Exhibit 99.1
______________________________________________________________
ACQUISITION AGREEMENT
by and among
MCLEODUSA TELECOMMUNICATIONS SERVICES, INC.,
MCLEODUSA HOLDINGS, INC.,
MCLEODUSA INTEGRATED BUSINESS SYSTEMS, INC.,
MCLEODUSA MARKET RESPONSE, INC.
and
HOMEBASE ACQUISITION CORP.
July 16, 2002
______________________________________________________________
TABLE OF CONTENTS
-----------------
(not part of Agreement)
Page
ARTICLE I PURCHASE AND SALE................................................................2
SECTION 1.1 Purchase and Sale...................................................2
SECTION 1.2 Excluded Assets.....................................................5
SECTION 1.3 Nonassignable Agreements............................................6
SECTION 1.4 Assumed Liabilities.................................................7
SECTION 1.5 Purchase Price......................................................8
SECTION 1.6 Closing.............................................................8
SECTION 1.7 Allocation of Purchase Price.......................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS.......................................11
SECTION 2.1 Organization.......................................................11
SECTION 2.2 Capitalization.....................................................11
SECTION 2.3 Authorization; Validity of Agreement...............................12
SECTION 2.4 Consents and Approvals; No Violations..............................12
SECTION 2.5 Financial Statements...............................................13
SECTION 2.6 No Undisclosed Liabilities.........................................14
SECTION 2.7 Absence of Certain Changes.........................................15
SECTION 2.8 Employee Benefit Plans; ERISA......................................15
SECTION 2.9 Environmental Laws and Regulations.................................16
SECTION 2.10 Labor Matters......................................................17
SECTION 2.11 Litigation.........................................................17
SECTION 2.12 No Default; Compliance with Applicable Laws; Permits...............17
SECTION 2.13 Taxes..............................................................18
SECTION 2.14 Intellectual Property..............................................20
SECTION 2.15 Contracts..........................................................20
SECTION 2.16 Title to Assets....................................................21
SECTION 2.17 Insurance..........................................................22
SECTION 2.18 Sufficiency of Assets..............................................22
SECTION 2.19 Transactions with Affiliates.......................................22
SECTION 2.20 Auxiliary Business.................................................23
SECTION 2.21 Real Property......................................................23
SECTION 2.22 McLeod Plan of Reorganization......................................23
SECTION 2.23 Brokers or Finders.................................................24
SECTION 2.24 No Other Representations or Warranties.............................24
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................................24
SECTION 3.1 Organization.......................................................24
SECTION 3.2 Authorization; Validity of Agreement...............................25
SECTION 3.3 Consents and Approvals; No Violations..............................25
SECTION 3.4 Sufficient Funds; Solvency.........................................26
SECTION 3.5 Qualifications.....................................................26
SECTION 3.6 Litigation.........................................................27
SECTION 3.7 Investment Purpose.................................................27
SECTION 3.8 Brokers or Finders.................................................27
SECTION 3.9 Investigation by Purchaser.........................................27
ARTICLE IV COVENANTS.......................................................................28
SECTION 4.1 Interim Operations.................................................28
SECTION 4.2 Access to Information..............................................31
SECTION 4.3 Employees..........................................................32
SECTION 4.4 Publicity..........................................................34
SECTION 4.5 Approvals and Consents; Cooperation; Notification..................34
SECTION 4.6 Further Assurances.................................................35
SECTION 4.7 Supplements to the Disclosure Schedule.............................36
SECTION 4.8 Intercompany Arrangements..........................................36
SECTION 4.9 Insurance Coverage.................................................36
SECTION 4.10 Sellers' Names.....................................................37
SECTION 4.11 Working Capital....................................................38
SECTION 4.12 Certain Assets.....................................................39
SECTION 4.13 Vendor Contracts...................................................40
SECTION 4.14 Title Insurance and Estoppel Certificates..........................40
ARTICLE V TAX MATTERS.....................................................................40
SECTION 5.1 Preparation and Filing of Tax Returns..............................40
SECTION 5.2 Tax Allocation and Indemnity.......................................41
SECTION 5.3 Cooperation on Tax Matters.........................................42
SECTION 5.4 Contests...........................................................43
SECTION 5.5 Written Notices....................................................44
SECTION 5.6 Refund and Carrybacks..............................................44
