Exhibit 10.1
Execution Copy
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AGREEMENT AND PLAN OF MERGER
among
LEVEL 3 COMMUNICATIONS, INC.,
ELDORADO ACQUISITION THREE, LLC
and
TELCOVE, INC.
Dated as of April 30, 2006
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TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS..................................................................................1
ARTICLE II. THE MERGER...................................................................................9
Section 2.1. The Merger.............................................................................9
Section 2.2. Effective Date of the Merger...........................................................9
Section 2.3. Reorganization.........................................................................9
ARTICLE III. THE SURVIVING COMPANY........................................................................9
Section 3.1. Certificate of Formation...............................................................9
Section 3.2. Operating Agreement....................................................................9
Section 3.3. Managers; Officers....................................................................10
ARTICLE IV. CONVERSION OF SHARES........................................................................10
Section 4.1. Merger Consideration; Effect on Capital Stock.........................................10
Section 4.2. Exchange of Certificates..............................................................11
Section 4.3. Dividends and Other Distributions.....................................................12
Section 4.4. No Fractional Shares..................................................................12
Section 4.5. Lost, Stolen or Destroyed Certificates................................................13
Section 4.6. Closing of the Company's Transfer Books...............................................13
Section 4.7. Closing...............................................................................13
Section 4.8. Additional Actions....................................................................13
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................13
Section 5.1. Corporate Organization................................................................13
Section 5.2. Qualification to Do Business..........................................................14
Section 5.3. No Conflict or Violation..............................................................14
Section 5.4. Consents and Approvals................................................................14
Section 5.5. Authorization and Validity of Agreement...............................................14
Section 5.6. Capitalization and Related Matters....................................................15
Section 5.7. Subsidiaries and Equity Investments...................................................16
Section 5.8. Financial Statements; Debt............................................................16
Section 5.9. Absence of Certain Changes or Events..................................................17
Section 5.10. Tax Matters...........................................................................18
Section 5.11. Absence of Undisclosed Liabilities....................................................19
Section 5.12. Company Property......................................................................20
Section 5.13. Assets of the Company and its Subsidiaries............................................21
Section 5.14. Intellectual Property.................................................................21
Section 5.15. Software..............................................................................22
Section 5.16. Licenses and Permits..................................................................22
Section 5.17. Compliance with Law...................................................................23
Section 5.18. Litigation............................................................................23
Section 5.19. Contracts.............................................................................24
Section 5.20. Employee Plans........................................................................25
Section 5.21. Insurance.............................................................................27
Section 5.22. Transactions with Directors, Officers, Managers, and Affiliates.......................27
Section 5.23. Suppliers and Customers...............................................................28
Section 5.24. Labor Matters.........................................................................28
Section 5.25. Environmental Matters.................................................................29
Section 5.26. No Brokers............................................................................30
Section 5.27. Network Operations....................................................................30
Section 5.28. State Takeover Statutes...............................................................31
Section 5.29. Opinion of Financial Advisor..........................................................31
Section 5.30. Bankruptcy Claims.....................................................................31
Section 5.31. No Other Representations or Warranties................................................31
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................................31
Section 6.1. Organization..........................................................................31
Section 6.2. Qualification to Do Business..........................................................32
Section 6.3. No Conflict or Violation..............................................................32
Section 6.4. Consents and Approvals................................................................32
Section 6.5. Authorization and Validity of Agreement...............................................32
Section 6.6. Capitalization and Related Matters....................................................32
Section 6.7. SEC Filings...........................................................................33
Section 6.8. No Brokers............................................................................33
Section 6.9. Sufficiency of Funds..................................................................34
Section 6.10. Tax Matters...........................................................................34
Section 6.11. No Other Representations or Warranties................................................34
ARTICLE VII. COVENANTS OF THE COMPANY....................................................................34
Section 7.1. Conduct of Business Before the Closing Date...........................................34
Section 7.2. Consents and Approvals................................................................37
Section 7.3. Access to Properties and Records......................................................37
Section 7.4. Negotiations..........................................................................37
Section 7.5. Meeting of or Written Consent of Stockholders of the Company..........................37
Section 7.6. Reasonable Best Efforts...............................................................38
Section 7.7. Notice of Breach......................................................................38
Section 7.8. Drag-Along Notice.....................................................................38
Section 7.9. Affiliate Letter......................................................................38
ARTICLE VIII. COVENANTS OF PARENT AND MERGER SUB..........................................................38
Section 8.1. Consents and Approvals................................................................38
Section 8.2. Employee Benefits.....................................................................39
Section 8.3. Reasonable Best Efforts...............................................................40
Section 8.4. Indemnification Continuation..........................................................40
ARTICLE IX. ADDITIONAL COVENANTS OF THE PARTIES.........................................................41
Section 9.1. Consummation of the Merger............................................................41
Section 9.2. Registration Statement................................................................41
Section 9.3. Confidentiality.......................................................................42
Section 9.4. Reorganization........................................................................42
ARTICLE X. MUTUAL CONDITIONS...........................................................................43
Section 10.1. No Injunction or Action...............................................................43
Section 10.2. Registration Statement................................................................43
Section 10.3. Stockholder Approval..................................................................43
Section 10.4. HSR Act...............................................................................43
Section 10.5. FCC Approvals.........................................................................43
Section 10.6. Authorized Shares.....................................................................43
ARTICLE XI. CONDITIONS PRECEDENT TO PERFORMANCE BY THE COMPANY..........................................43
Section 11.1. Representations and Warranties of Parent and Merger Sub...............................44
Section 11.2. Performance of the Obligations of Parent and Merger Sub...............................44
Section 11.3. No Parent Material Adverse Effect.....................................................44
Section 11.4. Opinion of Counsel....................................................................44
Section 11.5. Share Listing.........................................................................44
Section 11.6. Tax Opinion...........................................................................44
ARTICLE XII. CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT AND MERGER SUB................................44
Section 12.1. Representations and Warranties of the Company.........................................45
Section 12.2. Performance of the Obligations of the Company.........................................45
Section 12.3. Consents and Approvals................................................................45
Section 12.4. No Company Material Adverse Effect....................................................45
Section 12.5. Opinion of Counsel....................................................................45
Section 12.6. Executive Officer Employment Agreements...............................................45
Section 12.7. Drag-Along Notice and Cancellation of Warrants........................................45
Section 12.8. Appraisal Rights......................................................................45
Section 12.9. Resignation of Directors..............................................................45
Section 12.10. FIRPTA Affidavit......................................................................45
Section 12.11. Tax Opinion...........................................................................46
ARTICLE XIII. TERMINATION.................................................................................46
Section 13.1. Conditions of Termination.............................................................46
Section 13.2. Effect of Termination.................................................................47
ARTICLE XIV. MISCELLANEOUS...............................................................................47
Section 14.1. Survival..............................................................................47
Section 14.2. Disclosure Schedules..................................................................48
Section 14.3. Successors and Assigns................................................................48
Section 14.4. Governing Law; Jurisdiction...........................................................48
Section 14.5. Expenses..............................................................................48
Section 14.6. Severability; Construction............................................................48
Section 14.7. Notices...............................................................................49
Section 14.8. Amendments; Waivers...................................................................50
Section 14.9. Public Announcements..................................................................50
Section 14.10. Entire Agreement......................................................................50
Section 14.11. Parties in Interest...................................................................50
Section 14.12. Section and Paragraph Headings........................................................50
Section 14.13. Counterparts..........................................................................50
Section 14.14. No Liability..........................................................................51
INDEX TO EXHIBITS
A Form of Opinion of Counsel to Parent
B Form of Opinion of Counsel to the Company
C Form of Akin Gump Strauss Hauer & Feld LLP Tax Opinion
D Form of Willkie Farr & Gallagher LLP Tax Opinion
E Form of Company Tax Opinion Backup Representation Letter
F Form of Parent Tax Opinion Backup Representation Letter
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of April 30, 2006,
by and among Level 3 Communications, Inc., a Delaware corporation ("Parent"),
Eldorado Acquisition Three, LLC, a Delaware limited liability company and a
direct, wholly owned subsidiary of Parent ("Merger Sub"), and TelCove, Inc., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, Parent and the Company desire to effect a business combination by
means of the merger of the Company with and into Merger Sub, with Merger Sub
continuing as the surviving entity (the "Merger");
WHEREAS, the managers of Merger Sub and the Board of Directors of the
Company have approved the Merger upon the terms and subject to the conditions
set forth herein; and
WHEREAS, pursuant to the Merger, among other things, and subject to the
terms and conditions of this Agreement, all of the issued and outstanding
capital stock of the Company ("Company Capital Stock") and warrants to purchase
Company Common Stock shall be converted into the right to receive a combination
of cash and shares of common stock of Parent or otherwise cancelled;
WHEREAS, for United States federal income tax purposes, the Parties intend
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Action" -- See Section 5.18 hereof;
"Adjusted Parent Stock Price" shall mean the average of the volume weighted
sales prices per share of Parent Common Stock as reported by the NASDAQ Stock
Market for the ten trading-day period ending upon the trading day immediately
preceding the third trading day prior to the Closing Date;
"Affiliate" shall mean, as to any Person, any other Person that controls,
is controlled by, or is under common control with, such Person;
"Agreement" -- See Preamble hereto;
"Aggregate Cash Consideration" shall mean $445,000,000;
"Aggregate Merger Consideration" shall mean the Aggregate Share
Consideration and the Aggregate Cash Consideration collectively;
"Aggregate Share Consideration" shall mean the aggregate number of shares
of Parent Common Stock equal to the sum of (i) the quotient of (A) the Share
Value Factor divided by (B) the Parent Stock Price and (ii) the quotient of (A)
Exercise Price Consideration divided by (B) the Adjusted Parent Stock Price. For
avoidance of doubt, the minimum aggregate number of shares of Parent Common
Stock to be issued pursuant to this Agreement shall be 110,590,278;
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which banks in the State of New York are required or authorized to close;
"Cash Consideration" -- See Section 4.1(b)(ii) hereof;
"Cash Exchange Ratio" -- See Section 4.1(b)(ii) hereof;
"Certificate of Merger" -- See Section 2.2 hereof;
"Certificates" -- See Section 4.2(a) hereof;
"Closing" -- See Section 4.7 hereof;
"Closing Date" -- See Section 4.7 hereof;
"Code" -- See Recitals hereto;
"Common Stock Exchange Ratio" -- See Section 4.1(b)(i) hereof;
"Company" -- See Preamble hereto;
"Company Common Stock" shall mean shares of common stock, par value $0.01
per share, of the Company;
"Company Material Adverse Effect" shall mean any event, change,
circumstance, effect, development or state of facts that, individually or in the
aggregate, is or is reasonably likely to become, materially adverse to the
business, assets, properties, condition (financial or otherwise), liabilities or
results of operations of the Company and its Subsidiaries, taken as a whole;
provided, however, that Company Material Adverse Effect shall not include the
effect of any event, change, circumstance, effect, development or state of facts
arising out of or attributable to (i) general economic conditions, (ii) the
industry in which the Company and its Subsidiaries operate so long as such
event, change, circumstance, effect, development or state of facts does not
affect the Company and its Subsidiaries in a materially disproportionate manner
when compared to the effect of such event, change, circumstance, effect,
development or state of facts on other Persons in the industry in which the
Company and its Subsidiaries operate, (iii)
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any act or omission by the Company taken with the prior written consent of
Parent in contemplation of the Merger, (iv) any costs or expenses reasonably
incurred or accrued in connection with the Merger, (v) any act or omission of
the Company taken consistent with the terms of this Agreement or (vi) clearly
shown to be directly resulting from this Agreement and the announcement or
performance hereof and the transactions contemplated hereby, including without
limitation, the direct impact thereof on relationships with customers, suppliers
or employees;
"Company Warrants" shall mean warrants to purchase shares of Company Common
Stock;
"Contract" -- See Section 5.19(c) hereof;
"Company Options" shall mean options exercisable for shares of Company
Common Stock;
"Company Organizational Documents" shall mean the Amended and Restated
Certificate of Incorporation and the Bylaws of the Company, together with all
amendments thereto;
"Company Preferred Stock" shall mean preferred stock, par value $0.01 per
share. of the Company;
"Company Property" -- See Section 5.12(b) hereof;
"Company Welfare Plans" -- See Section 8.2(b) hereof;
"Confidentiality Agreement" -- See Section 9.3 hereof;
"Continuing Employees" -- See Section 8.2 hereof;
"Customer Contracts" -- See Section 5.19(c) hereof;
"Debt" shall mean long-term debt (plus the current portion thereof) and
short-term debt of the Company or any Subsidiary thereof, in each case
determined in accordance with GAAP, including commercial paper, deferred
derivative, interest rate swaps and capital leases;
"DGCL" shall mean the Delaware General Corporation Law;
"Drag-Along Notice" -- See Section 7.8 hereof;
"Effective Date" -- See Section 2.2 hereof;
"Effective Time" -- See Section 2.2 hereof;
"Employee Benefit Plans" -- See Section 5.20(a) hereof;
"Environmental Laws" -- See Section 5.25(a) hereof;
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended;
"ERISA Affiliate" -- See Section 5.20(a) hereof;
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder;
"Excluded Shares" -- See Section 4.1(a) hereof;
"Executive Officer Employment Agreements" shall mean the employment
agreements between each of the individuals on Schedule 1.2 and Level 3
Communications LLC, dated as of the date hereof;
"Exercise Price Consideration" shall mean the aggregate amount of cash
received by the Company after the date hereof and prior to the Effective Time
with respect to the exercise of Company Warrants;
"Existing Policy" -- See Section 8.4(c) hereof;
"Financial Statements" -- See Section 5.8 hereof;
"Fully-Diluted Shares" shall mean the sum of (i) the aggregate number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time, plus (ii) all additional shares of Company Common Stock that
would be outstanding immediately prior to the Effective Time assuming (A) the
cashless exercise immediately prior to the Effective Time of all then
outstanding Company Warrants pursuant to Section 3.02(d) of the applicable
Warrant Agreement and (B) a Current Market Price of One Share of Common Stock
(as defined in the applicable Warrant Agreement) equal to the Per Share Merger
Consideration. For the avoidance of doubt, in respect of each Company Warrant
with an exercise price per share immediately prior to the Effective Time in
excess of the Per Share Merger Consideration, zero additional shares of Company
Common Stock shall be deemed outstanding pursuant to such Company Warrant for
purposes of clause (ii) above;
"GAAP" shall mean United States generally accepted accounting principles;
"Governmental Entity" shall mean any federal, state, local or foreign
governmental, regulatory or administrative authority, branch, agency or
commission or any court, tribunal or judicial body;
"Hazardous Materials" -- See Section 5.25 hereof;
"HLHZ" -- See Section 5.26 hereof;
"HSR Act" -- See Section 5.4 hereof;
"Indemnified Person" -- See Section 8.4(a) hereof;
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"Intellectual Property" shall mean all of the following, owned or used by
the Company and its Subsidiaries: material (i) trademarks and service marks,
trade dress, product configurations, trade names and other indications of
origin, applications or registrations in any jurisdiction pertaining to the
foregoing and all goodwill associated therewith; (ii) inventions (whether or not
patentable), discoveries, improvements, ideas, know-how, formula methodology,
processes, technology, software (including password unprotected interpretive
code or source code, object code, development documentation, programming tools,
drawings, specifications and data) and applications and patents in any
jurisdiction pertaining to the foregoing, including re-issues, continuations,
divisions, continuations-in-part, renewals or extensions; (iii) trade secrets,
including confidential information and the right in any jurisdiction to limit
the use or disclosure thereof; (iv) copyrighted and copyrightable writings,
designs, software, mask works or other works, applications or registrations in
any jurisdiction for the foregoing and all moral rights related thereto; (v)
database rights; (vi) Internet Web sites, domain names and applications and
registrations pertaining thereto and all intellectual property used in
connection with or contained in all versions of the Web sites of the Company and
its Subsidiaries; (vii) rights under all agreements relating to the foregoing;
(viii) books and records pertaining to the foregoing; and (ix) claims or causes
of action arising out of or related to past, present or future infringement or
misappropriation of the foregoing;
"Interim Balance Sheet" -- See Section 5.8 hereof;
"IRU" -- See Section 5.9(b) hereof;
"Knowledge" shall mean, with respect to the Company, the actual conscious
knowledge of the executives of the Company listed on Schedule 1.3 after due
inquiry of the senior employees of the Company and its Subsidiaries who have
administrative or operational responsibility for the particular subject matter
in question.
