto sets forth copies of the Amended and
Restated Limited Liability Company Agreement of Devnet L.L.C., dated as of
January 16, 1998, as amended (the "Operating Agreement");
(i) Schedule 5.1(i) sets forth a list of all contracts or agreements
granting a power of attorney from, or similar authority to act for, Devnet;
(j) Schedule 5.1(j) sets forth a list of all policies of fire,
liability, title, products liability and other forms of insurance maintained by
Devnet and all binders of insurance and all of Devnet's programs of self
insurance, together with a list and brief description of all claims of Devnet
which have been submitted to any insurer but have not been finally disposed of;
(k) Schedule 5.1(k) sets forth a list of all Approvals (as defined in
Section 5.20 hereof) (provided that, with respect to matters related to
Environmental Laws the same may be listed on Schedule 5.13);
(l) Schedule 5.1(l) sets forth a list of all agreements and contracts
related to the distribution of any products or services by Devnet; and
(m) Schedule 5.1(m) sets forth a list of any material agreement of
Devnet which is not set forth in any of the Schedules 5.1(a) through 5.1(l).
Devnet has made available to FiberNet copies that are true, correct and in
all material respects complete, of all documents, contracts, instruments and
agreements which are referred to in Schedules 5.1(a) through 5.1(m) and all
material amendments, modifications, supplements or renewals with respect
thereto.
5.2 Limited Liability Company Organization; Authority.
-------------------------------------------------
(a) Devnet is duly organized, validly existing and in good standing
under the laws of the State of Delaware. Devnet has full limited liability
company power and all lawful
16
authority to own, lease and operate its properties and to carry on its Business,
as defined herein. Devnet is duly qualified or licensed to do business as a
foreign limited liability company and is in good standing in each jurisdiction
set forth on Schedule 5.2 hereto and such listed jurisdictions constitute all
those in which its ownership of property or the conduct of its business requires
such qualification, except where a failure to be so qualified would not have a
Material Adverse Effect.
(b) Devnet has full limited liability company power and authority to
enter into this Agreement and the Documents executed and delivered by Devnet and
to consummate the transactions contemplated hereby and thereby. Devnet and the
Managing Member have taken all actions required to authorize the execution and
delivery of this Agreement and the Documents executed and delivered by Devnet,
the performance of Devnet hereunder and thereunder and the consummation by
Devnet of the transactions contemplated hereby and thereby, including, without
limitation, the Devnet Merger. No further company proceedings on the part of
Devnet, the Managing Member or any of its Members are necessary to authorize the
execution and delivery of this Agreement or the Documents executed and delivered
by Devnet or the performance by Devnet of its obligations hereunder or
thereunder, including, without limitation, the Devnet Merger. This Agreement is
and each Document executed and delivered by Devnet will be a valid and binding
agreement of Devnet, enforceable against Devnet in accordance with its terms,
except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other laws relating to or affecting
creditors rights generally or by general principles of equity. Upon consummation
of the Devnet Merger in accordance with the terms hereof, Holdco will be the
holder of all of the Units transferred in the Devnet Merger, free and clear of
all liens, claims relating to the ownership of the Units, pre-emptive rights,
rights of third parties relating to ownership of the Units, and encumbrances,
other than any liens, claims, pre-emptive rights, rights of third parties, or
encumbrances created by FiberNet, Holdco, Merger Sub, Devnet Merger Sub or any
Person claiming by, through or under any of the foregoing, and no person
previously owning any Units, will, thereafter own or have any right to acquire,
any of such Units (in each case other than solely as a result of actions taken
by Holdco).
5.3 Capitalization. The issued and outstanding Membership Interests of
--------------
Devnet consist of (i) 101.01 Class A Units (ii) 100 Class B Units, and (iii) 100
of Class C Units all of which are duly authorized, validly issued, fully paid
and non-assessable, to Devnet's knowledge subject to no encumbrances, preemptive
rights or rights of third parties, and with no personal liability attaching to
the ownership thereof and have the rights set forth in the Operating Agreement.
Except as set forth in Schedule 5.3 and in the Devnet Agreements (as such term
is hereinafter defined), there are no statutory or contractual preemptive
rights, rights of first refusal or similar rights or restrictions with respect
to the sale or issuance of membership interests of Devnet. Schedule 5.3 hereto
is a true and complete list of all of the authorized, issued and outstanding
membership interests in Devnet including, without limitation, the Units, but
excluding the Class C Units held by FiberNet, the names and last known addresses
of the holders of the Units and the number of Units held by each such holder.
Except as set forth on Schedule 5.3 hereto and the Devnet Agreements, there are
no outstanding subscriptions, warrants, rights, puts, calls, commitments,
conversion rights, rights of exchange, plans or other agreements or commitments,
contingent or otherwise of any character providing for the purchase, redemption,
acquisition, retirement, issuance or sale by Devnet or its Subsidiaries of any
membership of Devnet or its Subsidiaries. Except as set forth in Schedule 5.3
hereto or in the Operating Agreement, the Amended and Restated Limited Liability
Company Agreement of FP Enterprises L.L.C., dated as of January 16, 1998, as
amended (the "FP Operating Agreement"), the
17
Membership Interest Purchase Agreement, dated as of March 3, 1998, by and among
Devnet, SpaceTel, Inc., Devnet Energy Group L.L.C. and the Managing Member, as
amended (the "SpaceTel Agreement") and the Membership Unit Purchase Agreement
dated as of April 12, 2000 by and among FiberNet, Devnet and the Managing Member
(the "FiberNet Agreement," and together with the Operating Agreement, the FP
Operating Agreement and the SpaceTel Agreement, the "Devnet Agreements"), there
are no agreements or understandings binding on Devnet or, to Devnet's knowledge,
binding on third parties with respect to the voting of the Units.
5.4 Subsidiaries. Except as set forth on Schedule 5.4 hereto, Devnet does
------------
not own, directly or indirectly, or have any right or obligation to acquire, any
capital stock or any other direct or indirect equity interest in any Person.
5.5 No Violation. Except as set forth in Schedule 5.5 hereto, neither: (a)
------------
the Devnet Merger; (b) the execution and delivery of this Agreement or any of
the Documents executed and delivered by Devnet; (c) the performance by Devnet of
its obligations hereunder and thereunder; nor (d) the consummation of the
transactions contemplated hereby or thereby will: (i) violate any provisions of
the Operating Agreement; (ii) with or without the giving of notice or the
passage of time, or both, violate, or be in conflict with, or constitute a
violation of or default under, or cause or permit the termination or the
acceleration of the maturity of, any debt, contract, agreement, instrument or
obligation of Devnet or require the payment of any pre-payment or other penalty
with respect to, or otherwise result in the creation or occurrence of any right,
duty or obligation based upon or as a result of any change of control of Devnet
or its assets, under any debt, contract, agreement, instrument or obligation;
(iii) require notice from Devnet to any party to any agreement or contract,
including without limitation, any lease or license, to which Devnet is a party,
or by which Devnet or Devnet's properties is bound or subject or permit any such
party to renegotiate with Devnet, receive a refund from Devnet with respect to,
or require Devnet to modify or otherwise change any agreement or contract; (iv)
require the obtaining by Devnet of the consent of any party to any agreement or
contract, including without limitation, any lease or license, to which Devnet is
a party, or by which Devnet or Devnet's properties is bound or subject or permit
any such party to renegotiate, receive a refund from Devnet with respect to, or
require Devnet to modify or otherwise change any agreement or contract; (v)
result in the creation or imposition of any security interest, lien, or other
encumbrance upon any property or assets of Devnet under any contract or
agreement to which Devnet is a party, or by which Devnet or Devnet's properties
is bound or subject; or (vi) violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority to which Devnet
or Devnet's properties is bound or subject.
5.6 Consents and Approvals of Governmental Authorities. Except as set
--------------------------------------------------
forth on Schedule 5.6, no consent, approval or authorization of, or declaration,
filing or registration with, any governmental or regulatory authority is
required to be made or obtained by Devnet in connection with the execution or
delivery by Devnet of this Agreement or any of the Documents executed and
delivered by Devnet, the performance by Devnet of its obligations hereunder or
thereunder, the consummation of the transactions contemplated hereby or thereby,
or the Devnet Merger, other than the filing of the Certificate of Merger.
5.7 Financial Statements of Devnet. Devnet has delivered to FiberNet true,
------------------------------
correct and complete copies of Devnet's unaudited balance sheet as of May 31,
2000 (such balance sheet
18
as of May 31, 2000 (the "Balance Sheet Date") being referred to herein as the
"Balance Sheet"). The Balance Sheet was prepared in accordance with GAAP
consistently applied (except as noted therein) through the periods involved
based on information contained in Devnet's books and records (which are true and
correct in all material respects) and fairly presents Devnet's assets and
liabilities as of such Balance Sheet Date.
There are no liabilities of Devnet or the Business that are both (i) of the
type required by GAAP to be reflected in a balance sheet or the notes thereto
and (ii) of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, other than:
(i) liabilities provided for on the Balance Sheet or disclosed in
the notes thereto;
(ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;
(iii) liabilities under any contractual obligation pursuant to a
contract or agreement listed on Schedule 5.1(a) or 5.1(c); and
(iv) liabilities disclosed on Schedule 5.7.
5.8 Contractual Arrangements with Members, the Managing Member or
-------------------------------------------------------------
Employees. Except as set forth in Schedule 5.8 and the Devnet Agreements, Devnet
---------
does not, directly or indirectly, have any contractual arrangement with or
obligation to or from any of its Members, Managing Member or employees. Without
limiting the generality of the foregoing, except as set forth in Schedule
no Member or employee or the Managing Member of Devnet (other than Devnet) is,
directly or indirectly, a joint investor or co-venturer with, or owner, lessor,
lessee, licensor or licensee of any property, real or personal, tangible or
intangible, owned or used by Devnet and no such person is, directly or
indirectly, a lender to or debtor of Devnet other than advances for and
reimbursements of business expenses incurred in the ordinary course of business.
5.9 Absence of Certain Changes.
--------------------------
(a) Except as set forth in Schedule 5.9(a) hereto and the
transactions contemplated hereunder, since the Balance Sheet Date, Devnet has
conducted the Business in the ordinary course and there has not been any change
or any event, occurrence, development or fact that alone or in the aggregate has
had, or would reasonably be expected to have, a Material Adverse Effect (as
defined hereinafter) other than as set forth in Schedule 5.9(a). In addition,
and without limiting the foregoing, except as set forth on Schedule 5.9(a), and
except as contemplated by this Agreement, Devnet has not done any of the
following since the Balance Sheet Date:
(i) amended its Operating Agreement, except as contemplated by
Section 8.20;
(ii) declared or made any distribution to its Members;
19
(iii) redeemed or otherwise acquired or issued, or amended any
term of, any Unit;
(iv) adopted or amended any Benefit Plans (as hereinafter
defined) or collective bargaining agreement that would increase materially
the expense of maintaining such Benefit Plans or collectively bargained
agreement;
(v) made or granted to the Managing Member or any employee any
increase in compensation or benefits, except as may be required under
existing agreements, or in the ordinary course of business or granted or
otherwise become obligated to pay (whether on the occurrence of any future
event or otherwise) any severance or termination pay to any officer,
director or employee of Devnet;
(vi) incurred or assumed any liabilities for borrowed money,
obligations for borrowed money or indebtedness for borrowed money or
guaranteed any such third party liabilities, obligations or indebtedness;
(vii) except in the ordinary course of business, permitted,
allowed or suffered any of its assets to be subject to any Encumbrance,
other than Permitted Liens (as such terms are defined below);
(viii) except (i) pursuant to agreements disclosed on Schedule
5.8 hereto and the Devnet Agreements and (ii) fees for legal services
rendered by Xxxxx Xxxxxxxxxx LLP (one of the partners of which is a member
of the Management Committee of the Managing Member), paid, loaned or
advanced any amount to, or sold, transferred or leased any of its assets
to, or entered into any agreement or arrangement with any Member or any
person or entity which, to Devnet's knowledge, is an Affiliate thereof;
(ix) made any change in any accounting practice or policy
(other than those changes occurring after the date hereof as required by
GAAP);
(x) acquired or agreed to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof;
(xi) except in the ordinary course of business (in which case
copies have been made available to FiberNet), entered into any amendment of
or cancellation of any material agreement;
(xii) sold, leased, or otherwise transferred or disposed of, or
agreed to sell, lease or otherwise dispose of, any of its assets (or group
of related assets), other than in the ordinary course of business, for: (A)
a sales price in excess of $50,000 in any particular transaction; or (B) in
the aggregate, in an amount in excess of approximately $200,000;
(xiii) suffered any condemnation, damage, destruction or loss (by
destruction, theft or otherwise) of or to any of Devnet's assets or
properties of a nature that would have a Material Adverse Effect; or
20
(xiv) agreed to any of the foregoing.
(b) Further, since the Balance Sheet Date, except as set forth on
Schedule 5.9(b) and except as contemplated by this Agreement, none of the
following has occurred
(i) There has not been any resignation of Xxxx X. Xxxxxx,
Xxxxxx X. XxXxxxxxx, Xxxxxx X. Xxxxxxx or J. Xxxxx Xxxxxxxxx from Devnet;
and
(ii) No Person (including Devnet), has accelerated, terminated
or canceled any agreement, contract, lease or license that is material to
Devnet to which Devnet is a party, and to the knowledge of Devnet, no party
intends to take any such action.
5.10 Title to Property; Leases; Encumbrances.
---------------------------------------
(a) Title to Property.
(i) Except as set forth on Schedule 5.10(a)(i), Devnet has good
and valid title to all assets (other than real property or interests in
real property) reflected on the Balance Sheet or thereafter acquired,
except for those since sold or otherwise transferred or disposed of in the
ordinary course of business, in each case free and clear of all mortgages,
deeds of trust, liens, claims, pledges, leases, subleases, rights of
occupancy, covenants, conditional limitations, security interests,
encumbrances, easements, judgments or imperfections of title of any nature
whatsoever ("Encumbrances") except Permitted Liens (as hereinafter defined)
and Encumbrances which are not, in the aggregate, material.
(ii) Except (A) as set forth on Schedule 5.10(a)(ii) and (B)
Permitted Liens, Devnet has not granted any lien with respect to, or other
security interest in, any of its assets (other than real property or
interests in real property).
(b) Title to Real Property. Devnet does not own any fee interest in
----------------------
any real property. Schedule 5.10(b)(i) sets forth a complete list of all real
property and interests in real property leased or licensed by Devnet (the
"Leased Real Property"). Except as set forth on Schedule 5.10(b)(ii), Devnet has
a valid leasehold or license interest in the Leased Real Property, free and
clear of all Encumbrances except Permitted Liens.
(c) Status of Leases and Contracts. Except as disclosed in Schedule
------------------------------
5.10(c), to the knowledge of Devnet, (i) Devnet has performed all material
obligations required to be performed by it and is not in material default under
or material breach of nor in receipt of any claim of material default or
material breach under any Contracts, and, to the knowledge of Devnet, no event
has occurred which with the passage of time or the giving of notice or both
would result in such a material default, material breach or material event of
noncompliance by Devnet under any Contract and (ii) each other Person that is a
party to any Contract has performed all material obligations required to be
performed by it and is not in material default under or material breach of nor
in receipt of any claim of material default or material breach under any
Contract, and to the knowledge of Devnet, no event has occurred which with the
passage of time or the giving of notice or both would result in such a material
default, material breach or material event of noncompliance by such other Person
under any Contract. For purposes of this Section 5.10(c), any breaches or
defaults which, individually or in the aggregate,
21
cause a termination or other substantial economic loss under any Contract shall
be deemed material.
(d) Assets. Except as set forth on Schedule 5.10(d), the equipment of
------
Devnet is substantially free of defects, is in good operating condition and
repair and has been reasonably maintained consistent with standards generally
followed in the industry (giving due account to the age and length of use of
same, ordinary wear and tear excepted), is substantially suitable for its
present uses.
(e) Permitted Liens. As used in this Agreement "Permitted Liens"
---------------
shall mean (i) any Encumbrances disclosed on the Balance Sheet or on Schedule
5.10(e); (ii) liens for Taxes which are not yet due and payable or delinquent or
which are being contested by Devnet in good faith and, with respect to which
adequate provision has been made by Devnet on its financial statements (whether
or not required to be disclosed under GAAP), (iii) liens incurred in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security benefits; (iv)
mechanics', carriers', workmen's, repairmen's, suppliers', vendors' or other
like liens arising out of or incurred in the ordinary course of business; (v)
liens arising under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business; (vi) liens created by or existing from any litigation or legal
proceeding that is being contested by Devnet; (vii) any Encumbrances not created
by Devnet which attach to or affect all or any portion of the fee or other
estate of any landlord owning Leased Real Property (collectively, "Landlord
Encumbrances"); (viii) extensions, renewals or replacements of any lien for
money borrowed by Devnet, provided that the amount of the obligations secured
thereby is not increased and that any such extension, renewal or replacement is
limited to the property originally encumbered thereby; (ix) rights of landlords
which are parties to any of the agreements listed on Schedule 5.1(a), including
all liens, claims and other rights arising under such agreements; (x) rights of
parties arising out of contracts and agreements listed on Schedule 5.1(c)
between Devnet and any owners or property managers or between Devnet and any
telecommunications or data service providers, cable television providers or
similar providers; and (xi) rights of landlords or property managers,
telecommunications or data service providers, cable television providers or
similar providers with respect to contracts, agreements, leases and licenses
which Devnet may hereafter enter into with such parties in compliance with
Article VII.
5.11 Patents, Trademarks, Trade Names. There are no patents, trademarks,
--------------------------------
service marks, trade names (whether registered or unregistered) or copyrights
(the "Intangible Property") as to which it is necessary for the conduct of the
Business that Devnet be the sole owner thereof or that Devnet have the full,
exclusive right to the use thereof, in either such case for the life of the
Intangible Property. Except as set forth in Schedule 5.11 hereto, the use of any
Intangible Property by Devnet does not materially infringe on the rights of any
other person and Devnet has not received any written notice of any conflict
between the asserted rights of others with respect to any Intangible Property
owned or licensed by Devnet. Except as set forth on Schedule 5.11, Devnet has
not been a defendant in any action, suit, investigation or proceeding relating
to, or otherwise been notified of, any alleged claim of infringement by Devnet
of any patents, trademarks, intellectual property, service marks or copyrights
of others, and Devnet has no knowledge of any other claim or infringement by
Devnet, and there exists no continuing infringement by any other person of any
Intangible Property as to which it is necessary for the conduct of the Business
that Devnet be the sole owner thereof or that Devnet have the full,
22
exclusive right to the use thereof, in either such case for the life of the
Intangible Property. Except as set forth on Schedule 5.11 or in the Devnet
Agreements, Devnet has not entered into any agreement to indemnify any other
person against any charge of infringement of any patent, trademark, intellectual
property, service xxxx or copyright.