SECTION 5.7 Section 338(h)(10) Election........................................44
SECTION 5.8 No Right of Set-Off or Off-Set.....................................45
SECTION 5.9 Mitigation.........................................................46
SECTION 5.10 Exclusive Remedies.................................................46
SECTION 5.11 Adjustment to Purchase Price.......................................46
SECTION 5.12 Transfer Taxes.....................................................46
SECTION 5.13 Conflicts and Survival.............................................46
ARTICLE VI CONDITIONS......................................................................47
SECTION 6.1 Conditions to Each Party's Obligation
to Effect the Closing........................................47
SECTION 6.2 Conditions to the Obligations of Purchaser.........................47
SECTION 6.3 Conditions to the Obligations of Sellers...........................48
ARTICLE VII INDEMNIFICATION.................................................................49
SECTION 7.1 Indemnification....................................................49
SECTION 7.2 Adjustment to Purchase Price.......................................52
SECTION 7.3 Exclusive Remedies.................................................53
ARTICLE VIII TERMINATION.....................................................................53
SECTION 8.1 Termination........................................................53
SECTION 8.2 Procedure and Effect of Termination................................54
ARTICLE IX MISCELLANEOUS...................................................................55
SECTION 9.1 Amendment and Modification.........................................55
SECTION 9.2 Notices............................................................55
SECTION 9.3 Interpretation.....................................................57
SECTION 9.4 Counterparts.......................................................57
SECTION 9.5 Entire Agreement; Third Party Beneficiaries........................57
SECTION 9.6 Severability.......................................................57
SECTION 9.7 Governing Law......................................................58
SECTION 9.8 Jurisdiction.......................................................58
SECTION 9.9 Specific Performance...............................................58
SECTION 9.10 Assignment.........................................................58
SECTION 9.11 Expenses...........................................................59
SECTION 9.12 Headings...........................................................59
SECTION 9.13 Waivers............................................................59
SECTION 9.14 Schedules..........................................................59
SECTION 9.15 Consequential Damages..............................................60
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of July 16, 2002 (this
"Agreement"), by and among McLeodUSA Telecommunications Services, Inc., an
Iowa corporation ("Telecom") and an indirect wholly owned subsidiary of
McLeodUSA Incorporated, a Delaware corporation ("McLeodUSA"), McLeodUSA
Holdings, Inc., a Delaware corporation ("Holdings"), McLeodUSA Integrated
Business Systems, Inc., an Iowa corporation ("IBS"), McLeodUSA Market
Response, Inc., an Iowa corporation ("Market Response," and together with
Telecom, Holdings and IBS, "Sellers," and each a "Seller"), and Homebase
Acquisition Corp., a Delaware corporation ("Purchaser").
WHEREAS, Telecom conducts the business of providing live
and automated long distance assistance and national directory assistance
services (collectively, "Operator Services") and the business of providing
paging services and acting as a sales agent for wireless telephone services
within the service area of Illinois Consolidated Telephone Company ("Mobile
Services");
WHEREAS, IBS conducts the business of selling and
installing telecommunications equipment (the "Equipment Business" and
together with Operator Services and Mobile Services, taken as a whole, the
"Services Business");
WHEREAS, Telecom and its affiliates conduct the business
of providing private line, Internet Service Provider and long distance
services to certain customers in the service area of Illinois Consolidated
Telephone Company (to the extent provided by Telecom or its affiliates
(other than Illinois Consolidated Telephone Company), the "Auxiliary
Business");
WHEREAS, the Services Business together with the
businesses of each of Illinois Consolidated Telephone Company, an Illinois
corporation ("ICTC"), McLeodUSA Public Services, Inc., an Illinois
corporation ("Public Services"), and Consolidated Market Response, Inc., an
Illinois corporation ("CMR" and together with ICTC and Public Services, the
"Transferred Companies," and each a "Transferred Company"), taken as a
whole, are referred to herein as the "Business";
WHEREAS, as of the Closing Date, ICTC will be a wholly
owned subsidiary of Holdings;
WHEREAS, on the terms and subject to the conditions of
this Agreement, Purchaser desires to purchase, and the applicable Sellers
desire to sell or cause to be sold to Purchaser, all of the issued and
outstanding shares of the capital stock (the "Shares") of each of the
Transferred Companies;
WHEREAS, on the terms and subject to the conditions of
this Agreement, Purchaser desires to purchase and acquire, and Telecom and
IBS desire to sell and transfer, or cause to be sold and transferred, the
Purchased Assets (as defined herein); and
WHEREAS, on the terms and subject to the conditions of
this Agreement, Purchaser is willing to assume, and Telecom and IBS desire
to assign to Purchaser, the Assumed Liabilities (as defined herein).
