Exhibit 99(i)
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AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
BY AND BETWEEN
THE SELLERS PARTY HERETO
AND
THE BUYERS PARTY HERETO
DATED AS OF FEBRUARY 22, 2003
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TABLE OF CONTENTS
1. Definitions........................................................................ 2
1.1 Defined Terms............................................................. 2
1.2 Other Definitional and Interpretive Matters............................... 13
2. Purchase and Sale of the Assets.................................................... 14
2.1 Purchased Assets.......................................................... 14
2.2 Assignment of Contracts and Permits....................................... 15
2.3 Excluded Assets........................................................... 16
2.4 Purchase Price............................................................ 16
2.5 Assumed Liabilities....................................................... 21
2.6 No Offset................................................................. 22
2.7 Further Assurances; Further Conveyances and Assumptions;
Consent of Third Parties.................................................. 22
2.8 Delivery of Guaranties.................................................... 23
3. Representations and Warranties of Sellers.......................................... 23
3.1 Organization and Qualification............................................ 23
3.2 Authorization; Binding Effect............................................. 24
3.3 Non-Contravention; Consents............................................... 24
3.4 Title to Purchased Assets; Sufficiency of Assets.......................... 25
3.5 Licenses and Permits...................................................... 26
3.6 Compliance With Laws; Litigation.......................................... 27
3.7 Business Employees; Employee Benefits..................................... 27
3.8 Contracts................................................................. 28
3.9 Financial Statements; Absence of Changes.................................. 30
3.10 Intellectual Property..................................................... 33
3.11 Real Property............................................................. 33
3.12 Taxes..................................................................... 34
3.13 Brokers................................................................... 34
3.14 Environmental Matters..................................................... 35
3.15 Network................................................................... 35
3.16 Overall Material Adverse Effect........................................... 35
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3.17 No Other Representations.................................................. 35
4. Representations and Warranties of Buyers........................................... 36
4.1 Organization and Qualification............................................ 36
4.2 Authorization; Binding Effect............................................. 36
4.3 No Violations............................................................. 36
4.4 Litigation................................................................ 37
4.5 No Additional Representations or Warranties............................... 37
4.6 Brokers................................................................... 38
4.7 Financing................................................................. 38
4.8 Overall Material Adverse Effect........................................... 38
4.9 No Other Representations.................................................. 38
5. Certain Covenants.................................................................. 39
5.1 Access to Information..................................................... 39
5.2 Conduct of Business....................................................... 39
5.3 Taxes..................................................................... 43
5.4 Employees and Employee Benefits........................................... 45
5.5 Regulatory Compliance..................................................... 46
5.6 Certain Provisions Relating to the Transfer............................... 47
5.7 Advice of Changes......................................................... 47
5.8 Covenant Not to Compete; No Solicitation and No Hiring.................... 49
5.9 Confidentiality........................................................... 50
5.10 Waiver of Restrictions on Certain Business Employees...................... 50
5.11 Additional Agreements..................................................... 51
5.12 Other Securities.......................................................... 52
5.13 No Solicitation........................................................... 52
5.14 Communication and Cooperation with Respect to Customers................... 53
5.15 Sellers' Business Plan.................................................... 53
5.16 Agreements Regarding Certain Actions...................................... 53
5.17 Ownership and Use of Broadwing Names Following Staged Closings............ 54
5.18 Business Audited Financials............................................... 56
5.19 Additional Monthly Financials............................................. 56
5.20 Certain BCI and Sellers' Guaranties....................................... 57
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5.21 Collection of Receivables................................................. 57
5.22 Participating Accounts.................................................... 57
5.23 Commitment Letters........................................................ 57
5.24 Optional Intercompany Agreements.......................................... 58
5.25 BTS Employees............................................................. 58
5.26 Revenues by State......................................................... 58
6. Closing............................................................................ 58
6.1 Closing................................................................... 58
6.2 Deliveries by Sellers..................................................... 59
6.3 Deliveries by Buyers...................................................... 59
6.4 Contemporaneous Effectiveness............................................. 60
7. Conditions Precedent to Staged Closings............................................ 60
7.1 First Stage Closing General Conditions.................................... 60
7.2 First Stage Closing Conditions Precedent to Buyers' Obligations........... 60
7.3 First Stage Closing Conditions Precedent to Sellers' Obligations.......... 62
7.4 Second Stage General Conditions........................................... 63
8. Survival and Indemnity............................................................. 63
8.1 Survival of Representations and Warranties................................ 63
8.2 General Agreement to Indemnify............................................ 63
8.3 General Procedures for Indemnification.................................... 66
9. Termination........................................................................ 68
9.1 Termination............................................................... 68
9.2 Effect of Termination..................................................... 69
10. Miscellaneous Provisions........................................................... 69
10.1 Notices................................................................... 69
10.2 Expenses.................................................................. 70
10.3 Entire Agreement.......................................................... 71
10.4 Jurisdiction, Service of Process.......................................... 71
10.5 Governing Law............................................................. 71
10.6 Waiver.................................................................... 71
10.7 No Oral Modification...................................................... 72
10.8 Assignments, Successors................................................... 72
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10.9 Severability.............................................................. 72
10.10 Captions.................................................................. 72
10.11 Specific Performance...................................................... 72
10.12 No Third Party Beneficiaries.............................................. 73
10.13 Counterparts.............................................................. 73
10.14 Waiver of Compliance with Bulk Transfer Laws.............................. 73
10.15 Publicity................................................................. 73
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EXHIBITS
Exhibit A Cranberry Plan Adjustment Calculation
Exhibit B Form of Buyers' Parent Guaranty
Exhibit C Form of Sellers' Parent Guaranty
Exhibit D Form of Help Desk Agreement
Exhibit E Form of APTIS Software Agreement
Exhibit F Form of Intercompany Agreements
Exhibit G Form of Intellectual Property Rights Assignment Agreement
Exhibit H Form of C III Communications, LLC Agreement
Exhibit I-1 Form of Escrow Agreement (Working Capital/Indemnity)
Exhibit I-2 Form of Escrow Agreement (Cranberry Adjustment)
Exhibit I-3 Form of Escrow Agreement (Closing Adjustment Receivables)
Exhibit I-4 Form of Escrow Agreement (Second Stage Closing)
Exhibit J Terms and Conditions of Transition Services Agreement
Exhibit K Form of Sellers' Parent's Non-Competition and Confidentiality
Agreement
Exhibit L Form of Management Services Agreement
Exhibit M Form of Security Agreement
Exhibit N Communications Plan for Customers and other Persons
Exhibit O Form of Bill of Sale
Exhibit P Form of Assignment and Assumption Agreement
Exhibit Q Form of Portion of Opinion of Counsel to Sellers
Exhibit R Form of Portion of Opinion of Counsel to Buyers
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SCHEDULES
Schedule 1.1(a) Knowledge of Sellers
Schedule 1.1(b) Knowledge of Buyers
Schedule 1.1(c) Permitted Encumbrances
Schedule 1.1(d) Participating Accounts
Schedule 1.1(e) Network
Schedule 1.1(f) Retained Business
Schedule 2.1 Certain Purchased Assets
Schedule 2.2 Purchased Contracts and Permits
Schedule 2.3 Excluded Assets
Schedule 2.4(h)(iii) Illustrations of Section 2.4(h)
Schedule 2.4(i) Working Capital Calculation Principles
Schedule 2.5(a) Assumed Liabilities
Schedule 2.5(c) Excluded Liabilities
Schedule 3.1 Organization and Qualification
Schedule 3.2 Authorization, Binding Effect
Schedule 3.3(b) Sellers' Consents
Schedule 3.4(a) Title to Purchased Assets, Etc.
Schedule 3.4(b) Condition of Assets
Schedule 3.4(c) Sufficiency of Acquired Assets
Schedule 3.5(a) Communications Licenses
Schedule 3.5(c) Communications License Compliance
Schedule 3.5(d) Communications License Revocation, etc.
Schedule 3.5(e) Permits
Schedule 3.6(a) Sellers' Compliance with Law
Schedule 3.6(b) Sellers' Litigation
Schedule 3.7(a) List of Business Employees
Schedule 3.7(b) Benefit Plans
Schedule 3.7(d) ERISA
Schedule 3.7(g) WARN Act
Schedule 3.8 Contracts
Schedule 3.9(a)(i) Financial Statements
Schedule 3.9(a)(ii) GAAP Exceptions
Schedule 3.9(b) Exceptions to Financial Statements
Schedule 3.9(c) Aging Schedule
Schedule 3.9(d) Undisclosed Liabilities
Schedule 3.9(e) Ordinary Course Exceptions
Schedule 3.10 Intellectual Property
Schedule 3.11(a)(i) Owned Real Property
Schedule 3.11(a)(ii) Leased Real Property
Schedule 3.11(a)(iii) Exceptions to Real Property
Schedule 3.14 Environmental
Schedule 4.3(b) Buyers' Consents
Schedule 4.4(a) Buyers' Compliance with Law
Schedule 4.4(b) Buyers' Litigation
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Schedule 5.2 Sellers' Conduct of Business
Schedule 5.3(b) Purchase Price Allocation
Schedule 5.8 Description of Sellers' Parent's Business
Schedule 5.15(b) Sellers' Business Plan
Schedule 5.15(c) Cranberry Capital Expenditure Budget
Exhibit 5.15(d) Lines of Business - Exit or Terminate
Schedule 5.16 Certain Actions
Schedule 5.20 Certain BCI and Sellers' Guaranties
Schedule 5.24 Certain Collateral Agreements
Schedule 5.25 BTS Employees
Schedule 7.2(d) Key Employees
Schedule 8.2(b) Specific Indemnity
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AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS is made as of
February, 22, 2003 by and between Broadwing Communications Services Inc., a
Delaware corporation, Broadwing Communications Services of Virginia, Inc., a
Virginia corporation, Broadwing Communications Real Estate Services LLC, a
Delaware limited liability company, Broadwing Services LLC, a Delaware limited
liability company, IXC Business Services LLC, a Delaware limited liability
company, Broadwing Logistics LLC, a Delaware limited liability company,
Broadwing Telecommunications Inc., a Delaware corporation, IXC Internet
Services, Inc., a Delaware corporation, and MSM Associates, Limited Partnership,
a Delaware limited partnership (individually, a "Seller" and collectively,
"Sellers"), on the one side, and C III Communications, LLC, a Delaware limited
liability company ("C III"), and C III Communications Operations, LLC, a
Delaware limited liability company (individually, a "Buyer" and collectively,
"Buyers"), on the other side.
RECITALS
A. WHEREAS, Sellers are, among other things, engaged in
the Business (as defined herein);
B. WHEREAS, Sellers desire to sell, transfer and assign
to Buyers, and Buyers desire to purchase from Sellers, the Business and the
Acquired Assets (as defined herein), and Buyers are willing to assume the
Assumed Liabilities (as defined herein), in each case as more fully described
and upon the terms and subject to the conditions set forth herein;
C. WHEREAS, Sellers, on the one side, and Buyers, on the
other side, contemplate entering into the Bill of Sale, the Assignment and
Assumption Agreement, each as defined herein, and the other documents and
instruments to be executed and delivered to effectuate the transfer of the
Acquired Assets and the assumption of the Assumed Liabilities and the other
transactions contemplated hereby; and
D. WHEREAS, one or more of Sellers and/or their
Affiliates, on the one side, and Buyers, on the other side, contemplate entering
into the Help Desk Agreement, the APTIS Software Agreement, the Intercompany
Agreements, the Transition Services Agreement, and certain other Collateral
Agreements, each as defined herein, among other reasons, to enable Buyers to
continue to conduct the Business substantially as currently conducted by
Sellers.
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
subject to the terms and conditions hereinafter set forth, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
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AGREEMENT
1. DEFINITIONS
1.1 DEFINED TERMS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings whenever used in this Agreement (including the
Schedules and Exhibits hereto):
"Accounting Firm" has the meaning assigned to it in Section 2.4(e).
"Accounting Firm Determination" shall have the meaning assigned to it
in Section 2.4(e).
"Acquired Assets" means, collectively, the Purchased Assets, the
Purchased Contracts and Permits and the Transferred Communications Licenses.
"Action" means any action, litigation, claim, suit, mediation,
arbitration, inquiry, government or other investigation or proceeding of any
nature, whether criminal, civil, legislative, administrative, regulatory,
prosecutorial or otherwise, by or before any mediator, arbitrator or
Governmental Body or similar Person.
"Adjusted CWC Purchase Price" has the meaning assigned to it in Section
2.4(g).
"Adjustment Receivables" means all Receivables and "Disputes Withheld"
and "Disputes Paid Under Protest" included in the accepted cost of services as
contemplated by, and calculated in accordance with the principles applied in
calculating the Adjustment Receivables as of December 31, 2001 set forth in,
Schedule 2.4(h).
"Adjustment Statements" has the meaning assigned to it in Section
2.4(d).
"Affiliate" of any Person means any Person that controls, is controlled
by, or is under common control with such Person. As used herein, "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract or otherwise. For
purposes of Sections 3.8, 3.9 and 5.2, "Affiliate" also means subsidiaries of
the Sellers or any Person in which a Seller holds any equity interest (other
than any minority equity interests held solely for investment purposes by any
Seller).
"Agreement" means this Agreement for the Purchase and Sale of Assets,
as amended, supplemented or otherwise modified in accordance with the terms
herein.
"Allocation" has the meaning assigned to it in Section 5.3(b).
"APTIS Software Agreement" has the meaning assigned to it in Section
5.11(b).
"Assets" means any assets and properties, tangible and intangible,
including the Business Records, the Personal Property, Seller IP and Seller IPR,
used in the conduct of the Business
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(including all such assets that comprise a part of the Network), other than
Contracts, Permits and Communications Licenses.
"Assignment and Assumption Agreement" has the meaning assigned to it in
Section 6.2(b).
"Assumed Liabilities" has the meaning assigned to it in Section 2.5(a).
"Balance Sheet" means the statement of assets and liabilities included
in the Financial Statements.
"Bankruptcy" means, with respect to a Person, that such Person becomes
insolvent or generally fails to pay, or admits in writing its inability to pay,
debts as they become due; or such Person applies for, consents to or acquiesces
in the appointment of a trustee, receiver or other custodian for such Person or
any property thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for such Person or for a
substantial part of its property and is not discharged within 30 days; or any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution or liquidation proceeding
is commenced in respect of any of such Person, and, if such case or proceeding
is not commenced by such Person, it is consented to or acquiesced in by such
Person or remains for 30 days undismissed or an order for relief is entered in
any such involuntary bankruptcy; or such Person takes any corporate action to
authorize, or in furtherance of, any of the foregoing.
"BCI" shall mean Broadwing Communications, Inc., a Delaware
corporation.
"BCI and Sellers' Guaranties" has the meaning assigned to it in Section
5.20.
"Benefit Plan" means each "employee benefit plan," as defined in
Section 3(3) of ERISA (including any "multiemployer plan" as defined in Section
3(37) of ERISA) and each profit-sharing, bonus, stock option, stock purchase,
stock ownership, pension, retirement, severance, deferred compensation, excess
benefit, supplemental unemployment, post-retirement medical or life insurance,
welfare or incentive plan, or sick leave, long-term disability, medical,
hospitalization, life insurance, other insurance plan, or other employee benefit
plan, program or arrangement, whether written or unwritten, qualified or
non-qualified, funded or unfunded, sponsored, maintained or contributed to by
Sellers in which any current or former Business Employee participates or with
respect to which the Sellers have any liability, with respect to any current or
former Business Employee.
"Bill of Sale" has the meaning assigned to it in Section 6.2(a).
"Broadwing Name" shall mean any name that contains or is derived from
the words "Broadwing", "Broadwing Communications", "Broadwing Services", any
derivatives thereof, or any name intended or likely to be confused or associated
with any such words.
"Business" shall mean the businesses currently operated by Sellers of
providing data and voice communications services via a national fiber network
with multiple protocols to carrier and
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enterprise customers; provided, that "Business" shall not be deemed to include
the Retained Business, any Excluded Asset or any Excluded Liability.
"Business Day" means a day that is not a Saturday, a Sunday or a day on
which banks in The City of New York are authorized or required by law,
regulation or executive order to remain closed.
"Business Employees" means the (i) employees of BCI or Sellers who work
primarily in the Business and who continue to be employees of Sellers working
primarily in the Business until and as of the First Stage Closing Date and (ii)
employees hired by the Business between the date of this Agreement and the First
Stage Closing Date who continue to be employees of BCI or Sellers working
primarily in the Business until and as of the First Stage Closing Date.
"Business Records" means, collectively, all business books, records,
ledgers and files or other similar business information of Sellers (in any form
or medium) related to the Business, except the general ledger (other than the
Oracle software on which the general ledger is kept containing a copy of the
general ledger), stock ledgers, corporate minute books, litigation files, Tax
Returns and other corporate level information and all information with respect
to the Excluded Assets, Excluded Liabilities and the Retained Business
(collectively, the "Excluded Business Records").
"Buyers" has the meaning assigned to it in the preamble.
"Buyers' Consents" has the meaning assigned to it in Section 4.3(b).
"Buyers' Covenant Failure" shall have the meaning assigned to it in
Section 5.7(b).
"Buyers' Parent" means Corvis Corporation, a Delaware Corporation.
"Buyers' Parent Guaranty" has the meaning assigned to it in Section
2.8.
"Buyers' R&W Breach" shall have the meaning assigned to it in Section
5.7(b).
"Cap" shall have the meaning assigned to it in Section 8.3(b).
"C III" has the meaning assigned to it in the preamble.
"C III LLC Agreement" has the meaning assigned to it in Section
5.11(e).
"Circuit Commitments" means those commitments for circuits or local
loops of the Business comprising a part of the Network arising from orders
placed pursuant to tariffs or master circuit lease agreements with third party
vendors such as RBOCs, competitive access providers or competitive local
exchange carriers.
"Claim" has the meaning assigned to it in Section 8.2(a).
"Closing Adjustment Receivables" and "Closing Adjustment Receivables
Statement" have the meanings assigned to them in Section 2.4(h).
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"Closing Adjustment Receivables Pool" means Seven Million Five Hundred
Thousand U.S. Dollars ($7,500,000).
"Closing Disagreement Notice" has the meaning assigned to it in Section
2.4(e).
"Closing Working Capital" has the meaning assigned to it in Section
2.4(d).
"Closing Working Capital Statement" has the meaning assigned to it in
Section 2.4(d).
"COBRA Coverage" means health continuation coverage as required by
Section 4980 of the Code of Part 6 of Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agreements" means the Bill of Sale, Assignment and
Assumption Agreement, Help Desk Agreement, APTIS Software Agreement,
Intercompany Agreements, Intellectual Property Rights Assignment Agreement, C
III LLC Agreement, Escrow Agreement (Working Capital/Indemnity), Escrow
Agreement (Cranberry Adjustment), Escrow Agreement (Closing Adjustment
Receivables), Escrow Agreement (Second Stage Closing), Transition Services
Agreement, Sellers' Parent Guaranty, Buyers' Parent Guaranty, and the other
documents and instruments to be executed and delivered to effectuate the
transfer of the Acquired Assets and the assumption of the Assumed Liabilities
and the other transactions contemplated hereby, and any other agreement or
instrument entered into at or prior to the First Stage Closing Date and/or the
Second Stage Closing Date pursuant to the provisions of this Agreement, each as
amended, supplemented or otherwise modified in accordance with the terms herein
and/or therein.
"Collected Closing Adjustment Receivables I" and "Collected Closing
Adjustment Receivables II" have the meanings assigned to them in Section 2.4(h).
"Collected PA Accounts" has the meaning assigned to it in Section 5.22.
"Commitment Letter" has the meaning assigned to it in Section 5.23.
"Communications Act" has the meaning assigned to it in Section 3.3(b).
"Communications Licenses" has the meaning assigned to it in Section
3.5(a).
"Compete" has the meaning assigned to it in Section 5.8.
"Confidential Information" has the meaning assigned to it in Section
5.9.
"Consent" means any consent, action, approval, authorization, waiver or
Order.
"Contracts" means all contracts, agreements, leases, subleases,
licenses, sublicenses, commitments, assignments and arrangements, whether
written or oral.
"Cranberry Plan Adjustment Amount" means an adjustment to the Initial
Purchase Price determined in accordance with Exhibit A attached hereto.
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"Cranberry Plan Adjustment Statement" has the meaning assigned to it in
Section 2.4(d).
"Credit Agreement" shall mean that certain Credit Agreement, dated as
of November 9, 1999, amended and restated as of January 12, 2000, and as further
amended from time to time, among Cincinnati Bell and IXCS, as the borrowers,
Cincinnati Bell as parent guarantor, the Initial Lenders, Initial Issuing Banks
and Swing Line Banks, each named and as defined therein, Bank of America, N.A.,
as syndication agent, Citicorp USA, Inc., as administrative agent, Credit Suisse
First Boston and The Bank of New York, as co-documentation agents, PNC Bank,
N.A., as agent and Salomon Smith Barney Inc. and Banc of America Securities LLC,
as joint lead arrangers, together with all collateral agreements thereto.
"Current Assets" has the meaning assigned to it in Section 2.4(i).
"Current Liabilities" has the meaning assigned to it in Section 2.4(i).
"Customer Contracts" shall have the meaning assigned to it in Section
2.2.
"Easements" means easements, rights of way and similar interests in
real property.
"ELI Contract" means that certain Fiber and Construction Lease
Agreement, dated February 28, 1999, between IXC Communications Services, Inc.
and Electric Lightwave, Inc.
"ELI Dispute" shall have the meaning assigned to it in Section 5.16(c).
"ELI Replacement Fibers" shall have the meaning assigned to it in
Section 5.16(c).
"ELI Route" shall have the meaning assigned to it in Section 5.16(c).
"Employment Agreement" means a contract, offer letter or agreement of
Sellers with or addressed to any Business Employee pursuant to which Sellers
have any actual or contingent liability or obligation to provide compensation or
benefits in consideration for past, present or future services, or pursuant to
which any Business Employee undertakes confidentiality or non-competition
obligations.
"Encumbrance" means any mortgage, pledge, security interest, easement,
hypothecation, assignment, lien or other encumbrance.
"Environmental Law or Order" shall mean any Law or Order which relates
to or otherwise imposes liability or standards of conduct concerning discharges,
emissions, releases or threatened releases of noises, pathogens, odors,
pollutants, or contaminants or hazardous or toxic wastes, substances or
materials, whether as matter or energy, into air (whether indoors or out), water
(whether surface or underground) or land (including any subsurface strata), or
otherwise relating to their manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling, including the
following Laws: Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of
1986, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, the Toxic Substances Control Act of 1976, as amended, the Federal Water
Pollution Control Act Amendments of 1972, the Clean Water Act of 1977, as
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amended, the National Environmental Policy Act of 1969, and any state provision
analogous to any of the foregoing.
"Environmental Liability" means, without limitation, all damages,
losses and liabilities (including investigation, cleanup, compliance,
enforcement, response and toxic tort liabilities) (whether absolute, contingent,
matured, liquidated, accrued, known, or unknown), including fines, penalties,
capital expenditures, fees and expenses of any kind or nature whatsoever,
including of counsel or consultants, and whether arising out of loss of life,
personal injuries, liens or other claims against property or improvements
thereon or other obligations of any kind or character, in each case, that relate
in arise under any way to Environmental Law or Order or any Hazardous Substance.
"Environmental Permit" shall mean any Permit required by or pursuant to
any applicable Environmental Law or Order.
"Environmental Warranties" shall mean the representations and
warranties in Section 3.14.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement (Cranberry Adjustment)" has the meaning assigned to
it in Section 5.11(f).
"Escrow Agreement (Closing Adjustment Receivables)" has the meaning
assigned to it in Section 5.11(f).
"Escrow Agreement (Second Stage Closing)" has the meaning assigned to
it in Section 5.11(f).
"Escrow Agreement (Working Capital/Indemnity)" has the meaning assigned
to it in Section 5.11(f).
"Escrow Amount (Closing Adjustment Receivables)" means Three Million
Seven Hundred Fifty Thousand U.S. Dollars ($3,750,000).
"Escrow Amount (Cranberry Adjustment)" means Five Million U.S. Dollars
($5,000,000).
"Escrow Amount (Second Stage Closing)" means Twenty-Three Million One
Hundred Ten Thousand U.S. Dollars ($23,110,000).
"Escrow Amount (Working Capital/Indemnity)" means Five Million U.S.
Dollars ($5,000,000).
"Excluded Assets" has the meaning assigned to it in Section 2.3.
"Excluded Liabilities" has the meaning assigned to it in Section
2.5(c).
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"FCC" means the Federal Communications Commission.
"Financial Statements" has the meaning assigned to it in Section
3.9(a).
"First Stage Closing" has the meaning assigned to it in Section 6.1.
"First Stage Closing Date" has the meaning assigned to it in Section
6.1.
"First Stage Customer Contracts" has the meaning assigned to it in
Section 2.2(a).