5.12 Litigation; Compliance with Laws.
--------------------------------
(a) Except as set forth in Schedule 5.12 hereto, there is no action,
suit, proceeding or investigation pending or, to the knowledge of Devnet,
threatened in writing against or involving Devnet or, to Devnet's knowledge,
threatened in writing that seeks to invalidate, terminate or otherwise rescind
any of the Contracts (as defined in Section 5.18) (whether or not covered by
insurance). Except as set forth on Schedule 5.12, there is no outstanding
judgment, order, writ, injunction or decree against Devnet or, to Devnet's
knowledge, seeking to invalidate any of the Contracts or that is directed
against Devnet and could reasonably be expected to have a Material Adverse
Effect on Devnet.
(b) There is no action, suit, investigation or proceeding pending
against, or to the knowledge of Devnet, threatened against or affecting Devnet
before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
(c) Except as set forth on Schedule 5.12 and Schedule 5.13, Devnet
has complied and is in compliance, in all material respects, with all applicable
laws, statutes, rules, regulations, ordinances, orders, judgments and decrees,
local, federal, state, domestic or foreign (including, without limitation,
applicable insurance requirements, requirements of any Board of Fire
Underwriters or similar body, building, zoning, occupational safety and health,
pension, fair employment, equal opportunity, safety, health, procurement,
reimbursement, consumer protection or similar laws, rules, regulations and
ordinances. No notice has been received by Devnet and Devnet has no knowledge of
any notice being given, with respect to any violation by Devnet of any such
legal requirements.
5.13 Environmental Matters.
---------------------
Environment, Health and Safety. Devnet has obtained all permits, licenses
------------------------------
and other authorizations which are required for the ownership and operation of
the Business under all applicable Environmental, Health and Safety Laws except
where such failure to obtain any such permit, license or authorization will not
have a Material Adverse Effect. Such permits, licenses and other authorizations
are set forth on Schedule 5.13. Each such permit, license and other
authorization is assignable by Devnet to Surviving LLC without the consent or
approval of any party or governmental agency, and will continue in full force
and effect immediately following the Effective Time. Devnet has not disposed of
or released any substance, arranged for the disposal of any substance, exposed
any employee or other Person to any substance or condition, or owned or operated
the Business or any property or facility so as to give rise to any liability or
corrective or remedial obligation under any Environmental, Health and Safety
Laws except where any such actions or such liability or corrective or remedial
obligation will not have a Material Adverse Effect. Devnet is in compliance
with, and has complied with, all Environmental, Health and Safety Laws except
where the failure to comply will not have a Material Adverse Effect. Devnet has
not received any notice of any pending or threatened
23
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against Devnet alleging any failure to so comply. Devnet has not either
expressly or by operation of law, assumed or undertaken any liability of any
other Person under any Environmental, Health and Safety Laws.
5.14 Taxes and Tax Returns. Except as set forth in Schedule 5.14 hereto:
---------------------
(a) All Tax Returns required to be filed by or with respect to Devnet
for all Taxable periods have been timely filed. All such Tax Returns (i) were
prepared in the manner required by applicable law, (ii) are true, correct, and
complete in all material respects, and (iii) accurately reflect the liability
for Taxes of Devnet. All Taxes shown to be payable on such Tax Returns, and all
assessments of Tax made against Devnet with respect to Taxes, have been paid
when due. No adjustment relating to any such Tax Return has been proposed in
writing by any Taxing authority and no basis exists for any such adjustment.
(b) True and complete copies of all federal, state, local and foreign
Tax Returns of or including Devnet have been provided or made available to
FiberNet prior to the date hereof. Since the date of Devnet's last Financial
Statement, Devnet has not incurred any liability for Taxes that would result in
a material decrease in the net worth of Devnet.
(c) Devnet has paid, or caused to be paid, all Taxes due, whether or
not shown (or required to be shown) on a Tax Return, and Devnet has provided a
sufficient reserve for the payment of all Taxes not yet due and payable on
Devnet's Financial Statements.
(d) Devnet has complied (and until the Closing Date will comply) in
all respects with the provisions of the Code relating to the withholding and
payment of Taxes, as well as similar provisions under any other laws, and has,
within the time and in the manner prescribed by law, withheld from employee
wages and paid over to the proper governmental authorities all amounts required.
(e) None of the Tax Returns of or including Devnet has been or is
currently being examined by the IRS or relevant state, local or foreign Taxing
authorities. There are no examinations or other administrative or court
proceedings relating to Taxes in progress or pending nor has Devnet received a
revenue agent's or similar report asserting a Tax deficiency.
(f) No material claim has ever been made by any Taxing authority with
respect to Devnet in a jurisdiction where Devnet does not file Tax Returns that
Devnet is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of Devnet that arose in connection with
any failure (or alleged failure) to pay any Taxes and, except for Permitted
Liens, there are no liens for any Tax upon any asset of Devnet.
(g) Devnet has not been a member of an (i) affiliated group (within
the meaning of Section 1504 of the Code) or (ii) affiliated, combined,
consolidated, unitary, or similar group for state or local Tax purposes.
(h) Devnet has neither agreed (nor has there been agreed on its
behalf) nor is required to include in income any adjustment under either Section
481(a) or Section 482 of the Code (or an analogous provision of state, local, or
foreign law) by reason of a change in accounting method or otherwise.
24
(i) Devnet is not a party to any agreement relating to allocating or
sharing the payment of, or liability for, Taxes with respect to any taxable
period.
(j) Devnet has not been the subject of any distribution, or
distributed the stock of any corporation, in a transaction satisfying the
requirements of Section 355(a) of the Code since April 16, 1997.
5.15 Benefit Plans. Except for the Options and as set forth in Schedule
-------------
5.15, Devnet has no material employment, bonus, commission, deferred
compensation, pension, stock option, stock appreciation right, employee stock
ownership, profit-sharing or retirement plan, arrangement or practice, or any
medical, vacation, retiree medical, severance pay plan, or any other material
agreement or fringe benefit plan, arrangement or practice, whether in the form
of a written document or not, which affects one or more of its respective
employees, including "employee benefit plans" as defined by Section 3(3) of
ERISA ("Benefit Plans").
5.16 Labor Matters. Except as set forth on Schedule 5.16, Devnet has not
-------------
experienced any labor disputes or any work stoppages due to labor disagreements
and there is no such dispute or work stoppage threatened against Devnet. No
employee of Devnet is represented by any union or collective bargaining agent
and to the knowledge of Devnet, there has never been a union organizational
effort in respect of any employees of Devnet. There are no pending and, to the
knowledge of Devnet, there has never been any threat in writing to commence
lawsuits, administrative proceedings, reviews, or investigations by any person
or Governmental Entity against Devnet with respect to any violation or alleged
violation of any applicable federal, state or local laws, rules or regulations
(i) prohibiting discrimination on any basis, including, without limitation, on
the basis of race, color, religion, sex, disability, national origin or age, or
(ii) relating to employment or labor, including, without limitation, those
related to immigration, wages, hours or plant closing.
5.17 Insurance. Devnet has furnished to the FiberNet on Schedule 5.1(j) a
---------
list of, and true and complete copies of, all currently effective insurance
policies relating to the Business and maintained by Devnet. Such policies or
insurance (or other policies providing substantially similar insurance coverage)
have been in effect since the respective dates set forth in Schedule 5.1(j) and
remain in full force and effect. All premiums payable under all such policies
and bonds have been paid prior to incurring any right of the insurer to cancel
and Devnet has otherwise complied in all material respects with the terms and
conditions of all such policies and bonds. Devnet has not received any notice of
any claims by Devnet against any policies of insurance owned by Devnet, as to
which any insurer is denying liability or defending under any reservation of
rights clause. Devnet has not received any notice of cancellation, non-renewal
or termination in respect of any of the insurance policies listed on Schedule
5.1(j) hereto.
5.18 Contracts. Except as set forth on Schedule 5.18 hereto, all of the
---------
contracts, agreements, indentures, instruments, leases and licenses listed on
Schedules 5.1(a) through 5.1(m) (collectively, "Contracts") to which Devnet is a
party are legal, valid and binding obligations of Devnet and the other parties
thereto, enforceable in accordance with their terms, are in full force and
effect, except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other laws relating to or affecting
creditors rights generally or by general principles of equity.
25
5.19 Finders and Investment Bankers. Except as set forth on Schedule 5.19,
------------------------------
neither Devnet nor any of its Affiliates has employed any broker, finder,
investment banker or financial advisor as to whom FiberNet or Devnet has or
hereafter may have, an obligation to pay monies, or incurred any liability for
any brokerage fees or commissions or for any finders', investment banking or
financial advisory fees for which FiberNet or Devnet may be responsible, in
connection with the transactions contemplated hereby.
5.20 Licenses, Permits and Authorizations. Devnet has obtained all
------------------------------------
approvals, authorizations, consents, clearances, licenses, franchises, orders or
other permits of all governmental or regulatory agencies, whether federal,
state, local or foreign necessary to the operation of its Business as presently
conducted (collectively, the "Approvals") including, without limitation, those
necessary for the construction, alteration, operation, use or occupancy by
Devnet of the Leased Real Property or any improvements thereon. Such Approvals
are in full force and effect and in good standing. Devnet is not in material
default under any Approval and, to Devnet's knowledge, there exists no basis for
the termination, suspension or revocation of any of such Approvals. Except as
set forth on Schedule 5.20 hereof, the consummation of the transactions
contemplated hereby will not constitute a transfer or assignment which would
adversely affect the continuing validity of any such Approval nor will such
consummation require any filing or registration with or notice to any
governmental authority relating to such Approvals and all such Approvals shall,
to the extent necessary to the operation of Devnet's Business as presently
conducted, remain in full force and effect to the benefit of Devnet following
the Closing.
5.21 Entire Business. Except for acts by the Managing Member for and in the
---------------
name of Devnet, no portion of the Business of Devnet is conducted by any Member
or any Affiliate thereof (other than Devnet) and all of the assets, rights and
Approvals which are both necessary for and used in the conduct of the Business
as presently conducted are owned, held, leased or licensed by Devnet.
5.22 Disclosure. No representation or warranty of Devnet contained in this
----------
Agreement, or in any certificate executed by Devnet on the date hereof, or
hereafter executed by Devnet, and furnished by Devnet to FiberNet, Holdco,
Merger Sub or Devnet Merger Sub pursuant hereto in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements made herein or therein, in the light of the circumstances in
which they were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF HOLDCO, FIBERNET, MERGER SUB AND DEVNET MERGER SUB
6. Representations and Warranties of Holdco, FiberNet, Merger Sub and Devnet
-------------------------------------------------------------------------
Merger Sub
----------
Each of Holdco, FiberNet, Merger Sub and Devnet Merger Sub hereby jointly
and severally represents and warrants to Devnet as follows:
26
6.1 Organization; Etc. Each of Holdco, FiberNet, Merger Sub and Devnet
-----------------
Merger Sub is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.2 Authorization; Etc. Holdco, FiberNet, Merger Sub and Devnet Merger Sub
------------------
have full power and authority to enter into this Agreement and the Documents
contemplated hereby and thereby and to carry out the transactions contemplated
hereby and thereby. Each of Holdco, FiberNet, Merger Sub and Devnet Merger Sub
has taken all action required to authorize the execution and delivery of this
Agreement and the other Documents executed and delivered by Holdco, FiberNet,
Merger Sub and Devnet Merger Sub, the performance of the obligations of Holdco,
FiberNet, Merger Sub and Devnet Merger Sub hereunder and thereunder and the
consummation by Holdco, FiberNet, Merger Sub and Devnet Merger Sub of the
transactions contemplated hereby and thereby including, without limitation, the
Merger and the Devnet Merger. No other proceedings on the part of Holdco,
FiberNet, Merger Sub and Devnet Merger Sub are necessary to authorize the
execution and delivery by Holdco, FiberNet, Merger Sub or Devnet Merger Sub of
this Agreement or the Documents executed and delivered by Holdco, FiberNet,
Merger Sub and Devnet Merger Sub or the performance by Holdco, FiberNet, Merger
Sub and Devnet Merger Sub of their obligations hereunder or thereunder
including, without limitation, the Merger and the Devnet Merger. This Agreement
and each Document executed and delivered by Holdco, FiberNet, Merger Sub and
Devnet Merger Sub are valid and binding agreements of Holdco, FiberNet, Merger
Sub and Devnet Merger Sub enforceable against each in accordance with their
terms, except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency or other laws relating to or affecting
creditors rights generally or by general principles of equity. Upon issuance of
Holdco Common Stock comprising the Devnet Merger Securities to the Members in
the Devnet Merger, such Devnet Merger Securities shall be duly authorized,
validly issued, fully paid and nonassessable and free and clear of all liens,
claims relating to the ownership of Holdco Common Stock, preemptive rights,
rights of third parties or encumbrances other than any liens, claims, preemptive
rights or encumbrances created by any Member with respect to the Devnet Merger
Securities it has received or any Person claiming by, through or under such
Member. Upon issuance of Holdco Common Stock upon exercise of the Options, such
Holdco Common Stock shall be duly authorized, validly issued, fully paid and
nonassessable and free and clear of all liens, claims relating to the ownership
of Holdco Common Stock, preemptive rights, rights of third parties or
encumbrances other than any liens, claims, preemptive rights or encumbrances
created by any Optionee with respect to the Holdco Common Stock acquired by such
Optionee upon the exercise of such Optionee's Option(s) or any Person claiming
by, through or under such Optionee and except as provided in Section 4.9 herein.
6.3 Capitalization. The authorized capital stock of FiberNet as of the
--------------
date hereof is 170,000,000 shares, consisting of (i) 150,000,000 shares of
FiberNet Common Stock; and (ii) 20,000,000 shares of FiberNet Preferred Stock,
of which (A) 133,333 shares have been designated FiberNet Series C Preferred
Stock, (B) 500,000 shares have been designated FiberNet Series D Preferred
Stock; (C) 750,000 shares have been designated FiberNet Series E Preferred
Stock; and (D) 500,000 shares have been designated FiberNet Series F Preferred
Stock. As of May 24, 2000 there were (i) 28,509,009 shares of FiberNet Common
Stock issued and outstanding; (ii) (A) 83,688 shares of FiberNet Series C
Preferred Stock issued and outstanding; (B) 310,173 shares of FiberNet Series D
Preferred Stock issued and outstanding; (C) 293,872 shares of FiberNet Series E
Preferred Stock issued and outstanding; and (D) 347,819 shares of
27
FiberNet Series F Preferred Stock issued and outstanding; (iii) 10,000,000
shares of FiberNet Common Stock reserved for issuance upon exercise of stock
options of FiberNet outstanding or which may be granted pursuant to employee
stock option and similar plans; (iv) 9,602,328 shares of FiberNet Common Stock
reserved for issuance upon the conversion of FiberNet Preferred Stock; and (v)
10,296,260 shares of FiberNet Common Stock reserved for issuance upon the
exercise of FiberNet Warrants outstanding. No shares, options, warrants,
convertible securities or other equity securities of FiberNet have been granted
or issued since May 24, 2000. Except as set forth above, as of the date hereof,
no shares of voting or non-voting capital stock, other equity interests, or
other voting securities of FiberNet were issued, reserved for issuance or
outstanding. Except as set forth on Schedule 6.3 hereto, there are no
outstanding stock appreciation rights of FiberNet and no outstanding limited
stock appreciation rights or other rights to redeem for cash options or warrants
of FiberNet. All outstanding shares of capital stock of FiberNet are, and all
shares which may be issued upon the exercise of stock options (including the
Options) will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth on
Schedule 6.3 hereto, there are no bonds, debentures, notes or other indebtedness
of FiberNet with voting rights (or convertible into, or exchangeable for,
securities with voting rights) on any matters on which stockholders of FiberNet
may vote.
6.4 No Violation. Except as set forth on Schedule 6.4 hereto, neither the
------------
execution and delivery of this Agreement or the other Documents executed and
delivered by Holdco, FiberNet, Merger Sub or Devnet Merger Sub nor the
consummation of the transactions contemplated hereby or thereby will violate any
provisions of the FiberNet Charter or FiberNet By-Laws, or violate, or be in
conflict with, or allow the termination, or constitute a violation of or default
under, or cause the acceleration of the maturity of, any debt or obligation
pursuant to, any agreement or contract to which Holdco, FiberNet, Merger Sub or
Devnet Merger Sub is a party or by which it is bound, or violate any statute,
any law or any judgment, decree, order, regulation or rule of any court or
governmental authority to which Holdco, FiberNet, Merger Sub or Devnet Merger
Sub is subject.
6.5 Reports.
-------
(a) FiberNet has timely filed the reports and schedules set forth in
Schedule 6.5(a) with the Securities and Exchange Commission pursuant to the
Exchange Act and the SEC Regulations promulgated thereunder. Such reports and
any reports filed subsequent to the date hereof (collectively, the "FiberNet SEC
Reports") are the only reports required to be filed and were prepared (and, as
to future reports, will be when filed) in accordance, and complied (and, as to
future reports, will comply when filed) as of their respective dates in all
material respects, with the requirements of the Exchange Act and the SEC
Regulations promulgated thereunder and did not (and, as to future reports, will
not when filed) as of their respective filing dates (or if amended by a filing
prior to the date hereof, then as of the date of such amendment) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent superseded by a FiberNet SEC Report filed subsequently and prior to
the date hereof.
(b) Except as disclosed in the FiberNet SEC Reports, to FiberNet's
knowledge, no fact or event exists or has occurred that has had or could
reasonably be expected to have a
28
Material Adverse Effect on FiberNet, except for those facts or events that have
been publicly disclosed or are generally known by persons involved in the
telecommunications industry.