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties, intending to be legally bound hereby,
agree as follows:
ARTICLE I
PURCHASE AND SALE
SECTION 1.1 Purchase and Sale. Upon the terms and subject
to the conditions set forth in this Agreement, at the Closing (as defined
below):
(a) the applicable Sellers shall sell, assign, transfer,
convey and deliver to Purchaser, and Purchaser shall purchase and accept
from such Sellers, the Shares, free and clear of all Encumbrances; and
(b) Telecom and IBS shall sell, assign, transfer, convey
and deliver to Purchaser, free and clear of all Encumbrances, other than
Permitted Encumbrances, and Purchaser shall purchase and accept all right,
title and interest of Telecom and IBS in the following (collectively, the
"Purchased Assets"):
(i) all accounts receivable and any notes
receivable to the extent arising out of operation of the Services
Business, but excluding any receivables that have been paid or
satisfied prior to the Closing;
(ii) all inventories held primarily for the
Services Business, but excluding any inventories that have been
transferred, consumed or disposed of prior to the Closing;
(iii) all equipment, furniture, vehicles and
all other tangible personal property used primarily in the
operation of the Services Business including, without limitation,
those listed or described on Schedule 1.1(b)(iii);
(iv) all rights and incidents of interest as of
the Closing in and to all leases, agreements, contracts and
commitments (other than Tower Leases (as defined below),
Intellectual Property Rights (as defined below), Services Permits
(as defined below) or Real Property Leases (as defined below)
primarily for use in the Services Business, including, without
limitation, the contracts listed on Schedule 1.1(b)(iv) or that
arise primarily for use in the Services Business after the date
hereof, but excluding all of such contracts that have terminated,
expired or been fully performed prior to the Closing (the
"Contracts");
(v) all rights and incidents of interest to all
tower leases used primarily in the operation of the Services
Business including, without limitation, those listed or described
on Schedule 1.1(b)(v), or that arise primarily for use in the
Services Business after the date hereof, but excluding all of such
leases that have terminated or expired prior to the Closing (the
"Tower Leases");
(vi) all right, title and interest in and to all
U.S. and other letters patent, patents, patent applications,
patent licenses, trade secrets, customer lists, software licenses
and know-how licenses, trade names, trademarks, registered
copyrights, service marks, trademark registrations and
applications, service mark registration and applications and
copyright registrations and applications, in each case together
with all goodwill associated therewith (collectively,
"Intellectual Property Rights") used primarily in the Services
Business, including, without limitation, the Intellectual
Property Rights listed or described on Schedule 1.1(b)(vi);
(vii) all permits, licenses, authorizations,
certificates, exemptions and approvals of Governmental Entities
(defined below) that are listed or described on Schedule
1.1(b)(vii), but excluding all of such licenses, permits,
authorizations and approvals that have terminated or expired
prior to the Closing (the "Services Permits");
(viii) all rights, interests and incidents of
interest to all real property leases used primarily in the
operation of the Services Business including, without limitation,
those listed or described on Schedule 1.1(b)(viii), or that arise
primarily for use in the Services Business after the date hereof,
but excluding all of such leases that have terminated or expired
prior to the Closing (the "Real Property Leases");
(ix) originals or copies of all books and
records of Telecom and IBS exclusively relating to the operation
of the Services Business (the "Services Business Books and
Records");
(x) all rights to causes of action, lawsuits,
judgments, claims and demands of any nature available to or being
pursued by Telecom or IBS on behalf of the Services Business,
whether arising by way of counterclaim or otherwise, other than
against Sellers or any of their affiliates, except to the extent
arising out of this Agreement and subject to the limitations
contained herein;
(xi) to the extent transferable, all rights in
and under all express or implied guarantees, warranties,
representations, covenants, indemnities and similar rights in
favor Telecom or IBS relating primarily to the Services Business;
(xii) all customer, supplier, price and mailing
lists of the Services Business in whatever media retained or
stored, including, without limitation, computer programs and
disks; and
(xiii) the goodwill of the Services Business.
SECTION 1.2 Excluded Assets. Notwithstanding anything to
the contrary contained in Section 1.1, neither Telecom nor IBS shall sell,
assign, transfer, convey or deliver to Purchaser, and the Purchaser shall
not purchase, and the Purchased Assets shall not include the following
(collectively, the "Excluded Assets"):
(i) any right, title or interest in any
property, asset (tangible or intangible), claim, contract, lease,
license, right or power of Telecom or IBS which is not included in
the Purchased Assets;
(ii) any cash, cash equivalents or marketable
securities of Telecom or IBS;
(iii) any assets, properties or rights of
Telecom, IBS or their affiliates not used primarily in the
operation of the Services Business;
(iv) any rights of Telecom or IBS under this
Agreement, the Bill of Sale (as defined below) (or any other
instrument of transfer) or the Assumption Agreement (as defined
below) or any other agreement entered into by and among Sellers
and Purchaser or their respective affiliates in connection with
this Agreement and the transactions contemplated hereby, including
the Transition Services Agreement (as defined below) and the
Operating Agreements (as defined below), (collectively, the
"Ancillary Agreements");
(v) subject to Section 4.9, any of Telecom's or
IBS's right, title and interest in any insurance policy or coverage;
(vi) the company seal, minute books, charter
documents, stock or equity record books and such other books and
records as pertain to the organization, existence or
capitalization of Telecom or IBS as well as any other records or
materials relating to Telecom or IBS generally;
(vii) subject to Section 4.3, any pension,
profit sharing or cash or deferred plans and trusts and assets
thereof and any other employee benefit plan, program, policy or
arrangement (including, but not limited to, plans described in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) and the assets thereof, if any,
maintained by Telecom or IBS;
(viii) subject to Article V, any right Telecom
or IBS has with respect to a credit or refund for Taxes (as
defined below);
(ix) any right to the attorney-client or similar
privilege; and
(x) any right, contract, property or asset that
is listed or described on Schedule 1.2(x).