"First Stage Purchased Assets" has the meaning assigned to it in
Section 2.1(a).
"First Stage Transferred Communications Licenses" has the meaning
assigned to it in Section 2.2(a).
"First Stage Purchased Contracts" has the meaning assigned to it in
Section 2.2(a).
"First Stage Purchased Permits" has the meaning assigned to it in
Section 2.2(a).
"500K Customers" means any customer of the Business that generated in
excess of $500,000 of revenues, as calculated by multiplying twelve (12) times
revenues generated from such customer for the month ending November 30, 2002.
"GAAP Exceptions" means the exceptions described on Schedule 3.9(a).
"General Cap" shall have the meaning assigned to it in Section
8.2(f)(ii).
"Generally Accepted Accounting Principles" means United States
generally accepted accounting principles applied on a basis consistent with the
application of such principles in the preparation of the Financial Statements,
but subject to the GAAP Exceptions.
"Governmental Body" means any nation or government, any state or other
political subdivision thereof, any legislative, executive or judicial unit or
instrumentality of any governmental entity (foreign, federal, state or local) or
any department, commission, board, agency, bureau, official or other regulatory,
administrative or judicial authority thereof or any entity (including a court or
self-regulatory organization) exercising executive, legislative, judicial, Tax,
regulatory or administrative functions of or pertaining to government.
"Hazardous Substance" shall mean any material, substance, form of
energy or pathogen which (i) constitutes a "hazardous substance", "toxic
substance" or "pollutant", "contaminant", "hazardous material", "hazardous
chemical", "regulated substance", or "hazardous waste" (as such terms are
defined by or pursuant to any Environmental Law) or (ii) is otherwise regulated
or controlled by, or gives rise to liability under, any Environmental Law.
Without limiting the generality of the foregoing, Hazardous Substance shall
include any substance that contains asbestos or petroleum.
"Help Desk Agreement" has the meaning assigned to it in Section
5.11(a).
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Taxes" has the meaning assigned to it in Section 5.3(e).
"Indemnified Party" has the meaning assigned to it in Section 8.2(a).
"Indemnifying Party" has the meaning assigned to it in Section 8.2(a).
"Initial Purchase Price" has the meaning assigned to it in Section
2.4(b).
"Intellectual Property" or "IP" shall mean all trade secrets, computer
software (including source code, object code and existing user and technical
documentation, databases, websites (including the content thereof in electronic
form), technology, processes, methodologies, technical information and data,
specifications, research materials, designs, drawings and other similar
intangible property.
"Intellectual Property Rights" or "IPR" shall mean any right, title or
interest in or to any packaging designs or trade dresses, any derivatives or
combinations thereof, any patents, patent registrations, patent applications,
trademarks, trademark registrations, trademark applications, tradenames, service
names, domain names, registrations and applications therefor, copyrights,
copyright applications, copyright registrations, trade secrets and inventions.
"Intellectual Property Rights Assignment Agreement" has the meaning
assigned to it in Section 5.11(d).
"Intercompany Agreements" has the meaning assigned to it in Section
5.11(c).
"IRS" means the U.S. Internal Revenue Service.
"IRU Portion" has the meaning assigned to it in Section 3.15.
"Key Employees" has the meaning assigned to it in Section 7.2(d).
"Knowledge" means, in connection with any representation and warranty
contained in this Agreement that is expressly qualified by reference to the
Knowledge of Sellers or Buyers, with respect to Knowledge of Sellers, the actual
knowledge of those persons set forth on Schedule 1.1(a), or, with respect to
Knowledge of Buyers, the actual knowledge of those persons set forth on Schedule
1.1(b).
"Law" or "Laws" shall mean any law, statute, ordinance, rule,
regulation or code of any Governmental Body.
"Leased Real Property" has the meaning assigned to it in Section
3.11(a).
"Losses" has the meaning assigned to it in Section 8.2(a).
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"Material Adverse Effect" means a material adverse effect on the
business, operations, assets, condition (financial or other) or results of
operations of the Business or the Sellers (taken as a whole) or the Buyers
(taken as a whole) as the context requires; provided, that none of the following
shall be deemed, either alone or in combination, to constitute a Material
Adverse Effect: (i) conditions generally affecting any of the industries or
markets in which Sellers or Buyers, as the context requires, operate, (ii) any
disruption arising out of the announcement of the transactions contemplated
hereby, (iii) the engagement in hostilities by the United States, an escalation
in hostilities involving the United States or a declaration of a national
emergency or war by the United States or (iv) any change in general economic,
political or financial condition of the United States, including, without
limitation, as a result of terrorist activities.
"Monthly Statements" has the meaning assigned to it in Section 3.9(a).
"Network" means all Assets, Contracts, Permits and Communications
Licenses comprising fiber, cables, ducts, conduit, equipment, the network
operating center, software, systems, schematics and diagrams, licenses or other
IP, and associated administrative, access and storage equipment and facilities
(including without limitation hand holes and space in equipment cages) and other
support facilities comprising and/or used in connection with the network, other
telecommunications facilities, network management and operations and systems
owned and/or operated by Sellers, covering, at a minimum, the routes indicated
on the map, the route register, and the points of presence ("POPs") and other
network metrics, in each case with respect to such routes, route register and
POPs as indicated on Schedule 1.1(e).
"Orders" means any judgment, order (consent or other), writ,
stipulation, injunction, ruling (Tax or otherwise), decision or decree of any
Governmental Body.
"Overall Cap" shall have the meaning assigned to it in Section
8.2(f)(iii).
"Owned Portion" has the meaning assigned to it in Section 3.15.
"Owned Real Property" has the meaning assigned to it in Section
3.11(a).
"Participating Accounts" means accounts of the Sellers that do not
constitute Current Assets for the purposes of Section 2.4, and which are set
forth on Schedule 1.1(d).
"party" means a Buyer or a Seller or Buyers or Sellers, as the context
requires.
"Permits" means all permits, licenses, certificates, approvals,
qualifications, registrations, and similar authorizations issued to Sellers by a
Governmental Body related to the Business as currently conducted, including any
amendment, modification, limitation, condition or renewal thereof, other than
Communications Licenses.
"Permitted Encumbrances" means (i) liens for Taxes not yet due and
payable or that are being contested in good faith by appropriate proceedings,
(ii) any mechanics', carriers', workmen's, repairmen's or other similar liens
arising or incurred in the ordinary course of business not in excess of
$100,000, (iii) any liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary
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course of business, (iv) mortgages, liens, security interests and similar
Encumbrances which secure debt that is reflected as a liability on the Financial
Statements and the existence of which is expressly indicated in the notes
thereto, (v) any imperfections of title which do not, individually or in the
aggregate, have a material impact on the ability of Sellers to use the Acquired
Assets in the conduct of the Business as currently conducted or on the ability
of the Buyer, after the applicable Staged Closing Date, to use the Acquired
Assets in the conduct of the Business as currently conducted by Sellers, (vi)
any restriction or limitation or other similar Encumbrance included as a term of
any of the Purchased Contracts and Permits or Transferred Communications
Licenses, and (vii) those Encumbrances that are set forth in Schedule 1.1(c), of
which those marked with an asterisk are to be released at or before the
applicable Staged Closing Date.
"Person" means any individual, corporation, partnership, limited
liability company, limited liability firm, association, joint venture, joint
stock company, trust, unincorporated organization or other entity, or any
Governmental Body.
"Personal Property" means all fixtures, fiber, fiber rights, vehicles,
machinery, equipment, rolling stock, tools, furniture, pallets, phones, office
supplies and other items of personal property, related to the Business, whether
or not recorded on the books of Sellers.
"Preliminary Adjustment Amount" has the meaning assigned to it in
Section 2.4(b).
"Preliminary Disagreement Notice" has the meaning assigned to it in
Section 2.4(a).
"Preliminary Working Capital" has the meaning assigned to it in Section
2.4(a).
"Preliminary Working Capital Statement" has the meaning assigned to it
in Section 2.4(a).
"Prime Rate" has the meaning assigned to it in Section 2.4(g).
"Purchase Price" has the meaning assigned to it in Section 2.4(g).
"Purchased Assets" has the meaning assigned to it in Section 2.1.
"Purchased Contracts" has the meaning assigned to in Section 2.2(b).
"Purchased Contracts and Permits" has the meaning assigned to it in
Section 2.2(b).
"Purchased Permits" has the meaning assigned to it in Section 2.2(b).
"Real Property" has the meaning assigned to it in Section 3.11(a).
"Real Property Leases" has the meaning assigned to it in Section
3.11(a).
"Receivables" means all accounts receivable, including billed and
unbilled amounts, which are payable as a result of goods and services provided
by Sellers in the conduct of the Business, other than those that comprise
Excluded Assets.
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"Retained Business" means the business of Broadwing Technology
Solutions Inc. that is described on Schedule 1.1(f).
"Revenues Statement" has the meaning assigned to it in Section 5.26.
"Second Stage Closing" has the meaning assigned to it in Section 6.1.
"Second Stage Closing Date" has the meaning assigned to it in Section
6.1.
"Security Agreement" has the meaning assigned to it in Section 5.11(j).
"Seller IP" shall mean all IP used by Sellers primarily in their
conduct of the Business and comprises (a) all such IP that is owned by Sellers
("Seller Owned IP") and (b) all such IP which is licensed to Seller ("Seller
Licensed IP"), as generally described on Schedule 2.2.
"Seller IPR" shall mean all IPR used by Sellers primarily in their
conduct of the Business and comprises (a) all such IPR that is owned by Sellers
("Seller Owned IPR") and as set forth on Schedule 2.2, and including, without
limitation, the business name, brand name, trade name, trademark, service mark,
logo and domain name "Broadwing" and any business name, brand name, trade name,
trademark, service mark and domain name that includes the word "Broadwing" and
any and all derivatives thereof, and (b) all such IPR which is licensed to
Seller ("Seller Licensed IPR"), as generally described on Schedule 2.2.
"Sellers" has the meaning assigned to it in the preamble hereof.
"Sellers' Consents" has the meaning assigned to it in Section 3.3(b).
"Sellers' Covenant Failure" shall have the meaning assigned to it in
Section 5.7(a).
"Sellers' Parent" means Broadwing Inc., an Ohio corporation.
"Sellers' Parent Guaranty" has the meaning assigned to it in Section
2.8.
"Sellers' R&W Breach" shall have the meaning assigned to it in Section
5.7(a).
"Staged Closing Dates" means, collectively, the First Stage Closing
Date and the Second Stage Closing Date.
"State Licenses" has the meaning assigned to it in Section 3.5(a).
"State PUCs" means state public service and utility commissions or
similar Governmental Bodies.
"Statements" has the meaning assigned to it in Section 3.9(a).
"Tax Returns" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority or any Person relating to Taxes.
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"Tax Warranties" shall mean the representations and warranties in
Sections 3.7(c), 3.7(d) and 3.12.
"Taxes" mean all taxes of any kind, charges, fees, customs, levies,
duties, imposts, required deposits or other assessments, including all net
income, capital gains, gross income, gross receipt, property, franchise, sales,
use, excise, withholding, payroll, employment, social security, worker's
compensation, unemployment, occupation, capital stock, ad valorem, value added,
transfer, gains, profits, license, net worth, asset, transaction, and other
taxes, imposed upon any Person by any Law, Order or Governmental Body, together
with any interest and any penalties, or additions to tax, with respect to such
taxes.
"Territory" has the meaning assigned to it in Section 5.8.
"Third Party" means any Person other than, and not an Affiliate of, the
other referenced Person or Persons.
"Third Party Claim" has the meaning assigned to it in Section 8.3(a).
"Title and Authorization Warranties" shall mean the representations and
warranties in Sections 3.1, 3.2, 3.4(a), 4.1 and 4.2.
"Total Escrow Amount" has the meaning assigned to it in Section 2.4(b).
"Transfer Date" has the meaning assigned to it in Section 5.4(a).
"Transferred Employee" has the meaning assigned to it in Section
5.4(a).
"Transition Services Agreement" has the meaning assigned to it in
Section 5.11(g).
"Two Stage Waiver Notice" shall have the meaning assigned to it in
Section 6.1.
"Working Capital" has the meaning assigned to it in Section 2.4(i).
"9% Notes" shall mean the 9% Senior Subordinated Notes due 2008 of BCI.
"12 1/2% Preferred Stock" shall mean the 12 1/2% Preferred Stock of
BCI.
"Senior Notes" shall mean the 12 1/2% Senior Notes of BCI.
1.2 OTHER DEFINITIONAL AND INTERPRETIVE MATTERS
Unless otherwise expressly provided, for purposes of this Agreement and
the Collateral Agreements, the following rules of interpretation shall apply:
(a) Calculation of Time Period. When calculating
the period of time before which, within which or following which any act is to
be done or step taken, the date that is the reference date in calculating such
period shall be excluded. If the last day of such period is a non-Business Day,
the period in question shall end on the next succeeding Business Day.
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(b) Gender and Number. Any reference to gender
shall include all genders, and words imparting the singular number only shall
include the plural and vice versa.
(c) Headings. The provision of a Table of
Contents, the division into Articles, Sections and other subdivisions and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in construing or interpreting this Agreement and the Collateral
Agreements. All references in this Agreement to any "Section" are to the
corresponding Section of this Agreement, the Collateral Agreement or the other
agreement in which such Section occurs (unless otherwise specified).
(d) Herein. The words such as "herein,"
"hereinafter," "hereof," "hereunder," "therein," "thereof" and "thereunder"
refer to this Agreement, the Collateral Agreement or the other agreement to
which such reference is made, as a whole and not merely to a subdivision in
which such words appear (unless the context otherwise requires).
(e) Including. The word "including" or any
variation thereof means "including without limitation" and shall not be
construed to limit any general statement that it follows to the specific or
similar items or matters immediately following it.
(f) Schedules and Exhibits. The Schedules and
Exhibits attached to each of this Agreement and the Collateral Agreements shall
be construed with and as an integral part of this Agreement and the Collateral
Agreements, respectively, to the same extent as if the same had been set forth
verbatim herein and therein. Disclosure in any of the Schedules provided
pursuant to Article 3 or Article 4 shall be deemed to be disclosure on every
other Schedule so provided in which it may be relevant, if the disclosure of any
matter in a Schedule other than in the relevant Schedule provides the other
party with sufficiently full disclosure such that the party should reasonably be
expected to know that the matter disclosed was applicable to the disclosure
contained in the relevant Schedule. By listing matters on the Schedules, neither
Sellers nor Buyers shall be deemed to have established any materiality standard,
admitted any liability, or concluded that any one or more of such matters are
material, or expanded in any way the scope or effect of the representations and
warranties of Sellers or Buyers, as applicable, contained in this Agreement.
2. PURCHASE AND SALE OF THE ASSETS
2.1 PURCHASED ASSETS
(a) First Stage Closing. Upon the terms and
subject to the conditions of this Agreement, at and as of the First Stage
Closing Date, Sellers shall sell and transfer, assign, convey and deliver to
Buyers, and Buyers shall purchase, acquire and accept from Sellers, all of the
Sellers' right, title and interest in, to and under, all of the Assets for which
the sale, transfer, assignment, conveyance and delivery do not require FCC or
State PUC Consents or for which FCC and State PUC Consents have been obtained,
but excluding the Excluded Assets (collectively, the "First Stage Purchased
Assets"), including the Assets listed on Schedule 2.1 (but only to the extent
FCC and State PUC Consents are not required or have been obtained). In addition,
as FCC and State PUC Consents (up to the last required FCC and State PUC
Consent) necessary to sell, transfer, assign and convey to Buyers any Assets are
obtained, such
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Assets shall be deemed so sold, transferred, assigned and conveyed and to
constitute "First Stage Purchased Assets" as of the date obtained.
(b) Second Stage Closing. Upon the terms and
subject to the conditions of this Agreement, Sellers shall sell and transfer,
assign, convey and deliver to Buyers, and Buyers shall purchase, acquire and
accept from Sellers, all of Sellers' right, title and interest in, to and under,
each remaining Asset not transferred pursuant to the First Stage Closing, but
excluding the Excluded Assets (collectively, with the First Stage Purchased
Assets, the "Purchased Assets"), including the remaining Assets listed on
Schedule 2.1, when and as the last FCC and State PUC Consent(s) required to
sell, transfer, assign, convey and deliver such Assets are obtained.
2.2 ASSIGNMENT OF CONTRACTS AND PERMITS
(a) First Stage Closing. Upon the terms and
subject to the conditions of this Agreement, at and as of the First Stage
Closing Date, Sellers shall assign and transfer to Buyers all of Sellers' right,
title and interest in and to, and Buyers shall take assignment of all of the
following (as to which FCC and State PUC Consents are not required or have been
obtained): (a) all of the Contracts related to the Business (including, without
limitation, the Network) to which one or more Sellers is a party, excluding
Contracts that comprise Excluded Assets, but including all of the Contracts with
customers of the Business ("First Stage Customer Contracts"), the Employment
Agreements set forth on Schedule 3.8(a) to the extent the Business Employee
under such an Employment Agreement executes and delivers to Buyers a Commitment
Letter and becomes a Transferred Employee and all of the other Contracts listed
on Schedule 2.2 (collectively, including the First Stage Customer Contracts, the
"First Stage Purchased Contracts"), (b) all of the Permits of Sellers related to
the Business, (including, without limitation, the Network) set forth on Schedule
2.2 which are transferable, excluding Permits that comprise Excluded Assets, but
including the Permits listed on Schedule 2.2 (collectively, the "First Stage
Purchased Permits"); and (c) the Communications Licenses of Sellers related to
the Business (including, without limitation, the Network) that are transferable,
excluding Communications Licenses that comprise Excluded Assets (collectively,
the "First Stage Transferred Communications Licenses"). In addition, when and as
the FCC and State PUC Consents (up to the last required FCC and PUC Consent)
necessary to assign and transfer to Buyers all of Sellers' right, title and
interest in and to all Contracts, Permits and Communications Licenses described
in the preceding clauses (a), (b) and (c), respectively, are obtained, all such
items shall be deemed so assigned and transferred to Buyers and to constitute
"First Stage Purchased Contracts", "First Stage Purchased Permits" and "First
Stage Transferred Communications Licenses", respectively, as of the date
obtained.
(b) Second Stage Closing. Upon the terms and
subject to the conditions of this Agreement, when and as the last FCC and State
PUC Consent(s) required to assign and transfer the following are obtained,
Sellers shall assign and transfer to Buyers all of Sellers' right, title and
interest in and to, and Buyers shall take assignment of all of the following:
(a) all of the remaining Contracts related to the Business to which one or more
Sellers is a party, excluding Contracts that comprise Excluded Assets, but
including all of the remaining Contracts with customers of the Business
(collectively, with the First Stage Customer Contracts, the "Customer
Contracts") and all of the other remaining Contracts listed on Schedule 2.2
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(collectively, including the Customer Contracts, with the First Stage Purchased
Contracts, the "Purchased Contracts"); (b) all of the remaining Permits of
Sellers related to the Business set forth on Schedule 2.2 which are
transferable, excluding Permits that comprise Excluded Assets, but including the
remaining Permits listed on Schedule 2.2 (collectively, with the First Stage
Purchased Permits, the "Purchased Permits"; and together with the Purchased
Contracts, the "Purchased Contracts and Permits"); and (c) the remaining
Communications Licenses of Sellers related to the Business that are
transferable, excluding Communications Licenses that comprise Excluded Assets
(collectively, with the "First Stage Transferred Communications Licenses", the
"Transferred Communications Licenses").
2.3 EXCLUDED ASSETS
Notwithstanding Sections 2.1 and 2.2, Sellers shall not sell or
transfer, assign, convey or deliver, and Buyers shall not assume or acquire any
interest in, any Assets, Contracts, Permits or Communications Licenses that are
listed on Schedule 2.3 (the "Excluded Assets").
2.4 PURCHASE PRICE
(a) (i) On or before fifteen (15) days
before the First Stage Closing Date, Sellers shall deliver to Buyers a statement
(the "Preliminary Working Capital Statement"), setting forth the Working Capital
as of the close of business on the last day of the immediately preceding month.
The Preliminary Working Capital Statement shall be prepared by the Sellers in
accordance with the terms of this Agreement.
(ii) During the ten (10) day period
following Buyers' receipt of the Preliminary Working Capital Statement,
Sellers shall provide access to the Business Records and Business
Employees and provide Buyers' independent accountants with such access,
upon reasonable prior notice and during normal business hours, to the
work papers of Sellers as is reasonably necessary to verify the
calculation of the Working Capital. The Preliminary Working Capital
Statement shall be final and shall be accepted by and be binding on the
parties on the tenth (10th) day following delivery thereof unless
Buyers give written notice to Sellers of its disagreement with the
Preliminary Working Capital Statement (such notice, a "Preliminary
Disagreement Notice") prior to such date. Any Preliminary Disagreement
Notice shall specify in reasonable detail the nature of any
disagreement so asserted. If a Preliminary Disagreement Notice is
received by Sellers on or prior to such date, then the Preliminary
Working Capital Statement (as revised in accordance with clause (iii)
below) shall become final and binding upon each Seller and each Buyer
on the date Sellers and Buyers resolve in writing any differences they
have with respect to the matters specified in such Preliminary
Disagreement Notice.
(iii) During the two (2) day period
following delivery of a Preliminary Disagreement Notice, Sellers and
Buyers shall seek in good faith to resolve in writing any differences
which they may have with respect to the matters set forth in such
Preliminary Disagreement Notice. If any disagreement included in the
Preliminary Disagreement Notice is not resolved in writing within such
two (2) day period, the amount of the Working Capital shall be equal to
the amount that was not the subject of the Preliminary Disagreement
Notice plus any additional amount that Sellers and Buyers
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have mutually agreed upon (as set forth in the Preliminary Working
Capital Statement and adjusted, if necessary pursuant to this Section
2.4(a), the "Preliminary Working Capital").
(b) In consideration of the sale, transfer,
assignment, conveyance and delivery by Sellers of the Business and the Acquired
Assets, Buyers shall (i) (A) pay Ninety-Two Million Four Hundred Forty Thousand
U.S. Dollars ($92,440,000) in cash to Sellers at the First Stage Closing Date
which amount shall be either (1) increased by an amount, if any, by which the
Preliminary Working Capital is greater than $0 or (2) reduced by an amount, if
any, by which Preliminary Working Capital is less than $0 (the amount in the
preceding clause (1) or clause (2), whichever is applicable, the "Preliminary
Adjustment Amount"), (B) place the Escrow Amount (Second Stage Closing) in an
interest bearing escrow account in which it will be held pursuant to the terms
of the Escrow Agreement (Second Stage Closing) to support Buyers' obligation to
pay the amount Buyers' are obligated to pay at the Second Stage Closing, (C)
place the Escrow Amount (Working Capital/Indemnity) in an interest bearing
escrow account in which it will be held pursuant to the terms of the Escrow
Agreement (Working Capital/Indemnity) to support Sellers' obligations to pay any
amount required to be paid by Sellers under Section 2.4(g) regarding the
difference between Closing Working Capital and Preliminary Working Capital and
Sellers' indemnification obligations in accordance with Article 8, (D) place the
Escrow Amount (Cranberry Adjustment) in an interest bearing account in which it
will be held pursuant to the terms of the Escrow Agreement (Cranberry
Adjustment) to support Sellers' obligation to pay amounts, if any, required to
be paid by Sellers under Section 2.4(g) regarding the Cranberry Plan Adjustment
Amount, and (E) place the Escrow Amount (Closing Adjustment Receivables) in an
interest bearing account in which it will be held pursuant to the terms of the
Escrow Agreement (Closing Adjustment Receivables) to support Sellers' obligation
to pay amounts, if any, required to be paid by Sellers under Section 2.4(h) and
(ii) assume the First Stage Assumed Liabilities. The amount in Section
2.4(b)(i)(A), as adjusted by the Preliminary Adjustment Amount plus the Escrow
Amount (Working Capital/Indemnity), the Escrow Amount (Cranberry Adjustment) and
the Escrow Amount (Closing Adjustment Receivables) (the three such escrow
amounts in the preceding clauses (C), (D) and (E) referred to herein
collectively as the "Total Escrow Amount") constitutes the "Initial Purchase
Price".
(c) All payments of the Purchase Price, except
for the Total Escrow Amount, shall be made by wire transfer in immediately
available funds to an account designated by Sellers in written instructions to
be delivered to Buyers on or prior to the payment date.
(d) Within thirty (30) days after the First
Stage Closing Date, Sellers shall deliver to Buyers a statement (the "Closing
Working Capital Statement"), setting forth the Working Capital as of the close
of business on the First Stage Closing Date (the "Closing Working Capital") and
a Cranberry Plan Adjustment Statement (the "Cranberry Plan Adjustment
Statement") setting forth the Cranberry Plan Adjustment Amount. The Closing
Working Capital Statement and the Cranberry Plan Adjustment Statement shall be
referred collectively to as the "Adjustment Statements". The Adjustment
Statements shall be prepared by the Sellers, and the Sellers' independent
accountants shall provide an attestation thereof, in accordance with the terms
of this Agreement. The Cranberry Plan Adjustment Statement shall apply the
principles
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and will be calculated consistently with the model Cranberry Plan Adjustment
Statements attached as Annex I to Exhibit A hereto.