6.6 Consents and Approvals of Governmental Authorities. Except as set
--------------------------------------------------
forth on Schedule 6.6 hereto, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Holdco, FiberNet, Merger Sub or
Devnet Merger Sub in connection with the execution, delivery and performance of
this Agreement or the Documents executed and delivered by Holdco, FiberNet,
Merger Sub or Devnet Merger Sub or the consummation by Holdco, FiberNet, Merger
Sub or Devnet Merger Sub of the transactions contemplated hereby and thereby,
other than the filing of the FiberNet Certificate of Merger with the Delaware
Secretary of State.
6.7 Finders and Investment Bankers. Neither Holdco, FiberNet, Merger Sub
------------------------------
or Devnet Merger Sub nor any of their respective Affiliates have employed any
broker, finder, investment banker or financial advisor as to whom Devnet or any
of its Members has or hereafter may have, an obligation to pay monies, or
incurred any liability for any brokerage fees or commission or for any finders',
investment banking or financial advisory fees for which Devnet may be
responsible, in connection with the transactions contemplated hereby.
6.8 Litigation. There is no action, suit, investigation or proceeding
----------
pending against, or to the knowledge of Holdco, FiberNet, Merger Sub or Devnet
Merger Sub threatened against or affecting, Holdco, FiberNet, Merger Sub or
Devnet Merger Sub before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement or
that is directed against FiberNet, Holdco, Merger Sub or Devnet Merger Sub and
could reasonably be expected to have a Material Adverse Effect on FiberNet.
6.9 Taxes and Tax Returns. Except as set forth in Schedule 6.9 hereto:
---------------------
(a) All Tax Returns required to be filed by or with respect to
FiberNet and/or any of the Subsidiaries for all taxable periods have been timely
filed. All such Tax Returns (i) were prepared in the manner required by
applicable law, (ii) are true, correct, and complete in all material respects,
and (iii) accurately reflect the liability for Taxes of FiberNet and its
Subsidiaries. All Taxes shown to be payable on such Tax Returns, and all
assessments of Tax made against FiberNet and/or any of its Subsidiaries with
respect to Taxes, have been paid when due. No adjustment relating to any such
Tax Return has been proposed in writing by any Taxing authority and no basis
exists for any such adjustment.
(b) True and complete copies of all federal, state, local and foreign
Tax Returns of or including FiberNet and/or any of its Subsidiaries have been
provided or made available to Devnet prior to the date hereof. Since the date of
FiberNet's last Financial Statement, neither FiberNet nor any Subsidiary has
incurred any liability for Taxes that would result in a material decrease in the
net worth of FiberNet or any such Subsidiary.
(c) Each of FiberNet's Subsidiaries and FiberNet and each other
member of any consolidated, combined or unitary group of which FiberNet or any
of its Subsidiaries have been a member (a "FiberNet Group") have paid, or caused
to be paid, all Taxes due, whether or not shown (or required to be shown) on a
Tax Return, and FiberNet and its Subsidiaries have
29
provided a sufficient reserve for the payment of all taxes not yet due and
payable on FiberNet's Financial Statements.
(d) FiberNet and each of its Subsidiaries have complied (and until
the Closing Date will comply) in all respects with the provisions of the Code
relating to the withholding and payment of Taxes, as well as similar provisions
under any other laws, and have, within the time and in the manner prescribed by
law, withheld from employee wages and paid over to the proper governmental
authorities all amounts required.
(e) None of the Tax Returns of or including FiberNet or any of its
Subsidiaries have been or is currently being examined by the IRS or relevant
state, local or foreign Taxing authorities. There are no examinations or other
administrative or court proceedings relating to Taxes in progress or pending nor
has any member of any FiberNet Group and/or any Subsidiary of FiberNet received
a revenue agent's or similar report asserting a Tax deficiency.
(f) No material claim has ever been made by any Taxing authority with
respect to FiberNet or any of its Subsidiaries in a jurisdiction where FiberNet
or such Subsidiary does not file Tax Returns that FiberNet or such Subsidiary is
or may be subject to taxation by that jurisdiction. There are no security
interests on any of the assets of FiberNet or any of its Subsidiaries that arose
in connection with any failure (or alleged failure) to pay any Taxes and, except
for Permitted Liens, there are no liens for any Tax upon any asset of FiberNet
or any of its Subsidiaries.
(g) Neither FiberNet nor any of its Subsidiaries has been a member of
an (i) affiliated group (within the meaning of Section 1504 of the Code) or (ii)
affiliated, combined, consolidated, unitary, or similar group for state or local
Tax purposes, other than the group of which FiberNet is the common parent.
(h) Neither FiberNet nor any member of any FiberNet Group nor any of
FiberNet's Subsidiaries has agreed (nor has there been agreed on its behalf) or
is required to include in income any adjustment under either Section 481(a) or
Section 482 of the Code (or an analogous provision of state, local, or foreign
law) by reason of a change in accounting method or otherwise.
(i) Neither FiberNet nor any of its Subsidiaries is a party to any
agreement relating to allocating or sharing the payment of, or liability for,
Taxes with respect to any taxable period.
(j) Neither FiberNet nor any of its Subsidiaries have been the
subject of any distribution, or distributed the stock of any corporation, in a
transaction satisfying the requirements of Section 355(a) of the Code since
April 16, 1997.
(k) To FiberNet's knowledge, there is no plan or intention by any
shareholder of FiberNet who owns five percent or more of (i) any of the FiberNet
Common Stock, the FiberNet Series C Preferred Stock, the FiberNet Series D
Preferred Stock, the FiberNet Series E Preferred Stock, the FiberNet Series F
Preferred Stock or FiberNet New Stock or (ii) the total voting power or value of
all classes of FiberNet stock to sell, exchange or otherwise dispose of any of
the shares of Holdco stock received in the Merger, and to the knowledge of
FiberNet, there is no
30
plan or intention on the part of any particular remaining shareholder of
FiberNet to sell, exchange, or otherwise dispose of any of the shares of Holdco
stock received in the Merger. To the knowledge of FiberNet, there is no plan or
intention on the part of any holder of FiberNet Options or FiberNet Warrants to
sell, exchange, or otherwise dispose of any of such FiberNet Options or FiberNet
Warrants, any Holdco Options or Holdco Warrants or any Holdco Common Stock
issuable upon exercise of any such options or warrants.
6.10 Merger Sub and Devnet Merger Sub. Merger Sub and Devnet Merger Sub
--------------------------------
were formed solely for the purpose of engaging in the transactions contemplated
hereby, have engaged in no other business activities and have conducted their
operations only as contemplated hereby. Except for (i) obligations or
liabilities incurred in connection with their incorporation or organization and
the transactions contemplated hereby and (ii) this Agreement and any other
agreements or arrangements contemplated hereby or in furtherance of the
transactions contemplated hereby, Merger Sub and Devnet Merger Sub have not
incurred, directly or indirectly, any obligations or liabilities or engaged in
any business activities of any type whatsoever or entered into any agreements or
arrangements with any person.
6.11 Additional Tax Representations, Warranties and Covenants. FiberNet
--------------------------------------------------------
and Holdco represent, warrant and covenant, jointly and severally, to Devnet
that:
(a) No stock or securities will be issued by Holdco to any person in
connection with the Transaction other than pursuant to such person's exchange of
FiberNet stock for Holdco stock in the Merger or such person's exchange of Units
for Holdco stock in the Devnet Merger.
(b) Each of FiberNet and Holdco has no plan or intention for (and
will not permit) Holdco to issue any stock other than Holdco Common Stock, the
Holdco Series C Preferred Stock, the Holdco Series D Preferred Stock, the Holdco
Series E Preferred Stock, the Holdco Series F Preferred Stock and any Holdco New
Stock in (or in connection with) the Transaction.
(c) Each of FiberNet and Holdco has no plan or intention for (and
will not permit in connection with the Transaction or unless otherwise required
by the terms of any Holdco Preferred Stock) Holdco to redeem or otherwise
acquire any of the Holdco Common Stock, the Holdco Series C Preferred Stock, the
Holdco Series D Preferred Stock, the Holdco Series E Preferred Stock, the Holdco
Series F Preferred Stock or any Holdco New Stock to be issued in the
Transaction.
(d) Each of FiberNet and Holdco has no plan or intention to (i)
terminate the existence of Holdco or FiberNet, or (ii) cause FiberNet to be
liquidated for U.S. federal income tax purposes or (iii) merge Holdco or
FiberNet with any other entity, and will not permit the occurrence of any such
event in (or in connection with) the Transaction.
(e) Each of FiberNet and Holdco has no plan or intention for (i)
Holdco to dispose of any of the Units or FiberNet stock or (ii) Devnet or
FiberNet to dispose of any asset other than in the ordinary course of business,
and will not permit any event described in (i) or (ii) to occur in (or in
connection with) the Transaction.
31
(f) Neither FiberNet nor any of its Subsidiaries nor Holdco has
taken (or will take) or failed to take (or will fail to take) any action or has
any knowledge of any fact or circumstance that is reasonably likely to prevent
(i) the Merger, when taken together with the Devnet Merger, from qualifying as a
transfer of property to Holdco governed by Section 351(a) of the Code or (ii)
the Devnet Merger, when taken together with the Merger, from qualifying as a
transfer of property to Holdco by the Members governed by Section 351(b) of the
Code.
(g) Each of FiberNet and Holdco (i) has no plan or intention to
cause the business combination (regardless of whether effected by merger,
liquidation, dividend or otherwise) of Holdco and FiberNet, (ii) will take no
action with respect to any such business combination and will prevent any such
business combination for at least three full taxable years following the Closing
and (iii) will not, in any event, cause or permit any such business combination
to occur in (or in connection with) the Transaction.
(h) Neither FiberNet nor Holdco has made or will permit to be made
an election under Section 7701 of the Code to treat Devnet Merger Sub as a
corporation for federal income tax purposes.
(i) The Escrow Shares will appear as issued and outstanding on
Holdco's balance sheet and such shares will be legally outstanding under
applicable law.
ARTICLE VII
CONDUCT OF BUSINESS PENDING CLOSING
7. Conduct of Business Pending Closing
-----------------------------------
7.1 Conduct of Business. Except as set forth in Schedule 7.1 or as
-------------------
otherwise contemplated by this Agreement and the Schedules hereto, from the date
of this Agreement to the Closing Date, Devnet shall conduct its operations in
the ordinary and usual course of business, and in connection therewith Devnet
shall use commercially reasonable efforts to preserve intact the Business and
the business organization of Devnet, keep available the services of Devnet's
Managing Member and employees and maintain satisfactory relationships with
suppliers, customers and others having business relationships with Devnet (and
in connection therewith will pay payables and collect receivables in the
ordinary course). Except (i) as contemplated by Schedule 7.1 and Section 8.20,
(ii) for a Bona Fide Financing (as defined in Section 8.8(d)(iii)(B)), or (iii)
as otherwise contemplated in this Agreement and the Schedules hereto, Devnet
will not do any of the following, without the prior written consent of FiberNet,
to be given through the President of FiberNet or his designee (which consent
shall not be unreasonably withheld):
(i) amend its Operating Agreement;
(ii) declare or make any distributions to its Members;
(iii) redeem or otherwise acquire, issue or sell, or amend any
material term of, any Unit;
32
(iv) adopt, enter into, terminate or amend any Benefit Plan or
collective bargaining agreement, except for the Options; provided, however,
that Devnet may amend its medical and dental insurance plans (the "Medical
Plan Amendment") to add the Managing Member and its personnel to such
coverage; provided, further, that to the extent Devnet incurs any costs
after the Closing Date with respect to the Managing Member or its personnel
in connection with such medical and/or dental insurance plans, the Managing
Member shall reimburse Devnet for such costs. In addition, Devnet
represents that such medical and dental insurance plans may be amended
and/or terminated by Devnet after the Closing Date (it is the intent of the
parties that Devnet's medical and dental insurance plans (x) shall not,
after the Closing, be amended as to the Managing Member and its personnel
and (y) shall not be terminated as to the Managing Member and its
personnel, provided, however, that if it is not possible to terminate such
plans as to Devnet unless such plans are also terminated as to the Managing
Member and its personnel, then such plans may be terminated as to both (A)
Devnet and (B) the Managing Member and its personnel);
(v) make or grant to any executive officer, director or employee
any increase in compensation or benefits, except as may be required under
existing agreements, or in the ordinary course of business or grant, agree
or otherwise become obligated to pay (whether on the occurrence of any
future event or otherwise) any severance or termination pay to any officer,
director or employee of Devnet;
(vi) incur or assume any liabilities for borrowed money, obligations
for borrowed money or indebtedness for borrowed money or guarantee any such
liabilities, obligations or indebtedness of third parties;
(vii) permit, allow or suffer any of its assets to be subject to any
Encumbrance, other than Permitted Liens;
(viii) except (i) pursuant to the agreements disclosed on Schedule 5.8
hereto and (ii) fees for legal services rendered by Xxxxx Xxxxxxxxxx LLP
(one of the partners of which is a member of the Management Committee of
the Managing Member), pay, loan or advance any amount to, or sell, transfer
or lease any of its assets to, or enter into any agreement or arrangement
with any Member or any Affiliate of a Member, except for the Medical Plan
Amendment;
(ix) make any change in any accounting practice or policy other than
as required in accordance with GAAP;
(x) acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets other than in the ordinary course of business;
(xi) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any assets other than in the ordinary course of
business;
33
(xii) except in the ordinary course of business, enter into any
amendment of, cancellation of, or sublease with respect to, any of the
Leases;
(xiii) except in the ordinary course of business, acquire any
additional real property or interest therein (by lease or otherwise) or
exercise any option contained in any of the Leases to purchase any real
property or interest therein; or
(xiv) agree to any of the foregoing.
7.2 Communications with Members. Nothing in this Agreement shall be
---------------------------
deemed to (i) subject to Section 8.8(e), restrict Devnet from sending to Members
copies of this Agreement and/or any Documents or (ii) restrict Devnet's
communication with the Members in the ordinary course of business.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8. Additional Agreements
---------------------
8.1 Advice of Change.
----------------
(a) Each party will promptly advise the other party in writing upon
obtaining knowledge of any event which occurred on or prior to the date of
execution of this Agreement that is not disclosed herein and any event which
occurs after the date of this Agreement, in each case that would, under this
Agreement or any Schedule or Document delivered pursuant hereto, have been
required to be disclosed on the date of execution of this Agreement by such
party.
(b) Devnet will promptly advise FiberNet in writing, upon any change
or changes in the Business, operations, properties, assets or financial
condition of Devnet that individually or in the aggregate have had or could
reasonably be expected to have a Material Adverse Effect.
(c) Each party shall promptly notify the others of (i) any notice or
other communication from any Person alleging that the consent of such Person is
or may be required in connection with the transactions contemplated by this
Agreement; and (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement.
8.2 Access to Properties and Records; Confidentiality.
-------------------------------------------------
(a) Between the date hereof and the Closing Date, Devnet will give
authorized representatives of FiberNet during normal business hours, reasonable
access to any and all premises, properties, contracts, books, records, Tax
Returns and affairs of the Business (including, without limitation, access to
properties in order to conduct environmental audits and reviews) and will cause
its officers to furnish any and all financial, technical and operating data and
other information pertaining to the Business, as FiberNet shall from time to
time reasonably require in connection with the transactions contemplated hereby,
other than such data or
34
information which Devnet reasonably determines to be competitive or marketing
information that should not be disclosed to a competitor.
(b) From the date hereof through the Closing Date, FiberNet will hold
in confidence all information obtained as a result of such access or previously
furnished by Devnet and will use such information only for the purpose of
considering the transactions contemplated hereby. If such transactions are not
consummated as contemplated herein, FiberNet and its Affiliates will, and will
use their best efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or deliver to
Devnet, upon request, all documents and other materials, and all copies thereof,
obtained by FiberNet or its Affiliates or on their behalf from Devnet in
connection with this Agreement that are subject to such confidence and will not
use any information as to Devnet for any purposes whatsoever. Such obligation of
confidentiality shall not extend to any information that can be shown to have
been: (i) previously known on a nonconfidential basis by FiberNet; (ii) in the
public domain through no fault of FiberNet or (iii) later lawfully acquired by
FiberNet from sources other than Devnet who are not bound to maintain the
confidence of such information. It being agreed that it is impossible to measure
in money the damages which will accrue by reason of a breach by FiberNet of this
Section 8.2(b), this Section may be specifically enforced and FiberNet hereby
waives the claim or defense therein that any other party has an adequate remedy
at law.
(c) From the date hereof through the Closing Date, Devnet will hold
in confidence all information obtained from, produced in conjunction with, or
previously furnished by FiberNet, Holdco, Merger Sub or Devnet Merger Sub and
will use such information only for the purpose of considering the transactions
contemplated hereby. If such transactions are not consummated as contemplated
herein, Devnet will use its best efforts to cause its Managing Member,
employees, accountants, counsel, consultants, advisors and agents to, destroy or
deliver to FiberNet, upon request, all documents and other materials, and all
copies thereof, obtained by such person or on their behalf from FiberNet,
Holdco, Merger Sub or Devnet Merger Sub in connection with this Agreement that
are subject to such confidence and will not use any information as to FiberNet,
Holdco, Merger Sub or Devnet Merger Sub for any purposes whatsoever. Such
obligation of confidentiality shall not extend to any information that can be
shown to have been: (i) previously known on a nonconfidential basis by Devnet;
(ii) in the public domain through no fault of Devnet or (iii) later lawfully
acquired by Devnet from sources other than FiberNet who are not bound to
maintain the confidence of such information. It being agreed that it is
impossible to measure in money the damages which will accrue by reason of a
breach by Devnet of this Section 8.2(c), this Section may be specifically
enforced and Devnet hereby waives the claim or defense therein that any other
party has an adequate remedy at law.
8.3 Books and Records. Until the Effective Time, Devnet shall keep
-----------------
adequate records and books of account, in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions and in which all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made. The parties shall
provide each other with reasonable access to any records or information relevant
to any return, audit or examination by any Taxing Authority, or judicial or
administrative proceeding or determination relating to liability for Taxes
(including refunds) as are in its possession or subject to its control pursuant
to this Section 8.3. Holdco shall retain all books and records of Devnet
relating to the
35
Taxes or Tax Returns for a period of seven years from the Effective Time and,
prior to disposing of any such books and records, shall notify the Managing
Member and permit the Managing Member to obtain any or all such books and
records or copies thereof.