SECTION 1.3 Nonassignable Agreements.
(a) To the extent that any Contract, Tower Lease,
Intellectual Property Right or Real Property Lease to be assigned pursuant
to the terms of Section 1.1 is not capable of being assigned without the
consent, approval or waiver of a third person, or if such assignment or
attempted assignment would constitute a breach thereof (each a
"Nonassignable Agreement") nothing in this Agreement will constitute an
assignment or require the assignment thereof, except to the extent provided
in this Section 1.3.
(b) Notwithstanding anything contained in this
Agreement to the contrary, neither Telecom nor IBS will be obligated to
assign or cause to be assigned to Purchaser any rights and obligations in
and to any of the Nonassignable Agreements without first having obtained
all consents, approvals and waivers necessary for such assignment;
provided, however, that each of Telecom and IBS shall use commercially
reasonable efforts to obtain all such consents, approvals and waivers prior
to the Closing and, if the Closing occurs, will continue to use
commercially reasonable efforts after the Closing Date to obtain all such
consents, approvals and waivers. Purchaser will cooperate with Telecom and
IBS in their efforts to obtain all required consents, approvals and
waivers; provided, however, neither Purchaser nor Sellers (or their
respective affiliates) will be required to incur any liability or pay any
consideration in connection therewith.
(c) To the extent that all consents, approvals and
waivers required pursuant to the Nonassignable Agreements are not obtained
by IBS or Telecom as of the Closing, after the Closing, IBS and Telecom
will use commercially reasonable efforts to (i) provide to Purchaser, to
the extent practicable, the financial and business benefits of each such
Nonassignable Agreement and (ii) enforce, at the request of Purchaser, for
the account of Purchaser, any rights of IBS and Telecom arising from any
such Nonassignable Agreement. Purchaser covenants and agrees to pay,
perform or discharge when due any obligation or liability arising under any
such Nonassignable Agreement and indemnify and hold harmless Sellers and
their affiliates with respect thereto. With respect to any such
Nonassignable Agreement as to which the necessary approval or consent for
the assignment or transfer to the Purchaser is obtained following the
Closing, the Sellers shall transfer such Nonassignable Agreement to the
Purchaser by execution and delivery of an instrument of conveyance
reasonably satisfactory to the Purchaser and the Sellers within three (3)
business days following receipt of such approval or consent. Notwithstanding
the foregoing, the Sellers shall not be indemnified to the extent of any
Losses which result from the Seller's gross negligence or willful misconduct.
SECTION 1.4 Assumed Liabilities. Purchaser shall assume
and thereafter pay, perform or otherwise discharge, as and when the same
shall become due and payable, and shall hold Telecom, IBS and their
affiliates harmless from, any liabilities, obligations or expenses (of any
nature or kind, and whether based in common law or statute or arising under
written contract or otherwise, known or unknown, filed or contingent,
accrued or unaccrued, liquidated or unliquidated, real or potential, now
existing or arising prior to, at or after Closing) relating to, arising out
of, or in connection with the Services Business or any of the Purchased
Assets (collectively, the "Assumed Liabilities"). Notwithstanding anything
to the contrary contained in this Section 1.4, the Assumed Liabilities
shall not include (x) any obligations of Telecom or IBS under this
Agreement or any of the Ancillary Agreements, (y) any obligations or
liabilities with respect to Taxes to the extent Sellers are liable therefor
pursuant to Article V or (z) any liabilities or obligations to the extent
related to the Excluded Assets (collectively, the "Excluded Liabilities").
SECTION 1.5 Purchase Price. The aggregate purchase price
(the "Purchase Price") for the Shares and the Purchased Assets shall be (i)
US$ 271.2 million less (ii) Closing Indebtedness plus or minus (iii) the
Closing Net Cash (the "Cash Purchase Price"), as well as the assumption by
the Purchaser of the Assumed Liabilities. The term "Closing Net Cash" shall
mean the aggregate amount of any cash and cash equivalents (including the
amount of uncashed checks payable to ICTC) on hand or in bank accounts or
lock boxes of ICTC less the amount of any checks written against such
accounts, which have not cleared such accounts, in each case as of 5:01
p.m. central time on the date immediately preceding the Closing Date. The
term "Closing Indebtedness" shall mean (i) all principal and interest due
and owing as of 5:01 p.m. central time on the date immediately preceding
the Closing Date under those certain First Mortgage Series K and Series L
Bonds issued pursuant to the First Mortgage by and between ICTC and Harris
Trust and Savings Bank, as trustee, as amended and supplemented from time
to time and (ii) other than as listed on Schedule 1.5, any other
indebtedness of the Transferred Companies or otherwise included in the
Assumed Liabilities with respect to borrowed money, notes payable, capital
lease obligations, letters of credit or similar facilities, long-term
vendor financing for goods and services, attributable indebtedness with
respect to sale leaseback transactions and indebtedness secured by an
Encumbrance on any Purchased Asset or any asset of the Transferred
Companies, in any such case of the Closing Date. As promptly as practicable
on the date immediately preceding the Closing Date, Seller shall deliver to
Purchaser a certificate setting forth the amount of (x) the Closing Net
Cash (together with supporting documentation) and (y) the Closing Indebtedness.