(e) During the thirty (30) day period following
Buyers' receipt of the Adjustment Statements, Sellers shall provide access to
the Business Records and Business Employees and shall cause Sellers' independent
accountants to provide Buyers' independent accountants with such access, upon
reasonable prior notice and during normal business hours, to the work papers of
Sellers' independent accountants as is reasonably necessary to verify the
calculation of the Closing Working Capital and the Cranberry Plan Adjustment
Amount. The Adjustment Statements shall be final and shall be accepted by and be
binding on the parties on the thirtieth (30th) day following delivery thereof
unless Buyers give written notice to Sellers of their disagreement with the
Adjustment Statements (such notice, a "Closing Disagreement Notice") prior to
such date. Any Closing Disagreement Notice shall specify in reasonable detail
the nature of any disagreement so asserted. If a Closing Disagreement Notice is
received by Sellers on or prior to such date, then the Adjustment Statements (as
revised in accordance with Section 2.4(f)) shall become final and binding upon
each Seller and each Buyer, on the earlier of (1) the date Sellers and Buyers
resolve in writing any differences they have with respect to the matters
specified in such Closing Disagreement Notice and (2) the date that a nationally
or regionally recognized independent accounting firm mutually agreed upon by
Sellers and Buyers (the "Accounting Firm") delivers to the Sellers and Buyers
its written determination of all disputed matters submitted to it pursuant to
Section 2.4(f) (the "Accounting Firm Determination").
(f) During the thirty (30) day period following
delivery of a Closing Disagreement Notice, Sellers and Buyers shall seek in good
faith to resolve in writing any differences which they may have with respect to
the matters set forth in such Closing Disagreement Notice. If any disagreement
included in the Closing Disagreement Notice is not resolved in writing within
such thirty (30) day period, Sellers and Buyers shall submit to the Accounting
Firm for review and determination of any and all matters which remain in
dispute. The scope of the Accounting Firm's review shall be limited to only
those matters which have not been resolved in writing within such thirty (30)
day period. Sellers and Buyers shall use all reasonable efforts to cause the
Accounting Firm to deliver the Accounting Firm Determination within thirty (30)
days of the receipt of such submission. Sellers and Buyers agree that the
Accounting Firm Determination shall be final and binding on the parties and that
judgment may be entered upon the Accounting Firm Determination in any court
having jurisdiction over the party against which such Determination is to be
enforced. The Accounting Firm Determination shall be accompanied by a
certificate of the Accounting Firm that it reached the Accounting Firm
Determination in accordance with the provisions of this Section 2.4. The cost
incurred in connection with the Accounting Firm Determination (including the
fees and expenses of the Accounting Firm and of any enforcement of the
Accounting Firm Determination) pursuant to this Section 2.4 shall be borne by
Buyers and Sellers in inverse proportion as they may prevail on matters resolved
by the Accounting Firm, which proportionate allocation shall be calculated on an
aggregate basis based on the relative dollar values of the amounts in dispute
and shall be determined by the Accounting Firm at the time the Accounting Firm
Determination is rendered on the merits of the matter submitted.
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(g) The Initial Purchase Price shall be (i)
increased by the amount, if any, by which the Closing Working Capital, as
finally determined pursuant to this Section 2.4, exceeds the Preliminary Working
Capital, and (ii) decreased by (x) the amount of any Cranberry Plan Adjustment
Amount, as finally determined pursuant to this Section 2.4, and (y) the amount,
if any, by which the Closing Working Capital, as finally determined pursuant to
this Section 2.4, is less than the Preliminary Working Capital (the Initial
Purchase Price as so increased or decreased shall hereinafter be referred to as
the "Adjusted CWC Purchase Price"). Within five (5) Business Days after the
Closing Working Capital and the Cranberry Plan Adjustment Amount have been
finally determined in accordance with this Section 2.4, (I) if the Closing
Working Capital is in excess of the Preliminary Working Capital, Buyers shall
pay to Sellers an amount equal to such excess, together with interest thereon at
a rate per annum equal to the rate of interest from time to time publicly
announced by Citibank, N.A., in its New York office as its prime or base rate
(the "Prime Rate"), calculated on the basis of the actual number of days elapsed
over 365 from the date of delivery of the Closing Working Capital Statement
pursuant to Section 2.4(d) to the date of payment, (II) if the Closing Working
Capital is less than the Preliminary Working Capital, Buyers shall receive from
the Escrow Amount (Working Capital/Indemnity) pursuant to the Escrow Agreement
(Working Capital/Indemnity), and from Sellers to the extent such Escrow Amount
(Working Capital/Indemnity) is insufficient, an amount equal to such deficit,
together with interest thereon at the Prime Rate, calculated on the basis of the
actual number of days elapsed over 365 from the date of delivery of the Closing
Working Capital Statement pursuant to Section 2.4(d) to the date of payment and
(III) if there is a Cranberry Plan Adjustment Amount owing from Sellers to
Buyers, Buyers shall receive from the Escrow Amount (Cranberry Adjustment)
pursuant to the Escrow Agreement (Cranberry Adjustment) and, to the extent the
Escrow Amount (Cranberry Adjustment) is insufficient, at Buyers' election, from
Sellers or from any remaining Escrow Amount (Working Capital/Indemnity), an
amount equal to the Cranberry Plan Adjustment Amount, together with interest
thereon calculated as set forth in the preceding clause; and any remaining funds
in the Escrow Amount (Cranberry Adjustment) shall be returned to Sellers
pursuant to the terms of the Escrow Agreement (Cranberry Adjustment). Payments
in respect of this Section 2.4 shall be made by wire transfer in immediately
available funds to an account that is designated by the party entitled to
payment at least two (2) Business Days prior to the date of payment.
(h) (i) Within one-hundred twenty (120)
days after the First Stage Closing, Buyers shall provide to Sellers a statement
showing all of the Adjustment Receivables that were included in Current Assets
or Current Liabilities on the Closing Working Capital Statement (collectively,
the "Closing Adjustment Receivables"), and stating the amount of the Closing
Adjustment Receivables that have been collected by Buyers and by Sellers (and
remitted to and received by Buyers, or credits have been issued to Buyers) as of
ninety (90) days after the First Stage Closing Date (collectively, the
"Collected Closing Adjustment Receivables I"). Buyers shall collect the Closing
Adjustment Receivables in the ordinary course of business and according to the
past practices of the Business. Buyers shall deliver monthly financial
information detailing the collections (and any dispute credits issued) described
herein.
a. In the event the Closing
Adjustment Receivables are in excess of the Collected Closing Adjustment
Receivables I and such excess is less than the
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Escrow Amount (Closing Adjustment Receivables), Seller shall not at that time be
obligated to pay to Buyers the amount of such excess.
b. In the event there is an
excess of Closing Adjustment Receivables over the Collected Closing Adjustment
Receivables I and such excess is also in excess of the Escrow Amount (Closing
Adjustment Receivables), Sellers shall pay to Buyers an amount of the excess of
the Closing Adjustment Receivables over the Collected Closing Adjustment
Receivables I (up to the maximum amount of the Closing Adjustment Receivables
Pool), within five (5) Business Days. In the event Sellers do not make such
payment, Buyers shall be entitled to withdraw such payment from the Escrow
Amount (Closing Adjustment Receivables), and Sellers shall continue to be liable
for the amount, if any, of such required payment in excess of the Escrow Amount
(Closing Adjustment Receivables), as well as interest on the amount of the
Escrow Amount (Closing Adjustment Receivables) so withdrawn and any such excess
at the Prime Rate.
(ii) Within one-hundred eighty (180)
days after the First Stage Closing, Buyers shall provide to Sellers a statement
showing all of the Closing Adjustment Receivables, and stating the amount of the
Closing Adjustment Receivables that have been collected by Buyers and by Sellers
(and remitted to and received by Buyers) as of one-hundred fifty (150) days
after the First Stage Closing Date (collectively, the "Collected Closing
Adjustment Receivables II"). In the event the Closing Adjustment Receivables are
in excess of the Collected Closing Adjustment Receivables II, Sellers and Buyers
shall effect a true-up that results in the receipt by Buyers, in the aggregate,
pursuant to Section 2.4(h)(i) and (ii) of an amount equal to such excess (up to
the maximum amount of the Closing Adjustment Receivables Pool) plus any interest
payable by Sellers ````under Section 2.4(h)(i)(b), (x) with any additional
amount that is to be paid by Sellers to Buyers to come first from the Escrow
Amount (Closing Adjustment Receivables) and, to the extent the Escrow Amount
(Closing Adjustment Receivables) is insufficient, then from the Sellers, in each
case within five (5) Business Days and (y) any repayment to be made by Buyers to
Sellers to be within five (5) Business Days (it being understood and agreed that
any such repayment shall not exceed the payment received by Buyers under Section
2.4(h)(i)(b)).
(iii) Illustrations of the operation at
this Section 2.4(h) are shown in Schedule 2.4(h)(iii).
(i) The term "Working Capital"
shall mean Current Assets minus Current Liabilities. The term "Current Assets"
means, with respect to the Business, Receivables less reserves and allowances
for Receivables determined in accordance with Generally Accepted Accounting
Principles as consistently applied with historical methods, inventory, materials
and supplies and prepaid expenses which accrue or will accrue to the benefit of
Buyers, vendor and real estate deposits and costs incurred and not billed
related to reimbursable projects for Governmental Bodies, and the term "Current
Liabilities" means accounts payable-trade, accrued cost of service, accrued
liabilities, short and long term capital lease liabilities, advance billings and
customer deposits, accrued vacation liability as required in Section 5.4(f) and
minority interest, in each case with respect to the Business and calculated in
accordance with the principles applied in calculating the Working Capital for
the Business as of December 31, 2002, attached hereto as Schedule 2.4(i) and
with Generally Accepted Accounting Principles (except as otherwise provided on
Schedule 2.4(i)). Notwithstanding anything in this Agreement to the contrary,
Working Capital shall not include any Excluded Assets or Excluded Liabilities.
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(j) At the Second Stage Closing, the Escrow
Amount (Second Stage Closing) shall be released to Sellers pursuant to the
Escrow Agreement (Second Stage Closing) and the sum of the Adjusted CWC Purchase
Price and such Escrow Amount shall constitute the "Purchase Price".
2.5 ASSUMED LIABILITIES
(a) Upon the terms and subject to the conditions
in this Agreement, at and as of the First Stage Closing Date, Sellers shall
assign, and Buyers shall assume and agree to honor, pay and discharge when due,
all of the following liabilities and obligations of Sellers: (i) the obligations
under the First Stage Purchased Contracts, First Stage Purchased Permits and the
First Stage Transferred Communications Licenses, to the extent arising out of,
or resulting from, facts, events and circumstances occurring, or which accrue,
after the First Stage Closing Date (other than due to any failure to comply or
breach of any of Sellers or any of their Affiliates, whether before, on or after
the First Stage Closing Date); (ii) all liabilities reflected on the balance
sheet of the Business on the First Stage Closing Date that are included as
Current Liabilities in the calculation of Working Capital; provided that to the
extent Sellers fail to make any payment provided for in Section 2.4(g)(II) the
amount equal to the amount of any such deficiency shall not be assumed by Buyers
as an Assumed Liability; (iii) all Circuit Commitments to the extent arising out
of, or resulting from, facts, events and circumstances occurring, or which
accrue, after the First Stage Closing Date (other than due to any failure to
comply or breach of any of Sellers or any of their Affiliates, whether before,
on or after the First Stage Closing Date); and (iv) those liabilities and
obligations listed on Schedule 2.5(a), in each case except any Excluded
Liabilities (collectively, the "First Stage Assumed Liabilities"); provided,
that with respect to First Stage Purchased Contracts, First Stage Purchased
Permits and First Stage Transferred Communications Licenses that are conveyed
pursuant to the last sentence of Section 2.2(a), such items will constitute
First Stage Assumed Liabilities as of the applicable conveyance date(s).
(b) Upon the terms and subject to the conditions
in this Agreement, at and as of (a) the Second Stage Closing Date, Sellers shall
assign, and Buyers shall assume and agree to honor, pay and discharge when due,
all of the following liabilities and obligations of Sellers: the obligations
under the Second Stage Purchased Contracts, Second Stage Purchased Permits and
the Second Stage Transferred Communications Licenses, to the extent arising out
of, or resulting from, facts, events and circumstances occurring, or which
accrue, after the Second Stage Closing Date (other than due to any failure to
comply or breach of any of Sellers or any of their Affiliates, whether before,
on or after the Second Stage Closing Date), in each case except any Excluded
Liabilities (collectively, the "Second Stage Assumed Liabilities" and,
collectively with the First Stage Assumed Liabilities, the "Assumed
Liabilities").
(c) The Assumed Liabilities shall not include
any liabilities or obligations of Sellers which are not described in Sections
2.5(a) and (b), including without limitation those liabilities and obligations
that are listed on Schedule 2.5(c) (the "Excluded Liabilities"), it being
understood that the Second Stage Assumed Liabilities shall constitute Excluded
Liabilities until the occurrence of the Second Stage Closing.
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2.6 NO OFFSET
Except for the determinations of Purchase Price set forth in Section
2.4, Buyers' and Sellers' obligations under Sections 2.4 and 2.5 shall not be
subject to offset or reduction for any reason, including by reason of any actual
or alleged breach of any representation, warranty or covenant contained in this
Agreement or any of the Collateral Agreements or any right or alleged right to
indemnification hereunder or thereunder.
2.7 FURTHER ASSURANCES; FURTHER CONVEYANCES AND
ASSUMPTIONS; CONSENT OF THIRD PARTIES
(a) Subject to the specific terms and conditions
hereof, Sellers and Buyers agree to use reasonable best efforts to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated hereby. Sellers will from time to time subsequent to
the applicable Staged Closing Date, at Buyers' request and assistance as
necessary, execute and deliver such other instruments of conveyance, assignment
and transfer and take such other actions as Buyers may reasonably request in
order more effectively to convey, assign, transfer to and vest in Buyers the
Acquired Assets, subject to any restrictions under applicable Law. Buyers and
Sellers will work together from the date of this Agreement to and following the
applicable Staged Closing Date to transfer electronic data and records and
accounting and personnel information related to the Business and similar
information that are being transferred in connection with the Business and the
Acquired Assets. Buyers will from time to time subsequent to the applicable
Staged Closing Dates, at Sellers' request, execute and deliver such other
instruments of conveyance, assignment and transfer and take such other actions
as Sellers may reasonably request in order more effectively to accomplish the
assumption of the related Assumed Liabilities.
(b) Anything in this Agreement or the Collateral
Agreements to the contrary notwithstanding, neither this Agreement nor the
Collateral Agreements shall constitute an attempt or agreement to sell, assign,
sublease, sublicense or assume any Acquired Asset, including without limitation,
any Contract, Permit or Communications License or Business Record or any claim
or right or any benefit or obligation thereunder or resulting therefrom, if a
sale, assignment, sublease, sublicense or assumption thereof would violate any
Law or Order or, without the Consent of a Third Party thereto or a Governmental
Body, would constitute a breach or violation of such Acquired Asset and if such
a Consent is not obtained at or prior to the applicable Staged Closing Date.
(Notwithstanding the prior sentence, Sellers' representations and warranties,
covenants and agreements regarding Acquired Assets shall include any Assets
(other than Excluded Assets), Contracts or Permits or Communications Licenses
that would constitute Acquired Assets but for the fact that a Consent is
required to sell, assign, sublease, sublicense, or assume such Assets, Contracts
or Permits or Communications Licenses.) Sellers shall use reasonable best
efforts, and Buyers shall reasonably cooperate with Sellers, to obtain such
prior Consents and to resolve the impediments to the sale, assignment, sublease,
sublicense or assumption required by this Agreement or the Collateral
Agreements; provided, that Sellers shall not be required to pay any fees or make
any other concessions to any Person in order to obtain any Consents other than
those listed on Schedule 3.3(b) in response to Sections 3.3(b)(ii) and (iii). In
the event any such Consents are not obtained on or prior to the applicable
Staged Closing Date, Sellers shall continue to use reasonable best efforts to
obtain any such Consents
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after the applicable Staged Closing Date, and Sellers shall reasonably cooperate
with Buyers (at Buyers' request) in any lawful and economically feasible
arrangement to provide that Buyer shall receive the interest of Sellers in the
benefits under any such Asset, Contract or Permit which require Consent to sell,
assign, sublease, sublicense, or assume such Asset, Contract or Permit,
including performance by Sellers, as agent, if economically feasible; provided,
that Buyers shall undertake to pay or satisfy the corresponding liabilities for
the enjoyment of such benefit to the extent Buyers would have been responsible
therefor hereunder if such Consent had been obtained; provided, further that
Sellers shall not be required to pay any fees or make any other concessions to
any Person in order to obtain any Consents other than those listed on Schedule
3.3(b) in response to Sections 3.3(b) (ii) and (iii). Upon the receipt of any
such Consent(s) after the applicable Staged Closing Date, the relevant Asset(s),
Contract(s) and/or Permit(s) and/or Communications License(s) shall constitute
Acquired Assets. During such time as the parties are attempting to obtain
Consents to assignment or assumption of any Contracts hereunder following the
applicable Staged Closing Date (including, any Contract that required a Consent
of a court for Sellers to perform services or receive compensation under the
Contract), if, and to the extent that, Buyers are unable to provide services
under any such Contract (including, by virtue of the fact that a court does not
provide its Consent to Sellers ceasing to perform services under the Contract or
otherwise), Sellers may, notwithstanding anything to the contrary herein,
continue to do so, if they so elect, and receive their customary fees and
expenses thereunder, or if Sellers are unable to do so for any reason (and
Buyers are not able for any reason to perform the work being performed by the
Seller), Sellers may terminate or withdraw from the Contract where necessary to
avoid material Losses (unless Buyers agree to indemnify, defend and hold
harmless Sellers under Section 8.2(c)).
2.8 DELIVERY OF GUARANTIES
Simultaneously with the execution and delivery of this Agreement, (i)
Buyers' Parent is executing and delivering a guaranty to Sellers, the form of
which is attached hereto as Exhibit B (the "Buyers' Parent Guaranty"), and (ii)
Sellers' Parent is executing and delivering to Buyers a guaranty, the form of
which is attached hereto as Exhibit C (the "Sellers' Parent Guaranty").
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and warrant to Buyers as
follows:
3.1 ORGANIZATION AND QUALIFICATION
Each Seller is a corporation, limited partnership or limited liability
company, as applicable, duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and has all requisite power
and authority to carry on the Business as currently conducted and to own, lease
or license and operate the Acquired Assets owned, leased or licensed by it as
currently operated. Sellers are licensed or qualified to do business and are in
good standing as foreign corporations in each jurisdiction set forth on Schedule
3.1. Except as set forth on Schedule 3.1, no Seller owns any capital stock or
other equity interest in any Person. Except as set forth on Schedule 3.1, all of
the capital stock of Sellers is held by BCI or other Sellers party hereto.
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3.2 AUTHORIZATION; BINDING EFFECT
(a) Each Seller has all requisite power and
authority to execute and deliver this Agreement and each Collateral Agreement to
which it will be a party and to effect the transactions contemplated hereby and
thereby. Except as set forth on Schedule 3.2, the execution, delivery and
performance by each Seller of this Agreement and each Collateral Agreement to
which it will be a party and the consummation by each Seller of the transactions
contemplated hereby and thereby have been duly and validly approved by each
Seller's board of directors and, to the extent required by applicable Law or
Contract, by any Affiliate of any Seller, and all stockholders or other
securityholders of each Seller (and each Affiliate of any Seller) entitled to
vote thereon, and no other actions or proceedings on the part of any Seller (or
any Affiliates of any Seller or any stockholder or other securityholder of any
Seller or any Affiliates of any Seller) are necessary to authorize the
execution, delivery and performance by each Seller of this Agreement or the
Collateral Agreements to which it will be a party or the transactions
contemplated hereby and thereby.
(b) Except as set forth on Schedule 3.2, this
Agreement has been, and each Collateral Agreement to which Sellers will be a
party will be, on or prior to First Stage Closing Date, duly and validly
executed and delivered by each Seller, as applicable. Assuming due execution by
Buyers, this Agreement is, and each Collateral Agreement to which Sellers will
be a party, when duly executed and delivered by each applicable Seller, will be,
valid and legally binding obligations of each applicable Seller, enforceable
against each applicable Seller in accordance with their respective terms, except
as such agreements may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws and equitable
principles relating to or affecting or qualifying the rights of creditors
generally and general principles of equity.
3.3 NON-CONTRAVENTION; CONSENTS
(a) Except as set forth on Schedule 3.3(b), the
execution and delivery of this Agreement by each Seller and the Collateral
Agreements by each Seller party thereto, and the consummation of the
transactions contemplated hereby and thereby, do not and will not: (i) conflict
with or result in a breach or violation of any provision of any organizational
document of Sellers' Parent or any Seller, provided that the approvals of the
shareholders of Sellers' Parent and of the Sellers are required to effect the
name changes contemplated in Section 5.17(a); (ii) violate or result in a breach
of or constitute an occurrence of default under any provision of, result in the
acceleration or cancellation of any obligation under, or give rise to a right by
any party to terminate or amend its obligations under, any Contract to which any
Seller is a party or is otherwise bound, except in each case for Contracts that
are not material to the conduct of the Business and having an annual value or
involving annual consideration that is less than $100,000 individually or
$1,000,000 in the aggregate, or that would not materially impair, delay or
prevent the consummation by any of the Sellers of the transactions contemplated
by this Agreement or any of the Collateral Agreements; (iii) or result in the
creation of any Encumbrance upon any of the Acquired Assets (other than a
Permitted Encumbrance), or permit the acceleration of the maturity of any
indebtedness of Sellers or indebtedness secured by any of the Acquired Assets,
having a value in excess of $100,000 individually or $1,000,000 in the
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aggregate; or (iv) violate in any material respect any Law or Order of any
Governmental Body (including any State PUC) having jurisdiction over any Seller
or the Acquired Assets.
(b) No Consent (including a waiver of any right
of first refusal or first offer) of, filing or registration with, or cooperation
from, any Governmental Body or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by Sellers
of this Agreement or the Collateral Agreements to which Sellers will be a party
or the consummation by Sellers of the transactions contemplated hereby or
thereby, except for (i) any filings required to be made under the HSR Act, (ii)
filings with the FCC under the Communications Act of 1934, as amended (the
"Communications Act"), and filings with State PUCs as required by applicable
Law, as set forth in Schedule 3.3(b), and (iii) Consents of Third Parties
required to transfer or assign to Buyers the Acquired Assets, or assign the
benefits of or delegate performance with regard thereto, in each case as set
forth in Schedule 3.3(b), except in each case for Purchased Contracts (other
than Customer Contracts) and Permits or other Acquired Assets that are not
material to the conduct of the Business and have a value or involving
consideration having an annual value or involving annual consideration of less
than $200,000 individually and $1,000,000 in the aggregate and Customer
Contracts that are not material to the conduct of the Business and have a value
or involving consideration having an annual value of less than $500,000 (the
"Sellers' Consents").
3.4 TITLE TO PURCHASED ASSETS; SUFFICIENCY OF ASSETS
(a) Sellers have, and at the applicable Staged
Closing Date will have, good and valid title to, or a valid and binding
leasehold interest, right, or license in, the Acquired Assets, free and clear of
any Encumbrance (except for Permitted Encumbrances, excluding on the applicable
Staged Closing Date, those contemplated by Section 7.2(f) to be removed). Except
as set forth on Schedule 3.4(a), Sellers have the full right to sell, convey,
transfer, assign and deliver the Acquired Assets to Buyers, and, at and as of
the applicable Staged Closing Date, Sellers will sell, convey, transfer, assign
and deliver the Acquired Assets to Buyers by instruments of sale, conveyance,
transfer and assignment effective to vest in Buyers, and Buyers shall have, good
and valid title to, or a valid and binding leasehold interest, right, or license
in, all of the Acquired Assets, free and clear of all Encumbrances (except for
Permitted Encumbrances, excluding on the applicable Staged Closing Date, those
contemplated by Section 7.2(f)).
(b) Except as set forth on Schedule 3.4(b), all
of the tangible Purchased Assets, whether real or personal, owned or leased,
have been well maintained and are in good operating condition and repair (with
the exception of normal wear and tear) in all material respects.
(c) Except as set forth on Schedule 3.4(c) or
with respect to other items which are not material to the conduct of the
Business or which have a value of less than $100,000, the Acquired Assets
constitute all of the Assets, Contracts, Permits and Communications Licenses (in
each case, except for the Excluded Assets) that are currently used in the
conduct of the Business (including the operation of the Network).