8.4 Consents and Approvals.
----------------------
(a) Each party will use its commercial best efforts to obtain the
necessary approvals, consents and releases of other persons which may be
required to consummate the transactions contemplated by this Agreement. The
parties will cooperate in order to assist each other in satisfying their
obligations under the preceding sentence, but no party shall be required to make
or be responsible for any material payment in order to obtain any such approval,
consent or release.
(b) Notwithstanding anything contained in Section 8.4(a) above, if 45
days after the date hereof FiberNet has not obtained the written consent of the
Lenders (as defined in the Credit Agreement) as provided for in the Credit
Agreement dated as of April 10, 2000 to the Transactions contemplated by this
Agreement (the "Bank Consent"), then:
(i) FiberNet and Devnet shall promptly enter into a written
agreement (the "FiberNet Amendment") to amend the Letter Agreement dated
April 12, 2000 between FiberNet and Devnet (the "Letter Agreement"). The
FiberNet Amendment will delete all references in the Letter Agreement to
"10 million square feet" and will substitute therefor references to "5
million square feet;" and
(ii) Until such time as FiberNet obtains the Bank Consent, Devnet
shall no longer be bound by the provisions of Section 8.8(a) of this
Agreement.
(c) Notwithstanding the consent required by FiberNet under the
Sublease referenced in Item 2 of Schedule 6.4 hereto, such consent under the
Sublease referenced in such Item 2 shall not be deemed a closing condition under
Article IX, X or XI hereof.
8.5 Satisfaction of Closing Conditions. Subject to the terms and
----------------------------------
conditions of this Agreement, each party shall use all commercially reasonable
efforts to take, or cause to be taken, all actions necessary to consummate the
transactions contemplated by this Agreement in a manner that will provide to
each party hereto the full benefits of the transaction contemplated herein in
all respects. The parties shall cooperate with one another (a) in determining
whether any action by or in respect of, or filing with, any governmental
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any contracts and (b) subject to the
terms and conditions of this Agreement, in taking such actions or making any
such filings, furnishing information required in connection therewith and
seeking to obtain in a timely fashion any such actions, consents approvals or
waivers. Each party shall use commercially reasonable efforts to cause all of
the conditions set forth in Article IX, X and XI hereof to be satisfied. No
party will take any action that is reasonably likely to prevent it from
performing or fulfilling the conditions and obligations to be performed or
fulfilled by them hereunder.
8.6 Litigation. Until the Closing Date, Devnet will promptly notify
----------
FiberNet of any actions, lawsuits, claims, proceedings or investigations which
are threatened against, relating to
36
or involving or otherwise affecting the Business, Devnet, or its affiliates, the
Managing Member or any employee, consultant or director of the foregoing.
FiberNet will notify Devnet of any litigation or threatened litigation relating
to the transactions contemplated hereby or that is reasonably likely to have a
Material Adverse Effect on FiberNet.
8.7 Tax Covenants.
-------------
(a) Devnet shall prepare and timely file, or cause to be prepared and
timely filed, with the appropriate Taxing authority all Tax Returns relating to
Devnet or the Business and required to be filed on or prior to the Effective
Time and shall timely pay all Taxes either (i) required to be shown as payable
by Devnet on any such Tax Returns, or (ii) which are not required to be shown on
such Tax Returns but which will be required to be paid by Devnet on or prior to
the Effective Time.
(b) FiberNet shall prepare and timely file with the appropriate
Taxing authority all Tax Returns relating to FiberNet or any of its Subsidiaries
required to be filed on or prior to the Effective Time and shall timely pay all
Taxes either (i) required to be shown as payable by FiberNet or any of its
Subsidiaries on any such Tax Returns, or (ii) which are not required to be shown
on such Tax Returns but which will be required to be paid by FiberNet or any of
its Subsidiaries on or prior to the Effective Time.
(c) The Managing Member, Holdco, FiberNet and Devnet will provide
such cooperation and information as any of the other parties reasonably may
request in: (i) filing any Tax Return, amended return or claim for refund, (ii)
determining a liability for Taxes or a right to a refund of Taxes or (iii)
conducting any audit or other proceeding in respect of Taxes of Devnet;
provided, however, that no amended return shall be filed with respect to Devnet
without the consent of the Managing Member and in the event the Managing Member
determines that an amended return should be filed with respect to Devnet, Holdco
and Devnet shall cooperate.
(d) Without the prior written consent of FiberNet (which shall not be
unreasonably withheld), Devnet shall not, on or prior to the Effective Time,
make or change any material Tax election, adopt or change any material method of
Tax accounting, file any amended return, enter into any closing agreement,
surrender any right to claim a Tax refund, or consent to any extension or waiver
of the limitations period applicable to any Tax claim or assessment, if any such
action would have the effect of increasing the post-Effective Time Tax liability
of Devnet.
(e) All Tax sharing agreements, if any, to which Devnet is a party,
other than this Agreement, shall be terminated as of the Effective Time and,
after the Effective Time, Devnet shall not be bound thereby or have any
liability thereunder.
(f) At least 10 days prior to the Effective Time, the Managing Member
shall have provided or shall have caused Devnet to have provided FiberNet with
copies of all Tax Returns of Devnet, and FiberNet shall have provided Devnet
with copies of all Tax Returns of FiberNet or any of its Subsidiaries, required
to be filed (taking into account extensions) during the period beginning on the
date hereof and ending 15 days prior to the Effective Time.
37
(g) The Managing Member and the Members shall be provided with a copy
of the Federal income tax return of Devnet for the period ending on the Closing
Date at least 15 days prior to the filing of such return and shall have the
right of review and consent with respect to all aspects of such return.
(h) As soon as practicable after the date of this Agreement and prior
to the Closing Date, Devnet shall prepare and deliver to Holdco and FiberNet a
schedule determining the allocation of the $15 million increased basis to Holdco
among the assets of Devnet. Within ten days after the receipt of such schedule
(and prior to the Closing Date), Holdco and FiberNet shall notify Devnet of any
objections to the schedule and the parties shall cooperate to resolve any
disputes and if the parties cannot reach a resolution, the matter shall be
referred to a mutually acceptable nationally recognized accounting firm (the
fees and expenses of which shall be shared equally by Devnet and Holdco) who
shall resolve any dispute and whose decision shall be binding on the parties;
provided, that Devnet's good faith determination as to whether any allocation
should be made to "unrealized receivables" or "inventory items" which "have
appreciated substantially in value," as such terms are defined in Section 751 of
the Code, shall not be subject to objection by Holdco or FiberNet and shall be
conclusive and binding on the parties.
(i) The parties shall provide representation letters as contemplated
in Sections 10.6 and 11.6 and shall use their best efforts to cause their
respective shareholders or members to provide representation letters as
reasonably requested.
8.8 No Solicitation.
---------------
(a) Devnet shall not, and shall not authorize, and shall instruct any
officer, director or employee of, or any investment banker, attorney or other
advisor or representative, including, without limitation, the Managing Member
and the members of the management committee of the Managing Member
(collectively, "Representatives") of Devnet not to, and shall use all reasonable
commercial efforts to insure that such Representatives do not, (i) directly or
indirectly solicit, initiate or encourage the submission of, any Devnet Takeover
Proposal (as defined in Section 8.8(d)), (ii) except in connection with a
termination of this Agreement pursuant to Section 12.1(c), enter into any
agreement (other than confidentiality agreements entered into in response to a
written Devnet Takeover Proposal) with respect to any Devnet Takeover Proposal
or (iii) directly or indirectly participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action designed to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Devnet Takeover
Proposal; provided, however, that prior to the acceptance of the Devnet Merger
Consideration, Devnet may to the extent required by the fiduciary obligations of
the Managing Member, as determined in good faith by it after consultation with
outside counsel, in response to a bona fide, written Devnet Takeover Proposal
made or received after the date of this Agreement that was not solicited by
Devnet or its Representatives in breach of this Section 8.8(a) and that did not
otherwise result from a breach of this Section 8.8(a) and that the Devnet Board
determines in good faith is reasonably likely to result in a Superior Devnet
Proposal (as defined in Section 8.8(d)) within a reasonable period of time, and
subject to compliance with Section 8.8(c), (x) furnish information with respect
to Devnet to the person making such Devnet Takeover Proposal and its
Representatives pursuant to a customary confidentiality agreement not less
restrictive of the other party than the
38
Confidentiality Agreement between FiberNet and Devnet dated February 4, 2000 and
(y) participate in discussions or negotiations (including solicitation of a
revised Devnet Takeover Proposal) with such person and its Representatives
regarding any Devnet Takeover Proposal. Devnet shall, and shall instruct its
Representatives to, and shall use all other reasonable efforts to insure that
such Representatives shall, cease immediately all discussions and negotiations
regarding any proposal that constitutes, or may reasonably be expected to lead
to, a Devnet Takeover Proposal that commenced prior to the date of this
Agreement (it being understood that this sentence does not preclude responding
to a bona fide, written Devnet Takeover Proposal made or received after the date
of this Agreement from a party that made a Devnet Takeover Proposal prior to the
date of this Agreement so long as Devnet is in compliance with all the other
provisions of this Section 8.8).
(b) Except as permitted by this Section 8.8(b), the Managing Member
shall not (i) withdraw or modify, or publicly (or in a manner designed to become
public) propose to withdraw or modify, in a manner adverse to FiberNet, Holdco,
Merger Sub or Devnet Merger Sub, the approval or recommendation by the Managing
Member of this Agreement, or the Devnet Merger, (ii) approve any letter of
intent, agreement in principle, acquisition agreement or similar agreement
relating to any Devnet Takeover Proposal or (iii) approve or recommend, or
publicly (or in a manner designed to become public) propose to approve or
recommend, any Devnet Takeover Proposal. Notwithstanding the foregoing, if,
prior to the acceptance for payment of the Devnet Merger Consideration, the
Managing Member receives a Superior Devnet Proposal and the Managing Member
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with their fiduciary obligations, the
Managing Member may withdraw or modify its approval or recommendation of the
Devnet Merger and this Agreement and enter into an agreement in connection with
a Superior Devnet Proposal in connection with a termination of this Agreement in
accordance with Section 12.1(c).
(c) Devnet promptly shall advise FiberNet orally and in writing of
any Devnet Takeover Proposal or any inquiry with respect to or that would
reasonably be expected to lead to any Devnet Takeover Proposal, in each case
made or received after the date of this Agreement, and the identity of the
person making any such Devnet Takeover Proposal or inquiry and shall keep
FiberNet reasonably informed of the status including any change to the details
of any such Devnet Takeover Proposal or inquiry.
(d) For purposes of this Agreement: "Devnet Takeover Proposal" means
(i) any proposal or offer for a merger, consolidation, dissolution,
recapitalization or other business combination involving Devnet, (ii) any
proposal for the issuance by Devnet of a material amount of its equity
securities as consideration for the assets or securities of another person or
(iii) any proposal or offer to acquire in any manner, directly or indirectly, a
material equity interest in any voting securities of, or a substantial portion
of the assets of, Devnet, in each case other than (A) the Devnet Merger and (B)
any one or more bona fide financing transactions (x) in which the aggregate of
all proceeds to Devnet from all such transaction(s) does not exceed $3 million,
(y) which will not result in a Change of Control of Devnet and (z) which will
not otherwise materially impede or prevent the consummation of the Transactions
contemplated by this Agreement (a "Bona Fide Financing"). "Superior Devnet
Proposal" means any proposal made by a third party to acquire substantially all
the equity securities or assets of Devnet, pursuant to a tender or exchange
offer, a merger, a consolidation, a liquidation or dissolution, a
recapitalization, a sale of its assets or otherwise, (i) on terms which the
Managing Member
39
determines in its good faith judgment to be more favorable to the Members than
the Devnet Merger, taking into account all the terms and conditions of such
proposal and this Agreement (including any proposal by FiberNet to amend the
terms of the Devnet Merger) and (ii) that in the good faith judgment of the
Managing Member is reasonably capable of being completed, taking into account
all financial, regulatory, legal and other aspects of such proposal.
(e) Without limiting any of Devnet's obligations under Section 8.8
hereof with regard to any Representative, in the event that Devnet sends this
Agreement to any Member, such distribution of the Agreement shall be under cover
of a letter that shall include the following language: "You are required to keep
this Agreement and the terms and conditions thereof confidential. In addition,
you are not authorized, directly or indirectly, to solicit, initiate or
encourage the submission of any proposal or offer to purchase Devnet or any
other Devnet Takeover Proposal (as defined in Section 8.8(d) of the Agreement)."
8.9 Additional Instruments; Further Assurances. At and after the
------------------------------------------
Effective Time, each party shall execute, acknowledge and deliver to the others,
without further consideration, all such further assignments, conveyances,
endorsements, deeds, powers of attorney, consents and other documents and take
such other action as any party may reasonably request to consummate the
transactions contemplated by this Agreement.
8.10 Estoppel Certificates. Devnet will use reasonable commercial efforts,
---------------------
at the request of the FiberNet, (i) to obtain estoppel certificates from the
building owner(s) and/or landlord(s) of real property leased by Devnet and
designated in such FiberNet request; and (ii) to obtain estoppel certificates or
similar certificates from the parties listed on Schedule 8.10 hereto.
8.11 Registration Rights Agreement. On or prior to the Closing Date,
-----------------------------
FiberNet will grant to the holders of the Units the right to execute a joinder,
which joinder shall previously have been duly authorized, executed and delivered
by all other parties thereto, substantially in the form of either, at the
election of such Member, Exhibit A-1 or A-2 hereto, to the Registration Rights
Agreement dated May 7, 1999 between FiberNet and certain stockholders listed
therein (as amended, restated, consolidated, supplemented or otherwise modified
from time to time), a copy of which is attached hereto as Exhibit B (a
"Joinder"), which will give such holders registration rights with respect to the
Devnet Merger Securities acquired by them in the Devnet Merger as provided
therein.
8.12 Tax Cooperation and Consistent Reporting.
----------------------------------------
(a) Information Sharing. Holdco agrees to furnish or cause to be
-------------------
furnished, upon request, as promptly as practicable, such information and
assistance relating to Devnet, the Members with respect to the Transaction and
the Units, Holdco and/or FiberNet, as is reasonably necessary for the filing of
all Tax Returns, and the making of any election related to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax Return. Holdco and
the Managing Member will cooperate with each other in the conduct of any audit
or other proceeding related to Taxes and all other Tax matters relating to
Devnet, the Members with respect to the Transaction and Units and Devnet, Holdco
and/or FiberNet, and each will execute and deliver such powers of attorney and
other documents as are necessary to carry out the intent of this Section 8.12.
40
(b) Tax Covenants. Unless there has been a Final Determination to
-------------
the contrary, Devnet, Holdco, and FiberNet covenant and agree, for all Tax
purposes including all Tax returns and any Tax controversies, to (and to cause
any Affiliate or successor to their assets or businesses to) take each of the
positions set forth below (and not to take or permit to be taken any position
inconsistent therewith):
(i) The Devnet Merger, together with the Merger, will qualify
as a transfer of property to Holdco by the Members governed by Section
351(b) of the Code.
(ii) Except for the Cash Consideration, none of the
consideration received in exchange for the Units will be treated as other
property or money under Section 351(b) of the Code.
(iii) Except with respect to the receipt of the Cash
Consideration and cash in lieu of fractional shares, no income, gain or
loss will be recognized by holders of Units on the transfer of the Units in
the Devnet Merger or upon the release to the holders of Units or return to
Holdco of the Escrow Shares and the holders of Units will be treated for
federal income tax purposes as owning the Escrow Shares.
(iv) None of the consideration in either the Devnet Merger or
the Merger will be paid or issued for services.
(v) The tax basis of each Unit to be received by Holdco will
be the same as the tax basis of such Unit in the hands of the Member of
Devnet increased by any gain recognized by such Member.
(vi) The holding period of each Unit will include the period
during which such Unit was held by a Member of Devnet.
(c) Reporting. FiberNet, Devnet and Holdco agree to report to each
---------
other and the Managing Member any communication from or with the Internal
Revenue Service or any other Taxing authority which relates in any way to the
characterization of the Transaction and/or Devnet with respect to any period (or
portion thereof) ending on or prior to the Closing Date. Notwithstanding any
such communication, Holdco and FiberNet covenant and agree to (and to cause any
Affiliate or successor to their assets or businesses to) continue to take each
of the positions specified in Section 8.12(b) for all Tax purposes (unless there
has been a Final Determination contrary to such position). Without limiting the
generality of the foregoing, (i) each of Holdco and the Managing Member will
file with its Federal income tax return for the taxable year in which the Devnet
Merger occurs (which Tax Return shall be timely filed) the information required
by Treas. Reg (S) 1.351-3 and provide each other with a statement to the effect
that such party has complied with this requirement after filing, and (ii) the
Members shall have the opportunity to review, at least 15 days prior to filing,
and approve any Tax Return to be filed by Holdco, Devnet and/or FiberNet with
respect to, or relating in any way to, the Transaction. In addition, Holdco,
Devnet and/or FiberNet will provide the information required by Treas. Reg. (S)
1.351-3 to the shareholders of FiberNet and shall inform the shareholders of
their obligation to provide such information with their Federal income tax
returns.
41
(d) Certain Elections and Transfer. Neither Devnet, FiberNet nor
------------------------------
Holdco will elect or permit any election or other action to be made or taken to
treat Devnet as a corporation for federal income tax purposes under Section 7701
of the Code or any Treasury regulation promulgated thereunder (or any similar
provision of state or local law) or otherwise. Neither Holdco nor FiberNet has a
plan or intention to transfer any Units or Class C Units or to incorporate
Devnet. For a period of three years following the Closing, Holdco will not
transfer any Units to FiberNet or any Subsidiary thereof. For a period of one
year following the Closing, Holdco will not cause or permit Devnet to be
incorporated.