SECTION 1.6 Closing.
(a) The sale and purchase of the Shares and the
Purchased Assets and the consummation of the other transactions
contemplated by this Agreement shall take place at a closing (the
"Closing") to be held at the offices of Skadden, Arps, Slate, Meagher &
Flom (Illinois) at 10:00 a.m. Chicago time on the second business day
following the satisfaction or waiver of the conditions to the obligations
of the parties set forth in Sections 6.1(b), 6.1(c) and 6.2(e) hereof or at
such other place, time or date as Sellers and Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the
"Closing Date").
(b) At the Closing, the applicable Seller shall
deliver or cause to be delivered to Purchaser:
(i) certificates evidencing the Shares, duly
endorsed in blank or accompanied by stock powers duly executed in
blank;
(ii) a bill of sale, substantially in the form
of Exhibit A attached hereto (the "Bill of Sale"), and such other
instruments as may be reasonably requested by Purchaser to
transfer or assign the Purchased Assets to Purchaser or otherwise
consummate the transactions contemplated by this Agreement; and
(iii) the Transition Services Agreement,
substantially in the form of Exhibit B attached hereto (the
"Transition Services Agreement");
(iv) Operating Agreements relating to other
commercial arrangements between Purchaser and Sellers or their
affiliates substantially in the form of Exhibits C-1 through C-7
attached hereto (the "Operating Agreements"); and
(v) an opinion of Sellers' counsel (or Sellers'
in-house counsel), dated as of the Closing Date, in such counsel's
customary form, and subject to the qualifications, assumptions
and limitations contained therein, as to such matters as Purchaser
may reasonably request.
(c) At the Closing, Purchaser shall deliver or cause
to be delivered to Sellers:
(i) the Cash Purchase Price by wire transfer in
immediately available funds to an account or accounts designated
by Sellers;
(ii) an assumption agreement, substantially in
the form of Exhibit D attached hereto (the Assumption Agreement");
and
(iii) the Transition Services Agreement;
(iv) the Operating Agreements; and
(v) an opinion of Purchaser's counsel, dated as
of the Closing Date, in such counsel's customary form, and subject
to the qualifications, assumptions and limitations contained
therein, as to such matters as Purchaser may reasonably request.
SECTION 1.7 Allocation of Purchase Price. Sellers and
Purchaser shall allocate the Purchase Price among the Shares of each of the
Transferred Companies and the Purchased Assets in the manner required by
Section 1060 of the Code. In making such allocation, the fair market values
will be agreed to in good faith by Purchaser and Sellers within 60 days
after the Closing Date. If the parties are unable to resolve any material
differences with regard to the allocation of the Purchase Price among the
Shares of the Transferred Companies and the Purchased Assets, then any
disputed matters will be finally and conclusively determined by an
independent certified accounting firm or independent certified appraisal
firm (the "Allocation Arbiter"), which Allocation Arbiter shall be mutually
agreed by Purchaser and Sellers, provided, however, that such agreement
shall not be unreasonably withheld or delayed. Promptly, but not later than
15 days after its acceptance of appointment hereunder, the Allocation
Arbiter will determine (based solely upon representations of Purchaser and
Sellers and not by independent review) only those matters in dispute, and
will render and written report as to the disputed matters and the resulting
allocation of the Purchase Price, which report shall be conclusive and
binding upon the parties. Such Allocation Arbiter's fees and expenses shall
be born equally by the parties. Purchaser will prepare and provide Sellers
with copies of Internal Revenue Service Form 8594 (including any amended
Form 8594) and any required exhibits thereto, consistent with the
allocations determined pursuant to this Section 1.7. Such forms shall be
subject to Sellers' review and consent, which shall not be unreasonably
withheld. Sellers and Purchaser shall be bound by such allocation, and
shall file, or cause to be filed, all applicable federal, state, local and
foreign Tax Returns (as defined below) in a manner consistent with such
allocation. If the allocation determine pursuant to this Section 1.7 is
disputed by any Taxing Authority (as defined below), the party receiving
notice of such dispute shall promptly notify the other party hereto
concerning the existence of such dispute and the parties shall consult with
each other with respect to all issues related to the allocation in
connection with such dispute.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as disclosed in the written statement delivered by
Sellers to Purchaser at or prior to the execution of this Agreement (the
"Disclosure Schedule"), Sellers jointly and severally represent and warrant
to Purchaser as follows:
SECTION 2.1 Organization. Each Seller and each
Transferred Company is duly organized, validly existing and in good
standing (or its equivalent) under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so existing and in good
standing or to have such power and authority would not have a Business
Material Adverse Effect (as defined below). Each Seller, with respect to
the Purchased Assets, and each Transferred Company is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be
so duly qualified, licensed and in good standing would not have a Business
Material Adverse Effect. Sellers have heretofore made available to
Purchaser a complete and correct copy of the articles of incorporation and