"Leased Real Property" -- See Section 5.12(b) hereof;
"Leases" -- See Section 5.12(b) hereof; "Letter of Transmittal" -- See
Section 4.2(a) hereof;
"Licenses and Permits" -- See Section 5.16(a) hereof;
"Lien" shall mean any mortgage, pledge, security interest, encumbrance or
title defect, lease, lien (statutory or other), conditional sale agreement,
claim, charge, limitation or restriction;
"LLCA" shall mean the Delaware Limited Liability Company Act;
"Merger" -- See Recitals hereto;
"Merger Consideration" shall mean, with respect to Company Common Stock,
the Share Consideration and the Cash Consideration, collectively, and with
respect to Company Warrants, the Warrant Consideration, collectively;
5
"Merger Sub" -- See Preamble hereto;
"Multiemployer Plan" -- See Section 5.20(c) hereof;
"Owned Real Property" -- See Section 5.12(a) hereof;
"Parent" -- See Preamble hereto;
"Parent Common Stock" -- See Section 4.1(b) hereof;
"Parent Material Adverse Effect" shall mean any event, change,
circumstance, effect, development or state of facts that, individually or in the
aggregate, is or is reasonably likely to become, materially adverse to the
business, assets, properties, condition (financial or otherwise), liabilities or
results of operations of Parent and its Subsidiaries, taken as a whole;
provided, however, that Parent Material Adverse Effect shall not include the
effect of any event, change, circumstance, effect, development or state of facts
arising out of or attributable to (i) general economic conditions, (ii) the
industry in which Parent and its Subsidiaries operate so long as such event,
change, circumstance, effect, development or state of facts does not affect
Parent and its Subsidiaries in a materially disproportionate manner when
compared to the effect of such event, change, circumstance, effect, development
or state of facts on other Persons in the industry in which Parent and its
Subsidiaries operate, (iii) any act or omission by Parent taken with the prior
written consent of the Company in contemplation of the Merger, (iv) any costs or
expenses reasonably incurred or accrued in connection with the Merger, (v) any
act or omission of Parent taken consistent with the terms of this Agreement or
(vi) clearly shown to be directly resulting from this Agreement and the
announcement or performance hereof and the transactions contemplated hereby,
including without limitation, the direct impact thereof on relationships with
customers, suppliers or employees;
"Parent Organizational Documents" shall mean the Amended and Restated
Certificate of Incorporation and the Amended and Restated Bylaws of Parent,
together with all amendments thereto;
"Parent SEC Reports" - See Section 6.7(a) hereof;
"Parent Stock" shall mean the Parent Common Stock and any other shares of
capital stock of Parent that are convertible into or exchangeable for shares of
Parent Common Stock;
"Parent Stock Price" shall mean the average of the volume weighted sales
prices per share of Parent Common Stock as reported by the NASDAQ Stock Market
for the ten trading-day period ending upon the trading day immediately preceding
the third trading day prior to the Closing Date; provided, however, that in no
event shall the Parent Stock Price be less than $3.84 or more than $5.76;
"Parties" shall mean Parent, Merger Sub and the Company;
"Pension Plans" -- See Section 5.20(a) hereof;
6
"Per Share Merger Consideration" shall mean the quotient of (i) (A) the
product of the Aggregate Share Consideration and the Adjusted Parent Stock Price
plus (B) the Aggregate Cash Consideration plus (C) the aggregate exercise price
of all outstanding Company Warrants outstanding immediately prior to the
Effective Time divided by (ii) the aggregate number of shares of Company Common
Stock and the number of shares of Company Common Stock issuable upon exercise
for cash of the Company Warrants, in each case outstanding immediately prior to
the Effective Time;
"Permitted Liens" shall mean means (a) liens for utilities and current
Taxes not yet due and payable, (b) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's, lessor's, landlord's and other similar liens
arising or incurred in the ordinary course of business not yet due and payable,
(c) liens for Taxes, assessments, or governmental charges or levies on a
Person's properties if the same shall not at the time be delinquent or
thereafter can be paid without penalty or are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been included on
the balance sheet of the applicable Person, (d) easements, restrictive covenants
and similar encumbrances or impediments against any assets or properties of an
entity and which individually or in the aggregate do not materially interfere
with the business of such entity or the operation of the property as currently
conducted to which they apply, (e) minor irregularities and defects of title
which individually or in the aggregate do not materially interfere with an
entity's business or the operation of the property as currently conducted to
which they apply, (f) Liens disclosed on the existing title policies, title
commitments and/or surveys which have been previously provided or made available
to Parent, none of which materially interfere with the business of the Company
or its Subsidiaries or the operation of the property as presently conducted to
which they apply, (g) Liens granted in respect of any Debt or securing any
obligations with respect thereto and other Liens as set forth on Schedule 1.5,
(h) Liens arising out of pledges or deposits under worker's compensation laws,
unemployment insurance, old age pensions or other social security or retirement
benefits or similar legislation, (i) deposits securing liability to insurance
carriers under insurance or self-insurance arrangements, (j) deposits to secure
the performance of bids, tenders, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business, (k) Liens arising
from protective filings and (l) Liens in favor of a banking institution arising
as a matter of applicable law encumbering deposits (including the right of
set-off) held by such banking institution incurred in the ordinary course of
business and which are within the general parameters customary in the banking
industry;
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Entity;
"Plan Effective Date" -- See Section 5.20(a) hereof;
"Proceeding" -- See Section 8.4(a) hereof;
"Registered Intellectual Property" -- See Section 5.14(b) hereof;
"Registration Statement" -- See Section 9.2 hereof;
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"Required Merger Stockholder Vote" -- See Section 5.5 hereof;
"SEC" shall mean the U.S. Securities and Exchange Commission;
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder;
"Share Consideration" -- See Section 4.1(b)(i) hereto;
"Share Value Factor" shall mean $637,000,000;
"Software" -- See Section 5.15(a) hereof;
"Stockholders" shall mean the holders of Company Common Stock, excluding
holders of any Excluded Shares;
"Subsidiary" means, with respect to any Person, as the case may be, any
entity, whether incorporated or unincorporated, of which at least a majority of
the securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by such party or
by one or more of its respective Subsidiaries or by such party and any one or
more of its respective Subsidiaries;
"Surviving Company" -- See Section 2.1 hereof;
"Tail Period" -- See Section 8.4(c) hereof;
"Tax Return" shall mean any report, return, information return, filing,
claim for refund or other information, including any schedules or attachments
thereto, and any amendments to any of the foregoing required to be supplied to a
taxing authority in connection with Taxes;
"Taxes" shall mean all federal, state, local or foreign taxes, including,
without limitation, income, gross income, gross receipts, production, excise,
employment, sales, use, transfer, ad valorem, value added, profits, license,
capital stock, franchise, severance, stamp, withholding, Social Security,
employment, unemployment, disability, worker's compensation, payroll, utility,
windfall profit, custom duties, personal property, real property, registration,
alternative or add-on minimum, estimated and other taxes, governmental fees or
like charges of any kind whatsoever, including any interest, penalties or
additions thereto; and "Tax" shall mean any one of them;
"Third Party Expenses" -- See Section 14.5 hereof;
"Vendor Contracts" -- See Section 5.19(c) hereof;
"WARN" -- See Section 5.24(c) hereof;
"Warrant Consideration" -- See Section 4.1(e) hereof;
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"Warrantholder" shall mean a holder of Company Warrants; and
"Warrant Agreements" shall mean the Warrant Agreement, dated as of April 8,
2004, between the Company and Wells Fargo Bank, N.A., as warrant agent, and the
Management Warrant Agreement, dated as of April 8, 2004, between the Company and
Wells Fargo Bank, N.A., as warrant agent.
ARTICLE II.
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the conditions
hereof, on the Effective Date, Company shall be merged with and into Merger Sub
and the separate existence of the Company shall thereupon cease, and Merger Sub,
as the surviving entity in the Merger (the "Surviving Company"), shall by virtue
of the Merger continue its existence under the laws of the State of Delaware.
The Merger shall have the effects set forth in Section 18-209 of the LLCA.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Date, all the property, rights, privileges, powers, and franchises of
the Company and Merger Sub shall vest in the Surviving Company, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Company.
Section 2.2. Effective Date of the Merger. The Merger shall become
effective on the date (the "Effective Date") and at the time (the "Effective
Time") when a properly executed Certificate of Merger (the "Certificate of
Merger") is duly filed with the Secretary of State of the State of Delaware. The
Parties shall cause the Certificate of Merger to be executed and filed as
aforesaid on the Closing Date upon the satisfaction or waiver of the conditions
contained in Articles X, XI and XII hereof.
Section 2.3. Reorganization. This Agreement is intended to constitute a
"plan of reorganization" with respect to the Merger for United States federal
income tax purposes pursuant to which, for such purposes, the Merger is to be
treated as a "reorganization" under Section 368(a) of the Code (to which each of
Parent and the Company are to be parties under Section 368(b) of the Code).
ARTICLE III.
THE SURVIVING COMPANY
Section 3.1. Certificate of Formation. The certificate of formation of
Merger Sub shall be the certificate of formation of the Surviving Company after
the Effective Date, and thereafter may be amended as provided therein or by law.
Section 3.2. Operating Agreement. The operating agreement of Merger Sub as
in effect on the Effective Date shall be the operating agreement of the
Surviving Company, and thereafter may be amended as provided therein or by law.
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Section 3.3. Managers; Officers. The managers of Merger Sub immediately
prior to the Effective Date shall be the managers of the Surviving Company and
the officers of the Company immediately prior to the Effective Date shall be the
officers of the Surviving Company, in each case until their respective
successors are duly elected and qualified or until their death, resignation or
removal in accordance with the LLCA and the certificate of formation and
operating agreement of the Surviving Company.
ARTICLE IV.
CONVERSION OF SHARES
Section 4.1. Merger Consideration; Effect on Capital Stock. Subject to the
terms and conditions of this Agreement, as of the Effective Date, by virtue of
the Merger and without any action on the part of any holder of any Company
Common Stock, the following shall occur:
(a) All shares of Company Common Stock issued and outstanding immediately
prior to the Effective Date that are held by the Company, and any shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Date owned by Parent, Merger Sub or any other Subsidiary of Parent, shall cease
to be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist (the "Excluded Shares").
(b) Subject to Sections 4.1(a), 4.1(c), and 4.4 hereof, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Date, shall be converted into the right to receive:
(i) that number of fully paid and nonassessable shares (the "Share
Consideration") of common stock, par value $0.01 per share, of Parent (the
"Parent Common Stock") equal to the quotient of the Aggregate Share
Consideration divided by the number of Fully-Diluted Shares, but excluding
any Excluded Shares (the "Common Stock Exchange Ratio"); and
(ii) an amount in cash (the "Cash Consideration") equal to the
quotient of the Aggregate Cash Consideration divided by the number of
Fully-Diluted Shares, but excluding any Excluded Shares (the "Cash Exchange
Ratio").
(c) In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares, or other similar
transaction, with respect to Parent Common Stock after the date hereof and prior
to the Effective Date, the Common Stock Exchange Ratio shall be adjusted
accordingly so as to maintain the relative proportionate interests of the
holders of Company Capital Stock and the holders of Parent Stock.
(d) Each membership interest of Merger Sub issued and outstanding
immediately prior to the Effective Date shall continue as one membership
interest, of the Surviving Company, which shall constitute the only outstanding
membership interest of the Surviving Company.
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(e) At the Effective Time, each outstanding Company Warrant shall by virtue
of the Merger and without any action on the part of the holder thereof, the
Company, Parent or Merger Sub, be cancelled and shall only entitle the holder
thereof to receive, as soon as reasonably practicable after the Effective Date
upon compliance with Section 4.2(c) hereof, from Parent or the Surviving
Company, the consideration such Company Warrant would have received if such
holder would have effected a cashless exercise of such Company Warrant pursuant
to Section 3.02(d) of the applicable Warrant Agreement immediately prior to the
Effective Time (and assuming a Current Market Price of One Share of Common Stock
(as defined in the applicable Warrant Agreement) equal to the Per Share Merger
Consideration), and the shares of Company Common Stock issued upon such cashless
exercise were converted in the Merger pursuant to Section 4.1(b) hereof;
provided, however, that any Company Warrant with an exercise price per share in
excess of the Per Share Merger Consideration shall terminate and cease to be
exercisable as of the Effective Date and no holder of any such Company Warrant
shall be entitled to any payment with respect to such termination (the "Warrant
Consideration").
Section 4.2. Exchange of Certificates.
(a) As soon as reasonably practicable after the Effective Date, Parent
shall mail to each holder of Company Common Stock (other than holders of
Excluded Shares) and Company Warrant (i) a letter of transmittal containing
customary provisions (the "Letter of Transmittal"), which shall specify that
delivery shall be effected, and risk of loss and title to the certificate or
certificates representing such Company Common Stock and Company Warrant (the
"Certificates") shall pass, only upon delivery of the Certificates to Parent and
shall otherwise be in such form and contain such other provisions as Parent may
reasonably specify, including an acknowledgement by Warrantholders that the
Company Warrants will be deemed cancelled upon consummation of the Merger, and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of such Certificate or
Certificates for cancellation to Parent or to such agent or agents as may be
appointed by Parent, together with the Letter of Transmittal, duly executed, for
each share formerly represented by each such Certificate, Parent shall promptly
deliver to each such Stockholder and Warrantholder (A) by check or by wire
transfer of immediately available funds for amounts in excess of $5,000,000, the
Cash Consideration or the cash portion of the Warrant Consideration payable to
such Stockholder with respect to such shares pursuant to Section 4.1 hereof, and
(B) certificates representing the Share Consideration or the share portion of
the Warrant Consideration issuable to such holder with respect to such shares
pursuant Section 4.1 hereof, and after the Effective Date, if applicable, any
dividends or other distributions with respect to Parent Common Stock to be
issued or paid pursuant to Section 4.3 hereof.
(b) In the event that any certificates for any shares of Parent Common
Stock are to be issued in a name other than that in which the Certificates
representing shares of Company Common Stock or Company Warrants surrendered in
exchange therefor are registered, it shall be a condition of such exchange that
the certificate or certificates so surrendered shall be properly endorsed with a
medallion guarantee or be otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to Parent any transfer or other taxes
required by reason of the issuance of certificates for such shares of Parent
Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Company
that such tax has been paid or is not applicable.