(e) Protective Claims. Notwithstanding anything in this Section 8.12
-----------------
to the contrary, Holdco will (and will cause any Affiliate or successor to its
assets or businesses to) file protective claims for refund if so requested in
writing by the Majority Members (and only if so requested by the Majority
Members) based on any position contrary to the positions described in Section
8.12(b), as long as such request is accompanied by an opinion of reputable tax
counsel, which would reasonably support the filing of such claims. In addition,
Holdco will (and will cause any Affiliate or successor to its assets or
businesses to) use its best efforts to obtain any refund if so requested in
writing by the Majority Members (and only if so requested by the Majority
Members) which may be available based on any position contrary to the positions
described in Section 8.12(b) and, upon receipt of any such refund, will promptly
remit any such amount to the Members. Each of the Members will have the right to
participate fully in any administrative or judicial proceeding relating to such
claim for refund. As used herein, the term "Majority Members" shall mean
Member(s) as to whom the sum of the respective percentages on the Distribution
Schedule set forth as applicable to such Members exceed fifty percent (50%).
8.13 Tax Adjustment Payments. If the IRS or another taxing authority
-----------------------
takes any position contrary to any of the positions described in Section 8.12(b)
(other than due to the actions of any Member but excluding any actions of any
Member pursuant to this Agreement or any of the transactions contemplated
hereby), then (a) Holdco shall promptly notify all Members and the Managing
Member of such event, reasonably specifying the nature of the position taken and
(b) Holdco shall pay to the Members an amount equal to the lesser of (i) the tax
benefit realized by Holdco or any of its subsidiaries as a result of any tax
basis increase attributable thereto and (ii) the tax detriment realized by the
Members as a result of any gain or income attributable thereto. Such payment
will be due ten days after Holdco or any of its subsidiaries realizes a tax
benefit. If any payment required under this Section 8.13 is not made on or
before the above due date, then such payment shall be made together with
interest at the rate per annum determined from time to time under section
6621(a)(2) of the Code compounded daily for the period from such due date to the
date on which the payment is actually made. Any dispute concerning the
calculation of payments due under this Section 8.13 shall be resolved by a
nationally recognized accounting firm that is jointly selected and mutually
engaged by the Members and Holdco. Nothing in this Section 8.13 shall be deemed
to limit or release any rights of the Members in the event of a breach by
FiberNet, Devnet, Holdco, Merger Sub or Devnet Merger Sub of any provision of
this Agreement.
8.14 Section 754 Election. Holdco shall cause Devnet to make a timely and
--------------------
valid election under Section 754 of the Code, effective for the tax year of
Devnet ending on the Closing Date, which election shall be included in the
filing of the Form 1065 U.S. Partnership Return of Income for such Tax year.
42
8.15 Disclosure Supplement. Prior to the Closing, the parties shall
---------------------
deliver to each other supplements to the Schedules hereto, if appropriate, to
reflect changes which occurred after the date of this Agreement and which are
required to be disclosed as of the Closing Date. As of the Effective Time, the
Schedules hereto shall be deemed to be modified, without the need for the
execution of any further document or instrument, so as to incorporate therein
the information set forth in each such supplement, provided, however, that
nothing in this sentence shall be deemed to waive a default or breach by a party
if this Agreement terminates prior to the Closing Date.
8.16 Director. On or before 10 business days after the Effective Time,
--------
Holdco shall take all corporate action required to appoint Xxxxxx X. XxXxxxxxx
to the Holdco Board. Holdco agrees to maintain such policies of Directors and
Officers liability insurance adequate and customary for companies of comparable
size and condition similarly situated in the same industry in which Holdco
operates, for a period of at least six years.
8.17 Escrow Agreement. On or before the Effective Time, FiberNet, Holdco,
----------------
Devnet, the Escrow Agent and the Managing Member will execute the Escrow
Agreement contemplated by Article XIII in the form attached hereto as Exhibit C.
8.18 Employment Agreements. Holdco agrees to offer to enter into (i) a
---------------------
consulting agreement with Xxxx X. Xxxxxx in substantially the form attached
hereto as Exhibit E and (ii) an employment agreement with Xxxxxx X. XxXxxxxxx in
substantially the form attached hereto as Exhibit I.
8.19 Surviving Rights. Notwithstanding the provisions of Section 10.11
----------------
hereof, (i) the right to indemnity granted to any Member or the Managing Member
pursuant to Section 12.4 of the Operating Agreement in respect of any liability,
claim or damage arising out of any act performed or omitted to be performed by
any Member or the Managing Member in connection with the Business and their role
in respect thereof prior to the Effective Time, and (ii) the piggyback
registration rights granted to Space Center Ventures, L.L.C. pursuant to the
SpaceTel Agreement shall survive the Effective Time and remain in full force and
effect in accordance with their terms and no changes shall be made to the
provisions thereof that would limit or restrict such rights.
8.20 Operating Agreement Amendment. On or before the Effective Time, the
-----------------------------
Operating Agreement may only be amended by the adoption of an amendment in
substantially the form attached hereto as Exhibit F.
8.21 Schedules. The parties hereby acknowledge and agree that to the
---------
extent relevant, the information actually and specifically disclosed in any
Schedule attached hereto shall be deemed to have been disclosed for purposes of
all of the representations and warranties hereunder; provided, that, the
information contained in any Contract or other document listed in or attached to
any Schedule shall be deemed to have been disclosed only for the purpose of the
specific representations and warranties to which the Schedule relates, and not
for purposes of all representations and warranties hereunder.
8.22 Knowledge.
---------
43
(a) FiberNet's knowledge. The parties hereby acknowledge and agree
--------------------
that, as used in this Agreement, the words "FiberNet's knowledge" or words of
similar import shall be deemed to mean, and shall be limited to, what is
actually known or should be known after reasonable inquiry of the Persons listed
on Schedule 8.22(a) hereto.
(b) Devnet's Knowledge. The parties hereby acknowledge and agree
------------------
that, as used in this Agreement, the words "Devnet's knowledge" or words of
similar import shall be deemed to mean, and shall be limited to, what is
actually known or should be known after reasonable inquiry addressed to the
Persons listed on Schedule 8.22(b) hereto. For purposes of this Section 8.22(b),
reasonable inquiry shall include, without limitation, inquiries addressed to the
Persons listed on Schedule 8.22(b) as to whether such Persons have reason to
believe, based on any discussions with, documents received from or their
relationships in general with third parties, that Devnet may be or may be
considered to be in material default of any of the Contracts or that any other
fact exists which such Person reasonably believes will otherwise cause a
termination, prior to the stated term thereof, of any of the Contracts.
8.23 Holdco Disclaimer as to Post-Closing Arrangements Among the Members.
-------------------------------------------------------------------
The parties acknowledge and agree that Holdco shall, from and after the
Effective Time, have no rights or obligations under Article XVII of the
Operating Agreement, as amended by the adoption of the amendment to the
Operating Agreement contemplated by Section 8.20 hereof.
8.24 Management Arrangements. Holdco agrees to offer, or cause the
-----------------------
Surviving LLC to offer, employment to the individuals listed on Schedule 8.24
hereto (with the titles and salaries indicated thereon), and in connection
therewith, to offer such individuals options to purchase that number of shares
of Holdco Common Stock as is set forth opposite such individual's name on
Schedule 8.24 on the terms and conditions contained in that Schedule; provided
that all such employment shall be employment at will.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF EACH PARTY
9. Conditions to Obligations of Each Party
---------------------------------------
The obligations of each party to consummate the transactions contemplated
hereby shall be subject to the fulfillment, at or prior to the Closing Date, of
the following conditions:
9.1 No Action or Proceeding. No claim, action, suit or other proceeding
-----------------------
shall be pending or threatened in writing by any public authority or private
person before any court, agency or administrative body which in the opinion of
counsel to either FiberNet or Devnet creates a substantial likelihood that the
consummation of this Agreement, the Merger, the Devnet Merger or the
transactions contemplated hereby will be restrained, enjoined or otherwise
prevented or that any material damages will be recovered or other material
relief obtained as a result of the transactions contemplated hereby or as a
result of any agreement entered into in connection with, or as a condition
precedent to, the consummation of the transactions contemplated hereby.
44
9.2 Compliance with Law. No provision of any applicable law and no
-------------------
judgment, injunction, order or decree shall prohibit the Closing.
9.3 Escrow Agreement. FiberNet, Holdco, the Managing Member and the
----------------
Escrow Agent shall have entered into an Escrow Agreement substantially in the
form attached hereto as Exhibit C.
9.4 Nasdaq. Holdco Common Stock shall have been approved for quotation,
------
upon official notice of issuance, by Nasdaq.
ARTICLE X
CONDITIONS TO FIBERNET'S, HOLDCO'S, MERGER SUB'S AND DEVNET MERGER SUB'S
OBLIGATIONS
10. Conditions to FiberNet's Obligations
------------------------------------
The obligations of FiberNet, Holdco, Merger Sub and Devnet Merger Sub to
consummate the Merger, the Devnet Merger and the transactions contemplated by
this Agreement and the Documents shall be subject to the satisfaction, at or
before the Closing, of each of the following conditions:
10.1 Statutes. No statute, rule or regulation shall have been enacted by
--------
any Governmental Entity that would make the consummation of the Merger illegal.
10.2 Representations and Warranties. The representations and warranties
------------------------------
made by Devnet in this Agreement (including all Exhibits and Schedules hereto)
and in the Documents executed and delivered by Devnet shall be true and correct
on the date hereof and on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date, except that any such
representations or warranties made with reference to a specified date shall have
been true on and with reference to such date and except for breaches of any such
representations or warranties that do not have, and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Devnet or the transactions contemplated hereby.
10.3 Performance. With respect to agreements, covenants, obligations and
-----------
conditions required to be performed or complied with by Devnet on or prior to
the Closing Date, Devnet shall have performed in all material respects (except
that any thereof which, by the terms thereof, are qualified so as to require
material performance or compliance must be performed and complied with as
written), each such agreement, covenant, obligation and condition.
10.4 Authority. All action required to be taken by, or on the part of
---------
Devnet to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby (including, without
limitation, the Devnet Merger) shall have been duly and validly taken by Devnet.
45
10.5 Opinion of Counsel. FiberNet shall have been furnished with an
------------------
opinion of Xxxxx Xxxxxxxxxx LLP, counsel to Devnet, dated the Closing Date
substantially in form attached hereto as Exhibit D.
10.6 Tax Opinion. FiberNet shall have received an opinion of Xxxxx,
-----------
Xxxxx, Cohn, Ferris, Glovsky and Popeo, P.C., special counsel to FiberNet,
reasonably satisfactory to FiberNet, dated the Closing Date, regarding the
Federal income tax status of the Merger, taken together with the Devnet Merger,
under Section 351 of the Code. Such opinion shall be based upon reasonably
requested representation letters from Persons including Holdco, FiberNet, Devnet
and the Managing Member.
10.7 Approvals and Filings. All approvals, consents, authorizations,
---------------------
permits, licenses and approvals from, and all declarations, filings and
registrations with, third parties and government agencies set forth on Schedule
5.6 hereof, shall have been obtained or made, shall be in full force and effect
and shall be reasonably satisfactory in form and substance to the FiberNet and
its counsel (except to the extent that the failure to receive the same,
individually or in the aggregate, will not result in a Material Adverse Effect).
10.8 Certificates. Devnet shall have furnished to FiberNet in connection
------------
with the transaction contemplated herein such certificates to evidence
compliance with the conditions set forth in this Agreement as may be reasonably
requested by FiberNet, including, without limitation, a certificate of Xxxx X.
Xxxxxx, Chairman and Chief Executive Officer of the Managing Member (or if he is
unavailable, another person reasonably acceptable to FiberNet) and other
appropriate officers of the Managing Member stating that the conditions set
forth in Sections 10.1, 10.2, 10.3 and 10.4 have been satisfied, and certifying
as to: (i) the due authorization and approval of this Agreement, (ii) copies of
Devnet's Certificate of Organization, Operating Agreement, governing documents,
and resolutions and (iii) the incumbency and specimen signature of the officer
executing the Agreement and the Documents to be executed by Devnet.
10.9 Resignation. Devnet shall have delivered to FiberNet, in form and
-----------
substance reasonably satisfactory to FiberNet and its counsel, the resignation
of the Managing Member and terminations with respect to all powers of attorney
granted by Devnet (other than powers of attorney in contracts with landlords),
in each case effective as of the Closing Date.
10.10 Signature Authority. Devnet shall have taken all action satisfactory
-------------------
to FiberNet to cause the termination of the power of such persons as shall be
requested by FiberNet in writing, to borrow, discount debt obligations, cash or
draw checks or otherwise act on behalf of Devnet with respect to the bank
accounts listed on Schedule 5.1(f).
10.11 Waiver of Rights. At the Effective Time, except as provided in
----------------
Schedule 5.8, none of the Members nor the Managing Member shall be a party to
any agreement with Devnet, on behalf of itself or its Affiliates, giving rise to
or that in the future could give rise to any obligation on the part of, or claim
against Devnet, whether asserted or unasserted, fixed or contingent, known or
unknown, arising out of or related to their status as Managing Member or Members
of Devnet or otherwise.
46
10.12 Members Agreements. Except as set forth on Schedule 10.12 hereto,
------------------
each agreement, voting trust, voting agreement or other similar agreement
between (i) the Managing Member or any Member and (ii) Devnet shall have been
terminated.
10.13 Consent. FiberNet shall have obtained the Bank Consent.
-------
10.14 Employment Agreement. Provided that Holdco shall have made the
--------------------
offer of employment contemplated in Section 11.10 hereof, Xxxxxx X. XxXxxxxxx
shall have entered into an employment agreement with Holdco in the form of
Exhibit I hereto, and on the Closing Date Xx. XxXxxxxxx shall reasonably be able
to perform his duties as set forth under his Employment Agreement subject to any
temporary illness which makes it impracticable for Xx. XxXxxxxxx to start work
on the Closing Date, provided that such temporary illness will not prevent Xx.
XxXxxxxxx from commencing work within a reasonable time thereafter.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF DEVNET
11. Conditions to Devnet's Obligations. The obligations of Devnet to
----------------------------------
consummate the Devnet Merger and the transactions contemplated by this Agreement
and the other Documents shall be subject to the satisfaction, at or before the
Closing, of each of the following conditions:
11.1 Statutes. No statute, rule or regulation shall have been enacted by
--------
any Governmental Entity that would make the consummation of the Devnet Merger
illegal.
11.2 Representations and Warranties. The representations and warranties
------------------------------
made by FiberNet, Holdco, Merger Sub and Devnet Merger Sub in this Agreement
(including all Exhibits and Schedules hereto), and in the Documents executed and
delivered by the FiberNet, Holdco, Merger Sub and Devnet Merger Sub shall be
true and correct, on the date hereof and on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date, except that
any such representation or warranty made with reference to a specified date
shall have been true on and with reference to such date and except for any
breaches of any such representations or warranties that do not have and could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on FiberNet, Holdco, Merger Sub or Devnet Merger Sub or the
transactions contemplated hereby.
11.3 Performance. With respect to agreements, covenants, obligations and
-----------
conditions required to be performed or complied with by FiberNet, Holdco, Merger
Sub or Devnet Merger Sub on or prior to the Closing Date, FiberNet, Holdco,
Merger Sub and Devnet Merger Sub, as required, shall have performed in all
material respects (except that any thereof which, by the terms thereof, are
qualified so as to require material performance or compliance must be performed
and complied with as written), each such agreement, covenant, obligation and
condition.
11.4 Authority. All action required to be taken by, or on the part of,
---------
FiberNet, Holdco, Merger Sub and Devnet Merger Sub to authorize the execution,
delivery and performance of this Agreement by FiberNet, Holdco, Merger Sub and
Devnet Merger Sub and the consummation of
47
the transactions contemplated hereby (including, without limitation, the
Transactions) shall have been duly and validly taken by FiberNet, Holdco, Merger
Sub and Devnet Merger Sub.
11.5 Opinion of FiberNet's Counsel. Devnet shall have been furnished with
-----------------------------
an opinion of Xxxxx Xxxxx, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to
FiberNet, Holdco, Merger Sub and Devnet Merger Sub, dated the Closing Date in
the form of Exhibit G hereto.
11.6 Tax Opinion. Devnet shall have received an opinion of Xxxxx
-----------
Ballantine LLP, special counsel to Devnet, reasonably satisfactory to Devnet,
dated the Closing Date, regarding the Federal income tax status of the Devnet
Merger, taken together with the Merger, under Section 351 of the Code. Such
opinion shall be based upon reasonably requested representation letters from
Persons including Holdco, FiberNet, Devnet and the Managing Member.
11.7 Approvals and Filings. All Approvals, consents, authorizations and
---------------------
approvals from, and all declarations, filings and registrations with, third
parties and government agencies, specified on Schedule 11.7 hereto shall have
been obtained or made, shall be in full force and effect and shall be
satisfactory in form and substance to Devnet and its counsel.
11.8 Certificates. FiberNet shall have furnished such certificates of its
------------
officers and others to evidence compliance with the conditions set forth in this
Agreement, as may be reasonably requested by Devnet including, without
limitation, certificates of the secretary of FiberNet stating that the
conditions set forth in Sections 11.1, 11.2, 11.3 and 11.4 have been satisfied
and including appropriate certification of the FiberNet Bylaws, Holdco Charter
and Holdco Bylaws, corporate resolutions and incumbency.
11.9 Fairness Opinion. Devnet shall have received an opinion, dated the
----------------
Closing Date, from its financial advisor to the effect that the transactions
contemplated hereby are fair, from a financial point of view, to Devnet and its
Members.
11.10 Offer of Employment. Holdco shall have offered to enter into an
-------------------
employment agreement with Xxxxxx X. XxXxxxxxx, in the form of Exhibit I hereto.
ARTICLE XII
TERMINATION
12. Termination
-----------
12.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date as follows and in no other manner:
(a) by mutual consent of the Board of Directors of FiberNet and the
Managing Member, on behalf of Devnet;
(b) by (i) Devnet by written notice to FiberNet or (ii) by FiberNet,
Holdco, Merger Sub or Devnet Merger Sub by written notice to Devnet, if the
Devnet Merger shall not have been consummated by the date which is one hundred
days after the date hereof (the "End Date"); provided, however, there shall be
no breach, by the party giving such notice under this
48
Section 12.1(b), of any representation, warranty, covenant or agreement
contained herein in any manner that shall have proximately caused the failure to
consummate the Devnet Merger by the End Date; or
(c) by Devnet, if the Managing Member shall, in the exercise of its
fiduciary duties under applicable law, have determined to withdraw its approval
of the Devnet Merger and approved, recommended and endorsed any Superior Devnet
Proposal (as defined in Section 8.8) other than the Devnet Merger.