by-laws of each Transferred Company, as currently in effect. As used in
this Agreement, "Business Material Adverse Effect" means any material
adverse change in, or material adverse effect on, the assets, business,
financial condition or results of operations of the Business, taken as a
whole; provided, however, that the effects of changes or effects that (i)
are generally applicable to the industries and markets in which the
Business operates or the United States economy or (ii) relate to changes in
GAAP (as defined below) or interpretations thereof or changes in Law (as
defined below) or interpretations thereof shall, in each case, be excluded
from the determination of Business Material Adverse Effect; and provided,
further, that any adverse change in or effect on the Business, taken as a
whole, resulting from the execution of this Agreement and the announcement
of this Agreement and the transactions contemplated by this Agreement or
the compliance by the parties with the terms of this Agreement shall also
be excluded from the determination of Business Material Adverse Effect.
SECTION 2.2 Capitalization. The authorized and
outstanding capital stock of each Transferred Company is set forth on
Section 2.2 of the Disclosure Schedule. As of the Closing, all of the
Shares will be owned by Sellers, free and clear of all liens, charges,
mortgages, security interest or other encumbrance (other than encumbrances
arising out of this Agreement or restrictions imposed by federal or state
securities, communications, regulatory, or other Law) (collectively,
"Encumbrances"). There are no existing (a) options, warrants, calls,
subscriptions or other rights, convertible securities, agreements or
commitments of any character obligating a Transferred Company to issue,
transfer or sell any equity interests in such Transferred Company or
securities convertible into or exchangeable for such equity interests; (b)
contractual obligations of Sellers or a Transferred Company to repurchase,
redeem or otherwise acquire any equity interests in such Transferred Company;
or (c) voting trusts or similar agreements to which Sellers or a
Transferred Company is a party with respect to the voting of equity
interests in such Transferred Company. None of the Transferred Companies
holds any equity interest in any other entity. The consummation of the
transactions contemplated hereby will convey to Purchaser good title to the
Shares free and clear of all Encumbrances, other than those created by
Purchaser.
SECTION 2.3 Authorization; Validity of Agreement. Each
Seller has full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by each Seller of this Agreement and the Ancillary
Agreements to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized and no other
corporate proceedings on the part of such Seller are necessary to
authorize the execution and delivery by such Seller of this Agreement or
the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby. This Agreement has been, and upon
execution thereof, each Ancillary Agreement executed by it will be, duly
executed and delivered by the applicable Seller and (assuming due and valid
authorization, execution and delivery hereof and thereof by Purchaser) is a
valid and binding obligation of such Seller enforceable against such Seller
in accordance with its terms, except that (a) such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally and (b) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
SECTION 2.4 Consents and Approvals; No Violations. Except
for filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), neither the execution, delivery or
performance of this Agreement and the Ancillary Agreements by Sellers nor
the consummation by Sellers of the transactions contemplated hereby or
thereby will (a) violate any provision of the articles of incorporation or
by-laws of any Seller or any Transferred Company; (b) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration), or result in the creation of any Encumbrance upon any of the
Shares, the Purchased Assets or any of the Transferred Companies' assets or
properties, under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which any Seller or any Transferred Company is
a party or by which any of them or any of their properties or assets may be
bound; (c) violate any order, writ, judgment, injunction, decree, law,
statute, rule or regulation (collectively, "Law") applicable to any Seller
or any Transferred Company or any of their properties or assets or (d)
require on the part of any Seller or affiliate of a Seller or any
Transferred Company any filing or registration with, notification to, or
authorization, consent or approval of, any federal, state or local court,
legislative, executive or regulatory authority or agency, including,
without limitation, the Federal Communications Commission ("FCC") and the
Illinois Commerce Commission ("ICC" and each of the foregoing, a
"Governmental Entity"); except in the case of clauses (b), (c) or (d) for
such violations, breaches or defaults that, or filings, registrations,
notifications, authorizations, consents or approvals the failure of which
to obtain, (x) would not have a Business Material Adverse Effect and would
not materially adversely affect the ability of Sellers to consummate the
transactions contemplated by this Agreement or (y) would become applicable
as a result of the business or activities in which Purchaser is or proposes
to be engaged (if different than the current business or activities of the
Business) or as a result of any acts or omissions by, or the status of any
facts pertaining to, Purchaser.