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3.5 LICENSES AND PERMITS
(a) Sellers have obtained all necessary
registrations, certifications and other regulatory authorizations from the
appropriate state and local Governmental Bodies (collectively, the "State
Licenses"), including State PUCs, and hold all licenses, permits, certificates,
franchises, registrations and other authorizations issued by the Federal
Communications Commission (collectively, the "FCC Licenses"), that are required
for the conduct of the Business as currently conducted, and for the holding of
the Acquired Assets, except where the failure to hold such State Licenses or FCC
Licenses (collectively, the "Communications Licenses") would not reasonably be
expected to result in a Material Adverse Effect. All of the Communications
Licenses are set forth in Schedule 3.5(a) hereto.
(b) Other than Communications Licenses that are
immaterial, each of the Communications Licenses was duly issued (to Sellers'
Knowledge) and is valid and in full force and effect and each of the
Communications Licenses has not been modified, canceled, revoked, or conditioned
in any adverse manner other than in a manner that is immaterial.
(c) Each holder of a Communications License is
set forth in Schedule 3.5(c) and has operated in all material respects in
compliance with all terms thereof. Each holder of a Communications License is in
all material respects in compliance with, and its businesses have operated in
all material respects in compliance with, the Communications Act, as applicable,
and with any other applicable Laws and Orders, and has filed all registrations
and reports and paid all required fees, including any renewal applications,
required by the Communications Act and any applicable Laws and Orders. Except as
would not reasonably be expected to result in a Material Adverse Effect, (i)
there is no pending or, to Sellers' Knowledge, threatened Action by or before
the FCC or any State PUC to revoke, cancel, suspend, modify or refuse to renew
any of the Communications Licenses, and (ii) except as set forth in Schedule
3.5(c), there is not now any issued, outstanding or, to Sellers' Knowledge,
threatened notice by the FCC or any State PUC of any violation or complaint
against Sellers with respect to the operation of their respective businesses.
(d) Except as set forth in Schedule 3.5(d) or as
would not reasonably be expected to result in a Material Adverse Effect, no
event has occurred that permits the revocation or termination of any of the
Communications Licenses or the imposition of any restriction thereon.
(e) Sellers hold (i) all valid and effective
Permits, leases, Communications Licenses, Easements, rights of way, licenses and
other Consents, whether issued by a Governmental Body or otherwise, necessary to
retain in place, operate and use the Owned Portion as currently conducted, (ii)
all valid and effective IRUs and other agreements, or any other Consents
necessary to retain in place, operate and use the IRU Portion as currently
conducted, and (iii) all material Permits that are required for them to own,
lease or operate their Assets and to carry on the Business as currently
conducted, except as set forth on Schedule 3.5(e). Sellers are in compliance in
all material respects with each Permit identified on Schedule 3.5(e), and no
Action is pending or, to Sellers' Knowledge, threatened to revoke or limit any
such Permit. Except as set forth on Schedule 3.5(e), Sellers have received no
notice of and have no Knowledge of any event or circumstance that could
reasonably be expected to cause a
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material impairment of their rights to retain, operate and/or use the Owned
Portion or the IRU Portion.
3.6 COMPLIANCE WITH LAWS; LITIGATION
(a) Except as set forth on Schedule 3.6(a) and
except as would not materially impair, delay or prevent the consummation by any
of the Sellers of the transactions contemplated hereby, Sellers are in material
compliance with all Laws and Orders applicable to the Business or the Acquired
Assets.
(b) Except as set forth on Schedule 3.6(b), no
Order that names a Seller and is related to the Business or the Acquired Assets
is in effect and that imposes a material obligation on the ongoing conduct of
the Business (including the operation of the Network). Except as set forth on
Schedule 3.6(b), Sellers have not entered into any agreement to settle or
compromise any Action pending or threatened against them which has involved any
obligation other than the payment of money or for which Sellers have any
continuing obligation. Except for individual Actions having an amount in
controversy, and which could not reasonably result in a Loss of, greater than
$200,000, and except as set forth on Schedule 3.6(b), there are no Actions
pending (to Sellers' Knowledge with respect to investigations of Governmental
Bodies) or, to Sellers' Knowledge, threatened, against or affecting Sellers or
any of their officers, directors, employees, agents or stockholders in their
capacity as such, in each case with respect to the Business or the Acquired
Assets, and to Sellers' Knowledge, there are no facts or circumstances which may
give rise to any of the foregoing.
(c) There are no Actions pending (to Sellers'
Knowledge with respect to investigations of Government Bodies) or, to Sellers'
Knowledge, threatened by or against Sellers with respect to this Agreement or
any of the Collateral Agreements, or in connection with the transactions
contemplated hereby or thereby, and Sellers have no reason to believe there is a
valid basis for any such Action.
3.7 BUSINESS EMPLOYEES; EMPLOYEE BENEFITS
(a) Schedule 3.7(a) contains a list of the
position held and aggregate annual compensation for Sellers' last fiscal year
and date of hire with respect to each Business Employee (which list shall be
updated as of the First Stage Closing Date and no update is deemed to be an
inaccuracy if in compliance with Section 5.2).
(b) Schedule 3.7(b) contains a list of all
Benefit Plans (which list shall be updated as of the First Stage Closing Date
and no update is deemed to be an inaccuracy if in compliance with Section 5.2).
With respect to each of the Benefit Plans identified on Schedule 3.7(b), Sellers
have made available to the Buyers true and complete copies of all plan documents
and benefit schedules, or if none exist, a summary of the material terms
thereof.
(c) Each Benefit Plan has been administered in
accordance with its terms, except for any failures so to administer any Benefit
Plan that would not individually or in the aggregate have a Material Adverse
Effect with respect to the Business. Sellers and all Benefit Plans are in
[material] compliance with the applicable provisions of ERISA, the Code
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and all other applicable Laws and Orders and the terms of all applicable
collective bargaining agreements, except for any failures to be in such
compliance that would not individually or in the aggregate have a Material
Adverse Effect with respect to the Business.
(d) Except as set forth on Schedule 3.7(d), no
Seller sponsors, maintains or contributes to any Benefit Plan that is subject to
Title IV of ERISA and no Benefit Plan is a multiemployer plan (within the
meaning of Section 3(37) of ERISA). No Benefit Plan which is subject to Title IV
of ERISA has been terminated and all contributions to any such plan which are
due have been paid.
(e) Sellers are in [material] compliance with
all Federal, state, local and foreign requirements regarding employment, except
for any failures to comply that would not individually or in the aggregate have
a Material Adverse Effect with respect to the Business. No Seller is a party to
any collective bargaining or other labor union contract applicable to persons
employed by any Seller in the United States and as of the date of this Agreement
no such collective bargaining agreement is being negotiated by any Seller. There
is no (i) strike against or otherwise affecting any Seller pending, or to
Seller's Knowledge, threatened; or (ii) work stoppage or other labor dispute
against or otherwise affecting any Seller pending or, to Sellers' Knowledge,
threatened, which may materially interfere with the respective business
activities of any Seller with respect to the Business. To Sellers' Knowledge,
within the last three (3) years, no Seller or any of their respective
representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of Sellers, and there
is no action, charge or complaint against any Seller by the National Labor
Relations Board or any comparable Governmental Body pending or, to Sellers'
Knowledge, threatened in writing.
(f) (i) No employee of any Seller will be
entitled to any additional benefits or any acceleration of the time of payment
or vesting of any benefits under any Benefit Plan or otherwise (other than
acceleration of vesting of options in accordance with their terms) as a result
of the transactions contemplated by this Agreement, (ii) no amount payable, or
economic benefit provided, by any Seller (including any acceleration of the time
of payment or vesting of any benefit (other than acceleration of vesting of
options in accordance with their terms)) could be considered an "excess
parachute payment" under Section 280G of the Code and (iii) no person is
entitled to receive any additional payment from any Seller or any other person
in the event that the excise tax of Section 4999 of the Code is imposed on such
person, in each case except where such additional benefits or payments or
acceleration (other than acceleration of vesting of options in accordance with
their terms), would not individually or in the aggregate have a Material Adverse
Effect with respect to the Business.
(g) Except as set forth in Schedule 3.7(g), no
Seller has implemented any plant closing or layoff of employees that could
implicate the Worker Adjustment Retraining and Notification Act of 1988, as
amended ("WARN"), or any similar state or local Law, within the last 90 days.
3.8 CONTRACTS
Schedule 3.8 contains a complete and accurate list of all Contracts to
which one or more of the Sellers are a party and that are related to the
Business as follows (which list shall be
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updated as of the First Stage Closing Date and the Second Stage Closing Date and
no such update is deemed to be an inaccuracy if in compliance with Section 5.2).
(a) any Employment Agreement or other Contract
of any kind with any stockholder, director, officer or employee of any Seller or
any of its Affiliates;
(b) any Customer Contracts, except for (i)
Customer Contracts that generate aggregate annual revenues of $500,000 or less,
or (ii) Customer Contracts entered into on or after November 30, 2002;
(c) any Contract with any Person for the
purchase or delivery of goods, or performance of services, to Sellers, including
goods or services used to provide services, or to be resold, to Sellers'
customers, in each case other than Contracts entered into in the ordinary course
of business or having a value or annual consideration less than $100,000 or that
has a term, or requires the performance of any obligations by any Seller over a
period of less than one (1) year;
(d) any Contract which is material to the
conduct of the Business or that has a value in excess of $100,000 pursuant to
which any Seller grants or is granted any license or other rights to use any of
the Acquired Assets or any material rights of joint use with respect to any of
the Acquired Assets (other than any Real Property Lease or IP License or IPR
License);
(e) any Contract with a sales representative,
sales agency, advertising agency or other Person engaged in sales or promotional
activities, or any Contract to act as one of the foregoing on behalf of any
Person in which the expected annual payment to such Person is in excess of
$100,000;
(f) any Contract pursuant to which any Seller
has made or will make loans or advances, or has or will have incurred debts or
become a guarantor or surety or pledged its credit on or otherwise become
responsible with respect to any undertaking of another Person (except for the
negotiation or collection of negotiable instruments in transactions in the
ordinary course of business), individually in excess of $25,000 or in the
aggregate in excess of $100,000;
(g) any indenture, credit agreement, loan
agreement, note, mortgage, security agreement, lease of real property or
personal property, loan commitment or other Contract relating to the borrowing
of funds, an extension of credit or financing, individually in excess of $25,000
and in the aggregate in excess of $100,000;
(h) any Contract having a value or containing
payment or other obligations in excess of $25,000 involving a partnership, joint
venture or other cooperative undertaking;
(i) any Contract involving any material
restrictions with respect to the geographical area of operations or scope or
type of business of any Seller, including the Business;
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(j) any power of attorney or agency Contract
with any Person pursuant to which such Person is granted the authority to act
for or on behalf of any Seller, or any Seller is granted the authority to act
for or on behalf of any Person;
(k) any Contract, whether or not fully
performed, relating to any acquisition or disposition of any stock of, or any
material portion of the assets of, any Seller, or any acquisition or disposition
of any subsidiary, division, line of business or real property of any Seller,
except as such Contract relates to any Excluded Asset or Excluded Liability; and
(l) any Contract having a value individually in
excess of $100,000 or in the aggregate in excess of $300,000, not made in the
ordinary course of business and consistent with past practice and that is to be
performed in whole or in part at or after the date hereof.
Sellers have provided Buyers with access to (i) true, accurate and
complete copies of each of the Contracts and the other documents set forth on
Schedule 3.8, as amended or modified and (ii) a written description of each oral
arrangement so listed on Schedule 3.8.
Each and all of (i) the Customer Contracts and (ii) the other Contracts
which, individually or in the aggregate, are material to the Business are valid
and binding on the applicable Seller and, to such Seller's Knowledge, on the
other parties thereto in accordance with its terms and is in full force and
effect. Except as set forth on Schedule 3.8(m), no Seller has received any
written notice that it is in default or breach of and is otherwise delinquent in
performance in any material respect under any Contract, and, to Sellers'
Knowledge, each of the other parties thereto has performed in all material
respects all obligations required to be performed by it and is not in default in
any material respect thereunder.
Except as set forth on Schedule 3.8(n), since December 31, 2002, no
$500K Customer has terminated or informed a Seller that it intends to terminate,
renegotiate or let expire, or materially reduce the amount of goods and/or
services received under, such Customer Contract(s) and, to Sellers' Knowledge,
there are no material disputes with any $500K Customers.
3.9 FINANCIAL STATEMENTS; ABSENCE OF CHANGES
(a) Schedule 3.9(a)(i) contains correct and
complete copies of the audited consolidated statements of BCI of (1) Assets and
Liabilities, (2) Income Statement and (3) Cash Flows (the "Statements"), in each
case for the fiscal year ended December 31, 2001 and the unaudited Statements
for the nine-months ended September 30, 2002 (collectively, the "Financial
Statements"). Also attached as Schedule 3.9(a)(i) is a correct and complete copy
of the unaudited consolidated balance sheet and profit and loss statement of BCI
and the Sellers for each of October 2002, November 2002, December 2002 and
January 2003 (collectively, the "Monthly Statements"). The Financial Statements
and the Monthly Statements include information with respect to and reflect the
financial condition and results of operation of the Retained Business which are
not being transferred hereby, and as to which Sellers makes no representation or
warranty of any kind. The Financial Statements and Monthly Statements were
prepared in conformity with Generally Accepted Accounting Principles, except as
set forth on
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Schedule 3.9(a)(ii) and subject, in the case of the unaudited Statements for the
nine-months ended September 30, 2002 and the Monthly Statements, to year-end
adjustments consistent with past practice.
(b) Except as set forth therein or on Schedule
3.9(b) with respect to the Business, the Financial Statements and Monthly
Statements present fairly the consolidated financial condition and results of
operations of BCI and its subsidiaries as of and for the periods then ended.
(c) Schedule 3.9(c) is an accurate and complete
aging schedule of all Receivables as of November 30, 2002. Except as set forth
on Schedule 3.9 (c), (i) each Receivable represents a sale made in the ordinary
course of business which arose pursuant to an enforceable written Contract for a
bona fide sale of goods or for services performed, and (ii) the applicable
Seller has performed all of its obligations to produce the goods or perform the
services to which such Receivable relates.
(d) Except as set forth in the balance sheets
included in the Financial Statements or the balance sheets in the Monthly
Statements or on Schedule 3.9(d), there are no liabilities, debts, claims or
obligations, whether accrued, absolute, contingent or otherwise, whether due or
to become due that are required to be included in such Financial Statements in
accordance with Generally Accepted Accounting Principles or which are
contemplated by this Agreement to constitute Assumed Liabilities.
(e) Since December 31, 2002, Sellers have
conducted and operated the Business in the ordinary course consistent with past
practice, and except as set forth in Schedule 3.9(e):
(i) there has been no material
destruction, damage or other loss to any material Purchased Assets;
(ii) other than in the ordinary course
of business, there has been no sale, lease, or other disposition of any
Acquired Asset, except for any such transaction less than $100,000
individually in value or $250,000 in value in the aggregate for all
such transactions;
(iii) Except in compliance with Section
5.15, other than in the ordinary course of business consistent with
past practice, there has been no purchase, lease or other acquisition
of any properties or assets related to the Business or other capital
expenditures related to the Business or with respect to the Acquired
Assets other than any such transaction less than $100,000 individually
in value or $250,000 in the aggregate for all such transactions;
(iv) no Seller has entered into or
authorized any material Contract related to the Business or any
material amendment or modification to any such Contract, other than in
the ordinary course of business and consistent with past practice; and,
to Sellers' Knowledge, no parties to such Contracts (including any
Seller) having the
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right to do so have accelerated, terminated, made modifications to or
cancelled any such Contract.
(v) no Seller has suffered or permitted
the imposition of any material Encumbrance (other than Permitted
Encumbrances) upon any Acquired Asset;
(vi) no Seller has granted any license
or sublicense of any rights under or with respect to any IP or IPR
related to the Business other than in the ordinary course of business
and consistent with past practice;
(vii) no Seller has made any loan or
advance, individually in excess of $10,000 or in the aggregate in
excess of $25,000, or capital contribution to, or investment in, any
other Person;
(viii) no Seller has entered into any
transaction or arrangement of any kind with any director, officer or
employee of any Seller or any Affiliate of any Seller (other than
another Seller), except as set forth in Schedule 3.8 in response to
Section 3.8(a);
(ix) no Seller has granted any increase
in the base compensation of any of the Business Employees other than in
the ordinary course of business consistent with past practice;
(x) no Seller has made any other
material change to the employment terms for any of the Business
Employees terminated the employment of any material Business Employee
of any Seller or established or materially modified any Benefit Plan
other than as required by applicable Law or entered into an Employment
Agreement;
(xi) no change has occurred (or
circumstance involving a prospective change) which is reasonably likely
to have a Material Adverse Effect;
(xii) no Seller has waived, released or
canceled any claims against third parties or debts owing to it or any
rights which have a value in excess of $200,000 individually or
$1,000,000 in the aggregate;
(xiii) no Seller has made any changes in
its accounting systems, policies, principles or practices, other than
any changes required by applicable accounting standards or the
Securities and Exchange Commission rules and regulations;
(xiv) no Seller has made any borrowing,
incurred any debt (other than ordinary course borrowings under the
Credit Agreement and trade payables in the ordinary course of business
and consistent with past practice) or assumed, guaranteed, endorsed
(except for the negotiation or collection of negotiable instruments in
transactions in the ordinary course of business and consistent with
past practice and the guarantee of lease obligations by Broadwing
Communications Real Estate Services LLC) or otherwise become liable
(whether directly, contingently or otherwise) for the
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obligations of any other Person, or made any payment or repayment in
respect of any indebtedness (other than ordinary course borrowings
under the Credit Agreement and accrued expenses in the ordinary course
of business and consistent with past practice), in each case, in excess
of $50,000 individually or $200,000 in the aggregate;
(xv) no Seller has paid any amount,
performed any obligation or agreed to pay any amount or perform any
obligation, in settlement or compromise of any Action or other claims
of liability against any Seller, or any of its directors, officers,
employees or agents, in each case, in excess of $200,000 individually
or $500,000 in the aggregate; or
(xvi) no Seller has contractually
committed or agreed to any of the foregoing in the future.
3.10 INTELLECTUAL PROPERTY
(a) Sellers own or possess the right to use all
of the Seller IP and Seller IPR. Sellers have the right to convey by sale or by
license any such Seller IP and Seller IPR that is so conveyed.
(b) Sellers have not granted any license to any
Person to use any of the Seller IP or Seller IPR other than in the ordinary
course of business. Except as set forth on Schedule 3.10, (i) no Action is
pending or, to Sellers' Knowledge, threatened, against Sellers or any of their
Affiliates where any of the Seller IP or Seller IPR is the basis for the Action;
(ii) no Seller has received written notice that a Person has claimed and, to
Sellers' Knowledge no Person has alleged, any rights to the Seller IP or Seller
IPR; (iii) to Sellers' Knowledge, the conduct by Sellers of the Business, any
process, method, part, design, material or other Seller IP or Seller IPR it
employs, and the marketing and use by Sellers of such Business and Seller IP or
Seller IPR, in each case, does not infringe any IP or IPR of any other Person;
(iv) Sellers are not obligated to pay any recurring royalties to any Person with
respect to the use of any Seller IP or Seller IPR; and (v) to Sellers'
Knowledge, no other Person has interfered with, infringed upon, or
misappropriated, any Seller IP or Seller IPR.
(c) Upon the applicable Staged Closing Date,
Sellers will, subject to any third party rights therein, deliver to Buyers
complete and correct copies of the source code, object code and user and
technical documentation for all computer software included in the Seller IP and
Seller IPR.
3.11 REAL PROPERTY
(a) Schedule 3.11(a)(i), sets forth a true,
accurate and complete list of all of the parcels of land owned by any Seller and
used by such Seller in the conduct of the Business by street address, block and
lot or other appropriate description (the "Owned Real Property"). Schedule
3.11(a)(ii) sets forth (i) a true, accurate and complete list of all of the
leases of real property to which any Seller is a party and which provide for the
lease to or by any Seller of any real property and used by such Seller in the
conduct of the Business (all such real property leased to any Seller,
collectively, the "Leased Real Property") and (ii) the street
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addresses and current use of all of the Leased Real Property. Except as
otherwise disclosed on Schedule 3.11(a)(i), Sellers hold fee simple title to the
Owned Real Property, subject only to the Permitted Encumbrances. Except as
otherwise disclosed on Schedule 3.11(a)(ii), Sellers have a valid leasehold
interests in the Leased Real Property leased to or by Sellers pursuant to the
leases described on Schedule 3.11(a)(ii) (the "Real Property Leases"), subject
only to the Permitted Encumbrances. Except as otherwise disclosed on Schedule
3.9(a)(iii), Sellers hold good title to those licenses or Easements appurtenant
to the Leased Real Property or Owned Real Property necessary to conduct the
Business in all material respects as it is currently being conducted (the
Easements and the Leased Real Property and the Owned Real Property, collectively
the "Real Property"), subject only to Permitted Encumbrances.
(b) All of the Real Property Leases necessary to
conduct the Business in all material respects as it is currently conducted are
in full force and effect, and are valid and enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors' rights generally, by equitable
limitations on the availability of specific remedies and by principles of
equity.
(c) No Seller has received any notice of any,
and, to Seller's Knowledge, there exists no, dispute, claim, event of default or
event which constitutes or would constitute (with notice or lapse of time or
both) a default under any Real Property Lease or Easement, except in each case
that would not result in, or would not reasonably be expected to result in,
individually or in the aggregate, a liability or other obligation with respect
to the Business in an amount in excess of $100,000. All rent due and payable
with respect to the Real Property Leases have been paid through the date of this
Agreement and all rent due and payable with respect to the Real Property Leases
on or prior to the Staged Closing Dates will have been paid on or prior to the
Staged Closing Dates or the parties will otherwise reimburse the others so that
they have effectively prorated the rent.
3.12 TAXES
(a) None of the Purchased Assets is "tax exempt
use property" within the meaning of Section 168(h) of the Code; (b) no liens for
material Taxes have been filed and no material claims for Taxes have been
asserted in writing, with respect to the Acquired Assets, the Assumed
Liabilities or the Business, except for taxes that are being contested in good
faith by Sellers and their Affiliates; (c) Sellers have paid all material Taxes
required to be paid by it with respect to the Business, the Acquired Assets and
the Assumed Liabilities that could become liens against the Business or the
Acquired Assets or could otherwise affect the Buyer; and (d) all Taxes which are
required by Law or Order to be withheld or collected with respect to the
Business, including sales and use taxes, and amounts required to be withheld for
Taxes of employees, have been duly withheld or collected and, to the extent
required, have been paid over to the proper Governmental Bodies or are held in
separate bank accounts for such purpose.
3.13 BROKERS
No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission from Buyers in
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connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of any Seller or any of their respective
Affiliates.
3.14 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 3.14 or as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect:
(a) Each Seller is complying in all [material]
respects with all applicable Environmental Laws and Orders, which compliance
includes the possession and maintenance of all Environmental Permits that are
necessary for the operation of the Business.
(b) No Seller is a party to any Action nor, to
Sellers' Knowledge, is any Action threatened, against any Seller with respect to
the Business that relates to any Environmental Laws or Orders or any Hazardous
Substance.
(c) There are no Environmental Liabilities of
any Seller with respect to the Business, and, to Sellers' Knowledge, there are
no facts, conditions, situations or set of circumstances that could reasonably
be expected to result in or be the basis of any such Environmental Liability.
(d) This Section 3.14 contains the sole and
exclusive representations and warranties of the Sellers with respect to any
environmental matters.
3.15 NETWORK
The Network (i) is operational, (ii) has a minimum of 12 fibers in each
segment cross-section, with an average of 28 fibers or more, and (iii) covers
approximately 18,700 route miles of fiber-optic transmission facilities across
the contiguous United States, as set forth on Schedule 1.1(e), including
approximately 7,700 route miles built and owned by Sellers (the "Owned Portion")
and approximately 11,000 miles acquired through IRUs (the "IRU Portion").
3.16 OVERALL MATERIAL ADVERSE EFFECT
The preceding representations and warranties of Sellers in this Article
3 (with the deletion of any and all references to materiality or Material
Adverse Effect or any other materiality qualifiers as set forth therein) do not
result in any breach or inaccuracy in any and all such representations and
warranties, where such breach and/or inaccuracy would individually or in the
aggregate have, or be reasonably likely to have, a Material Adverse Effect on
the Business or the Buyers (taken as a whole).