12.2 Effect of Termination.
---------------------
(a) If termination of this Agreement shall result from:
(i) the willful failure of Devnet to perform a covenant or
agreement of this Agreement; or
(ii) the willful breach by Devnet of any representation or
warranty contained herein which, individually or in the aggregate, had or
would reasonably be expected to have a Material Adverse Effect,
Devnet shall be fully liable for any and all damage, loss, cost, liability
and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees) incurred or suffered by
FiberNet and its Affiliates as a result of such failure or breach.
(b) If termination of this Agreement shall result from:
(i) the willful failure of FiberNet, Holdco, Merger Sub or
Devnet Merger Sub to perform a covenant or agreement of this Agreement; or
(ii) the willful breach by FiberNet, Holdco, Merger Sub or
Devnet Merger Sub of any representation or warranty which, individually or
in the aggregate, had or would reasonably be expected to have, a Material
Adverse Effect,
FiberNet shall be fully liable for any and all damage, loss, cost,
liability and expense (including, without limitation, reasonable expenses
of investigation and reasonable attorneys' fees) incurred or suffered by
Devnet and its Affiliates as a result of such breach.
(c) In the event of a termination of this Agreement pursuant to
Section 12.1(c), upon the Managing Member's approval, recommendation and
endorsement of, or resolution to approve, recommend and endorse, a Superior
Devnet Proposal, and provided that at the time of such termination FiberNet has
notified Devnet that it has obtained the Bank Consent as provided for in Section
8.4(b) hereof,
(i) Devnet and FiberNet shall promptly enter into a written
agreement (the "Devnet Amendment") to amend the Letter Agreement to delete
all references in the Letter Agreement to "10 million square feet" and to
substitute therefor references to "15 million square feet".
49
(ii) Devnet will pay to FiberNet an amount in cash equal to all
out-of-pocket costs and expenses, including, without limitation, reasonable
fees and disbursements of counsel, incurred by FiberNet in connection with
the preparation and negotiation of this Agreement, the Documents and the
transactions contemplated hereby and thereby.
(d) Except as provided for in Section 12.2(a), (b) and (c) above, in
the event of termination of this Agreement, neither Devnet nor FiberNet nor
their respective Affiliates shall be liable for any damages, loss, cost
liability or expense (including, without limitations, the fees and expenses of
its advisers, accountants and legal counsel) incurred or suffered by the other
party or its Affiliates as a result of such termination.
The provisions of Sections 8.2(b), 8.2(c), 14.6 and 14.7 shall survive any
termination hereof pursuant to this Article XII.
ARTICLE XIII
NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; ESCROW; INDEMNIFICATION, ETC.
13. Nature and Survival of Representations and Warranties; Indemnification,
-----------------------------------------------------------------------
Etc.
---
13.1 Survival of Representations, Warranties, Etc. All representations
--------------------------------------------
and warranties of the parties set forth in this Agreement or in the Documents
shall terminate one year from the Closing Date and shall be of no further force
and effect, provided, however, that the representations and warranties set forth
in Sections 6.9(k), 6.10 and 6.11 and in Documents delivered pursuant to
Sections 10.6 and 11.6 shall survive until thirty days after the expiration of
the applicable statute of limitations period relating to Taxes (subject to any
extension thereof). All such representations and warranties shall be deemed to
have been given and made on the date hereof and as of the Closing Date. Except
as set forth herein, all of the covenants, agreements and obligations of the
parties hereto, hereunder (including Section 13.11) and under any of the
Documents, shall survive the Closing indefinitely (or if indefinite survival is
not permitted by law, then for the maximum period permitted by applicable law).
13.2 Escrow Fund
-----------
(a) As soon as practicable after the Effective Time, certificates
representing shares of Holdco Common Stock comprising a portion of the Devnet
Merger Securities with a value (determined pursuant to Section 13.5(b)) of $5
million (the "Escrow Shares") shall be registered in the name of, and be
deposited with, US Trust (or other institution selected by FiberNet with the
reasonable consent of the Managing Member) as escrow agent (the "Escrow Agent"),
such deposit to constitute the Escrow Fund and to be governed by the terms set
forth herein and in the Escrow Agreement attached hereto Exhibit C. The Escrow
---------
Fund shall be available to compensate Holdco and FiberNet in respect of any and
all Losses resulting from or arising out of, or in connection with, (i) any
misrepresentation or breach of warranty made by Devnet in this Agreement or in
any Document executed and delivered by Devnet, (ii) any breach by Devnet of any
covenant or agreement made under this Agreement or in any Document executed and
delivered by Devnet relating to a period (or portion thereof) ending on or prior
to
50
the Closing Date, and (iii) any and all actions, suits, proceedings, claims,
demands, assessments, judgements, costs and expenses incident to any of the
foregoing. The foregoing notwithstanding, FiberNet and Holdco shall have no
claim against the Escrow Fund with respect to any of the foregoing until all
Losses with respect thereto exceed $300,000 (the "Minimum Amount"), provided
however that in the event that such Losses do exceed the Minimum Amount,
FiberNet's and Holdco's claim against the Escrow Fund hereunder shall include
all Losses resulting from any such breach, including, without limitation, those
included in the Minimum Amount. Following the Effective Time, the Escrow Fund
shall be the sole and exclusive remedy of FiberNet and Holdco for any Losses
resulting from any breach of any representation, warranty or covenant.
(b) [Intentionally Omitted].
(c) Notwithstanding anything contained in this Agreement to the
contrary, FiberNet, Holdco, Merger Sub and Devnet Merger Sub hereby expressly
waive, relinquish and release any right or remedy available to it at law, in
equity or under this Agreement to make a claim against the Escrow Fund for
damages that FiberNet, Holdco, Merger Sub and Devnet Merger Sub may incur, as
the result of any of Devnet's representations, warranties or covenants being
untrue, inaccurate, incorrect or breached if FiberNet, Holdco, Merger Sub or
Devnet Merger Sub had actual knowledge that such representation, warranty or
covenant was untrue, inaccurate, incorrect or breached at the time of the
Closing and the Closing nevertheless takes place.
13.3 Damage Threshold. Notwithstanding Section 13.2, FiberNet, Holdco,
----------------
Merger Sub and Devnet Merger Sub may not receive any shares from the Escrow Fund
with respect to their rights as set forth in Section 13.2 unless and until an
Officer's Certificate or Certificates (as defined in Section 13.5 below)
satisfying the requirements of Section 13.5 and identifying any Losses that
exceed the Minimum Amount has been delivered to the Escrow Agent as provided in
Section 13.5, 13.6 and 13.7 below and such amount is determined pursuant to this
Article XIII to be payable, in which case FiberNet and Holdco shall receive
shares from the Escrow Fund equal in value (determined pursuant to Section
13.5(b)) to the full amount of the Losses; provided, however, that in no event
shall FiberNet, Holdco, Merger Sub and Devnet Merger Sub receive more than the
Escrow Shares.
13.4 Escrow Period. The Escrow Period shall terminate upon the expiration
-------------
of 365 days from the Effective Time. Upon termination of the Escrow Period, the
Escrow Shares remaining in the Escrow Fund shall be transferred to the Members
in accordance with the Distribution Schedule; provided, however, that (i) a
portion of the Escrow Shares, which, in the reasonable judgment of FiberNet,
subject to the objection of the Managing Member and the subsequent resolution of
the matter in the manner provided in Section 14.12 hereof, are necessary to
satisfy any unsatisfied claims specified in any Officer's Certificate
theretofore delivered to the Escrow Agent prior to termination of the Escrow
Period with respect to facts and circumstances existing prior to expiration of
the Escrow Period ("Existing Claims"), shall remain in the Escrow Fund until
such claims have been resolved, provided, however, that such Escrow Shares shall
be used only to satisfy Existing Claims and (ii) a portion of the Escrow Shares
necessary to reimburse the Managing Member for its reasonable out-of-pocket
costs and expenses ("FP Escrow Costs") incurred in connection with the Escrow
Fund (including, without limitation, fees of counsel to the Managing Member and
any amounts payable by the Managing
51
Member under the last paragraph of Section 14.12 hereof) shall be transferred to
the Managing Member. A certificate signed by a member or officer of the Managing
Member as to the amount of the FP Escrow Costs shall be conclusive as to the
amount thereof. FP Escrow Costs shall include any amounts owing to an "FP
Covered Person" under Exhibit H hereto or Article XVII of the Operating
Agreement as amended and in effect at the Effective Time.
13.5 Claims upon Escrow Fund.
-----------------------
(a) Upon receipt by the Escrow Agent on or before the last day of
the Escrow Period of a certificate signed by any officer of Holdco or FiberNet
(an "Officer's Certificate"):
(i) stating that, with respect to their rights as set forth in
Section 13.2, Losses exist in an aggregate amount greater than the Minimum
Amount, and
(ii) specifying in reasonable detail the individual items of
such Losses included in the amount so stated, the date each such item was
paid, or properly accrued or arose, and the nature of the
misrepresentation, breach of warranty or claim to which such item is
related,
(iii) affirming that a copy of such certificate has been
delivered to the Managing Member as contemplated hereby,
the Escrow Agent shall, subject to the provisions of Section 13.6, 13.7 and
14.12, deliver to FiberNet or Holdco out of the Escrow Fund, as promptly as
practicable, Holdco Common Stock or other assets held in the Escrow Fund
having a value equal to such Losses with respect to the rights of FiberNet,
Holdco, Merger Sub and Devnet Merger Sub set forth in Section 13.3.
(b) For the purposes of compensating FiberNet and Holdco for its
Losses pursuant to this Agreement and reimbursing the Managing Member and any FP
Covered Person for FP Escrow Costs, the Holdco Common Stock in the Escrow Fund
shall be valued at the Market Price.
13.6 Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered to the Managing Member by FiberNet or Holdco and for a period
of fifteen (15) days after the receipt by the Escrow Agent of the Officer's
Certificate delivered to Escrow Agent, the Escrow Agent shall make no delivery
of Holdco Common Stock or other property unless the Escrow Agent shall have
received written authorization from the Managing Member to make such delivery.
After the expiration of the fifteenth (15th) day following the date on which the
Escrow Agent receives the Officer's Certificate (it being understood that the
Escrow Agent shall verify prior to any transfer described herein that an
Officer's Certificate was also delivered to the Managing Member on the date on
which the Escrow Agent received the Officer's Certificate; if such delivery
occurred on a later date, the fifteen-day period shall be deemed to run from the
date of delivery to the Managing Member), the Escrow Agent shall make delivery
of the Holdco Common Stock or other property in the Escrow Fund in accordance
with Section 13.5 hereof, provided that no such payment or delivery may be made
if the Managing Member shall object in a written statement to
52
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent and to FiberNet or Holdco prior to the expiration
of such fifteen (15) day period.
13.7 Resolution of Conflicts
-----------------------
(a) In case the Managing Member shall, pursuant to Section 13.6,
object in writing to any claim or claims by FiberNet or Holdco made in any
Officer's Certificate, FiberNet or Holdco shall have fifteen (15) days to
respond in a written statement to the objection of the Managing Member. If after
such fifteen (15) day period there remains a dispute as to any claims, the
Managing Member and FiberNet or Holdco shall attempt in good faith for thirty
(30) days to agree upon the rights of the respective parties with respect to
each of such claims. If the Managing Member and FiberNet or Holdco should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties and shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and shall retain or distribute the
Holdco Common Stock or other property from the Escrow Fund in accordance with
the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either the Managing Member or FiberNet or Holdco may, by written
notice to the other, demand arbitration of the matter pursuant to Section 14.12
hereof.
13.8 Actions of the Managing Member. A decision, act, consent or
------------------------------
instruction of the Managing Member shall constitute a decision of all Members as
to any matter relating to the Escrow Fund and claims made in respect thereof and
shall be final, binding and conclusive upon each such Member, and the Escrow
Agent and FiberNet, Holdco, Merger Sub and Devnet Merger Sub may rely upon any
decision, act, consent or instruction of the Managing Member as being the
decision, act, consent or instruction of each and every such Member. The Escrow
Agent, FiberNet, Holdco, Merger Sub and Devnet Merger Sub are hereby relieved
from any liability to any person for any acts done by them in accordance with
such decision, act, consent or instruction of the Managing Member. All of the
rights of the Members as third party beneficiaries to this Agreement are subject
to the provisions of Exhibit H attached hereto, which Exhibit H shall govern
rights and obligations as between the Members and Managing Member. This
Agreement and the Escrow Agreement have been entered into by the Managing Member
in reliance upon the provisions set forth in Exhibit H. Neither Holdco,
FiberNet, Merger Sub, Devnet Merger Sub nor Devnet shall have any rights or
obligations under Exhibit H.
13.9 FiberNet's Agreement to Indemnify
---------------------------------
(a) FiberNet and Holdco shall jointly and severally fully defend,
indemnify and hold harmless the Members and the Optionees against and in respect
of any Losses resulting from (i) any misrepresentation or breach of warranty by
Holdco, FiberNet, Merger Sub or Devnet Merger Sub in this Agreement or in any
Document executed and delivered by FiberNet, Holdco, Merger Sub or Devnet Merger
Sub, (ii) any breach by FiberNet, Holdco, Merger Sub or Devnet Merger Sub of any
covenant or agreement, or by Devnet with respect to any covenant or agreement
relating to a period (or portion thereof) beginning after the Closing Date, made
in this Agreement or in any Document executed and delivered by FiberNet, Holdco,
Merger Sub, Devnet Merger Sub or Devnet, (iii) the ownership and operation of
the Business after the Closing Date (but not including any such Loss to the
extent such Loss arises out of, in whole or in part,
53
any matter which constitutes a misrepresentation or breach of warranty of Devnet
made in this Agreement), and (iv) any and all actions, suits, proceedings,
claims, demands, assessments, judgments, costs and expenses incident to any of
the foregoing. The foregoing notwithstanding, FiberNet shall have no indemnity
obligations and shall not otherwise be liable to any Member for any Losses with
respect to any of the foregoing hereof in excess of such Member's pro rata share
(to be determined in accordance with their percentage interest of the Units as
set forth in the Distribution Schedule) of an amount equal to (x) the number of
Devnet Merger Securities plus the Adjustment Shares multiplied by (y) the Market
Price; provided that such limitation shall not apply to any Losses resulting
from a breach by Holdco or FiberNet of any of the representations, warranties
and covenants, or by Devnet with respect to any covenant or agreement relating
to a period (or portion thereof) beginning after the Closing Date, contained in
Sections 6.9(k), 6.10, 6.11, 8.7, 8.12, 8.13 and 8.14 hereof.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the parties agree that the Members shall not have any right or remedy
available to them at law, in equity or under this Agreement to seek
indemnification from FiberNet pursuant to Section 13.9(a) for damages that the
Members may incur, as the result of any of FiberNet's, Holdco's, Merger Sub's
and Devnet Merger Sub's representations, warranties or covenants being untrue,
inaccurate, incorrect or breached if Devnet had actual knowledge that such
representation, warranty or covenant was untrue, inaccurate, incorrect or
breached at the time of the Closing and the Closing nevertheless takes place.
13.10 Third Party Claims.
------------------
(a) Promptly after the receipt by any Member or Optionee of notice
of any claim, action, suit or proceeding of any third party which is subject to
indemnification under Section 13.9 (other than with respect to Taxes, which
shall be governed by Section 13.11), such Member or Optionee (the "Indemnified
Person") shall give written notice of such claim to Holdco or FiberNet (Holdco
and FiberNet being herein collectively, jointly and severally referred to as the
"Indemnifying Party"), stating the nature and basis of such claim and the amount
thereof, to the extent known. Failure of the Indemnified Person to give such
notice shall not relieve the Indemnifying Party from any liability which it may
have on account of the provisions hereof or otherwise, except to the extent that
the Indemnifying Party is materially prejudiced thereby (except that the
Indemnifying Party shall not be liable for any expense incurred during the
period in which the Indemnified Person failed to give such notice). So long as
the Indemnifying Party provides assurances, reasonably acceptable to the
Indemnified Person, that the Indemnifying Party is capable of satisfying all
Losses that may arise in respect of any matter, the Indemnifying Party shall be
entitled to elect to participate in the defense of and, if it so chooses, to
assume the defense of such claim, action, suit or proceeding with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Person. Upon any such election by the Indemnifying Party to assume
the defense of such claim, action, suit or proceeding, the Indemnifying Party
shall not be liable for any legal or other expenses subsequently incurred by the
Indemnified Person in connection with the defense, thereof, provided that the
Indemnified Person may, at its option, participate in such defense and employ
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. The Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnified Person for any period in which
the Indemnifying Party has not assumed the defense thereof (other than during
any period in which the Indemnified Person failed to give the notice
54
provided above). The Indemnifying Party and the Indemnified Person shall use
commercially reasonable efforts to minimize Losses from claims by third parties
and shall act in good faith in responding to defending against, settling or
otherwise dealing with such claims, notwithstanding any dispute as to liability
as between the Indemnifying Party and the Indemnified Person under this Article
XIII. The Indemnifying Party and the Indemnified Person shall also cooperate in
any such defense, give each other full access to all information relevant
thereto and make employees and other representatives available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the Indemnifying Party shall have
assumed the defense, the Indemnifying Party shall not be obligated to indemnify
the Indemnified Person hereunder for any settlement entered into without the
Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld or delayed. The Indemnifying Party shall not settle any
claim without the prior written consent of the Indemnified Person, which consent
shall not be unreasonably withheld or delayed.