SECTION 2.5 Financial Statements.
(a) Sellers have delivered or made available to
Purchaser (i) the audited balance sheets (including the related notes and
independent auditors' report thereon) of ICTC as of December 31, 1999,
December 31, 2000 and as of December 31, 2001, and the related audited
statements of income, retained earnings and cash flows of ICTC for the
years ended December 31, 1999, December 31, 2000 and December 31, 2001 and
(ii) the unaudited balance sheet of ICTC as of March 31, 2002 and the
related unaudited statements of income, retained earnings and cash flows
for ICTC for the 3 months ended March 31, 2002 (collectively including (i)
and (ii), the "ICTC Financial Statements"). The balance sheets and the
other related statements (including the related notes) included in the ICTC
Financial Statements present fairly, in all material respects, the
financial position, results of operations and cash flows of ICTC for the
respective periods or as of the respective dates set forth therein and were
prepared in accordance with United States generally accepted accounting
principles ("GAAP"), applied on a consistent basis during the periods
involved, except that the March 31, 2002 financial statements do not
contain footnotes and are subject to ICTC year-end adjustments and except
as otherwise noted therein.
(b) Sellers have delivered or made available to
Purchaser (i) the unaudited balance sheets of each of the Transferred
Companies (other than ICTC) and each of the Services Business, separately,
as of December 31, 2001, (ii) the unaudited statements of income of each of
the Transferred Companies (other than ICTC) and each of the Services
Businesses, separately, for the years ended December 31, 1999, December 31,
2000 and December 31, 2001 and (iii) the unaudited balance sheets of each
of the Transferred Companies (other than ICTC) and each of the Services
Businesses, separately, as of March 31, 2002 and the related unaudited
statements of income for each of the Transferred Companies (other than
ICTC) and each of the Services Businesses, separately, for the 3 months
ended March 31, 2002 and (collectively including (i), (ii) and (iii), the
"Non-Regulated Financial Statements" and together with the ICTC Financial
Statements, the "Financial Statements"). The balance sheets included in
the Non-Regulated Financial Statements are derived from McLeodUSA's asset
and liability reporting system, including collections and disbursements,
in accordance with McLeodUSA's accounting policies and principles, applied
on a consistent basis during the periods involved, except as otherwise
noted therein. The income statements included in the Non-Regulated
Financial Statements are derived from McLeodUSA's revenue and expense
financial reporting system in accordance with McLeodUSA's accounting
policies and principles, applied on a consistent basis during the periods
involved, except as otherwise noted therein.
SECTION 2.6 No Undisclosed Liabilities. Except for
liabilities and obligations (a) incurred in the ordinary course of business
consistent with past practices after December 31, 2001; (b) disclosed,
reflected or reserved for in the Financial Statements; or (c) incurred in
connection with the transactions contemplated hereby, none of the
Transferred Companies has incurred, since December 31, 2001, and the
Assumed Liabilities do not include, any liabilities or obligations that
would be required to be disclosed, reflected or reserved against in a
balance sheet of the Business prepared in accordance with GAAP.
SECTION 2.7 Absence of Certain Changes. Except as (a)
disclosed in the Financial Statements or (b) contemplated by this
Agreement, since December 31, 2001, no event has occurred or any
circumstance arisen, which, taken together with any other such events or
circumstances has had, or would reasonably be expected to have, a Business
Material Adverse Effect.
SECTION 2.8 Employee Benefit Plans; ERISA.
(a) Section 2.8(a) of the Disclosure Schedule sets
forth a list of all employee benefit plans, programs, policies and
arrangements (including, but not limited to, plans described in Section
3(3) of ERISA), established, contributed to or maintained or required to be
contributed to by any Seller or any of the Transferred Companies or by any
trade or business, whether or not incorporated (an "ERISA Affiliate") that
together with the Transferred Companies would be deemed a "single employer"
within the meaning of Section 4001(b)(15) of ERISA ("Benefit Plans"), in
any case, for the benefit of directors, employees or former employees of
the Services Business or the Transferred Companies or any of their
dependents, and all employment, severance, termination or similar
agreements with employees of the Services Business or the Transferred
Companies ("Employee Agreements"). True and complete copies of all Benefit
Plans and Employee Agreements, including all amendments to date, have been
made available to Purchaser by Sellers.
(b) Except as would not result in a Business
Material Adverse Effect, with respect to each Benefit Plan: (i) if intended
to qualify under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), such plan has received a current determination letter
from the Internal Revenue Service stating that it so qualifies and that its
trust is exempt from taxation under Section 501(a) of the Code; (ii) such
plan has been administered in all material respects in accordance with its
terms and applicable Law; and (iii) no Benefit Plan is a "Multiemployer
Plan" within the meaning of Section 3(37) of ERISA or a "Multiple Employer
Plan" within the meaning of Section 413(c) of the Code.