11
(c) Until surrendered, Certificates representing shares of Company Common
Stock or Company Warrants shall represent solely the right to receive the Merger
Consideration, and after the Effective Date, if applicable, any dividends or
other distributions with respect to Parent Common Stock to be issued or paid
pursuant to Section 4.3 hereof, in each case, without any interest thereon with
respect to Parent Common Stock. Neither Parent nor any Party hereto shall be
liable to a holder of shares of Company Common Stock or Company Warrants for any
amount properly delivered to a public official pursuant to any applicable
escheat laws. If any Certificates representing shares of Company Common Stock
entitled to be exchanged for Merger Consideration pursuant to Section 4.1 hereof
shall not have been surrendered for such exchange prior to the first anniversary
of the Closing Date, such shares of Company Common Stock shall, to the extent
permitted by applicable law, be deemed to be cancelled and no Merger
Consideration shall be due to the holder thereof. Notwithstanding the foregoing,
neither Parent nor any Party hereto shall be liable to a holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to any applicable escheat laws.
(d) Each of the Surviving Company and Parent shall be entitled to deduct
and withhold from the consideration otherwise payable to any Person pursuant to
this Article IV such amounts as it is required to deduct and withhold with
respect to the making of such payment under any provision of federal, state,
local or foreign tax law. If the Surviving Company or Parent, as the case may
be, so withholds amounts, such amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Capital
Stock in respect of which the Surviving Company or Parent, as the case may be,
made such deduction and withholding.
Section 4.3. Dividends and Other Distributions. All shares of Parent Common
Stock to be issued pursuant to the Merger shall be deemed issued and outstanding
on the Effective Date and whenever a dividend or other distribution is declared
by Parent in respect of the Parent Common Stock, the record date for which is on
or after the Effective Date, that declaration shall include dividends or other
distributions in respect of all shares issuable pursuant to this Agreement. No
dividends or other distributions that are declared or made on Parent Common
Stock will be paid to Persons entitled to receive certificates representing
Parent Common Stock pursuant to this Agreement until such Persons surrender
their Certificates representing Company Common Stock or Company Warrants.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be issued and/or paid to the holder of the certificates
representing whole shares of Parent Common Stock, as the case may be, issued in
exchange therefor, without interest, (i) at the time of such surrender, the
dividends or other distributions with a record date after the Effective Date and
a payment date on or prior to such time of surrender payable with respect to
such whole shares of Parent Common Stock and not paid and (ii) at the
appropriate payment date, the dividends or other distributions payable with
respect to such whole shares of Parent Common Stock with a record date after the
Effective Date but with a payment date subsequent to surrender.
Section 4.4. No Fractional Shares. No certificates or scrip representing
less than one share of Parent Common Stock shall be issued upon the surrender
for exchange of Certificates representing Company Common Stock or Company
pursuant to Section 4.1 hereof. Any fractional shares that would otherwise be
issuable pursuant to Section 4.1 hereof shall be rounded up to the nearest whole
number.
12
Section 4.5. Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and an indemnity agreement in an amount determined by Parent
or Parent agent by such Person at such Person's sole cost and expense against
any claim that may be made against it with respect to such Certificate, Parent
will pay and issue, in exchange for such lost, stolen or destroyed Certificate,
the Merger Consideration in accordance with Section 4.2 hereof in respect of the
shares represented by such lost, stolen or destroyed Certificate.
Section 4.6. Closing of the Company's Transfer Books. At the Effective
Date, the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock or Company Warrants shall be made thereafter. In
the event that, after the Effective Date, Certificates are presented to the
Surviving Company, they shall be cancelled and exchanged for Merger
Consideration in accordance with this Article IV.
Section 4.7. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place (i) at the offices of Willkie Farr &
Gallagher LLP, 787 Seventh Avenue, New York, New York 10019, at 9:00 A.M. local
time on the day which is the third business day after the day on which the last
of the conditions set forth in Articles X, XI, and XII is fulfilled or waived in
writing (other than those conditions that are not capable of being satisfied
until the Closing, but subject to the waiver in writing or satisfaction of these
conditions) or (ii) at such other time and place as Parent and the Company shall
agree in writing (the "Closing Date").
Section 4.8. Additional Actions. If, at any time after the Effective Date,
the Surviving Company shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Company its right, title or interest in, to or under any of the rights,
properties or assets of Merger Sub or the Company or otherwise to carry out this
Agreement, the officers and directors of the Surviving Company shall be
authorized to execute and deliver, in the name and on behalf of Merger Sub or
the Company, as the case may be, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Merger Sub or the
Company, as the case may be, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Company or otherwise to carry out this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
Section 5.1. Corporate Organization. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite corporate,
limited liability company or
13
limited partnership power (as the case may be) to own its properties and assets
and to conduct its business as now conducted. Copies of the Company
Organizational Documents and the organizational documents of each Subsidiary of
the Company, with all amendments thereto to the date hereof, have been made
available to Parent or its representatives, and such copies are accurate and
complete as of the date hereof. A complete and correct chart showing the Company
and all of its direct and indirect Subsidiaries is set forth on Schedule 5.1.
Section 5.2. Qualification to Do Business. Each of the Company and its
Subsidiaries is duly qualified to do business as a foreign corporation, limited
liability company or partnership (as the case may be) and is in good standing in
every jurisdiction in which the character of the properties owned or leased by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Company Material Adverse Effect. Schedule 5.2 sets forth for each of
the Company and its Subsidiaries all jurisdictions in which each of the Company
and its Subsidiaries are qualified to do business.
Section 5.3. No Conflict or Violation. The execution, delivery and
performance by the Company of this Agreement does not and will not (i) violate
or conflict with any provision of any Company Organizational Document or any of
the organizational documents of the Subsidiaries of the Company, (ii) violate
any provision of law, or any order, judgment or decree of any Governmental
Entity, (iii) except as set forth in Schedule 5.3, violate or result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
Contract or result in the creation or imposition of any Lien (other than any
Permitted Lien) upon any of the assets, properties or rights of either of the
Company or any of its Subsidiaries or result in or give to others any rights of
cancellation, modification, amendment, acceleration, revocation or suspension of
any of the Contracts or obligations thereunder, or Licenses and Permits or (iv)
violate or result in a breach of or constitute (with due notice or lapse of time
or both) a default under any contract, agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which it is bound or to
which any of its properties or assets is subject except in each case with
respect to clauses (iii) and (iv), for any such violations that would not have a
Company Material Adverse Effect.
Section 5.4. Consents and Approvals. No consent, waiver, authorization or
approval of any Governmental Entity, and no declaration or notice to or filing
or registration with any Governmental Entity, is required in connection with the
execution and delivery of this Agreement by the Company or the performance by
the Company or its Subsidiaries of their obligations hereunder or thereunder,
except for (i) the filing of Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act")
(ii) the consents, waivers, authorizations or approvals of any Governmental
Entity set forth on Schedule 5.4 and (iii) such consents, waivers,
authorizations, approvals, declarations, notices, filings or registrations,
which if not obtained or made would not have, a Company Material Adverse Effect
or prevent or materially delay the consummation of the transactions contemplated
by this Agreement.
Section 5.5. Authorization and Validity of Agreement. The Company has all
requisite power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery by the Company of this
Agreement and the
14
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized and unanimously approved by the Company's Board of
Directors, no other action of the Company's Board of Directors or corporate
proceeding on the part of the Company or any of its Subsidiaries are necessary
to authorize this Agreement, and, subject to obtaining the approval and adoption
of this Agreement and approval of the Merger by the holders of a majority of the
shares of the Company Common Stock outstanding (the "Required Merger Stockholder
Vote"), no other action of the Company's Board of Directors or corporate action
on the part of the Company or any of its Subsidiaries or stockholders is
necessary to consummate the transactions contemplated hereby. The Merger has
been declared advisable by the Board of Directors of the Company. This Agreement
has been duly executed by the Company and, assuming due execution and delivery
by Parent and Merger Sub, shall constitute its valid and binding obligation,
enforceable against it in accordance with its terms, subject to (i) the effect
of bankruptcy, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law) and (iii) an implied covenant of good faith and fair
dealing.
Section 5.6. Capitalization and Related Matters.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 25,000,000 shares of Company Common Stock, of which 8,555,686 shares
are issued and outstanding, and 5,000,000 shares of Company Preferred Stock, of
which no shares are issued and outstanding. Schedule 5.6 sets forth (i) the
names of the record owners of the Company Common Stock and the number of shares
held by each owner and (ii) the names of all holders of warrants to purchase
shares of Company Common Stock, the number of shares of Company Common Stock
purchasable thereunder and the exercise price(s) therefor. The Company Common
Stock (i) have been duly authorized and validly issued and are fully paid and
nonassessable and (ii) were issued in compliance with all applicable federal and
state securities laws. Except as set forth above or on Schedule 5.6, no shares
of capital stock of the Company are outstanding; the Company does not have
outstanding any securities convertible into or exchangeable for any shares of
capital stock, including Company Options, any rights to subscribe for or to
purchase or any options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or known claims
of any other character relating to the issuance of, any capital stock, or any
stock or securities convertible into or exchangeable for any capital stock; and
except with respect to the obligation to purchase the Company Warrants pursuant
to a put right held by the Warrantholders with respect to the Company Warrants,
the Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire, or to register under the Securities
Act, any shares of capital stock. The Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter. True and
correct copies of each Company Warrant agreement and the form of Company Warrant
thereto has been made available to Parent or its representatives, and such
copies are accurate and complete as of the date hereof.
(b) All of the outstanding shares of capital stock, or membership interests
or other ownership interests of, each Subsidiary of the Company, as applicable,
is validly issued,
15
fully paid and nonassessable and is owned of record and beneficially by the
Company, directly or indirectly. The Company has, as of the date hereof and
shall have on the Closing Date, valid and marketable title to all of the shares
of capital stock of, or membership interests or other ownership interests in,
each Subsidiary of the Company, free and clear of any Liens other than Permitted
Liens. Such outstanding shares of capital stock of, or membership interests or
other ownership interests in, the Subsidiaries of the Company, as applicable,
are the sole outstanding securities of such Subsidiaries; the Subsidiaries of
the Company do not have outstanding any securities convertible into or
exchangeable for any capital stock of, or membership interests or other
ownership interests in, such Subsidiaries, any rights to subscribe for or to
purchase or any options for the purchase of, or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of
any other character relating to the issuance of, any capital stock of, or
membership interests or other ownership interests in, such Subsidiaries, or any
stock or securities convertible into or exchangeable for any capital stock of,
or membership interests or other ownership interests in, such Subsidiaries; and
neither the Company or any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire, or to
register under the Securities Act, any capital stock of, or membership interests
or other ownership interests in, any Subsidiary of the Company.
Section 5.7. Subsidiaries and Equity Investments. Except as set forth in
Schedule 5.7, the Company and its Subsidiaries do not directly or indirectly
own, or hold any rights to acquire, any capital stock or any other securities,
interests or investments in any other Person other than investments that
constitute cash or cash equivalents.
Section 5.8. Financial Statements; Debt.
(a) The Company has heretofore made available to Parent (a) copies of the
audited consolidated balance sheet of the Company and its Subsidiaries as of
December 31, 2005 and 2004, together with the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the periods then
ended and the notes thereto, accompanied by the reports thereon of Grant
Thornton LLP, (b) copies of the unaudited consolidated balance sheets of the
Company and its Subsidiaries as of March 31, 2006 ("Interim Balance Sheet"),
together with the related consolidated unaudited statements of operations,
stockholders' equity (deficit), and cash flow for the period then ended, and the
notes thereto (all the financial statements referred to in clauses (a) and (b)
above being hereinafter collectively referred to as the "Financial Statements").
The Financial Statements, including the notes thereto, (i) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and (ii) present fairly in all material respects the financial
position, results of operations and changes in financial position of the Company
and its Subsidiaries as of such dates and for the periods then ended (subject,
in the case of the unaudited interim Financial Statements described in clause
(b) above, to normal year-end audit adjustments consistent with prior periods).
(b) Since March 31, 2006, as of the date hereof, there has been no material
increase in the aggregate amount of Debt outstanding.
(c) Neither the Company nor any of its Subsidiaries has any off balance
sheet arrangement (as defined in Item 303(a)(4)(ii) of Regulation S-K under the
Securities Act).
16
Section 5.9. Absence of Certain Changes or Events.
(a) Except as set forth in Schedule 5.9, since December 31, 2005, there has
not been:
(i) any Company Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the assets or properties of either of the Company or any of its
Subsidiaries (other than any for which insurance awards have been
received or guaranteed);
(iii) any change in any method of accounting or accounting
practice of either of the Company or any of its Subsidiaries except
for any such change required by reason of a concurrent change in GAAP;
or
(iv) any loss of the employment, services or benefits of the
chief executive officer of the Company and members of the Company's
senior management who report directly to such chief executive officer.
(b) Since December 31, 2005, each of the Company and each of its
Subsidiaries has operated in the ordinary course of its business and consistent
with past practice and, except as set forth in Schedule 5.9, has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise) except in the ordinary
course of business and consistent with past practice;
(ii) failed to discharge or satisfy any material Lien or pay or
satisfy any material obligation or liability (whether absolute,
accrued, contingent or otherwise), other than Permitted Liens and
liabilities being contested in good faith and for which adequate
reserves have been provided;
(iii) mortgaged, pledged or subjected to any Lien (other than
Permitted Liens) any of its assets, properties or rights;
(iv) sold or transferred any of its material assets, including
any sale, license or lease of any indefeasible rights of use of
capacity or infrastructure ("IRUs"), or cancelled any material debts
or claims or waived any material rights;
(v) disposed of any material patents, trademarks or copyrights or
any material patent, trademark or copyright applications;
(vi) defaulted on any material obligation;
(vii) entered into any transaction material to its business,
except in the ordinary course of business and consistent with past
practice;
17
(viii) granted any material increase in the compensation or
benefits of its key employees other than increases in accordance with
past practice not exceeding 8% of the key employee's annual base
compensation then in effect or entered into any employment, change of
control, retention or severance agreement or arrangement with any of
them;
(ix) contractually committed to make any capital expenditure for
any periods after the date hereof or additions to property, plant and
equipment used in its operations other than ordinary repairs and
maintenance in excess of $15,000,000 in the aggregate;
(x) laid off any significant number of its employees;
(xi) discontinued the offering of any material services or
product;
(xii) incurred any material obligation or liability for the
payment of severance benefits;
(xiii) declared, paid, or set aside for payment any dividend or
other distribution in respect of shares of its capital stock,
membership interests or other securities, or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of its capital
stock, membership interests or other securities, or agreed to do so;
or
(xiv) entered into any agreement or made any commitment to do any
of the foregoing.
Section 5.10. Tax Matters. Except as set forth in Schedule 5.10.