(b) Promptly after the receipt by FiberNet or Holdco of notice of any
claim, action, suit or proceeding of any third party which is subject to
reimbursement from the Escrow Fund pursuant to Section 13.5 (other than with
respect to Taxes, which shall be governed by Section 13.11), such party (the
"Reimbursed Person") shall give written notice of such claim to the Managing
Member (the " Notice Party"), stating the nature and basis of such claim and the
amount thereof, to the extent known. Failure of the Reimbursed Person to give
such notice shall not terminate the right of the Reimbursed Person to
reimbursement from the Escrow Fund pursuant to Section 13.5, except to the
extent that there is material prejudice, in the form of increased Losses
suffered by the Reimbursed Person that would be subject to reimbursement
pursuant to Section 13.5, by reason of such failure (except that there shall be
no reimbursement to the Reimbursed Person from the Escrow Fund for any expense
incurred during the period in which the Reimbursed Person failed to give such
notice). So long as the Escrow Fund has not been reduced to zero, the Notice
Party shall be entitled to elect to participate in the defense of and, if it so
chooses, to assume (without recourse to the Notice Party or to any source other
than the Escrow Fund) the defense of such claim, action, suit or proceeding with
counsel selected by the Notice Party and reasonably satisfactory to the
Reimbursed Person. Upon any such election by the Notice Party to so assume the
defense of such claim, action, suit or proceeding, there shall be no
reimbursement to the Reimbursed Person from the Escrow Fund for any legal or
other expenses subsequently incurred by the Reimbursed Person in connection with
the defense, thereof, provided that the Reimbursed Person may, at its option,
participate in such defense and employ counsel, at its own expense, separate
from the counsel employed by the Notice Party. There shall be reimbursement to
the Reimbursed Person from the Escrow Fund for the fees and expenses of counsel
employed by the Reimbursed Person for any period in which the Notice Party has
not so assumed the defense thereof (other than during any period in which the
Reimbursed Person failed to give the notice provided above). The Reimbursed
Person and the Notice Party shall use commercially reasonable efforts to
minimize Losses from claims by third parties and shall act in good faith in
responding to defending against, settling or otherwise dealing with such claims,
notwithstanding any dispute as to liability as between the Reimbursed Person and
the Notice Party under this Article XIII. The Reimbursed Person and the Notice
Party shall also cooperate in any such defense, give each other full access to
all information relevant thereto and make employees and other representatives
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Whether or not the Notice Party
shall have assumed the defense, there shall be no reimbursement to the
Reimbursed Person from the Escrow Fund for any settlement entered into
55
without the Notice Party's prior written consent, which consent shall not be
unreasonably withheld or delayed. The Notice Party shall not settle any claim
without the prior written consent of the Reimbursed Person, which consent shall
not be unreasonably withheld or delayed.
13.11 Tax Claims.
----------
(a) A Member receiving notice of any claim, audit, examination
or other proposed change or adjustment relating to Taxes which may affect the
liability of Holdco or FiberNet (Holdco and FiberNet being herein collectively,
jointly and severally referred to as the "Indemnitor") hereunder (a "Member Tax
Claim") shall promptly notify the Indemntor in writing of the commencement of
any such Member Tax Claim of which it or any of its Affiliates has been informed
in writing by any taxing authority. Such notice shall describe the asserted
Member Tax Claim in reasonable detail and shall include copies of any notices
and other documents received from any taxing authority in respect of any such
asserted Member Tax Claim. If notice of a Member Tax Claim is not given by the
Member to the Indemnitor within a sufficient period of time to allow the
Indemnitor to effectively contest such Member Tax Claim, or in reasonable detail
to apprise the Indemnitor of the nature of the Member Tax Claim or if the Member
otherwise fails to follow the requirements of this Section 13.11(a), the
Indemnitor shall not be liable to the Member, any of its Affiliates or any of
their respective officers, directors, employees or agents and the amount of any
indemnity payment pursuant to Section 13.9 shall be reduced to the extent that
the Indemnitor is harmed or its position is actually prejudiced as a result
thereof.
With respect to any Member Tax Claim, at the election of the Indemnitor (to
be made not later than 15 business days following such party's receipt of a
notification of a Member Tax Claim from the Member), the Indemnitor shall have
the sole right to represent the Member's interests in any Tax audit or
administrative or court proceeding and to employ counsel of its choice and,
without limiting the foregoing, may in its sole discretion pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with any
taxing authority with respect thereto, and may, in its sole discretion either
pay the Tax claimed and xxx for a refund where applicable law permits such
refund suits or contest the Member Tax Claim in any permissible manner. The
Indemnitor may settle any issues and take any other actions in its discretion in
connection with such audit or proceedings. The Member may participate in such
defense through counsel chosen by it, at its own expense. The Member shall
cooperate fully with the Indemnitor (including, but not limited to, by granting
to the Indemnitor a power of attorney reasonably necessary to represent the
Member in any such audit or proceeding and at the reasonable request of the
Indemnitor taking such requested actions in the defense against or compromise of
any claim in any Tax audit or proceedings which the Indemnitor controls pursuant
hereto), timely making available to the Indemnitor all data and other
information reasonably requested by the Indemnitor in connection with such audit
or proceedings, making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided hereunder
or testifying at proceedings relating to such Member Tax Claim and facilitating
the Indemnitor's participation in the contest of all Member Tax Claims.
In no case shall the Member or any of its respective Affiliates or any of
their respective officers, directors, employees or agents settle or otherwise
compromise any Member Tax Claim without the prior written consent of the
Indemnitor. In addition, none of Holdco, Devnet,
56
FiberNet or any affiliate thereof shall take or advocate any position, initiate
any claim or take or fail to take any action that could adversely affect any
Member with respect to Taxes relating to Devnet or the Transaction.
(b) Upon receipt by Holdco or FiberNet of a notice of any claim,
audit, examination or other proposed change or adjustment relating to Taxes for
which such party (the "Indemnitee") may be entitled to reimbursement from the
Escrow Fund pursuant to Section 13.5 (a "Holdco Tax Claim"), such party shall
promptly notify the Managing Member in writing of the commencement of any such
Holdco Tax Claim of which it or any of its Affiliates has been informed in
writing by any taxing authority. Such notice shall describe the asserted Holdco
Tax Claim in reasonable detail and shall include copies of any notices and other
documents received from any taxing authority in respect of any such asserted
Holdco Tax Claim. If notice of a Holdco Tax Claim is not given by the Indemnitee
to the Managing Member within a sufficient period of time to allow the Managing
Member to effectively contest such Holdco Tax Claim, or in reasonable detail to
apprise the Managing Member of the nature of the Holdco Tax Claim or if the
Indemnitee otherwise fails to follow the requirements of this Section 13.11(b),
the Indemnitee shall not be entitled to reimbursement from the Escrow Fund
pursuant to Section 13.5 to the extent that the Managing Member is harmed or its
position is actually prejudiced as a result thereof.
With respect to any Holdco Tax Claim, at the election of the Managing
Member (to be made not later than 15 business days following its receipt of a
notification of a Holdco Tax Claim from the Indemnitee), the Managing Member
shall have the sole right to represent the Indemnitee's interests in any Tax
audit or administrative or court proceeding and to employ counsel of its choice
and, without limiting the foregoing, may in its sole discretion pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
any taxing authority with respect thereto, and may, in its sole discretion,
either pay the Tax claimed and xxx for a refund where applicable law permits
such refund suits or contest the Holdco Tax Claim in any permissible manner.
The Managing Member may settle any issues and take any other actions in its
discretion in connection with such audit or proceedings. The Indemnitee may
participate in such defense through counsel chosen by it, at its own expense.
The Indemnitee shall cooperate fully with the Managing Member (including, but
not limited to, by granting to the Managing Member a power of attorney
reasonably necessary to represent the Indemnitee in any such audit or proceeding
and at the Managing Member's reasonable request taking such requested actions in
the defense against or compromise of any claim in any Tax audit or proceedings
which the Managing Member controls pursuant hereto), timely making available to
the Managing Member all data and other information reasonably requested by the
Managing Member in connection with such audit or proceedings, making employees
available on a mutually convenient basis to provide additional information or
explanation of any material provided hereunder or testifying at proceedings
relating to such Holdco Tax Claim and facilitating the Managing Member's
participation in the contest of all Holdco Tax Claims.
In no case shall the Indemnitee or any of its Affiliates or any of their
respective officers, directors, employees or agents settle or otherwise
compromise any Holdco Tax Claim without the Managing Member's prior written
consent.
13.12 Effect of Taxes and Insurance. The amount of any Losses for which
-----------------------------
indemnification is provided under this Article XIII shall be reduced to take
account of any net
57
Tax benefit realized and shall be increased to take account of any net Tax
detriment realized arising from the incurrence or payment of any such Losses or
from the receipt of any such indemnification payment and shall be reduced by the
insurance proceeds received and any other amount, if any, recovered from third
parties by the Indemnified Person or the Reimbursed Person, as the case may
be (or their respective affiliated entities), with respect to any Losses. The
Indemnified Person or the Reimbursed Person shall be obligated to use all
commercially reasonable efforts to prosecute diligently and in good faith claims
under any applicable insurance policies (including, without limitation, any
applicable insurance policies maintained by Devnet) and against other third
parties who may be responsible for Losses prior to collecting indemnification
for such Losses under this Article XIII; provided, however, that if the
Indemnified Person or the Reimbursed Person, as the case may be, has not
received payment from an insurer or other third party within one year after it
has given such insurer or other third party written notice of such claim, (or,
if such party shall have received notice that it will receive no such payment,
immediately after the receipt of such notice) such party shall be entitled to
collect indemnification in respect of such claim to the extent that it is
otherwise entitled to payment under this Article XIII; if any Indemnified Person
or Reimbursed Person, as the case may be (or their respective affiliated
entities), shall have received any payment pursuant to this Article XIII with
respect to any Loss and shall subsequently have received insurance proceeds or
other amounts with respect to such Loss, then such party (or its affiliated
entities) shall promptly pay over to the Indemnifying Party or the Escrow Agent,
as the case may be, the amount so recovered (after deducting the amount of the
expenses incurred by it in procuring such recovery), but not in excess of the
amount previously so paid by such party.
13.13 Purchase Price Adjustment. Any amount paid pursuant to this Article
-------------------------
XIII will be treated for Tax purposes as an adjustment to the aggregate Devnet
Merger Consideration unless a Final Determination (as defined below) causes any
such amount not to constitute an adjustment to the aggregate Devnet Merger
Consideration for any Tax purpose. "Final Determination" shall mean with respect
to Federal Taxes, a "determination" as defined in Section 1313(a) of the Code or
execution of an Internal Revenue Service Form 870AD and, with respect to the
Taxes other than Federal Taxes, any final determination of liability in respect
of a Tax that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of a
statute of limitations or a period for the filing of claims for refunds, amended
returns or appeals from adverse determinations.)
13.14 Interest. All payments required to be made under this Article XIII
--------
shall include interest at the rate of 1.5% per month (or, if lesser, the maximum
rate permitted by law) from the date of demand through the date of payment.
13.15 Managing Member Joinder. The Managing Member is entering into this
-----------------------
Agreement as a party solely for the following purposes: (i) to become a party
for purposes of Sections 13.2 through 13.8, inclusive, hereof, (ii) to become a
party for purposes of Sections 14.1, 14.3 and 14.12 hereof and (iii) to obtain
any rights and incur any obligations otherwise specifically provided to or
assumed by the Managing Member in any other provisions of this Agreement (it
being understood that references to the term "party" or "parties" should not be
deemed to be specific references to the Managing Member for purposes of this
clause (iii)).
58
13.16 Relationship to Section 12.2. Nothing in this Article XIII shall
----------------------------
limit the liability of any party under Section 12.2 for any breach of any
representation, warranty or covenant if the Transaction does not close.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14. Miscellaneous Provisions
------------------------
14.1 Amendment and Modification. This Agreement may be amended, modified
--------------------------
or supplemented only by written agreement executed by all of the parties
hereto.
14.2 Waiver. Any breach of any obligation, covenant, agreement or
------
condition contained herein shall be deemed waived by the non-breaching party,
only by a writing, setting forth with particularity the breach being waived and
the scope of the waiver, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other breach. No waiver shall be
implied from any conduct or action of the non-breaching party. No failure by any
party in exercising any right, power or privilege hereunder or under the
Documents and no course of dealing by any party shall operate as a waiver and
any right, power or privilege hereunder or under any Document nor shall any
single or partial exercise thereof or the exercise of any other right, power or
privilege.
14.3 Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested, or by telecopy,
with a copy thereof to be delivered by mail (as aforesaid) within 24 hours of
such telecopy, with confirmation as provided above, as follows:
(a) If to Devnet, to:
Devnet L.L.C.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopy No. (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Telecopy No. (000) 000-0000
or to such other person or address as Devnet or the Managing Member shall
furnish FiberNet in writing.
59
(b) If to FiberNet, Holdco, Merger Sub or Devnet Merger Sub, to:
FiberNet Telecom Group, Inc.
000 Xxxxxxxxx Xxxxxx, 0xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx
Telecopy No: (000) 000-0000
with copies to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Chrysler Center
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Telecopy No: (000) 000-0000
(c) If to the Managing Member, to:
FP Enterprises L.L.C.
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Telecopy No. (000) 000-0000
or to such other address or telecopy number and with such other copies as
such party may hereafter specify for the purpose of notice to the other party.
Each such notice, request, demand or other communication shall be effective (i)
if given by telecopy, when such or telecopy is transmitted to the telecopy
number specified in this Section and evidence of receipt is received or (ii) if
given by any other means, upon delivery or refusal of delivery at the address
specified in this Section.
14.4 Binding Nature; Assignment. This Agreement and all of the provisions
--------------------------
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without prior written consent of the other parties; provided,
however, that the rights of FiberNet hereunder may be assigned to any lender or
financing institution as security for a loan or loans, but such assignment to a
lender or financing institution shall not relieve FiberNet of its obligations
under this Agreement.
60
14.5 Governing Law; Submission to Jurisdiction. This Agreement and the
-----------------------------------------
legal relations among the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed therein. Subject to the terms and provisions of Section 14.4
hereof, each party hereto hereby irrevocably: (i) in any legal proceeding
brought in connection with this Agreement or any of the Documents or the
transactions contemplated hereby or thereby, submits to the nonexclusive in
personam jurisdiction of the United States District Court for the Southern
District of New York; (ii) waives any objection that it may now or hereafter
have to the venue of such proceeding in any such court or that such proceeding
was brought in an inconvenient court; (iii) designates Xxxxx Xxxxxxxxxx LLP (in
the case of Devnet) or Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (in
the case of FiberNet, Holdco, Merger Sub and Devnet Merger Sub) as agent to
receive service of any and all process and documents on their behalf in any
legal proceeding in the State of New York; and (iv) agrees that nothing herein
shall affect any parties right to effect service of process in any manner
permitted by law, and that FiberNet, Devnet and the Managing Member shall have
the right to bring any legal proceedings (including a proceeding for enforcement
of a judgment entered by any of the aforementioned courts) against any party in
any other court or jurisdiction in accordance with applicable law.
14.6 Public Announcements. Devnet and FiberNet agree that press releases
--------------------
and other announcements with respect to the transactions contemplated hereby
shall be subject to mutual agreement; provided, however, that either party may
make such announcements as, in the opinion of its counsel, such party is
required to make pursuant to applicable law or the requirements of a stock
exchange or other applicable self-regulatory organization, but in such event
such party shall, to the extent practicable, give the other party reasonable
prior notice and an opportunity to comment on the proposed announcement.
FiberNet will file with the SEC a current report on Form 8-K (the "Form 8-K")
which will incorporate both the press release in the form of Exhibit J hereto
and this Agreement (without any Exhibits or Schedules). FiberNet will use
reasonable efforts to file the Form 8-K with the SEC within three business days
of the date hereof.
14.7 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the Documents shall be paid at the Closing by the party incurring
such cost or expense provided, however, that (i) the Members shall be obligated
to pay fifty percent (50%) (the "Members' Fees") of the final legal fees of
Xxxxx Xxxxxxxxxx LLP incurred in connection with this Agreement and the
transactions contemplated hereby (the "Legal Fees") to Xxxxx Xxxxxxxxxx LLP,
pursuant to a standard xxxx which shall be presented at the Closing, which
Members' Fees shall be deducted from the Cash Consideration as set forth in
Section 4.4(a) hereof and (ii) with respect to the fee payable to Xxxxxxx Xxxxxx
as referred to in Item 2 in Schedule 5.19 (the "Fugazy Fee"), an amount equal to
$100,000 in payment of the portion of the Fugazy Fee which is due in January
2001 shall not be paid at the Closing. If and to the extent that (i) the other
fifty percent (50%) of the Legal Fees not deducted from the Cash Consideration
and (ii) the other $100,000 portion of the Fugazy Fee which is due at Closing,
are not paid at Closing by Devnet, FiberNet shall pay such other fifty percent
(50%) of such Legal Fees and such other portion of the Fugazy Fee at the
Closing.
14.8 Counterparts. This Agreement may be executed simultaneously in one or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
61
14.9 Headings. The headings contained in this Agreement are inserted for
--------
convenience only and shall not constitute a part hereof.
14.10 Entire Agreement. This Agreement, together with the Schedules and
----------------
Exhibits hereto, and the Documents, constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements, schedules, understandings, documents (including,
without limitation, information provided or made available by any party to any
other party), negotiations and discussions, whether oral or written, of the
parties hereto.
14.11 Remedies Exclusive. Prior to the Closing, the rights, remedies and
------------------
obligations of the parties hereto under this Agreement and the Documents set
forth in Article XII hereof shall be deemed to be exclusive of all other rights,
remedies and obligations under this Agreement and the Documents that would
otherwise be available to the parties hereto. After the Closing, the rights,
remedies and obligations under this Agreement and the Documents of the parties
hereto set forth in Article XIII hereof shall be deemed to be exclusive of all
other rights, remedies and obligations under this Agreement and the Documents
that would otherwise be available to the parties hereto. Notwithstanding the
foregoing, the parties agree that the Business and the transactions contemplated
by this Agreement are unique and that remedies at law may be inadequate, and
accordingly, the parties in addition to other remedies they may have, shall have
the right to enforce the obligation of the other parties to consummate the
Merger and the Devnet Merger and engage in the transactions contemplated herein,
by an action or actions for specific performance, injunction or other
appropriate equitable remedies. The foregoing shall in no event limit or
restrict the liability or obligation of any party hereto in respect of any claim
based upon fraud. In no event shall any officer, director, stockholder, member
or affiliate of any party be subject to any liability in connection with the
transactions contemplated hereby; provided, however, that nothing in the
foregoing shall be deemed to (i) limit in any way FiberNet's or Holdco's rights
pursuant to Section 13.5 of this Agreement or (ii) notwithstanding the fact that
FiberNet and the Managing Member are members of Devnet, limit in any way (x)
FiberNet's obligations and liabilities as a party to this Agreement or (y) the
Managing Member's obligations and liabilities under this Agreement to the extent
that, pursuant to Section 13.15, the Managing Member has entered into this
Agreement.