3.17 NO OTHER REPRESENTATIONS
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE
3 OR IN THE COLLATERAL AGREEMENTS (TO THE EXTENT THAT THE SELLERS ARE PARTY
THERETO), SELLERS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WRITTEN OR ORAL, AND HEREBY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW
DISCLAIMS ANY SUCH
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REPRESENTATION OR WARRANTY (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY SELLERS, THEIR
AFFILIATES OR ANY OF THEIR OFFICERS, DIRECTORS, PARTNERS, MEMBERS, PRINCIPALS,
EMPLOYEES, AGENTS, MEMBERS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT
TO THE ACQUIRED ASSETS, ASSUMED LIABILITIES AND THE BUSINESS OR THE EXECUTION
AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
4. REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to Sellers that:
4.1 ORGANIZATION AND QUALIFICATION
Each Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, and each
Buyer has all requisite limited liability company power and authority to carry
on its business as currently conducted and to own or lease and operate its
properties.
4.2 AUTHORIZATION; BINDING EFFECT
(a) Each Buyer has all requisite limited
liability company power and authority to execute and deliver this Agreement and
the Collateral Agreements and to effect the transactions contemplated hereby and
thereby and has duly authorized the execution, delivery and performance of this
Agreement and the Collateral Agreements by all requisite limited liability
company action.
(b) This Agreement has been duly executed and
delivered by each Buyer and this Agreement is, and each of the Collateral
Agreements when duly executed and delivered by each Buyer will be, valid and
legally binding obligations of such Buyer enforceable against it in accordance
with its terms, except as such agreements may be subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws and equitable principles relating to or affecting or qualifying the rights
of creditors generally and general principles of equity.
4.3 NO VIOLATIONS
(a) The execution, delivery and performance of
this Agreement and the Collateral Agreements by Buyers and the consummation of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or result in a breach or violation of any provision of the limited
liability company agreement of any Buyer; (ii) violate or result in a breach of
or constitute an occurrence of default under any provision of, result in the
acceleration or cancellation of any obligation under, or give rise to a right by
any party to terminate or amend its obligations under, any mortgage, deed of
trust, conveyance to secure debt, note, loan, indenture, lien, lease, contract,
agreement, instrument, order, judgment, decree or other arrangement or
commitment to which any Buyer is a party or by which it or its assets or
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properties are bound, or result in the creation of any Encumbrance (other than a
Permitted Encumbrance) upon any of its assets or properties, which violation,
breach, default or Encumbrance would individually or in the aggregate be have a
Material Adverse Effect with respect to Buyers (taken as a whole); or (iii)
violate any Law or Order of any Governmental Body having jurisdiction over
Buyers or any of their properties, which violation would individually or in the
aggregate be material to Buyers or materially impair, delay or prevent the
consummation by Buyers of the transactions contemplated hereby.
(b) Except as set forth on Schedule 4.3(b), no
Consent of, registration, declaration or filing with, any Person (including any
Governmental Body) is required to be obtained by Buyers in connection with the
execution and delivery by Buyers of this Agreement and the Collateral Agreements
to which Buyers will be a party or the consummation by Buyers of the
transactions contemplated hereby or thereby that has not been obtained, other
than any filings required to be made under the HSR Act (such scheduled Consents
registrations, declarations and filings being referred to herein collectively as
the "Buyers' Consents"), and other such consents the failure to obtain which
would not materially impair, delay or prevent the consummation of the
transactions contemplated hereby.
4.4 LITIGATION
(a) Except as set forth on Schedule 4.4(a) and
except as would not materially impair, delay or prevent the consummation by any
of the Buyers of the transactions contemplated hereby, Buyers are in material
compliance with all Laws and Orders applicable to Buyers.
(b) Except for individual Actions having an
amount in controversy, and which could not reasonably result in a Loss of,
greater than $100,000, and except as set forth on Schedule 4.4(b), there are no
Actions pending (to Buyers' Knowledge with respect to investigations by
Governmental Bodies) or, to Buyers' Knowledge, threatened, against or affecting
Buyers or any of their officers, directors, employees, agents or stockholders in
their capacity as such, and to Buyers' Knowledge, there are no facts or
circumstances which may give rise to any of the foregoing.
(c) There are no Actions pending (to Buyers'
Knowledge with respect to investigations by Governmental Bodies) or, to Buyers'
Knowledge, threatened by or against Buyers with respect to this Agreement or any
of the Collateral Agreements, or in connection with the transactions
contemplated hereby or thereby, and Buyers have no reason to believe there is a
valid basis for any such Action.
4.5 NO ADDITIONAL REPRESENTATIONS OR WARRANTIES
Buyers acknowledge that no Seller nor any of their respective
Affiliates or any other Person acting on behalf of any Seller (a) has made any
representation or warranty, express or implied, including any implied
representation or warranty as to the condition, merchantability, suitability or
fitness for a particular purpose of any of the Acquired Assets, or (b) has made
any representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding Sellers, the Business or the Acquired
Assets, in each case except as
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expressly set forth in this Agreement or any Collateral Agreement or as and to
the extent required by this Agreement or any Collateral Agreement to be
disclosed on the Schedules hereto or thereto. Buyer further agrees that no
Seller nor any of their respective Affiliates or any other Person acting on
behalf of any Seller will have or be subject to any liability, except as
specifically set forth in this Agreement, to Buyers resulting from the
distribution to Buyers, for Buyers' use, of any such information, and any
information, document or material made available to Buyers in certain "data
rooms," management presentations or any other form in expectation of the
transactions contemplated by this Agreement.
4.6 BROKERS
No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission from Sellers in connection with the transactions contemplated by this
Agreement based on arrangements made by or on behalf of Buyers or an Affiliate
of Buyers.
4.7 FINANCING
Buyers have as of the date hereof, and will have as of the First Stage
Closing Date, sufficient cash, available lines of credit or other sources of
immediately available funds to enable it to pay the Purchase Price.
4.8 OVERALL MATERIAL ADVERSE EFFECT
The preceding representations and warranties of Buyers in this Article
4 (with the deletion of any and all references to materiality or Material
Adverse Effect or any other materiality qualifiers as set forth therein) do not
result in any breach or inaccuracy in any and all such representations and
warranties, where such breach and/or inaccuracy would individually or in the
aggregate have, or be reasonably likely to have, a Material Adverse Effect on
Sellers (taken as a whole).
4.9 NO OTHER REPRESENTATIONS
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE
4 OR IN THE COLLATERAL AGREEMENTS (TO THE EXTENT THAT BUYERS ARE PARTY THERETO),
BUYERS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
AND HEREBY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW DISCLAIM ANY SUCH
REPRESENTATION OR WARRANTY (INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), WHETHER BY BUYERS, THEIR
AFFILIATES OR ANY OF THEIR OFFICERS, DIRECTORS, PARTNERS, MEMBERS, PRINCIPALS,
EMPLOYEES, AGENTS, MEMBERS OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT
TO THE ACQUIRED ASSETS, ASSUMED LIABILITIES AND THE BUSINESS OR THE EXECUTION
AND DELIVERY OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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5. CERTAIN COVENANTS
5.1 ACCESS TO INFORMATION
(a) Subject to any restrictions under applicable
Law, Sellers will (i) give to the Buyers and their officers, employees,
accountants, counsel and other representatives reasonable access, including for
inspection and copying, during normal business hours throughout the period prior
to the Staged Closing Dates, to the properties, personnel, books, contracts,
commitments, reports of examination and records reasonably requested by Buyers,
(ii) furnish or shall cause to be furnished any and all financial, technical and
operating data and other information pertaining to the Business and the Acquired
Assets as Buyers may reasonably request, and (iii) provide or cause to be
provided such copies or extracts of documents and records related to its
business as Buyers may reasonably request; provided, that no Seller shall be
obligated to disclose or provide hereunder information other than related to the
Business.
(b) For a period of six (6) years after the
First Stage Closing Date, upon reasonable prior written notice, Buyers and
Sellers shall furnish or cause to be furnished to each other and their
employees, agents, auditors and representatives access, during normal business
hours, to such information, books and records relating to the Business as is
reasonably necessary for financial reporting and accounting matters, for reports
or filings with any Governmental Bodies, for the preparation and filing of Tax
Returns, reports or forms for the defense of any Tax claims, assessments, audits
or disputes, or for the prosecution or defense of any Action, provided that with
respect to any Tax Returns or other records relating to Tax matters or any other
Action, either party shall have reasonable access to such information until the
applicable statute of limitations, if any, shall have expired. Except as
otherwise agreed in writing, each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting the other pursuant to
this Section 5.1(b). Each party shall have the right to copy any of such records
at its own expense. Neither party shall be required by this Section 5.1(b) to
take any action that would unreasonably interfere with the conduct of its
business or unreasonably disrupt its normal operations.
(c) Sellers and Buyers agree to preserve all
Business Records in their possession for at least six (6) years after the First
Stage Closing Date; provided that each party will preserve all such records
relating to Tax matters until expiration of the applicable statute of
limitations. After such six (6) years period or expiration of the applicable
statute of limitations and at least six (6) days prior to the planned
destruction of any Business Records or Tax-related records, but in any event no
longer than the later of six (6) years after the Second Staged Closing Date or
the expiration of the applicable statue of limitations, the party planning to
destroy such Business Records or Tax-related records shall notify in writing and
shall make available to the other, upon its reasonable request, such Business
Records or Tax-related records.
5.2 CONDUCT OF BUSINESS
From and after the date of this Agreement and until the First Stage
Closing Date, except as set forth on Schedule 5.2 or as otherwise contemplated
by this Agreement or the Schedules
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and Exhibits hereto or as Buyers shall otherwise consent to in writing, in each
case to the extent related to the Business, Sellers:
(a) will incur and pay costs and otherwise
operate the Business only in the ordinary course and in a manner consistent with
past practice, and shall use their commercially reasonable efforts to (i)
preserve intact the present business organization and the Business Employees,
(ii) preserve the goodwill and advantageous relationships of the Business with
customers, suppliers, independent contractors and other Persons material to the
operation of the Business, (iii) prevent any event that could have a Material
Adverse Effect and (iv) not permit any action or omission that would cause any
of the representations or warranties of Sellers contained herein to become
inaccurate or any of the covenants of Sellers to be breached, in either case in
any material respect.
(b) without limiting the generality of clause
(a), until the First Stage Closing Date, except as set forth on Schedule 5.2 or
with the prior written consent of Buyers, Sellers will not:
(i) do any act or omit to do any act,
or permit any act or omission to act, which would cause a material
breach of any of the Purchased Contracts, Purchased Permits and
Transferred Communications Licenses or any liabilities or obligations
contemplated by this Agreement or any of the Collateral Agreements to
be an Assumed Liability, the breach of which is reasonably likely to
have a Material Adverse Effect;
(ii) sell, transfer, convey, assign or
otherwise dispose of any of the Acquired Assets with a fair market
value in excess of $100,000 (without purchasing a replacement of the
same or better quality and condition) other than for goods or
inventory, including parts or supplies, sold or otherwise disposed of
in the ordinary course of business and consistent with past practice;
(iii) except for capital improvements,
purchases and expenditures permitted by clause (iv), purchase, lease or
other acquisition of any Acquired Assets, except for any such
transaction less than $50,000 individually in value or $250,000 in the
aggregate in value, except for circuits and services acquired in the
ordinary course of business and consistent with past practice for the
purpose of supporting ongoing sales activities;
(iv) authorize or make any capital
improvements or purchases or other capital expenditures that
individually or in the aggregate are in excess of those contemplated by
Section 5.15(c);
(v) other than in the ordinary course
of business and consistent with past practice, waive, release or cancel
any claims against third parties or debts owing to it, or any rights
which have a value of $200,000 individually or $500,000 in the
aggregate, other than any claims against or debts owing from
Affiliates;
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(vi) (A) make any borrowing, incur any
debt (other than ordinary course borrowings under the Credit Agreement
or from Sellers' Parent, and trade payables in the ordinary course of
business and consistent with past practice); (B) assume, guarantee,
endorse (except for the negotiation or collection of negotiable
instruments in the ordinary course of business and consistent with past
practice and the guarantee of lease obligations of Broadwing
Communications Real Estate Services LLC where any such guarantee is not
an Assumed Liability) or otherwise become liable (whether directly,
contingently or otherwise) for the obligations of any other Person; or
(C) make any payment or repayment in respect of any indebtedness (other
than (i) trade payables and accrued expenses in the ordinary course of
business and consistent with past practice or (ii) except as provided
for in the Credit Agreement, repayments or prepayments of Debt (as
defined in the Credit Agreement) owed to Sellers' Parent or any of its
Subsidiaries (as defined in the Credit Agreement)); in each case in
excess of $25,000 individually or $100,000 in the aggregate;
(vii) grant or permit the creation of any
Encumbrance over any of the Acquired Assets, other than Permitted
Encumbrances (except for items (iv) and (v) included in the definition
of Permitted Encumbrances with respect to any Acquired Assets owned by
any Seller on the date hereof). Until such time as the Required Lenders
under the Credit Agreement shall have consented to the first sentence
of this clause (vii) (or otherwise amended or waived the provisions of
Section 5.02(l) of the Credit Agreement) or the Credit Agreement shall
be terminated, this clause (vii) shall be subject to (x) the
restrictions on, and (y) the exceptions to the restrictions on, the
creation of Encumbrances set forth in Section 5.02(l) of the Credit
Agreement
(viii) make any loan, advance or capital
contribution (other than to any of the other Sellers) to, or investment
in, any other Person in excess of $10,000 individually or $25,000 in
the aggregate;
(ix) enter into, adopt, amend or
terminate any bonus, profit sharing, compensation, termination, stock
appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any director, officer, consultant (except
with respect to termination of any consultants) or employee, or
increase in any manner the compensation or fringe benefits of any
director, officer, consultant or employee or pay any benefit not
required by any existing plan and arrangement or enter into any
Contract to do any of the foregoing, which, in each case, individually
or in the aggregate, is reasonably likely to have a Material Adverse
Effect;
(x) (A) terminate the employment of any
Key Employee without cause; or (B) terminate the employment of any
other Business Employees without cause (which termination contemplated
by this clause (B), individually, or in the aggregate, is reasonably
likely to have a Material Adverse Effect);
(xi) pay any amount, perform any
obligation or agree to pay any amount or perform any obligation, in
settlement or compromise of any suits or claims
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of liability against any Seller or any of its directors, officers,
employees or agents which would be an Assumed Liability or, in each
case in excess of $200,000 individually or $1,000,000 in the aggregate;
(xii) other than in the normal course of
business and consistent with past practice, terminate, rescind, modify,
amend or otherwise alter or change any of the material terms or
provisions of any of the Purchased Contracts, Purchased Permits or
Transferred Communications Licenses, or reduce, discount, waive or
forego any material payment or right thereunder, or agree to any
compromise or settlement with respect thereto, in each case in excess
of $100,000 individually or $500,000 in the aggregate;
(xiii) enter into any Employment Agreement
or other Contract of any kind with any director, officer or employee of
any Seller or any of the respective Affiliates of such individuals, or
with any Affiliate of any Seller, which, in each case, is related to
the Business or would be an Assumed Liability;
(xiv) enter into any Contract pursuant to
which any Seller grants or is granted any license or sublicense or
other right to use any of the Acquired Assets;
(xv) other than in the ordinary course
of business and consistent with past practice, incur any obligation or
enter into, amend or modify any Contract or arrangement, which is
related to the Business or would be an Assumed Liability, that either
(i) requires a payment by any party in excess of, or a series of
payments which in the aggregate exceed, $500,000 or provides for the
delivery of goods or performance of services, or any combination
thereof, having a value in excess of $500,000 and (ii) has a term, or
requires the performance of any obligations by Seller over a period, in
excess of one (1) year;
(xvi) enter into any material Contract
with a sales representative, sales agency, advertising agency or other
Person engaged in sales, distributing or promotional activities, or any
material Contract to act as one of the foregoing on behalf of any
Person;
(xvii) enter into any Contract with
respect to any material modification or termination of any Real
Property Lease; or
(xviii) enter into any Contract to do any
of the foregoing.
(c) without limiting the generality of clause
(a), until the First Stage Closing Date, except as set forth on Schedule 5.2,
each Seller shall use their commercially reasonable efforts to:
(i) maintain all Communications
Licenses and Permits that are required for and material to the conduct of the
Business as currently conducted and for the holding of the Acquired Assets.
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(ii) maintain their books, accounts and
records in the usual, regular and ordinary manner, and on a basis consistent
with the Financial Statements and past practices, and
(iii) duly comply in all material
respects with all Laws and Orders applicable to Sellers or as may be required
for the valid and effective transfer and assignment of the Acquired Assets.
(d) Sellers shall continue to carry their
existing "occurrence" liability insurance applicable to periods up to the Second
Staged Closing Date and shall not allow any breach, default, termination or
cancellation of such insurance policies or agreements to occur or exist.
Any Contract or other obligation which is related to the Business and would be
an Assumed Liability which requires the prior written consent of Buyers pursuant
to Section 5.2(b) and which is entered into or incurred with the prior written
consent of Buyers shall be included in the Acquired Assets and shall constitute
an Assumed Liability, and the Schedules to this Agreement shall be deemed to
have been updated to include any such Contract or obligation. Any Contract or
other obligation entered into or incurred in violation of Section 5.2(b) shall
not be included in the Acquired Assets, shall constitute an Excluded Liability,
and shall not be included on any of the Schedules to this Agreement.
5.3 TAXES
(a) Sellers and Buyers acknowledge and agree
that (i) Sellers will be responsible for and will perform all applicable Tax
withholding, payment and reporting duties with respect to any wages and other
compensation and benefits paid or provided by Sellers to any Business Employee
for a taxable period or portion thereof ending on or prior to the First Stage
Closing Date, and (ii) Buyers will be responsible for and will perform all Tax
withholding, payment and reporting duties with respect to any wages and other
compensation and benefits paid or provided by Buyers or any of their Affiliates
to any Transferred Employee after the First Staged Closing Date.
(b) Buyers and Sellers shall use commercially
reasonable efforts to agree upon an allocation of the Purchase Price (and the
amount of Assumed Liabilities that are liabilities for Federal income tax
purposes) among the Acquired Assets (the "Allocation"), consistent with the
principles to be mutually agreed between Sellers and Buyers and set forth in
Schedule 5.3(b) on or prior to the first Stage Closing Date and Section 1060 of
the Code and the Treasury Regulations thereunder, within a reasonable amount of
time following the Staged Closing Dates. Buyers shall provide a proposed
Allocation to Sellers within sixty (60) days following the Staged Closing Dates.
Sellers shall propose any changes to the Allocation within thirty (30) days
thereafter, together with a reasonably detailed explanation of the reasons
therefor. Buyers and Sellers will negotiate in good faith to resolve any
disputed items. If Buyers and Sellers are unable to agree on the Allocation
within thirty (30) days following delivery of Sellers' proposed changes, then
Buyers and Sellers shall be permitted to use their respective Allocations.
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(c) If Buyers and Sellers are able to agree to
an Allocation, (i) each Seller and Buyer shall timely file IRS Form 8594 and all
other Federal, state, local and foreign Tax Returns in accordance with the
Allocation, as adjusted pursuant to Section 5.3(b) and (ii) neither Sellers nor
Buyers nor any of their respective Affiliates or representatives shall take any
position on any Tax Return that is inconsistent with the Allocation. Sellers and
Buyers agree to promptly provide the other party with any additional information
as so adjusted required to complete Form 8594.
(d) Buyers and Sellers shall cooperate fully
with respect to all Tax matters and shall keep each other promptly apprised of
any Tax audit or other controversy that may affect the other or reasonably could
be expected to result in an indemnification obligation hereunder.
(e) Each of Buyers and Sellers shall pay fifty
percent (50%) of all sales, transfer, value added (to the extent not creditable)
or similar Taxes and all recording and filing fees and other similar costs that
may be imposed, assessed or payable by reason of the sales, transfers, leases,
rentals, licenses, assignments and assumption of liabilities, if any, required
for performance under this Agreement and the Collateral Agreements. Buyers and
Sellers shall cooperate in timely making and filing all filings, Tax Returns,
reports and forms as may be required with respect to any Taxes described in the
preceding sentence. Buyers and Sellers shall use commercially reasonable efforts
to avail themselves of any available exemptions or other opportunities to reduce
or eliminate any such Taxes or fees. Notwithstanding any other provision hereof,
Sellers shall be responsible for income and capital gains Taxes or franchise or
other Taxes based on overall gross or net income of Sellers from the sale of the
Acquired Assets ("Income Taxes").
(f) Liability of Sellers for real, personal and
intangible property Taxes for the 2003 tax year including the Staged Closing
Dates shall be equal to the amount of such property Taxes for the entire period
multiplied by a fraction, the numerator of which is the number of days in such
period that precede the First Stage Closing Date and the denominator of which is
the number of days in the entire period. Liability for the remainder of such
Taxes shall be borne by Buyers. Sellers shall pay all such amounts to the taxing
authority when due and shall provide to Buyers proof of such payment and a
schedule setting out in reasonable detail the amount of Buyers' liability.
Buyers shall promptly pay to Sellers the amount of their liability as determined
in this Section 5.3(f) within five (5) days of Sellers' payment and notice
thereof. Sellers and Buyers shall cooperate with respect to any protest or audit
proceedings, and shall share the costs of such proceedings in proportion to the
fraction determined in the first sentence of this Section 5.3(f). Neither
Sellers nor Buyers shall settle any such proceeding without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
(g) Sellers shall deliver to Buyers at the First
Stage Closing Date a certification of non-foreign status as described in Section
1.1445-2(b)(2) of the Treasury Regulations.
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5.4 EMPLOYEES AND EMPLOYEE BENEFITS
(a) Sellers shall provide Buyers with an update
to Schedule 3.7(a) immediately prior to the First Stage Closing Date. Unless
otherwise agreed in writing prior to the First Stage Closing Date, Buyers shall
make offers of employment to all of the Business Employees of Sellers as of the
First Stage Closing Date, provided that Sellers shall comply with the covenant
set forth in Section 5.15(b). Business Employees who accept such offer of
employment, as of the effective date of their employment with Buyers or one of
its Affiliates (the "Transfer Date"), shall be referred to as "Transferred
Employees." All liabilities, costs and Actions related to Business Employees who
do not accept such offers of employment shall be Excluded Liabilities hereunder.
Each offer of employment shall provide for a base salary no less than their base
salary as an employee of Sellers as of the First Stage Closing Date and health,
welfare, retirement and severance benefits as shall be applicable to comparable
Buyers' employees generally; provided, however, that any Transferred Employee
who is a Key Employee shall receive base salary and health, welfare, retirement
and severance benefits (other than any defined benefit plans) that are, taken as
a whole, substantially equivalent to that currently enjoyed by such Transferred
Employee as an employee of Sellers.
(b) To the extent permitted by law, Buyers'
benefit plans and policies, including vacation, floating holidays, retirement,
severance and welfare plans, shall recognize, for purposes of determining
eligibility to participate all service with Sellers that was recognized by
Sellers for a similar purpose under a corresponding Benefit Plan. Nothing in
this paragraph (b) shall require the Buyers to provide duplicate benefits to any
Transferred Employee.
(c) Except as specifically provided in this
Section 5.4: (i) no Buyer or any of its Affiliates shall adopt, become a
sponsoring employer of, or have any obligations under or with respect to the
Benefit Plans, and Sellers shall be responsible for any and all liabilities
which have arisen or may arise under or in connection with any Benefit Plan; and
(ii) Sellers shall be responsible for any and all liabilities relating to or
arising out of the employment of any Business Employee by Sellers before the
First Stage Closing Date.
(d) Buyers shall be responsible for all
liabilities, costs and Actions to the extent arising out of, or resulting from,
facts, events and circumstances occurring, or which accrue, after the First
Stage Closing Date (other than due to any failure to comply or breach of any
Sellers or any of their Affiliates, whether before, on or after the First Stage
Closing Date) related to (i) the Transferred Employees, and (ii) the Business
Employees with respect to whom Buyers have not extended an offer as required
under Section 5.4(a) and whose employment with Sellers terminates within two (2)
months after the First Stage Closing Date (other than due to any failure or
breach of any Sellers or any of its Affiliates, whether before, on or after the
First Stage Closing Date). Sellers shall provide within three (3) months after
the First Stage Closing Date written reconciliation of any amount owed with
respect to such Transferred Employees and Business Employees, from and after the
First Stage Closing Date, including without limitation: (A) claims for the type
of benefits described in Section 3(1) of ERISA (whether or not covered by ERISA
but in no event to include such claims with respect to Business Employees to
whom offers have not been extended, in accordance with the terms hereof, who are
on long term disability) and for workers compensation, in each case that are
incurred by or with respect to any Transferred Employee on or after his or her
Transfer Date, and (B) claims relating to severance,
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redundancy and similar pay, salary continuation, and similar obligations
(collectively, "Severance Pay") relating to the termination or alleged
termination of employment of any Business Employee described in clause (ii) of
this Section 5.4(d) with Sellers, whether arising under a Benefit Plan, an
Employment Agreement or other agreement, in each case only with respect to those
which have been disclosed to Buyers on Schedule 3.7(b), with an individual
Business Employee, or applicable Law. Buyers shall indemnify and hold harmless
Sellers from: (i) all COBRA Coverage and related Losses attributable to
"qualifying events" with respect to any Business Employees described in clause
(ii) of this Section 5.4(d) and his or her beneficiaries and dependents that
occur on or after the First Stage Closing Date (other than due to any failure to
comply or breach of any of the Sellers or any of their Affiliates, whether
before, on or after the First Stage Closing) and (ii) all liabilities, costs,
claims and Actions arising under the Worker Adjustment and Retraining
Notification Act ("WARN") with respect to any Business Employees described in
clause (ii) of this Section 5.4(d) because of the failure of Buyers or their
Affiliates to extend offers of employment to Business Employees as required by
Section 5.4(a) (other than due to any failure to comply or breach of any of the
Sellers or any of their Affiliates, whether before, on or after the First Stage
Closing).