(a) (i) the Company and each of its Subsidiaries have filed when due all
material Tax Returns required by applicable law to be filed with respect to the
Company and each of its Subsidiaries; (ii) all such Tax Returns were true,
correct and complete in all material respects as of the time of such filing;
(iii) all material Taxes owed by the Company and each of its Subsidiaries, if
required to have been paid, have been paid (except for Taxes which are being
contested in good faith); and (iv) any liability of the Company or any of its
Subsidiaries for Taxes not yet due and payable, or which are being contested in
good faith, has been provided for on the financial statements of the Company in
accordance with GAAP;
(b) there is no material action, suit, proceeding, investigation, audit or
claim now pending with respect to the Company or any of its Subsidiaries in
respect of any Tax, nor has any material claim for additional Tax been asserted
in writing by any taxing authority;
(c) since March 27, 2002, no claim has been made in writing by any taxing
authority in a jurisdiction where the Company or any of its Subsidiaries has not
filed a Tax Return that it is or may be subject to Tax by such jurisdiction;
(d) (i) there is no outstanding request for any extension of time for the
Company or any of its Subsidiaries to pay any Taxes or file any Tax Returns;
(ii) there has been
18
no waiver or extension of any applicable statute of limitations for the
assessment or collection of any Taxes of the Company or any of its Subsidiaries
that is currently in force; (iii) the Federal statute of limitations for tax
years of the Company and its Subsidiaries has closed for all years ending prior
to January 1, 2002; and (iv) neither the Company nor any of its Subsidiaries is
a party to or bound by any agreement, whether written or unwritten, providing
for the payment of Taxes, payment for Tax losses, entitlements to refunds or
similar Tax matters;
(e) the Company and each of its Subsidiaries have withheld and paid all
material Taxes required to be withheld in connection with any amounts paid or
owing to any employee, creditor, independent contractor or other third party;
(f) the Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(g) neither the Company nor any of its Subsidiaries has distributed stock
of another Person, or has had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Section 355 or Section 361 of the Code;
(h) there is no Lien, other than a Permitted Lien, affecting any of the
assets, properties or rights of the Company and its Subsidiaries that arose in
connection with any failure or alleged failure to pay any Tax;
(i) neither the Company nor any of its Subsidiaries (i) has been a member
of an affiliated group (within the meaning of Code [SEC] 1504(a)) filing a
consolidated Federal income Tax Return (other than a group the common parent of
which is the Company) or (ii) has any liability for the Taxes of any Person
(other than any of the Company and its Subsidiaries) under Treasury Regulations
[SEC] 1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise;
(j) the Company and its Subsidiaries have neither (i) made, changed or
revoked, or permitted to be made, changed or revoked, any material election or
method of accounting with respect to Taxes affecting or relating to the Company
and its Subsidiaries, nor (ii) entered into, or permitted to be entered into,
any closing or other agreement or settlement with respect to Taxes affecting or
relating to the Company and its Subsidiaries; and
(k) neither the Company nor any of its Subsidiaries has taken or agreed to
take any action, or is aware of any fact or circumstance, that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
Section 5.11. Absence of Undisclosed Liabilities. Except as set forth in
Schedule 5.11 or as created pursuant to the terms of this Agreement, neither of
the Company or any of its Subsidiaries has any material indebtedness or
liability, absolute or contingent, known or unknown, which is not shown or
provided for on the Interim Balance Sheet other than liabilities as shall have
been incurred or accrued in the ordinary course of business since March 31, 2006
and other than obligations under Contracts. Except as shown in the Interim
Balance Sheet or in Schedule 5.11, neither of the Company or any of its
Subsidiaries is directly or
19
indirectly liable upon or with respect to (by discount, repurchase agreements or
otherwise), or obliged in any other way to provide funds in respect of, or to
guarantee or assume, any debt, obligation or dividend of any Person, except
endorsements in the ordinary course of business in connection with the deposit,
in banks or other financial institutions, of items for collection.
Section 5.12. Company Property.
(a) Schedule 5.12 contains a true and complete description of all real
property owned by the Company and its Subsidiaries (the "Owned Real Property")
as of the date hereof. The Company has made available to Parent copies of any
title insurance policies (together with copies of any documents of recorded
listed as exceptions to title on such policies) currently insuring each Owned
Real Property and copies of the most recent surveys of the same. The Company and
its Subsidiaries have good and valid title to all of the Owned Real Property
free and clear of Liens other than Permitted Liens.
(b) Schedule 5.12 sets forth a list of all leases, licenses, permits,
subleases and occupancy agreements, together with all material amendments
thereto, in which either of the Company or its Subsidiaries has a leasehold
interest or similar occupancy rights, whether as lessor or lessee, and (i) are
material to the operation of the Company and its Subsidiaries, taken as a whole,
and (ii) involve payments by the Company or its Subsidiaries in excess of
$250,000 per year (each, a "Lease" and collectively, the "Leases"; the property
covered by Leases under which either of the Company or its Subsidiaries is a
lessee is referred to herein as the "Leased Real Property"; the Leased Real
Property, together with the Owned Real Property, collectively being the "Company
Property"). Neither the Company nor any of its Subsidiaries is a party to any
Contract (other than a Lease) with the lessor of any of the Leased Real
Properties, which gives such lessor any right to terminate or adversely alter
the terms of the Lease to which such lessor is a party. The Company or its
Subsidiaries enjoys peaceful and undisturbed possession of, the Leased Real
Property pursuant to the Leases. No option has been exercised under any of such
Leases, except options whose exercise has been evidenced by a written document,
a true, complete and accurate copy of which has made available to Parent with
the corresponding Lease. Except as set forth in Schedule 5.12, the transactions
contemplated by this Agreement do not require the consent or approval of the
other party to the Leases.
(c) Since December 31, 2004, no Lease has been modified or amended in
writing in any way materially adverse to the business of the Company and its
Subsidiaries except as set forth on Schedule 5.12 and no party to any Lease has
given either of the Company or its Subsidiaries written notice of or, to the
Knowledge of the Company, made a claim with respect to any breach or default.
(d) Except as set forth in Schedule 5.12 and other than with respect to
IRUs, co-location, cross-connection, interconnection, entrance facilities or
other rights incidental to the provision of services established in the ordinary
course of business, none of the Company Property is subject to any option,
lease, sublease, license or other agreement granting to any Person or entity any
right to the use, occupancy or enjoyment of such property or any portion thereof
or to obtain title to all or any portion of such property.
20
(e) All material improvements, systems and fixtures on the Company Property
are in good operating condition and repair and generally are adequate and
suitable in all material respects for the present and continued use, operation
and maintenance thereof as now used, operated or maintained. All improvements on
the Company Property constructed by or on behalf of the Company or any
Subsidiary were constructed, to the Knowledge of the Company, in compliance in
all material respects with applicable laws, ordinances and regulations affecting
such Company Property.
Section 5.13. Assets of the Company and its Subsidiaries.
(a) The assets, properties and rights of each of the Company and its
Subsidiaries constitute all of the assets, properties and rights which are used
in the operation their business as currently conducted. Except as set forth on
Schedule 5.13(a), there are no material assets, properties, rights or interests
of any kind or nature that either of the Company or any of its Subsidiaries has
been using, holding or operating in their business prior to the Closing that
will not be used, held or owned by each of the Company or its Subsidiaries
immediately following the Closing.
(b) Each of the Company and its Subsidiaries has good and marketable fee
simple title, free and clear of any Liens other than Permitted Liens, to, or a
valid leasehold interest under enforceable leases in, all of its material
assets, properties and rights.
Section 5.14. Intellectual Property.
(a) The Company and its Subsidiaries own all right, title and interest in
and to, or have valid and enforceable licenses to use, all the Intellectual
Property, and such Intellectual Property represents all intellectual property
rights necessary for the conduct of their business as and where conducted on the
date hereof and on the Closing. The Company and its Subsidiaries are in
compliance in all material respects with all licenses relating to the protection
of such of the Intellectual Property as it uses pursuant to license or other
agreement. To the Knowledge of the Company, there are no conflicts with or
infringements of any Intellectual Property by any third party. To the Knowledge
of the Company, the conduct of the business of the Company and its Subsidiaries
does not conflict with, violate, misappropriate, misuse or infringe any
proprietary right of any third party. There is no claim, suit, action or
proceeding pending or, to the Knowledge of the Company, threatened against the
Company or its Subsidiaries: (i) alleging any such conflict, violation,
misappropriation, misuse or infringement with any third party's proprietary
rights; or (ii) challenging the Company's or its Subsidiaries' ownership or use
of, or the validity or enforceability of any Intellectual Property.
(b) Schedule 5.14(b) sets forth a complete and current list of all
registrations, applications or filings pertaining to the Intellectual Property
("Registered Intellectual Property") as of the date hereof and the owner of
record, date of application or issuance, and relevant jurisdiction as to each.
Except as described in Schedule 5.14(b), all Registered Intellectual Property is
owned by the Company and/or its Subsidiaries, free and clear of all Liens other
than Permitted Liens. All Registered Intellectual Property is valid,
subsisting, unexpired, and all renewal fees and other maintenance fees that have
fallen due on or prior to the Closing have been paid. Except as listed in
Schedule 5.14(b), there are no actions that must be taken or payments
21
that must be made by the Company or its Subsidiaries within one hundred eighty
(180) days of the Closing that, if not taken or paid, will adversely affect the
Intellectual Property or the right of the Company or its Subsidiaries to use the
same as and where used as of the effective date hereof. Except as listed in
Schedule 5.14(b), no Registered Intellectual Property is the subject of any
proceeding before any governmental, registration or other authority in any
jurisdiction, including any office action or other form of preliminary or final
refusal of registration. The consummation of the transactions contemplated by
this Agreement will not alter or impair any Intellectual Property.
(c) Schedule 5.14(c) sets forth a complete list of all license agreements
pertaining to Intellectual Property as of the date hereof, except for agreements
pertaining to commercially available, off-the-shelf software. Except as set
forth in Schedule 5.14(c), the Company and its Subsidiaries are in compliance in
all material respects with all agreements pertaining to the Intellectual
Property and are not under any obligation to pay royalties or other payments in
connection with any agreement, nor restricted from assigning its rights
respecting Intellectual Property nor will the Company or its Subsidiaries
otherwise be, as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any agreement
relating to the Intellectual Property. Neither the Company nor its Subsidiaries
is in material default of any such agreement.
(d) Except as set forth in Schedule 5.14(d), neither the Company nor any of
its Subsidiaries has made any claim of a violation, infringement, misuse or
misappropriation by any third party (including any employee or former employee
of the Company or its Subsidiaries) of its rights to, or in connection with, any
Intellectual Property, which claim is pending. Except as set forth in Schedule
5.14(d), neither the Company nor any of its Subsidiaries has entered into any
agreement to indemnify any other Person against any charge of infringement of
any Intellectual Property, other than indemnification provisions contained in
employment policies and agreements, customer agreements, purchase orders or
license agreements arising in the ordinary course of business.
Section 5.15. Software.
(a) To the Knowledge of the Company, none of the operating and applications
computer software programs and databases used by the Company and its
Subsidiaries that are material to the conduct of their business (collectively,
the "Software"), nor any use thereof, conflicts with, infringes upon or violates
any intellectual property or other proprietary right of any other Person and, no
claim, suit, action or other proceeding with respect to any such infringement or
violation is pending, or to the Knowledge of the Company, threatened.
(b) The Company and its Subsidiaries have not purchased any material amount
of telecommunications equipment without procuring a software license for the
imbedded software in such equipment nor is the Company or its Subsidiaries
subject to any claim for failing to procure such a license.
Section 5.16. Licenses and Permits.
22
(a) The Company and its Subsidiaries own or possess all right, title and
interest in and to each of their respective material licenses, permits,
franchises, registrations, authorizations and approvals issued or granted to any
of the Company or its Subsidiaries by any Governmental Entity (the "Licenses and
Permits") and has taken all necessary action to maintain such Licenses and
Permits. Each License and Permit has been duly obtained, is valid and in full
force and effect, and is not subject to any pending or, to the Knowledge of the
Company, threatened administrative or judicial proceeding to revoke, cancel,
suspend or declare such License and Permit invalid in any respect. The Licenses
and Permits are sufficient and adequate in all respects to permit the continued
lawful conduct of the business of the Company and its Subsidiaries, and none of
the operations of the Company or its Subsidiaries are being conducted in a
manner that violates in any material respects any of the terms or conditions
under which any License and Permit was granted.
(b) The operations of the Company and its Subsidiaries are in compliance in
all material respects with the terms and conditions of the Communications Act of
1934, as amended, applicable state law and the published rules, regulations, and
policies promulgated by any Governmental Entity, and neither the Company nor its
Subsidiaries have done anything or failed to do anything which reasonably could
be expected to cause the loss of any License or Permit.
(c) Other than those listed on Schedule 5.16, no petition, action,
investigation, notice of violation or apparent liability, notice of forfeiture,
order to show cause, complaint, or proceeding seeking to revoke, reconsider the
grant of, cancel, suspend, or modify any of the Licenses or Permits of the
Company or its Subsidiaries is pending or, to the Knowledge of the Company,
threatened before any Governmental Entity. No notices have been received by and,
no claims have been filed against the Company or its Subsidiaries alleging a
failure to hold any requisite permits, regulatory approvals, licenses and other
authorization.
Section 5.17. Compliance with Law. Except as set forth in Schedule 5.17,
the operations of the business of the Company and its Subsidiaries have been
conducted in accordance in all material respects with all applicable laws,
regulations, orders and other requirements of all Governmental Entities having
jurisdiction over such entity and its assets, properties and operations. Except
as set forth in Schedule 5.17, since January 1, 2005, none of the Company or its
Subsidiaries has received notice of any material violation (or any investigation
with respect thereto) of any such law, regulation, order or other legal
requirement, and none of the Company or its Subsidiaries is in default with
respect to any order, writ, judgment, award, injunction or decree of any
national, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to any of its assets, properties or
operations.
Section 5.18. Litigation. Except as set forth in Schedule 5.18, there are
no material claims, actions, suits, proceedings, subpoenas or, to the Knowledge
of the Company, investigations (each, an "Action") pending or, to the Knowledge
of the Company, threatened, before any Governmental Entity, or before any
arbitrator of any nature, brought by or against any of the Company or its
Subsidiaries or any of their officers, directors, members, managers, employees,
agents or Affiliates involving, affecting or relating to the Company or its
Subsidiaries, the assets, properties or rights of any of the Company and its
Subsidiaries or the
23
transactions contemplated by this Agreement. There is no material judgment,
decree, injunction, rule or order of any Governmental Entity or before any
arbitrator of any nature outstanding, or to the Knowledge of the Company,
threatened, against either of the Company or its Subsidiaries.
Section 5.19. Contracts.
(a) Schedule 5.19(a) sets forth a complete and correct list of all
Contracts as of the date hereof.
(b) Each Contract is valid, binding and enforceable against the Company or
its Subsidiaries and, to the Knowledge of the Company, against the other parties
thereto in accordance with its terms, and in full force and effect. Each of the
Company and its Subsidiaries has performed all material obligations required to
be performed by it to date under, and is not in material default or delinquent
in performance, status or any other respect (claimed or actual) in connection
with, any Contract, and no event has occurred which, with due notice or lapse of
time or both, would constitute such a default. To the Knowledge of the Company,
no other party to any Contract is in material default in respect thereof, and no
event has occurred which, with due notice or lapse of time or both, would
constitute such a default. The Company has made available to Parent or its
representatives true and complete originals or copies of all the Contracts.