14.12 Arbitration.
-----------
Disputes that arise under or with respect to this Agreement, the Documents
or the Escrow Fund will be resolved as follows:
(i) except as set forth in this Section 14.12, no party,
including the Managing Member, nor any Member or Optionee shall bring a
civil action arising under or with respect to this Agreement, the Documents
or the Escrow Fund.
(ii) at any time any party, including the Managing Member, or any
Member or Optionee may demand arbitration of any dispute, arising under or
with respect to any of this Agreement or the Escrow Fund by delivering
written notice thereof to: (v) the Managing Member, (w) the Members (at the
addresses specified on Schedule 14.12(a) hereof) or at such other address
as to which such Member shall have given notice to both (A) the Managing
Member and (B) FiberNet or Holdco, (x) the Optionees (at the
62
addresses specified on Schedule 14.12(b)) or at such other address as to
which such Optionee shall have given notice to both (A) the Managing Member
and (B) FiberNet or Holdco, (y) FiberNet or Holdco and (z) an office of
JAMS/Endispute located in New York City (or, if none, then the office of
JAMS/Endispute located closest to New York City); and
(iii) any such arbitration shall be conducted in New York City
according to JAMS/Endispute's Arbitration Rules then in effect applicable
to disputes of the type submitted to arbitration and the results of such
arbitration shall be final and binding on the parties thereto.
In the event that JAMS/Endispute is not available to provide such
arbitration services with respect to any such dispute, then that dispute shall
be resolved by final, binding arbitration in New York City by three arbitrators
pursuant to the rules then prevailing of the American Arbitration Association
applicable to disputes of the type submitted to arbitration. Judgment on the
award rendered by any of the above referenced arbitrators may be confirmed and
entered in and by any court having jurisdiction.
Notwithstanding the foregoing, each party, including the Managing Member,
and the Members and Optionees specifically reserves the right: (a) to seek
equitable remedies in a court of competent jurisdiction; and (b) to bring a
third party action against any other party in any proceeding to which such
person (the "Initiating Person") is a party under circumstances in which the
basis of the claim by the Initiating Person against the other party is that such
other party is liable (under any of the Agreements or otherwise), in whole or in
part, for or in respect of any claim or counterclaim being asserted against the
Initiating Person in such proceeding.
The parties hereto, including the Managing Member, and the Members and
Optionees agree that the party losing any matter that has been finally
determined by arbitration pursuant thereto shall promptly reimburse to all
prevailing parties the reasonable cost and expenses incurred by them in
connection therewith (including, without limitation, reasonable fees and
disbursements of counsel) provided that: (i) the FiberNet, Holdco, Merger Sub
and Devnet Merger Sub shall have no obligation to provide such reimbursement for
more than one counsel for the Managing Member, the Members and the Optionees,
collectively; and (ii) the Managing Member, the Members and the Optionees shall
have no obligation to provide such reimbursement for more than one counsel for
FiberNet, Holdco, Merger Sub and Devnet Merger Sub, collectively.
14.13 Third Party Beneficiaries. Article IV, Article VI and Sections 8.7,
-------------------------
8.11, 8.12, 8.13, 8.14, 8.16, 8.18, 8.19, 13.9, 13.10, 13.11, 13.12, 13.13 and
13.14 are made specifically for the benefit of the Members and the other persons
intended to be benefitted thereby, who may enforce such provisions as if they
were parties thereto. Article VI and Sections 4.9 and 13.9 are made specifically
for the benefit of the Optionees, who may enforce such provisions as if they
were parties thereto. Notwithstanding the foregoing, the Members and Optionees
shall only be entitled to resolve disputes with regard to such provisions
contemplated by this Section 14.13 in accordance with the provisions of Section
14.12 hereof.
63
ARTICLE XV
GLOSSARY
15. Glossary
--------
The following terms as used in this Agreement shall have the meaning
indicated below:
"Affiliate" shall mean, with respect to any person, any other person
controlling, controlled by or under common control with, such person.
"Adjustment Shares" has the meaning set forth in Schedule 4.9(a).
"Agreement" shall mean this Agreement and Plan of Reorganization entered
into this 2nd day of June, 2000, by and among FiberNet Telecom Group, Inc.,
FiberNet Holdco, Inc., FiberNet Merger Sub, Inc., Devnet Merger Sub, Inc.,
Devnet L.L.C. and FP Enterprises L.L.C.
"Approvals" has the meaning set forth in Section 5.20.
"Balance Sheet" has the meaning set forth in Section 5.7.
"Balance Sheet Date" has the meaning set forth in Section 5.7
"Bank Consent" has the meaning set forth in Section 8.4(b).
"Benefit Plans" has the meaning set forth in Section 5.15.
"Bona Fide Financing" has the meaning set forth in Section 8.8(d).
"Business" means the contracting for telecommunications access rights in
multi-tenant office buildings, the deployment of telecommunications networks in
and connected to such buildings, and the offering of voice and data
communications services either in a wholesale or resale nature, as such
business is now being conducted by Devnet.
"Cash Consideration" has the meaning set forth in Section 4.4(a).
"Change of Control" is defined as (A) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended,
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of Devnet representing 20% or more of the
total voting power represented by Devnet's then outstanding voting securities;
or (B) the consummation of a merger, consolidation, reorganization or similar
transaction in which Devnet's members before such transaction own less than 50%
of the voting stock on voting power of the surviving entity immediately after
such transaction; or (C) the consummation of the sale or disposition by Devnet
of all or substantially all of Devnet's assets.
"Class A Units" has the meaning set forth in the Recitals.
"Class B Units" has the meaning set forth in the Recitals.
"Class C Units" has the meaning set forth in the Recitals.
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"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2
"Code" means the Internal Revenue Code of 1986, as amended.
"Constituent Corporations" shall mean Holdco and Merger Sub.
"Contracts" has the meaning set forth in Section 5.18.
"Delaware Secretary of State" means the Secretary of State of the State of
Delaware
"Devnet" means Devnet L.L.C., a Delaware limited liability company.
"Devnet Agreements" has the meaning set forth in Section 5.3.
"Devnet Amendment" has the meaning set forth in Section 12.2(c)(i).
"Devnet Certificate of Merger" has the meaning set forth in Section 4.1.
"Devnet Certificates" has the meaning set forth in Section 4.8(b).
"Devnet Merger" has the meaning set forth in the Recitals.
"Devnet Merger Certificate" has the meaning set forth in Section 4.1.
"Devnet Merger Consideration" has the meaning set forth in Section 4.4(a).
"Devnet Merger Securities" has the meaning set forth in Section 4.4(a).
"Devnet Merger Sub" has the meaning set forth in the Recitals.
"Devnet Merger Sub Units" has the meaning set forth in Section 4.2.
"Devnet Takeover Proposal" has the meaning set forth in Section 8.8(d).
"DGCL" shall mean the General Corporation Law of the state of Delaware.
"Distribution Schedule" has the meaning set forth in Section 4.4(b).
"DLLCA" has the meaning set forth in the Recitals.
"Documents" shall mean and include and be deemed to refer to all
instruments, certificates, documents, representation letters and agreements to
be executed and delivered herewith or at or prior to the Closing in connection
with the transactions contemplated hereby.
"Effective Time" has the meaning set forth in Section 1.1.
"Encumbrances" has the meaning set forth in Section 5.10(a)(i).
"End Date" has the meaning set forth in Section 12.1.
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"ERISA" means the Employee Retirement Income Security Act of 1974.
"Escrow Agent" has the meaning set forth in Section 13.2.
"Escrow Fund" has the meaning set forth in Section 4.8(a).
"Escrow Shares" has the meaning set forth in Section 13.2(a).
"Exchange Act" has the meaning set forth in Section 3.9.
"Exchange Agent" has the meaning set forth in Section 4.8(a).
"Exchange Agreement" has the meaning set forth in Section 4.8(a).
"Exchange Fund" has the meaning set forth in Section 4.8(a).
"Existing Claims" has the meaning set forth in Section 13.4.
"Federal Tax" means any tax imposed under Subtitle A of the Code.
"FiberNet" means FiberNet Telecom Group, Inc., a Delaware corporation.
"FiberNet Agreement" has the meaning set forth in Section 5.3.
"FiberNet Amendment" has the meaning set forth in Section 8.4(b)(i).
"FiberNet Board" has the meaning set forth in Section 1.6.
"FiberNet Bylaws" has the meaning set forth in Section 1.5.
"FiberNet Charter" has the meaning set forth in Section 1.4.
"FiberNet Common Stock" means shares of FiberNet's common stock, $.001 par
value per share.
"FiberNet Group" has the meaning set forth in Section 6.9(c).
"FiberNet Certificate of Merger" has the meaning set forth in Section 1.1.
"FiberNet Merger Sub, Inc." means FiberNet Merger Sub, Inc., a Delaware
corporation, which is a direct wholly-owned subsidiary of Holdco and an indirect
wholly-owned subsidiary of FiberNet.
"FiberNet New Stock" has the meaning set forth in Section 2.2(f).
"FiberNet Option" has the meaning set forth in Section 3.5.
"FiberNet Option Plans" has the meaning set forth in Section 3.5.
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"FiberNet Preferred Stock" means shares of FiberNet's preferred stock,
$.001 par value per share.
"FiberNet SEC Reports" has the meaning set forth in Section 6.5(a).
"FiberNet Series C Preferred Stock" has the meaning set forth in the
Recitals.
"FiberNet Series D Preferred Stock" has the meaning set forth in the
Recitals.
"FiberNet Series E Preferred Stock" has the meaning set forth in the
Recitals.
"FiberNet Series F Preferred Stock" has the meaning set forth in the
Recitals.
"FiberNet Warrant" has the meaning set forth in Section 3.6.
"Final Determination" has the meaning set forth in Section 13.13.
"Form 8-K" has the meaning set forth in Section 14.6.
"FP Escrow Costs" has the meaning set forth in Section 13.4.
"FP Operating Agreement" has the meaning set forth in Section 5.3.
"Fugazy Fee" has the meaning set forth in Section 14.7.
"GAAP" shall mean generally accepted accounting principles.
"Holdco" means FiberNet Holdco, Inc., a Delaware corporation, which is a
direct wholly-owned subsidiary of FiberNet.
"Holdco Board" has the meaning set forth in Section 3.1(a).
"Holdco Bylaws" has the meaning set forth in Section 3.3.
"Holdco Charter has the meaning set forth in Section 3.2.
"Holdco Common Stock" means shares of Holdco's common stock, par value
$.001 per share.
"Holdco New Stock" has the meaning set forth in Section 2.2(f).
"Holdco Option" has the meaning set forth in Section 3.5.
"Holdco Preferred Stock" means shares of Holdco's preferred stock, par
value $.001 per share.
"Holdco Series C Preferred Stock" has the meaning set forth in the
Recitals.
"Holdco Series D Preferred Stock" has the meaning set forth in the
Recitals.
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"Holdco Series E Preferred Stock" has the meaning set forth in the
Recitals.
"Holdco Series F Preferred Stock" has the meaning set forth in the
Recitals.
"Holdco Tax Claim" has the meaning set forth in Section 13.11(b).
"Indemnified Person" has the meaning set forth in Section 13.10(a).
"Indemnifying Party" has the meaning set forth in Section 13.10(b).
"Indemnitee" has the meaning set forth in Section 13.11(b).
"Indemnitor" has the meaning set forth in Section 13.11(a).
"Initial Merger Consideration" has the meaning set forth in Section 4.8(a).
"Initiating Person" has the meaning set forth in Section 14.12.
"Intangible Property" has the meaning set forth in Section 5.11.
"Joinder" has the meaning set forth in Section 8.11.
"Landlord Encumbrances" has the meaning set forth in Section 5.10(e).
"Leased Real Property" has the meaning set forth in Section 5.10(b).
"Legal Fees" has the meaning set forth in Section 14.7.
"Letter Agreement" has the meaning set forth in Section 8.4(b).
"Losses" shall mean, as to any Person, all liabilities, losses, damages,
deficiencies, Taxes or expenses (including, without limitation, the reasonable
expenses of investigation and reasonable fees and expenses of counsel) of such
Person.
"Majority Members" has the meaning set forth in Section 8.12(e).
"Managing Member" means FP Enterprises, L.L.C., a Delaware limited
liability company and managing member of Devnet.
"Market Price" shall mean the average closing prices of FiberNet's Common
Stock sales on the Nasdaq Stock Market, Inc., or, if there have been no sales on
such market on any day, the average of the highest bid and lowest asked prices
on such market at the end of such day, or, if on any such day FiberNet Common
Stock is not so listed, the average representative bid and asked prices quoted
by any other United States securities exchange on which FiberNet Common Stock
may be listed at the time, or, if FiberNet Common Stock is not listed on any
other such exchange, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in each
such case averaged over a period of 10 days consisting of the 10 consecutive
business days prior to the Closing Date.
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"Material Adverse Effect" shall mean a material adverse change to the
condition (financial or otherwise), results of operations or assets, liabilities
of (1) Devnet, when such term is used in relation to Devnet or the context
otherwise requires or (2) FiberNet, and/or its subsidiaries, taken as a whole,
when such term is used in relation to FiberNet or the context otherwise so
required, but not including any such change which results from (x) changes in
general economic or political conditions generally or (y) general economic or
political conditions applicable to the telecommunications industry.
"Medical Plan Amendment" has the meaning set forth in Section 7.1.
"Member Tax Claim" has the meaning set forth in Section 13.11(a).
"Members" has the meaning set forth in the Recitals.
"Members' Fees" has the meaning set forth in Section 14.7.
"Merger" means the transaction where Merger Sub is merged with and into
FiberNet, with FiberNet continuing as the Surviving Corporation, in accordance
with the terms and conditions of this Agreement.
"Merger Sub" has the meaning set forth in the Recitals.
"Merger Sub Common Stock" means shares of Merger Sub's common stock, $.001
par value per share.
"Merger Sub Common Stock Certificate" has the meaning set forth in Section
2.4(b).
"Minimum Amount" has the meaning set forth in Section 13.2.
"Nasdaq" has the meaning set forth in Section 4.8(e)(ii).
"New Stock Accumulated Dividends" has the meaning set forth in Section
2.2(f).
"Officer's Certificate" has the meaning set forth in Section 13.5(a).
"Operating Agreement" has the meaning set forth in Section 5.1(h).
"Option Schedule" has the meaning set forth in Schedule 4.9.
"Optionee Termination" has the meaning set forth in Section 4.9.
"Optionees" has the meaning set forth in Schedule 4.9.
"Options" has the meaning set forth in Schedule 4.9.
"Outstanding FiberNet Common Shares" has the meaning set forth in the
Recitals.
"Outstanding FiberNet Series C Preferred Shares" has the meaning set forth
in the Recitals.
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"Outstanding FiberNet Series D Preferred Shares" has the meaning set forth
in the Recitals.
"Outstanding FiberNet Series E Preferred Shares" has the meaning set forth
in the Recitals.
"Outstanding FiberNet Series F Preferred Shares" has the meaning set forth
in the Recitals.
"Outstanding Holdco Common Shares" has the meaning set forth in the
Recitals.
"Outstanding Merger Sub Common Shares" has the meaning set forth in the
Recitals.
"Permitted Liens" has the meaning set forth in Section 5.10(e).
"Person" and "person" shall mean any natural person and any corporation,
trust, partnership, limited liability partnership, limited liability company,
limited liability corporation, venture or business entity.
"Registration Rights Agreement" has the meaning set forth in Section 8.11.
"Reimbursed Person" has the meaning set forth in Section 13.10(b).
"Notice Party" has the meaning set forth in Section 13.10(b).
"Representatives" has the meaning set forth in Section 8.8(a).
"SEC" shall mean the Securities and Exchange Commission.
"Series C Accumulated Dividends" has the meaning set forth in Section
2.2(b).
"Series D Accumulated Dividends" has the meaning set forth in Section
2.2(c).
"Series E Accumulated Dividends" has the meaning set forth in Section
2.2(d).
"Series F Accumulated Dividends" has the meaning set forth in Section
2.2(e).
"SpaceTel Agreement" has the meaning set forth in Section 5.3.
"Superior Devnet Proposal" has the meaning set forth in Section 8.8(d).
"Surviving Corporation" means FiberNet.
"Surviving Corporation Common Stock" has the meaning set forth in Section
2.1.
"Surviving Corporation Charter" has the meaning set forth in Section 1.4.
"Surviving LLC" has the meaning set forth in Section 4.1.
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"Taxes" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions, levies, imposts
and liabilities, including, without limitation, taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, gains, franchise, withholding, payroll, recapture,
employment, excise, unemployment, insurance, social security, business license,
occupation, business organization, stamp, environmental and property taxes,
together with all interest, penalties and additions imposed with respect to such
amounts. For purposes of this Agreement, "Taxes" also includes any obligations
under any agreements or arrangements with any person with respect to the
liability for, or sharing of, Taxes (including, without limitation, pursuant to
Treas. Reg. (S) 1.1502-6 or comparable provisions of state, local or foreign Tax
law) and including, without limitation, any liability for Taxes as a transferee
or successor, by contract or otherwise.
"Tax Asset" means any net operating loss, net capital loss, investment tax
credit or tax attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum Taxes).
"Tax Return" or "Return" means any report, return, election, notice,
estimate, declaration, information statement and other forms and documents
(including, without limitation, all schedules, exhibits and other attachments
thereto) relating to and filed or required to be filed with a Taxing authority
in connection with any Taxes (including, without limitation, estimated Taxes).
"Transaction" means the Merger and the Devnet Merger.
"Units" means the Class A Units and the Class B Units.
"US Trust" has the meaning set forth in Section 4.8(a).
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
FIBERNET TELECOM GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer and President
FIBERNET HOLDCO, INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Executive Officer and President
FIBERNET MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
DEVNET MERGER SUB, LLC
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: President
DEVNET L.L.C.
By: F.P. Enterprises L.L.C., its Managing Member
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
F.P. ENTERPRISES L.L.C., a Delaware Limited
Liability Company (exclusively for the purposes
set forth in Section 13.15 hereof)
By: /s/ Xxxx X. Xxxxxx
------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
2