(e) Buyers shall provide Sellers with
information concerning the employment status of Transferred Employees, including
any date of termination from Buyers and its Affiliates, so as to enable Sellers
to administer its Benefit Plans with respect to such Transferred Employees. Such
information shall be provided from time to time in such form (including any
electronic media) as reasonably requested by Sellers.
(f) Buyers shall credit each Transferred
Employee with vacation accrued but not used through his or her Transfer Date.
5.5 REGULATORY COMPLIANCE
(a) Sellers and Buyers shall use their
reasonable best efforts to take, or cause to be taken, all appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, including to: (i)
obtain from Governmental Bodies any consents, licenses, permits, waivers,
approvals, authorizations or orders required to (A) be obtained or made by
Sellers or Buyers or any of their Affiliates to consummate the transactions
contemplated by this Agreement or (B) avoid any action or proceeding by any
Governmental Body (including those in connection with the HSR Act and antitrust
and competition Laws of any other applicable jurisdiction) in connection with
the authorization, execution and delivery of this Agreement and to permit the
consummation of the transactions contemplated hereby to occur as soon as
reasonably possible, and (ii) promptly make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
required under (A) the HSR Act and antitrust and competition Laws of any other
applicable jurisdiction, in each case, to the extent required by applicable Law,
(B) the Communications Act or (C) any other applicable Law. Sellers and Buyers
shall cooperate with each other in connection with the making of all filings
referenced in the preceding sentence. Sellers and Buyers shall bear its own
costs and expenses in connection with its performance under this Section 5.5,
except the filing fees in connection with any required filings or
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submissions under the HSR Act shall be apportioned fifty percent (50%) to
Sellers and fifty percent (50%) to Buyers.
(b) Without limiting the foregoing, Buyers and
Sellers shall:
(i) promptly provide to the Federal
Trade Commission or Department of Justice, as the case may be, such
information as may reasonably and legally be requested by the Federal
Trade Commission or Department of Justice, as the case may be, and
shall cause their respective officers and employees to respond to any
reasonable and legal information or other requests from the Federal
Trade Commission or Department of Justice, as the case may be
(including complying with requests for in-person meetings), in
connection with the review by the Federal Trade Commission or
Department of Justice, as the case may be, of this Agreement and the
transactions contemplated hereby; and
(ii) promptly submit to the FCC, any
State PUCs, regulatory agencies or similar Governmental Bodies as
required by applicable Law and all other applicable Governmental Bodies
all applications, notices and other filings necessary to consummate the
transactions contemplated by this Agreement and the Collateral
Agreements, including those indicated on Schedule 3.3(b) and Schedule
4.3(b) and obtain any other Consents necessary to consummate the
transactions contemplated hereby.
5.6 CERTAIN PROVISIONS RELATING TO THE TRANSFER
(a) In the event that record or beneficial
ownership or possession of any Excluded Asset or Excluded Liability has been
transferred to Buyers on or after the Staged Closing Dates, Sellers and Buyers
shall use their commercially reasonable efforts to transfer, or cause to be
transferred, to Sellers such Excluded Asset or Excluded Liability; and, pending
such transfer to Sellers, Buyers shall hold such Excluded Asset or Excluded
Liability and provide to Sellers all of the benefits and liabilities associated
with the ownership and operation of such Excluded Asset or Excluded Liability
and, accordingly, Buyers shall cause such Excluded Asset or Excluded Liability
to be operated or retained as may reasonably be instructed by Sellers.
(b) In the event that record or beneficial
ownership or possession of any Acquired Asset or any Assumed Liability has not
been transferred to Buyers on the Staged Closing Dates, Sellers and Buyers shall
cooperate and shall use their commercially reasonable efforts to transfer, or
cause to be transferred, from Sellers to Buyers, such Acquired Asset or Assumed
Liability, and pending such transfer to Buyers, Sellers shall hold such Acquired
Asset or Assumed Liability and provide to Buyers all of the benefits and
liabilities associated with the ownership and operation of such Acquired Asset
or Assumed Liability and, accordingly, Sellers shall cause such Acquired Asset
or Assumed Liability to be operated or retained as may reasonably be instructed
by Buyers.
5.7 ADVICE OF CHANGES
(a) Sellers will promptly provide written notice
to Buyers of (i) any event known to Sellers which has rendered or reasonably
could be expected to render any
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representation or warranty of Sellers contained in this Agreement or any
Collateral Agreement (A) which does not contain materiality, Material Adverse
Effect or any other materiality qualifier, if made on or as of the date of such
event or the date of the First Stage Closing Date, untrue or inaccurate in any
material respect or (B) which does contain a materiality, Material Adverse
Effect or other materiality qualifier, if made on and as of the date of such
event or the First Stage Closing Date, untrue or inaccurate in any respect
(each, a "Sellers' R&W Breach"), or (ii) any failure of Sellers to comply with
or satisfy (X) in any material respect any covenant, condition or agreement
contained in this Agreement or any Collateral Agreement which does not contain
materiality, Material Adverse Effect or any other materiality qualifier to be
complied with or satisfied by Sellers hereunder or thereunder on or prior to the
First Stage Closing Date or (Y) any covenant, condition or agreement contained
in this Agreement or any Collateral Agreement which does contain materiality,
Material Adverse Effect or any other materiality qualifier to be complied with
or satisfied by Sellers hereunder or thereunder on or prior to the First Stage
Closing Date (each, a "Sellers' Covenant Failure").
(b) Buyers will promptly provide written notice
to Sellers of (i) any event known to Buyers which has rendered or reasonably
could be expected to render any representation or warranty of Buyers contained
in this Agreement or any Collateral Agreement (A) which does not contain
materiality, Material Adverse Effect or any other materiality qualifier, if made
on or as of the date of such event or the date of the First Stage Closing Date,
untrue or inaccurate in any material respect or (B) which does contain a
materiality, Material Adverse Effect or other materiality qualifier, if made on
and as of the date of such event or the First Stage Closing Date, untrue or
inaccurate in any respect (each, a "Buyers' R&W Breach"), or (ii) any failure of
Buyers to comply with or satisfy (X) in any material respect any covenant,
condition or agreement contained in this Agreement or any Collateral Agreement
which does not contain materiality, Material Adverse Effect or any other
materiality qualifier to be complied with or satisfied by Buyers hereunder or
thereunder on or prior to the First Stage Closing Date or (Y) any covenant,
condition or agreement contained in this Agreement or any Collateral Agreement
which does contain materiality, Material Adverse Effect or any other materiality
qualifier to be complied with or satisfied by Buyers hereunder or thereunder on
or prior to the First Stage Closing Date (each, a "Buyers' Covenant Failure").
(c) The parties acknowledge and agree that if
the Buyers have been given notice of any Sellers' R&W Breach(es) and/or Sellers'
Covenant Failure(s) in accordance with Section 5.7(a) and Buyers proceed with
the First Stage Closing when Buyers have the right not to proceed to Closing
under Section 7.2(a), then Buyers shall not be deemed to have waived such
Breach(es) and Failure(s), and Buyers and their related Indemnified Parties
shall be entitled to be indemnified pursuant to Section 8.2 relating to such
Breach(es) and/or Failure(s) to the extent solely of the Losses up to Five
Million U.S. Dollars ($5,000,000). The disclosure by Sellers of any Sellers' R&W
Breach(es) and/or Sellers' Covenant Failure(s) shall not limit any right of
Buyers to terminate this Agreement in accordance with Article 9, nor shall such
notice constitute an admission by Sellers that any such Breach(es) and/or
Failure(s) constitute or give rise to a Material Adverse Effect, failure of a
condition in Article 7 or right to terminate in accordance with Article 9.
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(d) The parties acknowledge and agree that if
the Sellers have been given notice of any Buyers' R&W Breach(es) and/or Buyers'
Covenant Failure(s) in accordance with Section 5.7(b) and Sellers proceed with
the First Stage Closing, Sellers shall not be deemed to have waived such
Breach(es) or Failure(s), and Sellers and their related Indemnified Parties
shall be entitled to be indemnified pursuant to Section 8.2 hereof relating to
such Breach(es) and/or Failure(s) to the extent solely of the Losses up to Five
Million U.S. Dollars ($5,000,000). The disclosure by Buyers of any Buyers' R&W
Breach(es) and/or Buyers' Covenant Failure(s) shall not limit any right of
Sellers to terminate this Agreement in accordance with Article 9, nor shall such
notice constitute an admission by Buyers that any such Breach(es) and/or
Failure(s) constitute or give rise to a Material Adverse Effect, failure of a
condition in Article 7 or right to terminate in accordance with Article 9.
(e) Sellers, on the one hand, and Buyers, on the
other hand, will promptly give notice to the other upon becoming aware that any
Action is pending or threatened by or before any Governmental Body, in each case
with respect to the transactions contemplated by this Agreement or any
Collateral Agreement. Sellers, on the one hand, and Buyers, on the other hand,
(i) will cooperate in connection with the prosecution, investigation or defense
of any such Action, (ii) will supply promptly all information reasonably and
legally requested by the other, by any such Governmental Body or by any party to
any such Action and (iii) will use commercially reasonable efforts to cause any
such Action to be determined as promptly as practicable and in a manner which
does not impact adversely on, and is consistent with, the transactions
contemplated by this Agreement and the Collateral Agreements.
5.8 COVENANT NOT TO COMPETE; NO SOLICITATION AND NO
HIRING
Sellers covenant and agree that for a period of thirty-six (36) months
following the First Stage Closing Date, except as required or permitted by the
Collateral Agreements listed in Sections 5.11(c) and 5.11(e) hereof, none of the
Sellers or their subsidiaries shall, directly or indirectly (and Sellers will
use their commercially reasonable efforts to cause their respective Affiliates
not to), (i) engage in, control, advise, manage, serve as a director, officer,
or employee of, act as a consultant to, receive any economic benefit from (other
than any economic benefit from the C III LLC Agreement) or exert any influence
upon, any business which conducts the same activities as those conducted by the
Business (individually and collectively "Compete"), except the delivery of
products and services to the Buyers under the Collateral Agreements and the
conduct of the Retained Business, within the continental United States (the
"Territory"); or (ii) solicit, divert or attempt to solicit or divert any party
who is, was, or was solicited to become, a customer or supplier of the Business
at any time prior to the Second Stage Closing Date, except solely the attempted
solicitation or solicitation of any such customer or supplier to become a
customer or supplier of a business that does not Compete with the Business,
except the delivery of products and services to the Buyers under the Collateral
Agreements and the conduct of the Retained Business, within the Territory. For a
period of thirty-six (36) months following the Second Stage Closing Date,
neither Sellers nor their respective Affiliates (other than any directors,
officers or employees of Sellers provided not in their capacity as such) shall
directly or indirectly solicit for employment or hire as an employee or
consultant, any of the Transferred Employees or other employees of Buyers or its
Affiliates engaged in the Business unless such employee's employment is earlier
terminated by Buyers. For the avoidance of doubt, neither the
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covenant in this Section nor the Sellers' Parent's Non-Competition and
Confidentiality Agreement shall prohibit Sellers' Parent or its Affiliates from
continuing to conduct their respective businesses described on Schedule 5.8. For
a period of twelve (12) months following the Second Stage Closing Date, Buyers
and their Affiliates shall not directly or indirectly solicit for employment or
hire as an employee or consultant, any employee (other than a Transferred
Employee) who works for Sellers or their respective Affiliates unless such
employee's employment is earlier terminated by Sellers or any of their
respective Affiliates. Notwithstanding the foregoing, this Section 5.8 shall not
prevent Buyers or Sellers (or any of their respective Affiliates or any Person
acting on their behalf) from conducting general searches for employees by use of
advertisements or the media that are not directly targeted at the employees of
the other party.
5.9 CONFIDENTIALITY
Except for confidential information related to or otherwise contained
in the Excluded Assets (other than any Excluded Assets that comprise Business
Records) including Intellectual Property not being sold, but being licensed to
Buyers, for a period of four (4) years after the Second Stage Closing Date,
Sellers will not, and Sellers will use commercially reasonable efforts to cause
their respective Affiliates not to, use for its or their own benefit or divulge
or convey to any Third Party, any Confidential Information (as hereinafter
defined) relating to the Business, provided that Sellers shall be entitled to
provide copies of this Agreement and the Collateral Agreements to the lenders
under the Credit Agreement. For purposes of this Agreement, Sellers shall not be
deemed to have violated this Section 5.9 if any Seller or any of their
respective Affiliates receives a request to disclose all or any part of the
Confidential Information under the terms of a subpoena, civil investigative
demand or order issued by a Governmental Body, and such Seller or such
Affiliate, to the extent not inconsistent with such request and to the extent
time reasonably allows: (a) notifies Buyers of the existence, terms and
circumstances surrounding such request; (b) consults with Buyers on the
advisability of taking legally available steps to resist or narrow such request;
and (c) if disclosure of any Confidential Information is advisable, to prevent
such Seller or such Affiliate or any of its or their partners, principals or
employees from becoming subject to any penalty, to furnish only such portion of
the Confidential Information as it reasonably determines that such Seller or
such Affiliate is legally obligated to disclose and to exercise commercially
reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to the disclosed Confidential
Information. For purposes of this Agreement and subject to the first sentence of
this Section 5.9, "Confidential Information" consists of all information,
knowledge or data related to the Business not in the public domain or otherwise
publicly available which are or were treated as confidential by the Business.
Information that enters the public domain or is or becomes publicly available
loses its confidential status hereunder so long as neither Sellers nor any of
their respective Affiliates, directly or indirectly, improperly causes such
information to enter the public domain.
5.10 WAIVER OF RESTRICTIONS ON CERTAIN BUSINESS EMPLOYEES
Sellers hereby agree to waive, effective as of the First Stage Closing
Date, any non-competition and other applicable restrictions on Business
Employees who become Transferred Employees so as to permit them to participate
in the conduct by Buyers and their Affiliates (and
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their respective successors and assigns) of the Business, whether such
restrictions are in their respective Employment Agreements or any other
Contracts.
5.11 ADDITIONAL AGREEMENTS
(a) Buyers and Sellers shall have entered into
an agreement prior to or on the First Stage Closing Date, substantially on the
terms and conditions contained in Exhibit D hereto, relating to Buyers' use of
Broadwing Technology Solutions Inc.'s provision of help desk services (the "Help
Desk Agreement").
(b) Buyers and Sellers shall have entered into
an agreement prior to or on the First Stage Closing Date, substantially on the
terms and conditions contained in Exhibit E hereto, relating to Buyers' use of
Sellers' APTIS software (the "APTIS Software Agreement").
(c) Buyers and Sellers shall have entered into
agreements prior to on the First Stage Closing Date, substantially on the terms
and conditions contained in Exhibit F hereto, including with respect to the
business of (i) providing underlying goods and services for resale to Sellers'
Parent and its Affiliates' customers, (ii) providing goods and services for
internal use by Sellers' Parent and its Affiliates and (iii) acting as an agent
of Buyers with respect to Sellers' Parent and Affiliates' customers
(collectively, the "Intercompany Agreements").
(d) Buyers and Sellers shall have entered into
an agreement prior to or on the First Stage Closing Date, substantially on the
terms and conditions contained in Exhibit G hereto, pursuant to relating to
Buyers' use of certain of Sellers' IP and Sellers' IPR (the "Intellectual
Property Rights Assignment Agreement").
(e) C III and Sellers' Parent shall have entered
into a limited liability agreement prior to or on the First Stage Closing Date,
substantially on the terms and conditions contained in Exhibit H hereto relating
to Sellers' Parent becoming a member of C III (the "C III LLC Agreement").
(f) Buyers and Sellers and the escrow agent
thereunder shall have entered into (w) an escrow agreement prior to or on the
First Stage Closing Date, substantially on the terms and conditions contained in
Exhibit I-1 hereto, relating to the Escrow Amount (Working Capital/Indemnity)
(the "Escrow Agreement (Working Capital/Indemnity)"), (x) an escrow agreement
prior to or on the First Stage Closing Date, substantially on the terms and
conditions contained in Exhibit I-2 hereto, relating to the Escrow Amount
(Cranberry Adjustment) (the "Escrow Agreement (Cranberry Adjustment)"), (y) an
escrow agreement prior to or on the First Stage Closing Date, substantially on
the terms and conditions contained in Exhibit I-3 hereto, relating to the Escrow
Amount (Closing Adjustment Receivables) (the "Escrow Agreement (Closing
Adjustment Receivables)"), and (z) an escrow agreement prior to or on the First
Stage Closing Date, substantially on the terms and conditions contained in
Exhibit I-4 hereto, relating to the Escrow Amount/Second Stage Closing (the
"Escrow Agreement (Second Stage Closing)").
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(g) Buyers and Sellers and Sellers' Parent shall
have entered into an agreement prior to or on the First Stage Closing Date,
substantially on the terms and conditions contained in Exhibit J hereto relating
to transition services to be provided by Sellers and Sellers' Parent to Buyers
(the "Transition Services Agreement").
(h) Buyers and Sellers' Parent shall have
entered into a letter agreement prior to or on the First Stage Closing Date,
substantially on the terms and conditions contained in Exhibit K hereto relating
to the obligation of Sellers' Parent and their Affiliates to comply with Section
5.8 (the "Sellers' Parent's Non-Competition Agreement").
(i) Buyers and Sellers and Sellers' Parent shall
have entered into an agreement prior to or on the First Stage Closing Date,
substantially on the terms and conditions contained in Exhibit L hereto relating
to management services to be provided by Buyers to Sellers during the period
between the First Stage Closing and the Second Stage Closing (the "Management
Services Agreement").
(j) Buyers and Sellers shall have entered into a
security agreement prior to or on the First Stage Closing Date, substantially on
the terms and conditions contained in Exhibit M hereto relating to a security
interest to be provided by Sellers to Buyers in the Acquired Assets that are
contemplated by this Agreement to be sold, transferred, assigned and conveyed
after the First Stage Closing to secure the obligation of Sellers to effect the
Second Stage Closing (the "Security Agreement").
5.12 OTHER SECURITIES
(a) Sellers covenant and agree (i) to retire the
9% Notes and the Senior Notes or (ii) to obtain a consent and/or waiver from the
holders of the 9% Notes and the Senior Notes with respect to the transactions
contemplated hereby, in either case on or prior to the First Stage Closing Date.
(b) Sellers covenant and agree to use their best
efforts (i) to retire or exchange the 12 1/2% Preferred Stock or (ii) to obtain
any necessary consents and/or waivers from the holders of the 12 1/2% Preferred
Stock with respect to the transactions contemplated hereby, in either case on or
prior to the First Stage Closing Date.
5.13 NO SOLICITATION
From and after the date of this Agreement, Sellers shall not, and shall
use their respective reasonable best efforts to cause their respective
Affiliates, representatives and agents (including, without limitation,
investment bankers, attorneys and accountants) not to, directly or indirectly,
through any officer, director, agent or otherwise, enter into, solicit,
initiate, conduct or continue any discussions or negotiations with, or knowingly
encourage any inquiries or proposals or offers by, or provide any information
to, or otherwise cooperate in any other way with, any Person or group, other
than Buyers and their representatives and agents, concerning (i) any sale of all
or any portion of the Business or the Acquired Assets to any Person other than
Buyers, (ii) any merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction
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involving the Business or the Acquired Assets or (iii) any transaction or
transactions that would have an effect similar to the transactions described in
clause (i) or (ii).
5.14 COMMUNICATION AND COOPERATION WITH RESPECT TO
CUSTOMERS
Sellers and Buyers shall, within ten (10) days after the date hereof,
reach mutual agreement on a communications plan with respect to customers and
other Persons who are important to the conduct of the Business which
communications plan shall constitute Exhibit N hereto. Seller shall use
reasonable commercial efforts to communicate with customers and such other
Persons as set forth in such communications plan, and otherwise as Buyers shall
reasonably request, with the objective of reducing any adverse consequences
arising from the announcement of the transactions contemplated hereby and by the
Collateral Agreements. Buyers shall have the right to review and comment upon
any communication, or plan to communicate, about the transaction prior to such
communication or plan being made or implemented.
5.15 SELLERS' BUSINESS PLAN
Except as otherwise consented to by Buyers, Sellers will:
(a) Use commercially reasonable efforts to
Employ at least seventy-five (75) national market sales persons as of the First
Stage Closing Date.
(b) Employ, as of the First Stage Closing Date,
a number of Business Employees in each of the line item categories listed on
Schedule 5.15(b), equal to (i) no more than ten percent (10%) greater than or
ten percent (10%) less than the number of Business Employees for those line
items with one hundred (100) or more employees, and (ii) no more than twenty
percent (20%) greater than or twenty percent (20%) less than the number of
Business Employees for those line items with fewer than 100 employees. The
minimums in this paragraph are on a commercially reasonably basis. The number of
Business Employees for this purpose shall be rounded to the nearest whole
person.
(c) Make capital expenditures no more than
twenty percent (20%) greater than and no less than twenty percent (20%) less
than the capital expenditure budget set forth in the Cranberry Capital
Expenditure budget set forth on Schedule 5.15(c).
(d) Except as set forth on Schedule 5.15(d), not
to exit or terminate any line of business of the Business that accounted for
greater than Five Million U.S. Dollars ($5,000,000) of annual revenue for the
fiscal year ending December 31, 2002.
(e) Not to terminate or discontinue access to
circuits that are necessary to generate any revenues of the Business.
5.16 AGREEMENTS REGARDING CERTAIN ACTIONS
With respect to the Actions set forth on Schedule 5.16 and all other
Excluded Liabilities, Sellers and Buyers hereby agree as follows:
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(a) All such Actions shall be Excluded Assets
and Excluded Liabilities; and
(b) Buyers shall provide Sellers with access to
all information that constitutes a part of the Acquired Assets and shall
otherwise cooperate with Sellers (including by the provision of a reasonable
amount of the time of Key Employees to assist Sellers) in Sellers' prosecution
of all such Actions; provided that such cooperation shall not unreasonably
interfere with the operation of Buyers' business and, except as set forth in
Section 5.16(c), Sellers shall have exclusive control with respect to such
Actions.
(c) One or more Sellers and/or their Affiliates
have a dispute under the ELI Contract (the "ELI Dispute") which, among other
things, could result in the loss by Sellers of the rights to the IRU under the
ELI Contract with respect to the ELI route from Sacramento to Seattle (the "ELI
Route"). Sellers shall provide Buyers with access to all information that does
not constitute a part of Acquired Assets and shall otherwise cooperate with
Buyers (including by the provision of a reasonable amount of time of the
personnel of Sellers and their Affiliates to assist Buyers) in Buyers'
prosecution of the ELI Dispute and Buyers shall have exclusive control with
respect to the ELI Dispute, except that Buyers shall allow Sellers to
participate in (at Seller's expense) and be kept informed regarding, such
dispute, and Buyers shall not be entitled to settle the dispute in a manner
which imposes any liability on Sellers or any of their Affiliates, without the
prior written consent of the applicable Seller(s). If at any time within one (1)
year after the Closing Date, Buyers' rights to the IRU with respect to the ELI
Route become unavailable for any reason (including without limitation in
connection with the ELI Dispute) other than Buyers' breach thereunder, then
Sellers shall use commercially reasonable efforts to procure for Buyers,
immediately after the loss or anticipated loss of such route and at no cost to
Buyers, four (4) fiber pairs of comparable or better fiber type with hut, space,
power and other features comparable to the existing fiber pairs (the "ELI
Replacement Fibers") for use with the Corvis ON platform on the same route.
Sellers shall transfer to Buyers, upon terms and conditions (including price) to
be negotiated in good faith at such time, any fiber, conduit, rights of way,
huts or similar items obtained by one or more Sellers in connection with the
dispute with El Paso Global Networks.
5.17 OWNERSHIP AND USE OF BROADWING NAMES FOLLOWING STAGED
CLOSINGS
(a) Sellers covenant and agree that Sellers
shall, and Sellers shall cause all of their Affiliates (including Sellers'
Parent and BCI) which use the Broadwing Name, to pass all required resolutions
and to amend their respective articles or certificate of incorporation or other
organizational documents to change their corporate or company name to a name
that does not include the word "Broadwing" or any name intended or likely to be
confused or associated with any Broadwing Name prior to or on the First Stage
Closing Date, and shall make commercially reasonable efforts to cause the
registration of the new name with the appropriate Governmental Bodies no later
than the Second Stage Closing Date. Promptly following receipt of confirmation
from the appropriate Governmental Bodies that such name change has been
effected, Sellers shall provide to Buyers written proof that such name change
has been effected.