(c) A "Contract" means any agreement, contract or commitment, oral or
written, to which either of the Company or any of its Subsidiaries is a party or
by which it or any of its assets are bound constituting:
(i) one of the 25 largest (by revenue generated for the Company
and its Subsidiaries in 2005) contracts or agreements for (A) the
sale, license (as licensor) or lease (as lessor) by the Company or any
of its Subsidiaries of services, products, Intellectual Property
rights or other assets to any third party or (B) a contract or
agreement relating to the sale, license or lease by the Company or any
of its Subsidiaries of any IRUs (the Contracts set forth in subsection
(A) and (B) collectively, the "Customer Contracts");
(ii) a contract or agreement for the purchase, license (as
licensee) or lease (as lessee) by the Company or any of its
Subsidiaries of services, materials, products, personal property,
supplies, Intellectual Property rights or other assets from any
supplier or vendor or for the furnishing of services to the Company or
any of its Subsidiaries reasonably expected to involve total payments
in excess of $2,000,000 in 2006 (the "Vendor Contracts");
(iii) a peering agreement of the Company and its Subsidiaries;
(iv) a mortgage, indenture, security agreement, guaranty, pledge
and other agreement or instrument relating to the borrowing of money
or extension of credit (other than accounts receivable or accounts
payable in the ordinary course of business and consistent with past
practice);
24
(v) an employment, change of control, retention, severance or
material consulting agreement;
(vi) a joint venture, partnership or limited liability company
agreement with third parties;
(vii) a non-competition agreement or any other agreement or
obligation which purports to limit in any material respect (i) the
manner in which, or the localities in which, the business of the
Company or its Subsidiaries may be conducted or (ii) the ability of
either of the Company or its Subsidiaries to provide any type of
service presently conducted by the Company or its Subsidiaries;
(viii) an agreement containing any exclusivity clause,
most-favored-nations clause, benchmarking clause or marked-to-market
pricing provision;
(ix) a Lease;
(x) an agreement limiting or restricting the ability of either of
the Company or its Subsidiaries to make distributions or declare or
pay dividends in respect of its capital stock or membership interests,
as the case may be;
(xi) an agreement requiring capital expenditures in excess of
$1,000,000; or
(xii) any other material agreement not in the ordinary course of
the business of the Company and its Subsidiaries.
(d) All of the peering arrangements or agreements of the Company and its
Subsidiaries are terminable by the Company or its Subsidiaries on 90 days' prior
notice without liability or obligation to the Company or its Subsidiaries.
Section 5.20. Employee Plans.
(a) Schedule 5.20(a) sets forth: (i) all "employee benefit plans", as
defined in Section 3(3) of ERISA, and all other material employee benefit
programs, policies, arrangements or payroll practices, including, without
limitation, any such programs, policies, arrangements or payroll practices
providing severance pay, sick leave, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay, incentive
pay, stock options, hospitalization insurance, medical insurance, life
insurance, cafeteria benefits, dependent care reimbursements, prepaid legal
benefits, scholarships or tuition reimbursements, maintained by the Company or
any of its Subsidiaries or to which the Company or any of its Subsidiaries is
obligated to contribute thereunder for current or former employees the Company
and its Subsidiaries (the "Employee Benefit Plans"), and (ii) all "employee
pension plans", as defined in Section 3(2) of ERISA, maintained or sponsored by
the Company or any trade or business (whether or not incorporated) which is or
since the effective date of the reorganization contemplated by the Modified
Third Amended Joint Plan of Reorganization dated as of April 7, 2004 (the "Plan
Effective Date") has been under control or treated as a single employer with the
Company under Section 414(b), (c), (m), or (o) of the Code (an "ERISA
Affiliate") or to which
25
the Company or any ERISA Affiliate has contributed or has since the Plan
Effective Date been obligated to contribute thereunder (the "Pension Plans").
(b) True, correct and complete copies of the following documents, with
respect to each of the Employee Benefit Plans and Pension Plans, have been made
available to Parent, to the extent applicable: (i) all plans and related trust
documents, and amendments thereto; (ii) Forms 5500 filed for the three most
recent plan years; (iii) the most recent IRS determination letter; (iv) the most
recent summary plan descriptions, annual reports and material modifications; (v)
the most recent actuarial report, if any; and (vi) written descriptions of all
non-written agreements relating to the Employee Benefit Plans.
(c) None of the Employee Benefit Plans or Pension Plans is a multiemployer
plan, as defined in Section 3(37) of ERISA ("Multiemployer Plan") or subject to
Title IV of ERISA or Section 412 of the Code.
(d) Each Pension Plan that is intended to qualify under Section 401 of the
Code and the trust maintained pursuant thereto is exempt from federal income
taxation under Section 501 of the Code, and to the Knowledge of the Company,
nothing has occurred with respect to the operation of any such Pension Plan that
would reasonably be expected to cause the loss of such qualification or
exemption or the imposition of any material liability, penalty or tax under
ERISA or the Code.
(e) All contributions (including all employer contributions and employee
salary reduction contributions) and all premiums required to have been paid
under any of the Employee Benefit Plans or Pension Plans or by law (without
regard to any waivers granted under Section 412 of the Code) to any funds or
trusts established thereunder or in connection therewith have been made by the
due date thereof (including any valid extension).
(f) To the Knowledge of the Company, there has been no material violation
of ERISA or the Code with respect to the filing of applicable reports, documents
and notices regarding the Employee Benefit Plans with the Secretary of Labor or
the Secretary of the Treasury or the furnishing of required reports, documents
or notices to the participants or beneficiaries of the Employee Benefit Plans.
(g) Except as set forth on Schedule 5.20(g), there are no pending actions,
claims or lawsuits which have been asserted or instituted against the Employee
Benefit Plans, the assets of any of the trusts under such plans or the plan
sponsor or the plan administrator, or against any fiduciary of the Employee
Benefit Plans with respect to the operation or administration of such plans or
the investment of plan assets (other than routine benefit claims), nor does the
Company have Knowledge of facts which could form the basis for any such claim or
lawsuit. No Employee Benefit Plan has been the subject of an audit,
investigation or examination by any Governmental Entity to the Knowledge of the
Company.
(h) The Employee Benefit Plans have been maintained, in all material
respects, in accordance with their terms and with all provisions of ERISA and
the Code (including rules and regulations thereunder) and other applicable
federal and state laws and regulations. None of the Company, its Subsidiaries,
or, to the Knowledge of the Company, any
26
"party in interest" or "disqualified person" with respect to the Employee
Benefit Plans has engaged in a non-exempt "prohibited transaction" within the
meaning of Section 406 of ERISA or 4975 of the Code pursuant to which the tax or
penalty could be material. Except as set forth on Schedule 5.20(h), no stock or
other security issued by the Company or any Affiliate forms or has formed a part
of the assets of any Employee Benefit Plan.
(i) Except as set forth on Schedule 5.20(i) hereto, none of the Employee
Benefit Plans provide retiree life or retiree health benefits except as may be
required under COBRA or any similar state or local law.
(j) Except as set forth on Schedule 5.20(j) hereto, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, either alone or together with the occurrence of
subsequent events (i) increase any benefits otherwise payable under any Employee
Benefit Plan; (ii) result in the acceleration of the time of payment or vesting
of any benefits under any Employee Benefit Plan or Contract to any employee; or
(iii) fail to be deductible by reason of Section 280G of the Code.
(k) No Contract, Employee Benefit Plan, warrant or other compensatory or
equity-based arrangement with any employee, officer or director of the Company
contains any provision requiring the Company to pay on behalf of, or otherwise
reimburse, any such individual for any income or excise taxes due by such
individual upon payment of any benefits by the Company, other than any such
obligations as required by applicable laws or regulations.
(l) This Section 5.20 shall constitute the sole and exclusive
representation and warranty regarding ERISA, Employee Benefit Plans,
Multiemployer Plans and Pension Plans.
Section 5.21. Insurance. Schedule 5.21 lists the material surety bonds,
fidelity bonds as well as the insurance companies, policy numbers, aggregate
coverage amount and type, and deductibles of all policies of title, liability,
fire, casualty, business interruption, workers' compensation and other forms of
insurance insuring each of the Company and its Subsidiaries and their assets,
properties and operations. The Company has made available a true, complete and
accurate copy of all such policies and bonds to Parent. Except as set forth in
Schedule 5.21, all such policies and bonds are in full force and effect. None of
the Company or its Subsidiaries is in material default under any provisions of
any such policy of insurance nor has any of the Company or its Subsidiaries
received notice of cancellation of or cancelled any such insurance. For all
material claims made under such policies and bonds, the Company and its
Subsidiaries have timely complied with any applicable notice provisions.
Section 5.22. Transactions with Directors, Officers, Managers, and
Affiliates. Except as set forth in Schedule 5.22, none of the Company or its
Subsidiaries is a party to any agreement or arrangement with any of the
directors, officers, managers, members, partners or stockholders of the Company
or its Subsidiaries or, to the Knowledge of the Company, any Affiliate (other
than the Company or any of its Subsidiaries) or family member of any of the
foregoing under which it: (i) leases any real or personal property (either to or
from such Person); (ii) licenses technology (either to or from such Person);
(iii) is obligated to purchase any tangible or intangible asset from or sell
such asset to such Person; (iv) purchases products or services from such Person;
(v) pays or receives commissions, rebates or other
27
payments; (vi) lends or borrows money or (vii) provides or receives any other
material benefit. To the Knowledge of the Company, since the Plan Effective
Date, none of the directors, officers, managers, members or stockholders of the
Company or its Subsidiaries, or any family member of any of such Persons, has
been a director, officer, manager or member of, or has had any direct or
indirect interest in, any Person which during such period has been a customer of
the Company or its Subsidiaries or has competed with or been engaged in any
business of the kind being conducted by the Company and its Subsidiaries. No
Affiliate of the Company and its Subsidiaries (other than the Company and its
Subsidiaries) owns or has any rights in or to any of the assets, properties or
rights used by the Company and its Subsidiaries in the ordinary course of their
businesses.
Section 5.23. Suppliers and Customers.
(a) Schedule 5.23(a) sets forth a list of the top twenty-five (25)
suppliers, by dollar amount paid by the Company and its Subsidiaries (taken
together), for the fiscal year of the Company ended December 31, 2005, from whom
the Company or any of its Subsidiaries has purchased goods and/or services. No
such supplier has expressed in writing or verbally to the Company or any of its
Subsidiaries its intention to cancel or otherwise terminate or materially reduce
or modify its relationship with the Company or any of its Subsidiaries.
(b) Schedule 5.23(b) sets forth a list of the top twenty-five (25)
customers, by revenue derived by the Company and its Subsidiaries (taken
together), for the fiscal year of the Company ended December 31, 2005, to whom
the Company or any of its Subsidiaries has sold goods and/or services. To the
Knowledge of the Company, no such customer has expressed in writing or verbally
to the Company or any of its Subsidiaries its intention to cancel or otherwise
terminate or materially reduce or modify its relationship with the Company or
any of its Subsidiaries.
Section 5.24. Labor Matters.
(a) Except as set forth in Schedule 5.24(a): (i) neither the Company nor
any of its Subsidiaries is a party to any outstanding employment agreements or
contracts with officers, managers or employees of either of the Company or its
Subsidiaries that are not terminable at will; (ii) neither the Company nor any
of its Subsidiaries is a party to any agreement, policy or practice that
requires it to pay termination, change of control or severance pay to salaried,
non-exempt or hourly employees of such company (other than as required by law);
(iii) neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to its
employees nor does the Company have Knowledge of any activities or proceedings
of any labor union to organize any such employees since the Plan Effective Date;
and (iv) neither the Company nor any of its Subsidiaries is a party to any
material consulting agreements with any Person providing services to the Company
or any of its Subsidiaries.
(b) Except as set forth in Schedule 5.24(b): (i) each of the Company and
its Subsidiaries is in compliance in all material respects with all applicable
laws relating to employment and employment practices, the classification of
employees, wages, hours, collective bargaining, unlawful discrimination, civil
rights, safety and health, workers' compensation
28
and terms and conditions of employment; (ii) there are no charges with respect
to or relating to either of the Company or its Subsidiaries pending or, to the
Knowledge of the Company, threatened before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices; and (iii) since the Plan Effective Date,
neither the Company nor any of its Subsidiaries has received any notice from any
national, state, local or foreign agency responsible for the enforcement of
labor or employment laws of an intention to conduct an investigation of either
of the Company or its Subsidiaries and no such investigation is in progress.
(c) Since the Plan Effective Date, and except as set forth on Schedule
5.24(c), there has been no "mass layoff" or "plant closing" as defined by the
Worker Adjustment and Retraining Notification Act or any similar state or local
"plant closing" law ("WARN") with respect to the current or former employees of
the Company or its Subsidiaries.
(d) Except as set forth on Schedule 5.24(d), neither the Company nor any of
its Subsidiaries has any severance plan or severance obligation with respect to
its employees.
Section 5.25. Environmental Matters.
(a) Each of the Company and its Subsidiaries is, and has been, prior to
that date was, in compliance in all material respects with all applicable laws,
regulations, common law and other requirements of governmental or regulatory
authorities relating to pollution, to the protection of the environment or to
natural resources ("Environmental Laws"). Each of the Company and its
Subsidiaries has in effect all material licenses, permits and other
authorizations required under all Environmental Laws and is in compliance in all
material respects with all such licenses, permits and authorizations.
(b) The Company and its Subsidiaries have not received any notice of
violation or potential liability under any Environmental Laws from any Person or
any Governmental Entity inquiry, request for information, or demand letter under
any Environmental Law relating to operations or properties of the Company or its
Subsidiaries which would be reasonably expected to result in the Company or any
of its Subsidiaries incurring material liability under Environmental Laws. None
of the Company or its Subsidiaries is subject to any orders arising under
Environmental Laws nor are there any administrative, civil or criminal actions,
suits, proceedings or investigations pending or, to the Knowledge of the
Company, threatened, against the Company or its Subsidiaries under any
Environmental Law which would reasonably be expected to result in the Company or
any of its Subsidiaries incurring material liability under Environmental Laws.
None of the Company or its Subsidiaries has entered into any agreement pursuant
to which the Company or its Subsidiaries has assumed or will assume any
liability under Environmental Laws, including without limitation, any obligation
for costs of remediation, of any other Person.
(c) To the Knowledge of the Company, there has been no release or
threatened release of a hazardous substance, hazardous waste, contaminant,
pollutant, toxic substance or petroleum and its fractions, the presence of which
requires investigation or remediation under any applicable Environmental Law,
("Hazardous Material"), on, at or beneath any of the Company Property or other
properties currently or previously owned or operated by
29
the Company or its Subsidiaries or any surface waters or groundwater's thereon
or thereunder which requires any material disclosure, investigation, cleanup,
remediation, monitoring, abatement, deed or use restriction by the Company, or
which would be expected to give rise to any other material liability or damages
to the Company or its Subsidiaries under any Environmental Laws.
(d) None of the Company or its Subsidiaries has arranged for the disposal
of any Hazardous Material, or transported any Hazardous Material, in a manner
that has given, or reasonably would be expected to give, rise to any material
liability for any damages or costs of remediation.
(e) The Company has made available to Parent copies of all environmental
studies, investigations, reports or assessments concerning the Company, its
Subsidiaries, the Company Property and any owned real property currently or
previously owned or operated by the Company or its Subsidiaries.
(f) This Section 5.25 shall constitute the sole and exclusive
representations and warranties regarding Environmental Laws, Hazardous Materials
and environmental matters.
Section 5.26. No Brokers. No broker, finder or similar intermediary has
acted for or on behalf of, or is entitled to any broker's, finder's or similar
fee or other commission from the Company or its Subsidiaries in connection with
this Agreement or the transactions contemplated hereby other than Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Houlihan, Lokey, Howard & Zukin, Inc
("HLHZ"). The Company has delivered a letter to Parent from each such financial
advisor setting forth its fees and expenses in connection with the transactions
contemplated by this Agreement.
Section 5.27. Network Operations.
(a) Except as set forth on Schedule 5.27(a) the network of the Company and
its Subsidiaries, taken as a whole, is in good working condition and is without
any material defects for purposes of operating the business of the Company and
its Subsidiaries as operated by the Company and its Subsidiaries.
(b) Company and its Subsidiaries have good and valid title to approximately
6,943 route-miles and approximately 555,773 fiber-miles of fiber in each of the
metropolitan areas set forth on Schedule 5.27(b), and have indefeasible rights
to use (or lease) approximately 4,919 route-miles and approximately 108,820
fiber-miles of fiber in each of the metropolitan areas set forth on Schedule
5.27(b).
(c) Company and its Subsidiaries have good and valid title to approximately
739 route-miles and approximately 14,327 fiber-miles of fiber between the city
pairs set forth on Schedule 5.27(c), and have indefeasible rights to use
approximately 9,937 route-miles (including 72 route-miles leased from Sunesys)
and approximately 70,161 fiber-miles of fiber (including 288 fiber-miles leased
from Sunesys) between the city pairs set forth on Schedule 5.27(c) (including
the names of the respective fiber vendors).
30
(d) The Company and its Subsidiaries have good and valid title to the
switches listed on Schedule 5.27(d) and that each such switch is in good
operating condition and repair, free from all material defects, subject only to
normal wear and tear.
Section 5.28. State Takeover Statutes. The Board of Directors of the
Company has taken all action necessary to ensure that any restrictions on
business combinations contained in the DGCL, including Section 203 of the DGCL,
will not apply to the Merger and the other transactions contemplated by this
Agreement. No other "fair price", "moratorium", "control share acquisition" or
other similar anti-takeover statute or regulation or any anti-takeover provision
in the Company's Organizational Documents is, or at the Effective Date will be,
applicable to the Company, the Company Common Stock, the Merger or the other
transactions contemplated by this Agreement.
Section 5.29. Opinion of Financial Advisor. The Board of Directors of the
Company has received the opinion of HLHZ, dated as of the date hereof, to the
effect that, as of such date, the Aggregate Merger Consideration to be received
by the holders of the Company Capital Stock and holders of Company Warrants
pursuant to the Merger is fair from a financial point of view to the holders of
such capital stock. A written copy of such opinion has been delivered to Parent.
HLHZ is an "Independent Financial Expert" as defined in that certain Warrant
Agreement, dated as of April 8, 2004, between the Company and Wells Fargo Bank,
N.A., as warrant agent.
Section 5.30. Bankruptcy Claims. Other than as set forth on Schedule 5.30,
there is no action, suit, proceeding or claim now pending with respect to the
Company or any of its Subsidiaries related to the Company's (or its
predecessor's) prior bankruptcy proceedings. All claims asserted by creditors of
the Company (or its predecessor) in connection with the Company's (or its
predecessor's) prior bankruptcy proceedings have been either satisfied or
discharged and all securities of the Company to be distributed under the
Company's (or its predecessor's) plan of reorganization have been made.
Section 5.31. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article V, neither the Company
nor any other Person makes any other express or implied representation or
warranty on behalf of the Company with respect to the Company and its
Subsidiaries.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company as follows:
Section 6.1. Organization. Each of Parent and 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, and has all requisite power
and authority to own its properties and assets and to conduct its businesses as
now conducted.
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Section 6.2. Qualification to Do Business. Each of Parent and Merger Sub is
duly qualified to do business as a foreign corporation or limited liability
company and is in good standing in every jurisdiction in which the character of
the properties owned or leased by it or the nature of the business conducted by
it makes such qualification necessary except where the failure to be so
qualified or in good standing would not have a Parent Material Adverse Effect.
Section 6.3. No Conflict or Violation. The execution, delivery and
performance by Parent and Merger Sub of this Agreement do not and will not (i)
violate or conflict with any provision of any Parent Organizational Documents or
the organizational documents of Merger Sub, (ii) violate any provision of law,
or any order, judgment or decree of any Governmental Entity, (iii) result in the
creation or imposition of any Lien (other than any Permitted Lien) upon any of
the assets, properties or rights of either Parent or Merger Sub or (iv) violate
or result in a breach of or constitute (with due notice or lapse of time or
both) a default under any material contract, agreement or instrument to which
Parent or Merger Sub is a party or by which it is are bound or to which any of
its properties or assets is subject, except in each case with respect to clauses
(iii) and (iv), for any such violations that would not have a Parent Material
Adverse Effect.
Section 6.4. Consents and Approvals. No consent, waiver, authorization or
approval of any Governmental Entity, and no declaration or notice to or filing
or registration with any Governmental Entity, is required in connection with the
execution and delivery of this Agreement by Parent or Merger Sub of their
obligations hereunder, except for (i) the filing of Notification and Report Form
under the HSR Act, (ii) the filing of the Registration Statement with the SEC,
(iii) the consents, waivers, authorizations or approvals of any Governmental
Entity set forth on Schedule 6.4 and (iv) such consents, waivers,
authorizations, approvals, declarations, notices, filings or registrations,
which if not obtained or made would not have, a Parent Material Adverse Effect
or prevent or materially delay the consummation of the transactions contemplated
by this Agreement.
Section 6.5. Authorization and Validity of Agreement. Parent and Merger Sub
have all requisite corporate or company power and authority to enter into this
Agreement and to carry out their respective obligations hereunder. The execution
and delivery of this Agreement and the performance of Parents and Merger Sub's
obligations hereunder have been duly authorized by all necessary corporate or
company action of Parent and Merger Sub, and no other corporate or company
proceedings on the part of Parent and Merger Sub are necessary to authorize such
execution, delivery and performance. This Agreement has been duly executed by
Parent and Merger Sub and, assuming due execution and delivery by the Company,
shall constitute their valid and binding obligation, enforceable against them in
accordance with its terms, subject to (i) the effect of bankruptcy, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law) and (iii) an
implied covenant of good faith and fair dealing.
Section 6.6. Capitalization and Related Matters.
(a) As of April 13, 2006, Parent's capital stock consists of (a) 1.5
billion authorized shares of Parent Common Stock, 846,580,967 shares of which
are outstanding and (b)
32
10,000,000 authorized shares of preferred stock, par value $0.01 per share, none
of which were outstanding. Except as set forth on Schedule 6.6 hereto or in the
Parent SEC Reports, as of April 13, 2006, (i) neither Parent nor any of its
Subsidiaries has outstanding any stock or other securities convertible into or
exchangeable for any shares of capital stock of Parent, any rights to subscribe
for or to purchase or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any other character relating to the issuance of, any
capital stock of Parent, or any stock or securities convertible into or
exchangeable for any capital stock of Parent other than those issued under
employee benefit plans of Parent; and (ii) neither Parent nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of capital stock of Parent.
All of the outstanding shares of Parent Common Stock have been duly and validly
issued and are fully paid and non-assessable. As of the Closing, the Aggregate
Share Consideration will be duly authorized and, upon issuance, sale and
delivery as contemplated by this Agreement, the Aggregate Share Consideration
will be validly issued, fully paid and non-assessable securities of Parent.
(b) All of the outstanding membership interests of Merger Sub are owned of
record and beneficially by Parent, directly or indirectly.
Section 6.7. SEC Filings.
(a) Parent and its Subsidiaries have filed each report and definitive proxy
statement (together with all amendments thereof and supplements thereto)
required to be filed by Parent or any of its Subsidiaries pursuant to the
Exchange Act with the SEC since January 1, 2005 (as such documents have since
the time of their filing been amended or supplemented, the "Parent SEC
Reports"). As of their respective dates, after giving effect to any amendments
or supplements thereto, the Parent SEC Reports (i) complied as to form in all
material respects with the requirements of the Exchange Act, and (ii) did not
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 light of the circumstances under which they were made, not
misleading.
(b) The audited consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the notes, if any,
thereto) included in the Parent SEC Reports complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q of the SEC) and fairly present (subject, in the case of the unaudited
interim financial statements included therein, to normal year-end adjustments
and the absence of complete footnotes) in all material respects the consolidated
financial position of Parent and its consolidated Subsidiaries as of the
respective dates thereof and the consolidated results of their operations and
cash flows for the respective periods then ended.
Section 6.8. No Brokers. No broker, finder or similar intermediary has
acted for or on behalf of, or is entitled to any broker's, finder's or similar
fee or other commission from Parent in connection with this Agreement or the
transactions contemplated hereby other than Morgan Stanley & Co. Incorporated.
33
Section 6.9. Sufficiency of Funds. Parent has and will have, at the
Closing, sufficient funds available to pay the Aggregate Cash Consideration.
Section 6.10. Tax Matters. Neither Parent nor any of its Subsidiaries,
including Merger Sub, has taken or agreed to take any action, or is aware of any
fact or circumstance, that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
Section 6.11. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article VI, none of Parent,
Merger Sub or any other Person makes any other express or implied representation
or warranty on behalf of Parent or Merger Sub with respect to Parent and its
Subsidiaries.
ARTICLE VII.
COVENANTS OF THE COMPANY.
The Company hereby covenants as follows:
Section 7.1. Conduct of Business Before the Closing Date.
(a) Without the prior written consent of Parent, between the date hereof
and the Closing Date, the Company shall not, and shall not permit its
Subsidiaries to, except as required or expressly permitted pursuant to the terms
hereof:
(i) make any material change in the conduct of its businesses or
enter into any transaction other than in the ordinary course of
business and consistent with past practices;
(ii) make any change in any of its organizational documents;
issue any additional shares of capital stock (other than upon the
exercise of warrants to purchase shares of Company Common Stock
outstanding on the date hereof, membership interests or partnership
interests or other equity securities or grant any option, warrant or
right to acquire any capital stock, membership interests or
partnership interests or other equity securities or issue any security
convertible into or exchangeable for such securities or alter in any
way any its outstanding securities or make any change in outstanding
shares of capital stock, membership interests or partnership interests
or other ownership interests or its capitalization, whether by reason
of a reclassification, recapitalization, stock split or combination,
exchange or readjustment of shares, stock dividend or otherwise;
(iii) make any sale, assignment, transfer, abandonment, sublease,
assignment or other conveyance of its assets, Company Property or
rights or any part thereof, including granting or entering into any
IRUs, other than dispositions of worn-out or obsolete equipment for
fair or reasonable value in the ordinary course of business and
consistent with past practice;
34
(iv) subject any of its assets, properties or rights or any part
thereof, to any Lien or suffer such to exist other than Permitted
Liens;
(v) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of the capital stock, membership interests or
partnership interests or other ownership interests of the Company and
its Subsidiaries or declare, set aside or pay any dividends or other
distribution in respect of such shares or interests;
(vi) acquire, lease or sublease any material assets, raw
materials or properties (including any real property), or enter into
any other transaction, other than in the ordinary course of business
and consistent with past practice;
(vii) enter into any new (or amend any existing to increase
benefits) employee benefit plan, program or arrangement or any new (or
amend any existing to increase benefits) employment, severance, change
of control or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or
commitment) or grant any increase in the compensation payable or to
become payable to any employee, except as otherwise provided pursuant
to the terms of any plan or agreement, as required by law, to the
extent necessary to avoid imposition of any taxes under Section 409A
or Section 4999 of the Code and for increases in compensation to
employees in accordance with pre-existing contractual provisions
and/or consistent with past practice;
(viii) contractually commit to make capital expenditures for any
post-Closing period in excess of $20,000,000 in the aggregate;
(ix) pay, lend or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates;
(x) fail to keep in full force and effect insurance comparable in
amount and scope to coverage maintained;
(xi) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP, or write off as
uncollectible any accounts receivable except in the ordinary course of
business and consistent with past practice;
(xii) make or change any material Tax election, change an annual
accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any
material Tax claim or assessment relating to the Company or any of its
Subsidiaries, surrender any right to claim a material refund of Taxes,
consent to any extension or waiver of the limitation period applicable
to any Tax claim or assessment relating to the
35
Company or any of its Subsidiaries, or take any other similar action
relating to the filing of any material Tax Return or the payment of
any material Tax;
(xiii) settle, release or forgive any material claim or
litigation or waive any right thereto which has not been properly
reserved on the books of the Company or its Subsidiaries;
(xiv) make, enter into, modify, amend in any manner that would be
reasonably expected to have an adverse effect on the Company and its
Subsidiaries, taken as a whole, or terminate, or waive any right or
remedy under, any Contract, bid or expenditure, where such Contract,
bid or expenditure is for a Contract entailing payments in excess of
$500,000;
(xv) lend money to any Person or incur or guarantee any
indebtedness for borrowed money or enter into any capital lease
obligation, except for borrowings in the ordinary course of business
and consistent with past practice under the Company's existing lines
of credit not to exceed $15,000,000 in the aggregate outstanding at
any one time above the amount outstanding thereunder as of the date
hereof and in connection with capital leases in an amount not to
exceed $2,000,000 in the aggregate outstanding at any one time above
the aggregate amount outstanding under the Company's capital leases as
of the date hereof; or
(xvi) commit to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the Company
shall and shall cause its Subsidiaries to:
(i) continue to maintain, in all material respects, its assets,
properties, rights and operations in accordance with present practice
in a condition suitable for their current use;
(ii) file, when due or required, all material Tax Returns and
other material reports required to be filed and pay when due all
material Taxes lawfully levied or assessed against it, unless the
validity thereof is contested in good faith and by
appropriate proceedings diligently conducted;
(iii) continue to conduct its business in the ordinary course and
consistent with past practice;
(iv) keep its books of account, files and records in the ordinary
course and in accordance with existing practice;
(v) use commercially reasonable efforts to preserve intact its
operations, organization and reputation, keep available the services
of its present officers and key employees and preserve the goodwill
and business relationships of its customers; and
36
(vi) use commercially reasonable efforts to continue to spend the
amounts under the Vendor Contracts at rates and consistent with past
practice and in a manner that will ensure that no penalty or shortfall
payment will be assessed against the Company or its Subsidiaries
during the 12 months after the Closing.
Section 7.2. Consents and Approvals. The Company shall, and shall cause its
Subsidiaries to, (a) use its commercially reasonable efforts to obtain all
necessary material consents, waivers, authorizations and approvals of all
Governmental Entities, and of all other Persons, required in connection with the
execution, delivery and performance by the Company of this Agreement, and (b)
diligently assist and cooperate with Parent and Merger Sub in preparing and
filing all documents required to be submitted by Parent and Merger Sub to any
Governmental Entities, in connection with such transactions and in obtaining any
governmental consents, waivers, authorizations or approvals which may be
required to be obtained by Parent and Merger Sub in connection with such
transactions (which assistance and cooperation shall include, without
limitation, timely furnishing to Parent and Merger Sub all information
concerning the Company and is Subsidiaries that counsel to Parent determines is
required to be included in such documents or would be helpful in obtaining such
required consent, waiver, authorization or approval).
Section 7.3. Access to Properties and Records. The Company shall, and shall
cause its Subsidiaries to, afford to Parent, and to the accountants, counsel and
representatives of Parent, reasonable access (subject to restrictions imposed by
law) during normal business hours throughout the period prior to the Closing
Date (or the earlier termination of this Agreement pursuant to Article XIII
hereof) to all personnel, properties, books, contracts, commitments and files
and records (including, but not limited to, Tax Returns, correspondence with
accountants) and all other records or work papers relating to Taxes and Tax
Returns of the Company and, during such period, shall furnish promptly to Parent
all other information concerning its business, properties and personnel as
Parent may reasonably request, provided that no investigation or receipt of
information pursuant to this Section 7.3 shall qualify any representation or
warranty of the Company or the conditions to the obligations of Parent and
Merger Sub.