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(b) Sellers acknowledge that the Broadwing Name
shall be and remain, subsequent to the Second Stage Closing, the sole and
exclusive property of Buyers or their Affiliates.
(c) Sellers shall grant Buyers an exclusive
license to the use of the Broadwing Name in every jurisdiction where Sellers are
permitted by Law, Governmental Body or applicable Communications License to
grant such license, and shall extend such license to additional jurisdiction as
Consents are obtained under Section 2.7.
(d) Subsequent to the Second Stage Closing,
neither Sellers nor any of their Affiliates shall have any right, title or
interest in or to, and, subject to Sections 5.17(e), Buyers are not granting
Sellers or any of their Affiliates, a license to use, the Broadwing Name.
(e) Sellers agree:
(i) that, as soon as reasonably
practicable, but, in any event, within ninety (90) days following the
Second Stage Closing, no stationery, purchase order, invoice, receipt
or other similar document containing any reference to the Broadwing
Name shall be printed, ordered or produced for use by any Seller or any
of its Affiliates and that Sellers shall, and Sellers shall cause each
of their respective Affiliates to, following the Second Stage Closing,
cease to use any of its Affiliates and that Sellers shall, and Seller
shall cause each of their respective Affiliates to, following the
Second Stage Closing, cease to use any stationery, purchase order,
invoice, receipt or other similar document containing any reference to
the Broadwing Name or shall only use such stationery, purchase order,
invoice, receipt or other similar document after having deleted, pasted
over or placed a sticker over such references. The obligations in this
paragraph (i) shall not apply (x) to the extent use of the Broadwing
Name is required by Law or otherwise reasonably required pending the
registration of the change of corporate name (as set out in Section
5.17), (y) to the extent use of the Broadwing Name is reasonably
required in order to enable collection or payment of invoices issued by
a Seller or any of its Affiliates, or (z) to the extent use of the
Broadwing Name is reasonably required pending registration of products
under the new corporate name (as set out in Section 5.17);
(ii) as soon as reasonably practicable
after the First Stage Closing, and in any event no later than (A)
ninety (90) days after the First Closing Date, with respect to all
premises and signs and (B) sixty (60) days after the First Stage
Closing Date, with respect to all vehicles, to remove the Broadwing
Name from all such premises, signs and vehicles which are used by or in
connection with the Sellers and their Affiliates, except in those
jurisdictions where an exclusive license is not granted pursuant to
Section 5.17(c);
(iii) that following the First Stage
Closing, no brochures, leaflets or similar documents and no packaging
containing any reference to the Broadwing Name shall be printed,
ordered or produced for use by any Seller or any of its Affiliates (or
in connection with its business) and, with respect to existing
brochures, leaflets or similar documents and packaging containing a
reference to the Broadwing
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Name, that Sellers shall, and Sellers shall cause each of its
Affiliates to, use its reasonable efforts to ensure that, as soon as
reasonably practicable but in no event later than sixty (60) days
following the First Stage Closing, such references are deleted, pasted
over or a sticker is put over such references, except in those
jurisdictions where an exclusive license is not granted pursuant to
Section 5.17(c); and
(iv) that Sellers shall, and Sellers
shall cause each of its Affiliates to, use its reasonable efforts to
ensure that, from and following the First Stage Closing, no stocks,
goods, products, services or software are manufactured, produced or
provided showing or having marked thereon or using the Broadwing Name;
provided that any stocks, goods or products of a Seller or any of its
Affiliates which, at the date hereof, show the Broadwing Name or have
the Broadwing Name marked thereon may be used by such Seller or
Affiliate in the conduct of their business as carried on at the date
hereof, except in those jurisdictions where an exclusive license is not
granted pursuant to Section 5.17(c).
(f) Notwithstanding any other provision of this
Agreement, it is understood and agreed that the remedy of indemnity payments
pursuant to Article 8 and other remedies at Law would be inadequate in the case
of a breach of any of the covenants contained in this Section 5.17. Accordingly,
Buyers shall be entitled to equitable relief, including the remedy of specific
performance, with respect to any breach or attempted breach of such covenants,
in accordance with Section 10.11.
5.18 BUSINESS AUDITED FINANCIALS
At or prior to Closing, Sellers shall deliver to Buyers financial
statements for the Business for the periods as at and ending December 31, 2000,
2001 and 2002 which have been audited by Sellers' independent public accountants
in compliance with applicable requirements of generally accepted accounting
principles, generally accepted auditing standards and Securities and Exchange
Commission requirements for inclusion in a periodic report on Form 8-K. Buyers
shall be responsible for all fees charged and costs incurred by such independent
public accountants for the audit of such financial statements and for any
out-of-pocket expenses incurred by Sellers in connection therewith. Buyers
acknowledge and agree that Sellers make, and shall make, no representation or
warranty with respect to such financial statements to be prepared pursuant to
this Section.
5.19 ADDITIONAL MONTHLY FINANCIALS
For each month ending after the date of this Agreement and prior to the
First Stage Closing Date, as soon as available but in any event within twenty
(20) days after the end of each such month, Sellers shall deliver to Buyers an
unaudited consolidated balance sheet and profit and loss for the Business (which
for purposes hereof may include the Retained Business) in substantially the form
of the Monthly Statements.
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5.20 CERTAIN BCI AND SELLERS' GUARANTIES
BCI and Sellers have executed and delivered the guaranties listed on
Schedule 5.20 pursuant to which BCI and Sellers have guaranteed certain
liabilities and/or obligations of one or more of the Sellers that constitute
Assumed Liabilities (collectively, the "BCI and Sellers' Guaranties"). Buyers
and Sellers shall use reasonable commercial efforts to obtain the Consent of the
Persons who are the named beneficiaries of the BCI and Sellers' Guaranties to
the replacement of BCI or applicable Seller, as guarantor under the BCI and
Sellers' Guaranties, with Buyers' Parent, with respect to the Assumed
Liabilities, provided that neither Buyers nor Buyers' Parent shall be required
to pay any fees or make any other financial or other concession to any such
Persons, including without limitation, any amendment, supplement or other
modification to any BCI or Seller Guaranty. In the event Buyers' Parent has not
replaced BCI or the applicable Seller under any BCI or Seller Guaranty on or
prior to the Second Stage Closing, Buyers shall indemnify, defend and hold
harmless BCI or the applicable Seller with respect to any Assumed Liabilities
under such BCI and Seller Guaranty(ies) as set forth in Section 8.2(c)(i). BCI
and Sellers shall remain on, and continue to be liable under, the BCI and
Sellers' Guaranties with respect to any Excluded Liabilities, and Sellers shall
indemnify, defend and hold harmless Buyers with respect to any Excluded
Liabilities under the BCI and Sellers' Guaranties as set forth in Section
8.2(b)(i).
5.21 COLLECTION OF RECEIVABLES
Prior to the applicable Staged Closing Date, Sellers shall continue to
collect Receivables in the ordinary course of business and according to past
practices, provided that Sellers shall not be obligated to initiate a suit or
other cause of action in order to collect any of the Receivables.
5.22 PARTICIPATING ACCOUNTS
From and after the First Stage Closing Date, Buyers shall use
reasonable commercial efforts to collect the Participating Accounts, provided
that Buyers shall not be obligated to initiate a suit or other cause of action
in order to collect any of the Participating Accounts. Within thirty (30) days
after the end of each month after the First Stage Closing for the first six (6)
months after such Closing, and within thirty (30) days after the end of each
calendar quarter for two (2) years thereafter, Buyers shall provide a written
statement to Sellers showing the collections of any amount of the Participating
Accounts (the "Collected PA Amounts"), and the out-of-pocket expenses incurred
by Buyers to make such collections. Buyers shall submit to Sellers with each
such statement an amount equal to the product of seventy-five percent (75%) and
the excess of the Collected PA Amounts over such out-of-pocket expenses.
5.23 COMMITMENT LETTERS
Prior to the First Stage Closing Date, Buyers shall meet with each
Business Employee who has an Employment Agreement set forth on Schedule 3.8(a),
explain such Business Employee his or her contemplated position within Buyers
and make a corresponding offer of employment. Buyers shall assume the Employment
Agreement of each such Business Employee who agrees to accept such offer
(including such position) and executes a letter agreeing to the assumption of
such Employment Contract and that such assumption (and the position to be held
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by such Business Employee) is not a constructive termination under such
Employment Contract (a "Commitment Letter").
5.24 OPTIONAL INTERCOMPANY AGREEMENTS
At the First Stage Closing, Buyers shall have the right (but not the
obligation) to enter into the Collateral Agreements set forth on Schedule 5.24
on the terms set forth therein. In the event that Buyers determine, in their
sole discretion, not to accept such terms, Buyers and Sellers shall undertake
good faith negotiations to attempt to reach agreement on mutually acceptable
terms for such Collateral Agreements. Any election or failure to reach mutual
agreement pursuant to this Section 5.24 will not be grounds for the failure of a
condition under Section 7.3(b).
5.25 BTS EMPLOYEES.
On or before the First Stage Closing Date, the Broadwing Technology
Services, Inc. employees set forth on Schedule 5.25 shall be transferred to the
Business and become Business Employees.
5.26 REVENUES BY STATE
Within sixty (60) days prior to the contemplated First Stage Closing
Date, Sellers shall deliver to Buyers a statement showing the allocation of the
revenues of the Business under Customer Contracts for each state in the United
States in which Sellers conduct the Business, such statement to be as of the
last day of the immediately preceding month (the "Revenues Statement"),
accompanied by a certification from the financial officer of Sellers who
prepared the Revenue Statement that it was prepared consistent with the
methodology used to fulfill prior annual reporting requirements of Sellers to
the relevant State PUCs.
6. CLOSING
6.1 CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place in two (2) stages at the offices of Gibson, Dunn &
Crutcher LLP in New York City. The first closing stage (the "First Stage
Closing"), at which the Initial Purchase Price shall be paid in full, shall
commence at 9:00 a.m. local time on the last Business Day of the month
containing the date on which all FCC and State PUC Consents necessary to
effectuate the transfer of Customer Contracts that generate not less than eighty
percent (80%) of the revenues of the Business set forth in the Revenues
Statement have been obtained (the "First Stage Closing Date"). The second
closing stage (the "Second Stage Closing") shall commence at 9:00 a.m. local
time on the first Business Day after the date on which the last FCC and the last
State PUC Consent(s) necessary to effectuate transfer of the remaining Acquired
Assets, including the Customer Contracts, have been obtained (the "Second Stage
Closing Date"). Buyers may elect to effect the Second Stage Closing at any time
on or subsequent to the First Stage Closing Date, by written notice to Sellers
at least five (5) Business Days before the Second Stage Closing Date contained
in such notice (the "Two Stage Waiver Notice").
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6.2 DELIVERIES BY SELLERS
At the applicable Staged Closing Date, and as applicable, Sellers shall
deliver to Buyers the following:
(a) a bill of sale for the Acquired Assets
(other than those Acquired Assets being conveyed pursuant to the Assignment and
Assumption Agreement, the Intellectual Property Rights Assignment Agreement and
the other agreements and instruments of conveyance executed at the applicable
Staged Closing), which shall include a schedule of the Acquired Assets (or a
reasonably specific description of the categories thereof) being transferred or
assigned from the respective Sellers to the respective Buyers, substantially in
the form of Exhibit O (the "Bill of Sale"), duly executed by Sellers;
(b) a counterpart of the Assignment and
Assumption Agreement substantially in the form of Exhibit P (the "Assignment and
Assumption Agreement") which shall include a schedule of the Assumed Liabilities
(or a reasonably specific description of categories thereof) being transferred
to or assumed by the respective Buyers from the respective Sellers, duly
executed by Sellers;
(c) executed counterparts of each other
Collateral Agreement;
(d) a certificate of non-foreign status as
described in U.S. Treasury Regulation section 1.1445-2(b)(2) of the Treasury
Regulations;
(e) other instruments of transfer reasonably
required by Buyers to evidence the transfer of the Acquired Assets to Buyers;
(f) certificate, dated the First Stage Closing
Date, of Sellers certifying as to the compliance by Sellers with Sections 7.2(a)
and (b);
(g) an opinion, dated the First Stage Closing
Date, from Gibson, Dunn & Crutcher LLP, counsel(s) for Sellers, and/or such
other counsel(s) reasonably acceptable to Buyers, in form and substance
reasonably satisfactory to Buyers and to the effect set forth and otherwise as
contemplated on Exhibit Q.
6.3 DELIVERIES BY BUYERS
At the applicable Staged Closing Date, and as applicable, Buyers shall
deliver, or shall cause a subsidiary of Buyers, as applicable, to deliver, to
Sellers or their respective designee(s) the following:
(a) the Initial Purchase Price;
(b) a counterpart of the Bill of Sale and the
Assignment and Assumption Agreement, duly executed by Buyers;
(c) executed counterparts of each other
Collateral Agreement;
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(d) a certificate, dated the First Stage Closing
Date, of Buyers, certifying as to compliance by Buyers with Sections 7.3(a) and
(b); and
(e) An opinion, dated the First Stage Closing
Date, of Mayer, Brown, Rowe & Maw, special counsel for Buyers, and/ or such
other counsel reasonably acceptable to Sellers, in form and substance reasonably
satisfactory to Sellers and to the effect set forth and otherwise as
contemplated on Exhibit R.
6.4 CONTEMPORANEOUS EFFECTIVENESS
All acts and deliveries prescribed by this Article 6, regardless of
chronological sequence, will be deemed to occur contemporaneously and
simultaneously on the occurrence of the last act or delivery, and none of such
acts or deliveries will be effective until the last of the same has occurred.
7. CONDITIONS PRECEDENT TO STAGED CLOSINGS
7.1 FIRST STAGE CLOSING GENERAL CONDITIONS
The respective obligations of Buyers and Sellers to effect the First
Stage Closing of the transactions contemplated hereby are subject to the
fulfillment, prior to or at the First Stage Closing Date, of each of the
following conditions; provided that such conditions shall only be a condition to
the obligations of and may only be waived by, the party(ies) adversely affected
thereby:
(a) No Action by any Governmental Body or other
Person shall have been instituted or threatened which (i) has had, or is
reasonably likely to have, a Material Adverse Effect or (ii) is reasonably
likely to enjoin, restrain or prohibit, or could result in substantial damages
in respect of, any provision of this Agreement or any Collateral Agreement or
the consummation of the transactions contemplated hereby or thereby, or affect
materially and adversely the right of Buyers to own the Acquired Assets or to
operate the Business.
(b) Any applicable waiting period under the HSR
Act relating to the transactions contemplated by this Agreement and the
Collateral Agreements shall have expired or been terminated.
7.2 FIRST STAGE CLOSING CONDITIONS PRECEDENT TO BUYERS'
OBLIGATIONS
The obligations of Buyers to effect the First Stage Closing of the
transactions contemplated hereby are subject to the fulfillment, prior to or at
the First Stage Closing Date, of each of the following conditions, any of which
may be waived in writing by Buyers in their sole discretion:
(a) (i) The representations and warranties of
Sellers contained in this Agreement shall be true and correct both when made and
at and as of the First Stage Closing Date, as though such representations and
warranties were made at and as of the First Stage Closing Date (except to the
extent that such representations and warranties are made as of a specified date,
in which case such representations and warranties shall be true and correct as
of
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such specified date) and (ii) each Seller shall have performed all obligations
and agreements and complied with all covenants and conditions required by this
Agreement and the Collateral Agreements to be performed or complied with by it
prior to or at the First Stage Closing Date, except where (x) with respect to
clause (i) the failure of such representations and warranties to be true and
correct (without giving effect to any limitation as to materiality or Material
Adverse Effect or other materiality qualifiers as set forth therein) and/or (y)
with respect to clause (ii) the failure to so perform or comply (without giving
effect to any limitation as to materiality or Material Adverse Effect or other
materiality qualifiers as set forth therein), have not individually or in the
aggregate had, or would not individually or in the aggregate be reasonably
likely to have, a Material Adverse Effect with respect to the Business or Buyers
(taken as a whole) or a material adverse effect on the ability of any of the
Sellers to consummate the transactions contemplated hereby or a material adverse
effect on Sellers' Parent's ability to consummate the transactions contemplated
by Sellers' Parent Guaranty.
(b) Each Seller party thereto shall have
executed and delivered, and have caused the other parties thereto (other than
Buyers) to have executed and delivered the agreements, instruments and documents
listed in Section 6.2.
(c) No change since December 31, 2002 (i) shall
have occurred which has had a Material Adverse Effect with respect to the
Business or Buyers (taken as a whole) or has had a material adverse effect on
the ability of any of the Sellers to consummate the transactions contemplated
hereby or on the Sellers' Parent's ability to consummate the transactions
contemplated by the Sellers' Parent Guaranty, and (ii) shall have occurred (or
circumstance involving a prospective change) which is reasonably likely to have
a Material Adverse Effect with respect to the Business.
(d) Seventy-five percent (75%) of the thirty
(30) Business Employees set forth on Schedule 7.2(d) and identified as key sales
and operations employees or replacements that are acceptable to Buyers in their
sole discretion (collectively, the "Key Employees") shall have accepted Buyers'
offer of employment.
(e) Buyers shall have received written evidence
reasonably satisfactory to them (i) that the Sellers' Consents set forth and
indicated as required on Schedule 3.3(b) (including without limitation an
amendment of the Credit Agreement, or Consent under the Credit Agreement, that
permits the consummation of the transactions contemplated by this Agreement and
the Collateral Agreements) and (ii) the Buyers' Consents set forth and indicated
as required on Schedule 4.3(b) have been received.
(f) Buyers shall have received written evidence
reasonably satisfactory to them that each of the Encumbrances (other than
Permitted Encumbrances) on the Acquired Assets, and Permitted Encumbrances
marked with an asterisk on Schedule 1.1(c), has been released, including,
without limitation, any Encumbrance under the Credit Agreement.
(g) The Sellers' Parent Guaranty shall continue
to be in full force and effect, and Sellers' Parent shall have received the
written amendment of the Credit Agreement, or Consent under the Credit
Agreement, necessary to permit the execution, delivery and performance of
Sellers' Parent Guaranty.
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(h) No facts, events or circumstance shall have
occurred prior to First Stage Closing Date that, in the aggregate, cause or
permit, or are reasonably likely to cause or permit before or after First Stage
Closing Date, the Pension Benefit Guaranty Corporation to seek to impose or
impose an Encumbrance on any of the Acquired Assets.
(i) Buyers shall have received written evidence
reasonably satisfactory to them (A) that the resolutions and amendments to the
articles or certificate of incorporation and/or other organizational documents
contemplated by Section 5.17(a) have been obtained, and (B) that the related
registrations are to become effective on the Second Stage Closing Date.
(j) There shall not have been or be any
Encumbrance (other than Permitted Encumbrances, excluding those contemplated by
Section 7.2(f) to be removed) imposed on any of the Acquired Assets in
connection with any Bankruptcy of any Seller or any of their Affiliates
(including, without limitation, Sellers' Parent and/or BCI).
7.3 FIRST STAGE CLOSING CONDITIONS PRECEDENT TO SELLERS'
OBLIGATIONS
The obligations of Sellers to effect the First Stage Closing of the
transactions contemplated hereby are subject to the fulfillment, prior to or at
the First Stage Closing Date, of each of the following conditions, any of which
may be waived in writing by Sellers in their sole discretion:
(a) (i) The representations and warranties of
Buyers contained in this Agreement shall be true and correct both when made and
at and as of the First Stage Closing Date, as though such representations and
warranties were made at and as of the First Stage Closing Date (except to the
extent that such representations and warranties are made as of a specified date,
in which case such representations and warranties shall be true and correct as
of such specified date) and (ii) Buyers shall have performed all obligations and
agreements and complied with all covenants and conditions required by this
Agreement or any Collateral Agreement to be performed or complied with by their
prior to or at the First Stage Closing Date, except where (x) with respect to
clause (i) the failure of such representations and warranties to be true and
correct (without giving effect to any limitation as to materiality or Material
Adverse Effect or any other materiality qualifiers as set forth therein) and/or
(y) with respect to clause (ii) the failure to so perform or comply (without
giving effect to any limitation as to materiality or Material Adverse Effect or
any other materiality qualifiers as set forth therein) has not individually or
in the aggregate had, or would not individually or in the aggregate be
reasonably expected to have, a Material Adverse Effect with respect to Sellers
(taken as a whole), a material adverse effect on the ability of any of the
Buyers to consummate the transactions contemplated hereby or a material adverse
effect on Buyers' Parent to consummate the transactions contemplated by the
Buyers' Parent Guaranty.
(b) Buyers shall have executed and delivered,
and have caused the other parties thereto (other than Sellers and Sellers'
Parent) to have executed and delivered the documents listed in Section 6.3.
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(c) The Buyers' Parent Guaranty shall continue
to be in full force and effect.
(d) Buyers shall have delivered the Initial
Purchase Price.
(e) Sellers shall have received written evidence
reasonably satisfactory to them (i) that the Buyers' Consents set forth and
indicated as required on Schedule 4.3(b) have been received and (ii) an
amendment of the Credit Agreement, or Consent under the Credit Agreement, that
permits the consummation of the transactions contemplated by this Agreement and
the Collateral Agreements has been received.
7.4 SECOND STAGE GENERAL CONDITIONS
The respective obligations of Buyers and Sellers to effect the Second
Stage Closing of the transactions contemplated hereby are subject to (i) there
not being an injunction or other court order prohibiting the consummation of the
transactions contemplated by this Agreement to occur on the Second Stage Closing
Date and (ii) Sellers shall have changed their corporate or company name to a
name that does not include the word "Broadwing" or any name intended or likely
to be confused or associated with any Broadwing Name and have caused the
registration of the new name with the appropriate Governmental Body.
8. SURVIVAL AND INDEMNITY
The rights and obligations of Buyers and Sellers under this Agreement
shall be subject to the following terms and conditions:
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Buyers and Sellers contained in
this Agreement and in any Collateral Agreement shall survive the First Stage
Closing Date for eighteen (18) months, except the Environmental Warranties which
shall survive for three (3) years, Tax Warranties which shall survive for the
applicable statutes of limitations plus ninety (90) days and Title and
Authorization Warranties which shall survive forever. Neither Sellers nor Buyers
shall have any liability whatsoever with respect to any such representations or
warranties unless a claim is made hereunder prior to expiration of the survival
period for such representation or warranty.
8.2 GENERAL AGREEMENT TO INDEMNIFY
(a) Sellers, jointly and severally, on the one
side, and Buyers, on the other side (Sellers or Buyers, whichever has the
obligation to indemnify, defend and hold harmless, the "Indemnifying Party")
shall indemnify, defend and hold harmless the other party hereto and their
Affiliates and any employee, representative, agent, director, officer, partner,
member or principal, as applicable, or assign of such party and their Affiliates
(each, an "Indemnified Party") from and against any and all Actions, whether by
a third party against an Indemnified Party or by one party against another party
(collectively, "Claims") related to or arising out of or resulting from,
liabilities, losses, damages, costs and expenses (including
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reasonable attorneys', accountants' and experts' fees and costs, and costs and
expenses of establishing entitlement to indemnification) (collectively,
"Losses") incurred by any Indemnified Party related to, or arising out of or
resulting from (i) any breach of or any inaccuracy in any representation or
warranty of the Indemnifying Party contained in this Agreement or any Collateral
Agreement when made or as of the applicable Staged Closing Date (or as of such
different date or period specified for such representation or warranty) as
though such representation or warranty were made at the applicable Staged
Closing Date (or at such different date or period specified for such
representation or warranty) (and for purposes of determining liability under
this Section 8.2, after removing any reference to materiality or Material
Adverse Effect or any other materiality qualifiers contained in such
representations and warranties other than such of the foregoing that are
underlined, provided that when an underlined reference to the word "material" or
"materiality" also appears in brackets, the applicable representations and
warranties should not be read for purposes of this Agreement (other than the
proceeding portion of this sentence) as though such terms were therein) or (ii)
the breach by the Indemnifying Party of any covenant or agreement of such party
contained in this Agreement or any Collateral Agreement.
(b) Sellers further agree jointly and severally
to indemnify, defend and hold harmless Buyers and any other Indemnified Party of
Buyers from and against any Losses incurred by such party arising out of,
resulting from, or relating to (i) any of the Excluded Assets (including the
Retained Business) or Excluded Liabilities (including those related to the
Retained Business), (ii) any matters identified on Schedule 8.2(b), (iii) any
matters identified on Schedule 3.6(a) or (b), (iv) any Taxes of Sellers (except
any such Taxes for which Buyers are responsible pursuant to Section 5.3 or
Section 10.2) and (v) any failure of Sellers to comply with the provisions of
any bulk transfer laws which may be applicable to the transactions contemplated
hereby and by the Collateral Agreements.