Section 7.4. Negotiations. From and after the date hereof and until the
earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Article XIII hereof, the Company shall not, and shall not permit or
cause any of its Subsidiaries, the officers and directors of the Company,
Affiliates or any Persons acting on behalf of the Company or any its
Subsidiaries to, directly or indirectly, encourage, solicit, engage in
discussions or negotiations with, or provide any information to, any Person or
group (other than Parent or its representatives) concerning any merger, sale of
substantial assets, purchase or sale of shares of capital stock, membership
interests or partnership interests or similar transaction involving the Company
or its Subsidiaries or any other transaction inconsistent with the transactions
contemplated hereby. The Company shall promptly communicate to Parent any
inquiries or communications concerning any such transaction which the Company or
its Subsidiaries may receive or of which the Company or its Subsidiaries may
become aware.
Section 7.5. Meeting of or Written Consent of Stockholders of the Company.
Following the execution of this Agreement, the Company shall promptly take all
37
action necessary in accordance with the DGCL and the Company Organizational
Documents, for the purpose of approving this Agreement and the transactions
contemplated hereby, to convene a meeting of the Company's securityholders or to
obtain the consent of the Company's securityholders by written action in lieu of
a meeting.
Section 7.6. Reasonable Best Efforts. Upon the terms and subject to the
conditions of this Agreement, the Company shall, and shall cause its
Subsidiaries to, use its and their reasonable best efforts to take, or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable consistent with applicable law to consummate and make
effective in the most expeditious manner practicable the transactions
contemplated hereby. In addition, upon the prior written request of Parent, the
Company shall prepare and deliver prepayment notices with respect to the
prepayment of certain outstanding indebtedness of the Company as specified in
such Parent request on and as of the Effective Date.
Section 7.7. Notice of Breach. From and after the date hereof and until the
earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Article XIII hereof, the Company shall promptly give written notice
with particularity upon having Knowledge of any matter that may constitute a
breach of any representation, warranty, agreement or covenant contained in this
Agreement.
Section 7.8. Drag-Along Notice. The Company shall cause a written notice
(the "Drag-Along Notice") to be delivered, promptly after the date hereof, by
Stockholders owning at least 51% of the issued and outstanding Company Common
Stock to all other holders of Company Common Stock or securities exercisable for
Company Common Stock in accordance with Section 7.7 of the Amended and Restated
Certificate of Incorporation of the Company. The Company shall take all other
actions necessary to cause the Company Warrants not exercised prior to the
Effective Time to be cancelled upon the Effective Time.
Section 7.9. Affiliate Letter. The Company shall deliver on the date hereof
a letter to Parent identifying all persons who, to the Knowledge of the Company,
are "affiliates" of the Company for purposes of Rule 145 under the Securities
Act.
ARTICLE VIII.
COVENANTS OF PARENT AND MERGER SUB.
Section 8.1. Consents and Approvals. Parent shall (a) use commercially
reasonable efforts to obtain all necessary consents, waivers, authorizations and
approvals of all Governmental Entities, including, but not limited to, SEC
declaring effective the Registration Statement, and of all other Persons,
required in connection with the execution, delivery and performance by Parent of
this Agreement, (b) not enter into, or permit any of its Subsidiaries to enter
into, any other acquisition transaction that would materially impede or delay
obtaining such consents and (c) diligently assist and cooperate with the Company
in preparing and filing all documents required to be submitted by the Company to
any Governmental Entities, in connection with such transactions and in obtaining
any governmental consents, waivers, authorizations or approvals which may be
required to be obtained by the Company in connection with such transactions
(which assistance and cooperation shall include, without limitation, timely
38
furnishing to the Company all information concerning Parent that counsel to the
Company determines is required to be included in such documents or would be
helpful in obtaining such required consent, waiver, authorization or approval).
Notwithstanding anything herein to the contrary, Parent shall not be required to
agree to any terms, conditions, modifications with respect to obtaining any
consents, permits, waivers, approvals, authorizations or orders in connection
with the Merger or the consummation of the transactions contemplated by this
Agreement that would result in, or would reasonably likely to result in, either
individually or in the aggregate, (i) a material adverse effect on the business
or operations of the Company and its Subsidiaries, taken as a whole, or Parent
and its Subsidiaries, taken as a whole (assuming Parent is the size of the
Company and its Subsidiaries, taken as a whole), or (ii) Parent, the Company or
any of their respective Subsidiaries having to cease, sell or otherwise dispose
of any assets of business (including the requirement that any such assets or
businesses be held separate).
Section 8.2. Employee Benefits.
(a) On and following the Closing, Parent shall, or will cause the Surviving
Company to maintain, without interruption, employee benefit plans, programs and
policies and fringe benefits that will provide benefits to the employees of
Company and its Subsidiaries who continue their employment with the Surviving
Company or who become employees of Parent or any subsidiary of Parent
("Continuing Employees") that are, in the aggregate, not less favorable than
those currently provided to such employees by the Company and its Subsidiaries.
Continuing Employees shall be given credit for all service with the Company and
its Subsidiaries (and their respective predecessors) (or service credited by the
Company and its Subsidiaries for similar plans, programs or policies) under all
employee benefit and fringe benefit plans, programs and policies of the Parent
or its affiliates in which they become participants for purposes of eligibility,
vesting and level of benefits (except to the extent such service credit will
result in benefit accrual under any defined benefit pension plans or otherwise
result in a duplication of benefits).
(b) If a Continuing Employee becomes eligible to participate in any
medical, dental or health plan of the Parent or any of its affiliates, Parent
shall cause such plan to (A) waive any preexisting condition limitations for
conditions covered under the applicable medical, health or dental plans of the
Company (the "Company Welfare Plans") and (B) honor any deductible and
out-of-pocket expenses incurred such employee and his or her beneficiaries under
the Company Welfare Plans during the portion of the applicable plan year
preceding the Closing. If such Continuing Employee becomes eligible to
participate in a group term life insurance plan maintained by the Parent or any
of its affiliates, Parent shall cause such plan to waive any medical
certification for such employee up to the amount of coverage the employee had
under the life insurance plan of the Company.
(c) Except as provided in this Section 8.2, nothing in this Agreement shall
limit or restrict the right of Parent or any of its Subsidiaries to modify,
amend, terminate or establish employee benefit plans or arrangements, in whole
or in part, at any time after the Effective Date.
(d) No provision of this Section 8.2 shall create any third party
beneficiary rights in any Continuing Employee or any current or former director
or consultant of the
39
Company or its Subsidiaries located in the United States in respect of continued
employment (or resumed employment) or any other matter.
Section 8.3. Reasonable Best Efforts. Upon the terms and subject to the
conditions of this Agreement, each of Parent and Merger Sub shall use its
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable consistent with
applicable law to consummate and make effective in the most expeditious manner
practicable the transactions contemplated hereby.
Section 8.4. Indemnification Continuation.
(a) For purposes of this Section 8.4, (i) "Indemnified Person" shall mean
any person who is now, or has been at any time prior to the Effective Date, an
officer or director of the Company or who was serving at the request of the
Company as an officer or director of another corporation, joint venture or other
enterprise, and can provide evidence thereof to Parent acceptable to Parent in
its sole discretion and (ii) "Proceeding" shall mean any claim, action, suit,
proceeding or investigation.
(b) From and after the Effective Date, Parent shall, or Parent shall cause
the Surviving Company, to provide indemnification to each Indemnified Person to
the same extent and under similar conditions and procedures as such Indemnified
Person is entitled on the date hereof in connection with any Proceeding based
directly or indirectly (in whole or in part) on, or arising directly or
indirectly (in whole or in part) out of, the fact that such Indemnified Person
is or was an officer or director of the Company, or is or was serving at the
request of the Company as an officer or director of another corporation, joint
venture or other enterprise or general partner of any partnership or a trustee
of any trust, whether pertaining to any matter arising before or after the
Effective Date. An Indemnified Person shall repay the Surviving Company for any
expenses incurred by Surviving Company in connection with the indemnification of
such Indemnified Person pursuant to this Section 8.4 if it is ultimately be
determined that such Indemnified Person did not meet the standard of conduct
necessary for indemnification by the Surviving Company.
(c) Parent shall, or shall cause the Surviving Company to, provide or
maintain in effect for six years from the Effective Date (the "Tail Period"),
through the purchase of run-off coverage or otherwise, directors' and officers'
liability insurance covering the Indemnified Persons who are covered by the
directors' and officers' liability insurance policy provided for directors and
officers of the Company and its Subsidiaries as of the date hereof (the
"Existing Policy") on terms (other than with respect to minimum aggregate limits
of liability for directors' and officers' liability insurance coverage)
comparable to the Existing Policy and such coverage shall contain minimum
aggregate limits of liability for directors' and officers' liability insurance
for the Indemnified Persons of at least $25,000,000 and deductibles no larger
than those customary for such type of insurance coverage; provided, however,
that in no event shall the Surviving Company be required to expend in excess of
150% thereof in aggregate premiums for such insurance coverage with respect to
the Tail Period, and if the premiums of such insurance coverage exceed such
amount, the Surviving Company shall be obligated to maintain or obtain a policy
with the greatest coverage available for a cost not exceeding such amount.
40
(d) The provisions of this Section 8.4 shall survive the consummation of
the Merger for a period of six years and are expressly intended to benefit each
of the Indemnified Persons; provided, however, that in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until disposition of any and all such claims.
ARTICLE IX.
ADDITIONAL COVENANTS OF THE PARTIES.
Section 9.1. Consummation of the Merger. Parent shall cause Merger Sub to
perform all of its obligations in connection with this Agreement.
Section 9.2. Registration Statement.
(a) Within thirty (30) days of the date hereof, Parent shall prepare and
file with the SEC a registration statement and information statement on Form S-4
(together with all amendments and supplements thereto, the "Registration
Statement"), in connection with the registration under the Securities Act of (i)
the Aggregate Share Consideration to be issued to the Stockholders and
Warrantholders pursuant to the Merger and (ii) the resale of the portion of the
Aggregate Share Consideration received in the Merger by the Stockholders set
forth on Schedule 9.2. The Registration Statement shall contain a resale
prospectus for the benefit of such Stockholders of the Company as selling
stockholders. Each of Parent and the Company shall promptly furnish all
information concerning itself (including, without limitation, opinions of
counsel with respect to the tax disclosure contained therein or as to the
matters described in Item 601(b)(5) of Regulation S-K under the Securities Act)
as the other may reasonably request in connection with such actions and the
preparation of the Registration Statement. The Company shall use commercially
reasonable efforts to cause each Stockholder to furnish all information
concerning itself as Parent may reasonably request in connection with the
preparation of the Registration Statement. Parent shall use commercially
reasonable efforts to cause the Registration Statement to become effective as
promptly as practicable after filing thereof. Parent shall use reasonable best
efforts to prepare and file with the SEC such amendments and supplements to the
Registration Statement and the resale prospectus used in connection therewith as
may be necessary to keep the Registration Statement effective and free from any
material misstatement or omission to state a material fact. Parent shall keep
the Registration Statement effective until the earlier of one year after the
Effective Date or the final sale by the selling stockholders of all shares of
Parent Common Stock registered on the Registration Statement, but in any event
at least so long as is necessary to consummate the Merger.
(b) Parent shall make, and the Company shall cooperate in, all necessary
filings with respect to the Merger and the transactions contemplated thereby
under the Securities Act and applicable state securities and "blue sky" laws.
Parent will advise the Company, promptly after it receives notice thereof, of
oral or written comments by the SEC with respect to the Registration Statement,
of the time at which the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the Aggregate Share Consideration
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment
41
to the Registration Statement or comments thereon and responses thereto or
requests by the SEC for additional information. Parent will provide the Company
with copies of any comments to the Registration Statement received from the SEC
and shall consult with the company in connection with the preparation of written
responses to such comments.
(c) The information supplied by Parent for inclusion in the Registration
Statement shall not, at the time the Registration Statement is declared
effective, contain any untrue statement of a material fact or fail to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The information supplied by the Company for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective, contain any untrue statement of a material fact or fail to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. If, at any time prior to the Effective Date, Parent or the
Company should discover any information relating to either party, or any of
their respective Affiliates, directors or officers, that should be set forth in
an amendment or supplement to the Registration Statement so that it would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party that discovers such information
shall promptly notify the other party and an appropriate amendment or supplement
describing such information shall be promptly filed with the SEC.
(d) Parent shall use all reasonable best efforts to cause shares of Parent
Common Stock representing the Aggregate Share Consideration to be approved for
quotation or listing, as the case may be, on the Nasdaq National Market System
(or any successor inter-dealer quotation system or stock exchange thereto)
subject to official notice of issuance.
Section 9.3. Confidentiality. The Parties shall comply with, and shall
cause their respective officers, directors, employees, accountants, consultants,
legal counsel, advisors, agents and other representatives to comply with, all of
their respective obligations under that certain Confidentiality Agreement, dated
January 23, 2006 (the "Confidentiality Agreement"), between the Company and
Parent.
Section 9.4. Reorganization.
(a) The Parties intend that the Merger qualify as a reorganization within
the meaning of Section 368(a) of the Code and will report it as such for
federal, state and local income tax purposes. None of the Parties will knowingly
take any action or fail to take any action, which action or failure to act would
cause the Merger to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Code and the regulations promulgated thereunder.
(b) Each of the Company and Parent shall use its reasonable best efforts to
provide the officers' certificates and to obtain the opinions referred to in
Sections 11.6 and 12.11 hereto, respectively.
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(c) The parties agree that Merger Sub shall be treated as a disregarded
entity for U.S. federal income tax purposes and agree not to take any action
that would be inconsistent with such treatment.
ARTICLE X.
MUTUAL CONDITIONS
The respective obligation of each Party to effect the Merger is subject to
the satisfaction or written waiver at or prior to the Closing Date of each of
the following conditions:
Section 10.1. No Injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or other Governmental Entity which
prohibits or prevents the consummation of the Merger which has not been vacated,
dismissed or withdrawn prior to the Effective Date. The Company and Parent shall
use their reasonable best efforts to have any of the foregoing vacated,
dismissed or withdrawn by the Effective Date.
Section 10.2. Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceeding seeking a stop order and no proceeding shall be pending
or threatened by the SEC, and all state securities and "blue sky" authorizations
necessary to carry out the transactions contemplated hereby shall have been
obtained and be in effect.
Section 10.3. Stockholder Approval. This Agreement and the Merger and the
transactions contemplated hereby and thereby shall have been approved and
adopted by the Stockholders by the Required Merger Stockholder Vote.
Section 10.4. HSR Act. All applicable waiting periods (and extensions
thereof) under the HSR Act shall have expired or otherwise been terminated.
Section 10.5. FCC Approvals. All approvals from the Federal Communications
Commission required to consummate the transactions contemplated by this
Agreement have been obtained and are in full force and effect on the Closing
Date.
Section 10.6. Authorized Shares. The stockholders of Parent shall have
approved an amendment to the Parent Organizational Documents increasing the
total number of shares of Parent Common Stock that Parent is authorized to issue
such that a sufficient number of shares of Parent Common Stock may be issued as
Aggregate Share Consideration.
ARTICLE XI.
CONDITIONS PRECEDENT TO PERFORMANCE BY THE COMPANY.
The obligations of the Company to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, at or before the Closing Date,
of the following conditions, any one or more of which may be waived by the
Company in writing in its sole discretion:
43
Section 11.1. Representations and Warranties of Parent and Merger Sub. (i)
Each of the representations and warranties of Parent and Merger Sub (other than
the representations and warranties contained in Section 6.6 hereto) contained in
this Agreement (read without any materiality qualifications) shall be true and
correct as of the Closing Date (except to the extent such representations and
warranties speak as of an earlier date), other than such failures to be true and
correct that would not result in a Parent Material Adverse Effect and (ii) the
representations and warranties of Parent and Merger Sub contained in Section 6.6
hereto shall be true and correct in all material respects as of the Closing
Date, and with respect to each of clause (i) and (ii), the Company shall have
received a certificate to that effect dated the Closing Date and signed by any
Senior or Executive Vice President of Parent and Merger Sub.
Section 11.2. Performance of the Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
obligations required under this Agreement to be performed by Parent and Merger
Sub on or before the Closing Date, and the Company shall have received a
certificate to that effect dated the Closing Date and signed by any Senior or
Executive Vice President of Parent and Merger Sub.
Section 11.3. No Parent Material Adverse Effect. During the period from the
date hereof to the Closing Date, there shall not have been a Parent Material
Adverse Effect.
Section 11.4. Opinion of Counsel. The Company shall have received a
favorable opinion, dated as of the Closing Date, from Willkie Farr & Gallagher
LLP, counsel to Parent, in form and substance reasonably satisfactory to the
Company and its counsel and substantially in the form attached hereto as Exhibit
A.
Section 11.5. Share Listing. The Parent Common Stock to be issued as
Aggregate Share Consideration shall have been approved for quotation or listing,
as the case may be, on the Nasdaq National Market System (or any successor
inter-dealer quotation system or stock exchange thereto) subject to official
notice of issuance.
Section 11.6. Tax Opinion. The Company shall have received the opinion of
Akin Gump Strauss Hauer & Feld LLP, counsel to the Company, substantially in the
form attached hereto as Exhibit C, to the effect that the Merger will be treated
for United States federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that the Company and Parent will be each
be a party to that reorganization within the meaning of Section 368(b) of the
Code, dated the Effective Date. In rendering such opinion, such counsel shall be
entitled to rely upon representations of officers of Parent and the Company
substantially in the form of Exhibits E and F hereto, respectively.
ARTICLE XII.
CONDITIONS PRECEDENT TO PERFORMANCE BY PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived in writing by Parent and Merger Sub in their sole discretion:
44
Section 12.1. Representations and Warranties of the Company. (i) Each of
the representations and warranties of the Company contained in this Agreement
(read without any materiality) shall be true and correct as of the Closing Date
(except to the extent such representation and warranties speak as of an earlier
date), other than such failures to be true and correct that would not result in
a Company Material Adverse Effect and (ii) the representations and warranties of
the Company contained in Section 5.6 hereof, shall be true and correct in all
material respects as of the Closing Date, and with respect to clauses (i) and
(ii), Parent shall have received a certificate to that effect dated the Closing
Date and signed by the President and the Chief Financial Officer of the Company.
Section 12.2. Performance of the Obligations of the Company. The Company
shall have performed in all material respects all material obligations required
under this Agreement to be performed by it on or before the Closing Date, and
Parent shall have received a certificate to that effect dated the Closing Date
and signed by the President and Chief Financial Officer of the Company.
Section 12.3. Consents and Approvals. All consents, waivers, authorizations
and approvals of any Person required in connection with the execution, delivery
and performance of this Agreement and set forth on Schedule 12.3 shall have been
duly obtained and shall be in full force and effect on the Closing Date.
Section 12.4. No Company Material Adverse Effect. During the period from
the date hereof to the Closing Date, there shall not have been a Company
Material Adverse Effect.
Section 12.5. Opinion of Counsel. Parent shall have received a favorable
opinion, dated as of the Closing Date, from Akin Gump Strauss Hauer & Feld LLP,
counsel to the Company, in form and substance reasonably satisfactory to Parent
and its counsel and substantially in the form attached hereto as Exhibit B.
Section 12.6. Executive Officer Employment Agreements. Each of the
individuals listed on Schedule 1.2 shall be an employee of the Company and each
of the Executive Officer Employment Agreements shall be in full force and effect
and the individual that is party thereto shall not be in material breach
thereof.
Section 12.7. Drag-Along Notice and Cancellation of Warrants. The
Drag-Along Notice shall have been delivered and evidence of such notice, in form
and substance reasonably satisfactory to Parent and its counsel, shall have been
delivered to Parent.
Section 12.8. Appraisal Rights. No Stockholder shall have exercised its
appraisal rights in the Merger in accordance with the DGCL.
Section 12.9. Resignation of Directors. Each member of the boards of
directors of each Subsidiary of the Company shall have resigned.
Section 12.10. FIRPTA Affidavit. The Company shall have delivered to Parent
an affidavit dated as of the Closing Date, made under penalty of perjury and in
form and substance required under the Treasury Regulations issued pursuant to
Section 1445 of the Code
45
stating that the Company is not, nor has it been within five years of the date
of the affidavit, a "United States real property holding corporation" as defined
in Section 897 of the Code.
Section 12.11. Tax Opinion. Parent shall have received the opinion of
Willkie Farr & Gallagher LLP, counsel to Parent, substantially in the form
attached hereto as Exhibit D, hereto, to the effect that the Merger will be
treated for United States federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code and that the Company and Parent will
each be a party to that reorganization within the meaning of Section 368(b) of
the Code, dated the Effective Time. In rendering such opinion, such counsel
shall be entitled to rely upon representations of officers of Parent and the
Company substantially in the form of Exhibits E and F hereto, respectively.
ARTICLE XIII.
TERMINATION.
Section 13.1. Conditions of Termination. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time before
the Closing:
(a) by mutual consent of the Company and Parent;
(b) by the Company or Parent if Parent's stockholders fail to approve an
increase in the authorized number of shares of Parent Stock at the annual
meeting of Parent's stockholders to be held May 15, 2006 (or any adjournment
thereof);
(c) by Parent if the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement and as a result of such breach
the conditions set forth in Sections 12.1 (assuming the accuracy of such
representation or warranty were also measured for purposes of Section 12.1 as of
the date hereof) and 12.2 hereof, as the case may be, would not then be
satisfied; provided, however, that if such breach is curable by the Company
within sixty (60) days through the exercise of its reasonable best efforts, then
for so long as the Company continues to exercise such reasonable best efforts
Parent may not terminate this Agreement under this Section 13.1(c) unless such
breach is not cured within sixty (60) days from written notice to the Company of
such breach (provided, that Parent and Merger Sub are not then in material
breach of the terms of this Agreement); provided, further, that if such breach
is not a result of an action taken by, or an omission by, the Company or any of
its Subsidiaries and is curable by the Company through the exercise of its
reasonable best efforts, then for so long as the Company continues to exercise
such reasonable best efforts Parent may not terminate this Agreement under this
Section 13.1(c) unless such breach is not cured at such time that all other
conditions set forth in Article XII have been satisfied or waived; and provided
further, that no cure period shall be required for a breach which by its nature
cannot be cured;
(d) by the Company if Parent or Merger Sub has breached any representation,
warranty, covenant or agreement contained in this Agreement and as a result of
such breach the conditions set forth in Sections 11.1 (assuming the accuracy of
such representation or warranty were also measured for purposes of Section 11.1
as of the date hereof) and 11.2 hereof, as the case may be, would not then be
satisfied; provided, however, that if such breach is curable by
46
Parent within sixty (60) days through the exercise of its reasonable best
efforts, then for so long as Parent continues to exercise such reasonable best
efforts the Company may not terminate this Agreement under this Section 13.1(d)
unless such breach is not cured within sixty (60) days from written notice to
Parent of such breach (provided, that the Company is not then in material breach
of the terms of this Agreement); provided, further, that if such breach is not a
result of an action taken by, or omission by, the Parent or any of its
Subsidiaries and is curable by Parent through the exercise of its reasonable
best efforts, then for so long as Parent continues to exercise such reasonable
best efforts Parent may not terminate this Agreement under this Section 13.1(d)
unless such breach is not cured at such time that all other conditions set forth
in Article XI have been satisfied or waived; and provided further, that no cure
period shall be required for a breach which by its nature cannot be cured);
(e) by the Company or Parent if: (i) there shall be a final, non-appealable
order of a federal or state court in effect preventing consummation of the
transactions contemplated hereby; or (ii) there shall be any final action taken,
or any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the transactions contemplated hereby, by any Governmental
Entity which would make consummation of the transactions contemplated hereby
illegal;
(f) by the Company or Parent if the Closing shall not have been consummated
prior to the first anniversary of the date hereof; provided that the right to
terminate this Agreement under this Section 13.1(f) shall not be available to
any party whose failure to fulfill any material obligation under this Agreement
has been both willful and the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(g) by Parent in the event that the Company fails to obtain the Required
Merger Stockholder Vote and deliver true and complete evidence thereof together
with a certificate from the Corporate Secretary of the Company certifying to the
same, not later than the close of business on the date hereof by the Parties
hereto.
Section 13.2. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 13.1 hereof, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of the Company, Parent or Merger Sub, or their respective officers, directors,
stockholders, or other Persons under their control, except to the extent that
such termination results from the breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, and provided that the provisions of Articles XIII and XV hereof shall
remain in full force and effect and survive any termination of this Agreement.
ARTICLE XIV.
MISCELLANEOUS.
Section 14.1. Survival. This Article XIV and the agreements of the Company,
Parent and Merger Sub contained in Section 8.4 (Indemnification Continuation)
and Article IX (Additional Covenants of the Parties) and those other covenants
and agreements contained herein
47
that by their terms apply, or that are to be performed in whole or in part,
after the Effective Date shall survive the consummation of the Merger. All other
representations, warranties, covenants and agreements in this Agreement shall
not survive the consummation of the Merger.
Section 14.2. Disclosure Schedules.
(a) The inclusion of any information in the disclosure schedules
accompanying this Agreement will not be deemed an admission or acknowledgment,
in and of itself, solely by virtue of the inclusion of such information in such
schedules, that such information is required to be listed in such schedules or
that such information is material to any Party or the conduct of the business of
any Party.
(b) Any item set forth in the disclosure schedules with respect to a
particular representation, warranty or covenant contained in the Agreement will
be deemed to be disclosed with respect to all other applicable representations,
warranties and covenants contained in the Agreement to the extent any
description of facts regarding the event, item or matter is disclosed in such a
way as to make readily apparent from such description or specified in such
disclosure that such item is applicable to such other representations,
warranties or covenants whether or not such item is so numbered.
Section 14.3. Successors and Assigns. No party hereto shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other parties hereto and any such attempted assignment without
such prior written consent shall be void and of no force and effect. This
Agreement shall inure to the benefit of and shall be binding upon the successors
and permitted assigns of the parties hereto.
Section 14.4. Governing Law; Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York, except for the provisions of this Agreement that
relate expressly to the DGCL or the LLCA, which shall be construed, performed
and enforced in accordance with, and governed by, the DGCL or the LLCA, as
applicable. The parties hereto irrevocably elect as the sole judicial forum for
the adjudication of any matters arising under or in connection with this
Agreement, and consent to the jurisdiction of, the courts of the County of New
York, State of New York or the United States of America for the Southern
District of New York.
Section 14.5. Expenses. All fees and expenses incurred in connection with
the Merger including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties ("Third
Party Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that the Third Party Expenses
incurred by the Company shall be paid prior to the Closing.
Section 14.6. Severability; Construction.
(a) In the event that any part of this Agreement is declared by any court
or other judicial or administrative body to be null, void or unenforceable, said
provision shall
48
survive to the extent it is not so declared, and all of the other provisions of
this Agreement shall remain in full force and effect.
(b) The Parties have participated jointly in the negotiation and drafting
of this Agreement. If any ambiguity or question of intent arises, this Agreement
will be construed as if drafted jointly by the Parties and no presumption or
burden of proof will arise favoring or disfavoring any Party because of the
authorship of any provision of this Agreement.
Section 14.7. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day after delivery to Federal
Express or similar overnight courier or the Express Mail service maintained by
the United States Postal Service; or (iii) on the fifth day after mailing, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid and properly addressed, to the party as
follows:
If to the Company:
TelCove, Inc.
121 Champion Way
Cannonsburg, PA 15317
Attn: Vice President & General Counsel
Copy to (such copy not to constitute notice):
Akin Gump Strauss Hauer & Feld LLP
Robert S. Strauss Building
1333 New Hampshire Ave., NW
Washington, DC 20036
Attention: Russell W. Parks, Jr.
If to Parent or Merger Sub:
Level 3 Communications, Inc.
1025 Eldorado Blvd.
Broomfield, CO 80021
Attn: General Counsel
Copy to (such copy not to constitute notice):
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attn: David K. Boston
Robert B. Stebbins
49
Any party may change its address for the purpose of this Section by giving
the other party written notice of its new address in the manner set forth above.
Section 14.8. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as a further or
continuing waiver of any such condition, or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
Section 14.9. Public Announcements. Except as required by law, no party to
this Agreement shall, and no party to this Agreement shall permit any of its
agent or representatives to, make any press release or public announcement
concerning this Agreement or the transactions contemplated hereby without the
prior written approval of Parent and the Company.
Section 14.10. Entire Agreement. This Agreement and the Confidentiality
Agreement contain the entire understanding among the parties hereto with respect
to the transactions contemplated hereby and supersede and replace all prior and
contemporaneous agreements and understandings, oral or written, with regard to
such transactions. All Exhibits and Schedules hereto and any documents and
instruments delivered pursuant to any provision hereof are expressly made a part
of this Agreement as fully as though completely set forth herein.
Section 14.11. Parties in Interest. Except for (i) the rights of the
Stockholders and the Warrantholders to receive the Merger Consideration
following the Effective Date in accordance with the terms of this Agreement (of
which the Stockholders and the Warrantholders, as applicable, are the intended
beneficiaries following the Effective Date) and (ii) the rights to continued
indemnification and insurance pursuant to Section 8.4 hereof (of which the
Persons entitled to indemnification or insurance, as the case may be, are the
intended beneficiaries following the Effective Date), nothing in this Agreement
is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liability of any third Persons to the
Company or Parent. No provision of this Agreement shall give any third parties
any right of subrogation or action over or against the Company or Parent.
Section 14.12. Section and Paragraph Headings. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
Section 14.13. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
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Section 14.14. No Liability. Notwithstanding anything to the contrary
herein, no officer, director or Stockholder of the Company shall have any
liability in such capacity to Parent or Merger Sub as such with respect to this
Agreement except in connection with the representations set forth in the Letter
of Transmittal.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LEVEL 3 COMMUNICATIONS, INC.
By: /s/ James Q. Crowe
Name: James Q. Crowe
Title: Chief Executive Officer
ELDORADO ACQUISITION THREE, LLC
By: /s/ Thomas C. Stortz
Name: Thomas C. Stortz
Title: Executive Vice President
TELCOVE, INC.
By: /s/ Robert Guth
Name: Robert Guth
Title: Chief Executive Officer
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