(c) Buyers further agree to jointly and
severally indemnify, defend and hold harmless Sellers and any other Indemnified
Party of Sellers from and against any Losses incurred by such party arising out
of, resulting from, or relating to: (i) any of the First Stage Assumed
Liabilities after the First Stage Closing and the Second Stage Assumed
Liabilities after the Second Stage Closing; (ii) any claim, demand or liability
for the Taxes for which Buyers are responsible pursuant to Section 5.3; (iii)
any other liability or obligation with respect to the conduct of the Business
transferred on the First Stage Closing Date after such Closing Date and with
respect to the conduct of the Business transferred after the First Stage
Closing, to the extent arising out of, or resulting from, facts, events or
circumstances occurring, or which accrue, after the applicable Staged Closing
Date (other than due to any failure to comply or breach of any of Sellers or any
of their Affiliates, whether before, on or after the applicable Staged Closing
Date); and (iv) any Third Party Claims arising out of the Two Stage Waiver
Notice (if any).
(d) Whether or not the Indemnifying Party
chooses to defend or prosecute any Third Party Claim (as defined in Section
8.3(a)), both parties hereto shall cooperate in the defense or prosecution
thereof and shall furnish such records, information and testimony, and attend
such conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith, except that nothing herein shall
permit
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Sellers, or require Buyers as a condition to obtaining indemnification,
to seek to collect back sales or use Tax from clients or customers of the
Business.
(e) The indemnification obligations of each
party hereto under this Article 8 shall inure to the benefit of the Affiliates
of the other party and the employees, representatives, agents, directors,
officers, partners, members and principals, as applicable, of the other party
hereto and their Affiliates on the same terms as are applicable to such other
party.
(f) Sellers' and Buyers' respective liability
for all Claims under Section 8.2(a)(i) shall be subject to the following
limitations:
(i) neither the Sellers nor Buyers,
respectively, shall have any liability for any Losses arising from such
Claims unless the aggregate of all Losses for which the Sellers or
Buyers, respectively, would, but for this provision, be liable exceeds
on a cumulative basis an amount equal to Five Hundred Thousand U.S.
Dollars ($500,000) (the "Threshold"), provided, that in the event that
such Losses of Sellers or Buyers, as applicable, on a cumulative basis
exceed the Threshold, the liability shall be from the first dollar of
Losses. Notwithstanding the foregoing, the Threshold shall not apply
(i) to Claims or Losses with respect to the Title and Authorization
Warranties, Tax Warranties and the representations and warranties
contained in Sections 3.13 and 4.6, or (ii) when Buyers have the right
not to proceed to Closing under Section 7.2(a) but proceed to Closing
under Section 5.7(c);
(ii) the Sellers' or Buyers' respective
aggregate liability for all Losses arising from such Claims (other than
any such Claims with respect to the Title and Authorization Warranties,
the Tax Warranties and the representations and warranties in Sections
3.13 and 4.6) shall not exceed fifty percent (50%) of the Purchase
Price (the "General Cap");
(iii) the Sellers' or Buyers' respective
aggregate liability with respect to their respective Title and
Authorization Warranties shall not exceed the Purchase Price (the
"Overall Cap"), and the Sellers' or Buyers' respective aggregate
liability under the preceding clause (ii) and this clause (iii) shall
not exceed the Overall Cap;
(iv) Sellers' or Buyers' respective
liability for Tax Warranties and the representations and warranties
contained in Sections 3.13 and 4.6 shall not be subject to the General
Cap or the Overall Cap; and
(v) in no event shall Sellers be
obligated to indemnify Buyers or any other Person with respect to any
Loss to the extent that a specific accrual or reserve for the amount of
such Loss was included in the calculation of the Closing Working
Capital. No Indemnified Party may make a claim for indemnification
under Section 8.2(a)(i) for breach by the Indemnifying Party of a
particular representation or warranty after the expiration of the
survival period specified in Section 8.1.
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(g) The amount of any Loss for which
indemnification is provided under this Article 8 shall be net of any amounts
recovered or recoverable by the Indemnified Party under insurance policies with
respect to such Loss.
(h) Notwithstanding anything herein or in the
Collateral Agreements (other than the Security Agreement) to the contrary, none
of the parties hereto or thereto shall be liable to the other, whether in
contract, tort or otherwise, for any special, indirect, incidental,
consequential, punitive or exemplary or other similar type of damages
whatsoever, which in any way arise out of, relate to, or are a consequence of,
its performance or nonperformance hereunder or the Collateral Agreements (other
than through fraud), including loss of profits, business interruptions and
claims of customers, except to the extent to which a Third Party Claim against
an Indemnified Party includes such damages.
(i) Each party further acknowledges and agrees
that, should the First Stage Closing occur, its sole and exclusive remedy with
respect to any and all claims relating to this Agreement, the Collateral
Agreements, the transactions contemplated hereby, the Business and its assets,
liabilities and business (other than claims of, or causes of action arising
from, fraud; provided that inaccuracies of representations or warranties
(whether or not accurate facts were knowable by inquiry including title searches
or otherwise) shall not be construed to be fraud, absent intent to deceive)
shall be pursuant to the indemnification provisions set forth in this Article 8.
In furtherance of the foregoing, except as set forth in the preceding sentence,
each party hereby waives and releases, from and after the First Stage Closing
Date, any and all rights, claims and causes of action (other than claims of, or
causes of action arising from, fraud, subject to the proviso set forth above in
this Section 8.2(i)) it may have against the other party and its Affiliates
arising under or based upon any Federal, state, local or foreign statute, law,
ordinance, rule or regulation or otherwise (except pursuant to the
indemnification provisions set forth in this Article 8) arising out of or
related to this Agreement and the Collateral Agreements. Notwithstanding the
foregoing, nothing in this Section 8.2(i) or elsewhere in this Agreement shall
be deemed to limit any party's right to seek specific performance or other
equitable relief in any court of competent jurisdiction of its rights and
remedies hereunder or in any Collateral Agreement, in accordance with Section
10.11.
8.3 GENERAL PROCEDURES FOR INDEMNIFICATION
(a) Procedures Relating to Indemnification. In
order for the Indemnified Party to be entitled to any indemnification provided
for under this Agreement in respect of, arising out of or involving a Claim made
by any Person against the Indemnified Party (each, a "Third Party Claim"), such
Indemnified Party must notify the Indemnifying Party in writing, and in
reasonable detail, of the Third Party Claim within ten (10) Business Days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, that the failure of the Indemnified Party to give notice in the manner
specified above shall not relieve the Indemnifying Party of its obligations
under this Article 8 except to the extent (if any) that the Indemnified Party
shall have been materially prejudiced thereby.
If the Indemnifying Party does not object in writing to such
indemnification claim within thirty (30) days of the Indemnifying Party's
knowledge of its receipt of notice thereof, the Indemnified Party shall be
entitled to recover promptly from the Indemnifying Party the amount
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of such claim, and no later objection by the Indemnifying Party shall be
permitted. If the Indemnifying Party agrees that it has an indemnification
obligation but objects that it is obligated to pay only a lesser amount, the
Indemnified Party shall nevertheless be entitled to recover promptly from the
Indemnifying Party the lesser amount, without prejudice to the Indemnified
Party's claim for the difference.
If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and
to assume the defense thereof with counsel selected by the Indemnifying Party
which is reasonably satisfactory to the Indemnified Party. Should the
Indemnifying Party so elect to assume the defense of a Third Party Claim, the
Indemnifying Party shall not be liable to the Indemnified Party for legal
expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof unless the Indemnified Party reasonably determines in its
judgment that representation by the Indemnifying Party's counsel of both the
Indemnifying Party and the Indemnified Party would present such counsel with a
conflict of interest, then such Indemnified Party may employ separate counsel to
represent or defend it in any such Third Party Claim and the Indemnifying Party
shall pay the reasonable fees and disbursements of one such separate counsel. If
the Indemnifying Party assumes such defense, the Indemnified Party shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense (subject to the preceding sentence), separate from the counsel
employed by the Indemnifying Party, it being understood that the Indemnifying
Party shall control such defense. The Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnified Party for any period
during which the Indemnifying Party has failed to assume the defense thereof
(other than during the period prior to the time the Indemnified Party shall have
given notice of the Third Party Claim as provided above). All attorneys' fees
and expenses shall count towards the indemnity limit specified in Section
8.2(f).
(b) If the Indemnifying Party so elects to
assume the defense of any Third Party Claim, all of the Indemnified Parties
shall reasonably cooperate with the Indemnifying Party in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
Indemnifying Party's request) the provision to the Indemnifying Party of records
and information that are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Any settlement
or compromise made or caused to be made by the Indemnified Party (which is
permitted if the Indemnifying Party has declined to assume the defense thereof)
or the Indemnifying Party, as the case may be, of a Third Party Claim referred
to in this paragraph shall also be binding upon the Indemnifying Party or the
Indemnified Party, as the case may be, in the same manner as if a final judgment
or decree had been entered by a court of competent jurisdiction in the amount of
such settlement or compromise; provided, that no such settlement by the
Indemnifying Party shall be binding upon the Indemnified Party without its prior
written consent, which shall not be unreasonably withheld or delayed with
respect to proposed settlements whereby the Indemnified Party is held harmless
with respect to all Losses and no other material obligation is imposed upon the
Indemnified Party (provided that in the event a Third Party Claim is subject to
the General Cap or the Overall Cap (each, a "Cap"), the Indemnified Party need
only be held harmless up to the amount of the remaining balance of the
applicable Cap); and provided, further that where a Third Party Claim is subject
to a Cap and the proposed settlement involves Losses in excess of such Cap (and
does
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not impose any other material obligation on the Indemnified Party) either the
Indemnified Party shall accept the proposed settlement or agree to assume the
defense thereof and hold harmless the Indemnifying Party for all Losses over the
lesser of the amount of the proposed settlement or the remaining balance of the
applicable Cap.
(c) Each Seller and Buyers shall make
commercially reasonable efforts to mitigate any Claim or other liability with
respect to which one party is obligated to indemnify the other party hereunder.
9. TERMINATION
9.1 TERMINATION
This Agreement may be terminated at any time prior to the applicable
Staged Closing Date by:
(a) The mutual written consent of Buyers and
Sellers.
(b) Buyers or Sellers, if there shall be in
effect a non-appealable injunction or order of a Governmental Body of competent
jurisdiction prohibiting the consummation of the transactions contemplated
hereby.
(c) Buyers or Sellers, if the First Stage
Closing Date shall not have occurred by the date that is ten (10) months
following the date hereof; provided that the failure of the First Stage Closing
to occur on or before such date did not result from the failure by the party
seeking termination of this Agreement to fulfill any undertaking or agreement or
satisfy any condition provided for herein that is required to be fulfilled or
satisfied by it prior to First Stage Closing.
(d) By Sellers, if there shall have been a
breach of any representation and warranty or covenant of Buyers hereunder or
under any of its Collateral Agreements, and such breach shall not have been
remedied within sixty (60) days after receipt by Buyers of notice in writing
from Sellers specifying the breach and requesting such be remedied, except where
such breach of representation and warranty or covenant (without giving effect to
any limitation as to materiality or Material Adverse Effect or any other
materiality qualifiers as set forth therein) has not individually or in the
aggregate had, or would not individually or in the aggregate be reasonably
likely to have, a Material Adverse Effect with respect to Sellers (taken as a
whole) or on the ability of any of the Buyers to consummate the transactions
contemplated hereby or a material adverse effect on Buyers' Parent's ability to
consummate the transactions contemplated by the Buyers' Parent Guaranty.
(e) By Buyers, if there shall have been a breach
of any representation and warranty or covenant of Sellers hereunder or under any
of its Collateral Agreements, and such breach shall not have been remedied
within sixty (60) days after receipt by Sellers of notice in writing from Buyers
specifying the breach and requesting such be remedied, except where such breach
of representation and warranty or covenant (without giving effect to any
limitation as to materiality or Material Adverse Effect or any other materiality
qualifiers as set forth
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therein) has not individually or in the aggregate had, or would not individually
or in the aggregate be reasonably likely to have, a Material Adverse Effect with
respect to the Business or Buyers (taken as a whole) or on the ability of any of
the Sellers to consummate the transactions contemplated hereby or a material
adverse effect on the Sellers' Parents' ability to consummate transactions
contemplated by the Sellers' Parent's Guaranty.
9.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement in accordance with
Section 9.1, this Agreement shall become void and have no effect, without any
liability on the part of any party or its directors, officers, partners,
members, principals or stockholders, except for the obligations of the parties
hereto as provided in Sections 10.1, 10.2, 10.4, 10.5, 10.12 and this Section
9.2, and except that, notwithstanding anything in this Agreement to the
contrary, neither Sellers nor Buyers shall be relieved or released from any
liabilities or damages arising out of its breach of any provision of this
Agreement.
10. MISCELLANEOUS PROVISIONS
10.1 NOTICES
All notices and other communications hereunder and under the Collateral
Agreements shall be in writing and shall be deemed to have been duly given upon
receipt if (i) mailed by certified or registered mail, return receipt requested,
(ii) sent by a nationally recognized overnight delivery service (receipt
requested), fee prepaid, (iii) sent via facsimile with receipt confirmed, or
(iv) delivered personally, addressed as follows or to such other address or
addresses of which the respective party shall have notified the other.
(a) If to Sellers, to:
Broadwing Inc.
201 East Fourth Street, 102-745
Cincinnati, Ohio 45204
Attention: General Counsel
Facsimile: (513) 721-7358
With an additional copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Steven Shoemate
Facsimile: (212) 351-5316
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(b) If to Buyers, to:
C III Communications LLC
7015 Albert Einstein Drive
Columbia, MD 21046
Attention: Kim Larsen
Facsimile: (443) 259-4418
and:
C III Communications LLC
Suite 450
12444 Powerscourt Dr.
St. Louis, MO 63131
Attention: Martin Kerckhoff
Facsimile: 314-965-0500
With a copy to:
Mayer, Brown, Rowe & Maw
1909 K Street, N.W.
Washington, D.C. 20006
Attention: Stuart P. Pergament
Facsimile: (202) 263-3300
and
Paul Hastings, Janofsky & Walker LLP
75 East 55th Street
New York, New York 10022
Attention: Leigh P. Ryan
Facsimile: (212) 319-4090
10.2 EXPENSES
Any sales, use or other transfer taxes arising out of or incurred in
connection with the transactions contemplated by this Agreement shall be paid in
accordance with Section 5.3. Except as provided in the preceding sentence or
otherwise expressly provided in this Agreement or the Collateral Agreements,
each party will pay its own costs and expenses, including legal and accounting
expenses, related to the transactions contemplated by this Agreement,
irrespective of when incurred and whether or not the Closing occurs; provided,
that Buyers and Sellers shall bear their portion of the fees and expenses of the
filings under the HSR Act irrespective of the occurrence of Closing hereunder.
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10.3 ENTIRE AGREEMENT
The agreement of Sellers and Buyers, which is comprised of this
Agreement, the Schedules and Exhibits hereto and the documents referred to
herein and therein, including the Collateral Agreements, sets forth the entire
agreement and understanding between the parties and supersedes any prior
agreement or understanding, written or oral, relating to the subject matter of
this Agreement.
10.4 JURISDICTION, SERVICE OF PROCESS
Each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the (a) Supreme Court of the
State of New York, New York County and (b) United States District Court for the
Southern District of New York, for any actions, suits or proceedings arising out
of or relating to this Agreement and the Collateral Agreements (and agrees not
to commence any action, suit or proceeding relating thereto except in such
courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to its respective address set forth in Section
10.1 will be effective service of process for any action, suit or proceeding
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the Collateral
Agreements in the courts of the State of New York or the United States of
America located in the City of New York and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
10.5 GOVERNING LAW
This Agreement and the Collateral Agreements will be construed in
accordance with and governed by the internal laws of the State of New York
applicable to agreements made and to be performed entirely within such State
without regard to conflicts of laws principles thereof.
10.6 WAIVER
The rights and remedies of the parties to this Agreement and the
Collateral Agreements are cumulative and not alternative. Neither the failure
nor any delay by any party in exercising any right, power or privilege under
this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by Law, (a) no claim or right arising
out of this Agreement or the Collateral Agreements can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is given
and will not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure or noncompliance; and (c) no notice to or demand on one party
will be deemed to be a waiver of any obligation of such party or of the right of
the party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the Collateral Agreements.
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10.7 NO ORAL MODIFICATION
Neither this Agreement nor any Collateral Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment. Any attempted amendment in violation of this Section 10.7 will be
void ab initio.
10.8 ASSIGNMENTS, SUCCESSORS
No party may assign any of its rights under this Agreement or any
Collateral Agreements without the prior written consent of the other parties
hereto or thereto. Notwithstanding the foregoing, Buyers may assign this
Agreement or rights and obligations of Buyers hereunder, in each case in whole
or part, to any Affiliate of Buyers and to any successor to all or substantially
all of the Business (whether by merger, consolidation, sale of assets or
otherwise), provided that Buyers shall remain liable for all of their
obligations under this Agreement. Subject to the preceding sentences, this
Agreement and the Collateral Agreements will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted assigns
of the parties.
10.9 SEVERABILITY
If any provision of this Agreement or the Collateral Agreements is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement and the Collateral Agreements will remain in full
force and effect. Any provision of this Agreement or the Collateral Agreements
held invalid or unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
10.10 CAPTIONS
The Article, section and paragraph captions herein and the table of
contents hereto are for convenience of reference only, do not constitute part of
this Agreement and the Collateral Agreements and will not be deemed to limit or
otherwise affect any of the provisions hereof or thereof. Unless otherwise
specified, all references herein to numbered Articles and Sections are to
articles and sections of this Agreement, all references herein to Schedules are
to Schedules to this Agreement and all references herein to Exhibits are to
Exhibits to this Agreement.
10.11 SPECIFIC PERFORMANCE
Each party recognizes and affirms that in the event of breach by him or
it of any of the provisions of Sections 5.8, 5.9, or 5.17 money damages would be
inadequate and the other parties would have no adequate remedy at law.
Accordingly, each party agrees that the other parties shall have the right, in
addition to any other rights and remedies existing in their favor, to enforce
their respective rights and the breaching party's obligations under Sections
5.8, 5.9 or 5.17 not only by an action or actions for damages, but also by an
action or actions for specific performance, injunction and/or other equitable
relief in order to enforce or prevent any violations (whether anticipatory,
continuing or future) of the provisions of Sections 5.8, 5.9 or 5.17. If a bond
is required to be posted in order for any party to secure an injunction, the
parties agree that such bond need not exceed the sum of $1,000.
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10.12 NO THIRD PARTY BENEFICIARIES
Nothing in this Agreement or the Collateral Agreements, express or
implied, is intended to or shall constitute the parties hereto as partners or as
participants in a joint venture. This Agreement is solely for the benefit of the
parties hereto and, only to the extent provided in Article 8, their respective
Affiliates and employees, representatives, agents, directors, officers,
partners, members or principals, as applicable, or their respective assigns, for
whom the parties shall be entitled to enforce this Agreement, and no provision
of this Agreement shall be deemed to confer upon any other Third Parties any
remedy, claim, liability, reimbursement, cause of action or other right
(including a right to enforce). Nothing in this Agreement or the Collateral
Agreements shall be construed as giving to any Business Employee, or any other
individual, any right or entitlement of any kind of nature, whether under any
Benefit Plan, policy or procedure maintained by any Seller or Buyer or
otherwise. No Third Party shall have any rights under Section 502, 503 or 504 of
ERISA or any regulations thereunder because of this Agreement or the Collateral
Agreements that would not otherwise exist without reference to this Agreement or
the Collateral Agreements. No Third Party shall have any right, independent of
any right that exists irrespective of this Agreement or the Collateral
Agreements, under or granted by this Agreement or the Collateral Agreements, to
bring any Action at law or equity for any matter governed by or subject to the
provisions of this Agreement (except for Indemnified Parties as provided in
Section 8.2) or the Collateral Agreements.
10.13 COUNTERPARTS
This Agreement and Collateral Agreements may be executed simultaneously
in two or more counterparts, each of which will be deemed to be an original copy
of this Agreement and the Collateral Agreements and all of which together will
be deemed, respectively, to constitute one and the same agreement.
10.14 WAIVER OF COMPLIANCE WITH BULK TRANSFER LAWS
Buyers hereby waive compliance by Sellers with the provisions of any
bulk transfer laws which may be applicable to the transactions contemplated
hereby and by the Collateral Agreements.
10.15 PUBLICITY
No public release or announcement concerning the transactions
contemplated by this Agreement and/or the Collateral Agreements shall be issued
by any party (or any of its Affiliates) without the prior written consent of the
other parties, except as such release or announcement may be required by Law or
the rules or regulations of any securities exchange or other Governmental Body,
in which case the party required to make the release or announcement shall allow
the other parties reasonable time to comment on such release or announcement in
advance of such issuance. Buyers and Sellers to discuss further.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each party has caused this Agreement to be duly executed on
its behalf by its duly authorized officers as of the date first written above.
BROADWING COMMUNICATIONS
SERVICES INC.
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
BROADWING COMMUNICATIONS SERVICES
OF VIRGINIA INC.
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
BROADWING COMMUNICATIONS REAL
ESTATE SERVICES LLC
By:________________________________
Name: Thomas L. Schilling
Title: Manager
BROADWING SERVICES LLC
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
IXC BUSINESS SERVICES, LLC
By:________________________________
Name: Thomas L. Schilling
Title: Manager
74
BROADWING TELECOMMUNICATIONS INC.
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
IXC INTERNET SERVICES, INC.
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
BROADWING LOGISTICS LLC
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
MSM ASSOCIATES, LIMITED PARTNERSHIP
By: MUTUAL SIGNAL CORPORATION OF
MICHIGAN, its General Partner
By:________________________________
Name: Kevin W. Mooney
Title: Chief Executive Officer
75
C III COMMUNICATIONS, LLC
By:________________________________
Name:
Title:
C III COMMUNICATIONS OPERATIONS,
LLC
By:________________________________
Name:
Title:
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Exhibit A
Cranberry Plan Adjustment Statement
To provide for Initial Purchase Price payment to be adjusted as
follows:
To Be Decreased:
(1) If Cash Net Revenue is less than 98.50% of Cranberry Cash Net
Revenue Target, then $2.00 for every $1.00 of Cash Net Revenue that is less than
Cranberry Cash Net Revenue Target for the Measurement Period.
(2) If Cash EBITDA Minus Capital Expenditures is less than 98.50%
of Cranberry Cash EBITDA Minus Capital Expenditures Target, then $2.00 for every
$1.00 of Cash EBITDA Minus Capital Expenditures that is less than Cranberry Cash
EBITDA Minus Capital Expenditures Target for the Measurement Period.
The decrease cannot exceed $7,150,000 for either item (1) or (2) above.
As used in this Exhibit A:
"Cash EBITDA Minus Capital Expenditures" means EBITDA plus any allocated
management fee, plus retention bonus expense, plus vacation liability accrued
and transferred to Buyer, less Non-Cash Revenues and plus non-cash expenses
exclusive of the Retained Business and calculated consistent with Exhibit VIII-C
in the Master-Data Room Index, attached hereto.
"Cranberry Cash EBITDA Minus Capital Expenditures Target" means Cash EBITDA
minus capital expenditures exclusive of the Retained Business as contemplated in
the Cranberry 2003 plan (Exhibit VIII-C in the Master-Data Room Index, attached
hereto). Exhibit A.1 contains the Cranberry Cash EBITDA Minus Capital
Expenditures Targets by month for 2003.
"Cranberry Cash Net Revenue Target" means the Cash Net Revenue exclusive of the
Retained Business as contemplated in the Cranberry 2003 plan (Exhibit VIII-C in
the Master-Data Room Index, attached hereto). Exhibit A.1 contains the Cranberry
Cash Net Revenue Targets by month for 2003.
"Measurement Period" means the three (3) complete calendar months preceding the
First Stage Closing Date.
"Net Revenue" means revenue net of sales allowances and billing adjustments as
reported by BCI exclusive of the Retained Business and calculated consistent
with Exhibit VIII-C in the Master-Data Room Index, attached hereto.
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"Non-Cash Revenue" means revenue included in BCI's Income Statement related to
the amortization of IRU contracts where BCI has previously received cash or
revenue included in BCI's Income Statement related to barter agreements and
calculated consistent with Exhibit VIII-C in the Master-Data Room Index,
attached hereto.
"Cash Net Revenue" means Net Revenue less Non-Cash Revenue.
"EBITDA" means net income (loss) from continuing operations before interest,
income tax expense (benefit), depreciation, amortization, restructuring and
asset impairments, minority interest expense (income), equity loss in
unconsolidated entities, loss (gain) on investments, other expense (income),
extraordinary items and the effect of changes in accounting principles.
78