(c) With respect to each Benefit Plan that is a
"welfare plan" (as defined in Section 3(1) of ERISA), no such plan provides
medical benefits with respect to current or former employees of the
Services Business or the Transferred Companies beyond their termination of
employment (other than to the extent required by applicable Law).
(d) There are no pending, threatened or anticipated
claims by or on behalf of any Benefit Plan, by any employee or beneficiary
covered under any such Benefit Plan, or otherwise involving any such
Benefit Plan (other than routine claims for benefits), in each case by an
employee of the Services Business or a Transferred Company.
(e) The transactions contemplated by this Agreement
will not result in any additional material payments to or material benefit
accruals for, or any material increase in the vested interest of, any
current or former employee or director of the Transferred Companies, or any
employee of Telecom or IBS who works primarily in the Services Business as
of the Closing, or their dependents, under any Benefit Plan. The
transactions contemplated by this Agreement will not result in any payments
to any current or former employee or director of the Transferred
Companies, or any employee of Telecom or IBS who works primarily in the
Services Business as of the Closing, which will be subject to Section 280G
of the Code.
The representations and warranties set forth in this Section 2.8
shall constitute Sellers' only representations with respect to ERISA.
SECTION 2.9 Environmental Laws and Regulations. To
Sellers' knowledge, (a) each of the Transferred Companies is and since June
14, 1997 has been, and with respect to the Services Business, Telecom and
IBS are and since June 14, 1997 have been, in compliance with all
applicable federal, state, local and foreign laws and regulations and other
legally binding standards or requirements relating to hazardous or toxic
substances, or petroleum, or pollution or protection of human health,
natural resources or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface
strata) (collectively, "Environmental Laws"), except for (i) non-compliance
matters that have been fully resolved with the applicable Governmental
Entity and (ii) any failure to comply that would not have a Business
Material Adverse Effect and (b) as of the date hereof, none of the
Transferred Companies is, and, with respect to the Services Business,
neither Telecom nor IBS is, the subject of any action, cause of action,
claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law that would
have a Business Material Adverse Effect, and none of the Transferred
Companies, Telecom or IBS has received any written notice of the foregoing.
The representations and warranties set forth in this Section 2.9
shall constitute Sellers' only representations with respect to
environmental matters.
SECTION 2.10 Labor Matters.
(a) Section 2.10 of the Disclosure Schedule sets
forth as of the date hereof all collective bargaining or other labor union
contracts to which any Transferred Company is a party or to which Telecom
or IBS is a party with respect to employees of the Services Business. As of
the date hereof, there is no pending or, to the knowledge of Sellers,
threatened, labor dispute, strike, work stoppage or concerted action
against any of the Transferred Companies or, with respect to the Services
Business, against Telecom or IBS, except where such dispute, strike, work
stoppage or concerted action would not have a Business Material Adverse Effect.
(b) Except as would not have a Business Material
Adverse Effect, (i) the Sellers and the Transferred Companies have not
engaged in any unfair labor practice with respect to the Business, and (ii)
to the Sellers' knowledge, as of the date hereof, there is no pending or
threatened National Labor Relations Board proceeding against any of the
Transferred Companies or Telecom or IBS with respect to the Services Business.
SECTION 2.11 Litigation. As of the date hereof, there is
no action, suit, proceeding or, to the knowledge of Sellers, investigation
pending or, to the knowledge of Sellers, action, suit, proceeding or
investigation threatened, having to do with the Services Business or to
which a Transferred Company is a specific party or would otherwise be an
Assumed Liability, by or before any Governmental Entity or arbitrator that
would reasonably be expected to have a Business Material Adverse Effect, in
each case, other than actions, suits, proceedings, audits or investigations
affecting the industries or markets of the Business generally.
SECTION 2.12 No Default; Compliance with Applicable Laws;
Permits.
(a) None of the Transferred Companies is, and, with
respect to the Services Business, neither Telecom nor IBS is, in default or
violation of any term, condition or provision of any applicable Law or
Permit (as defined below), except for defaults or violations that would not
have a Business Material Adverse Effect or that become applicable as a
result of the business or activities in which Purchaser is or proposes to
be engaged (if different than the current business or activities of the
Business) or as a result of any acts or omissions by, or the status of any
facts pertaining to, Purchaser.
(b) Except as would not have a Business Material
Adverse Effect, each of the Transferred Companies currently holds, and,
with respect to the Services Business, each of Telecom and IBS currently
holds, all permits, licenses, authorizations, certificates, exemptions and
approvals of Governmental Entities (collectively, "Permits") necessary for
the current use, occupancy and operation of its assets and the conduct of
its business, and all such Permits are in full force and effect. Except as
would not have a Business Material Adverse Effect, none of the Transferred
Companies has received, and, with respect to the Services Business, neither
Telecom nor IBS has received, any written notice from any Governmental
Entity revoking, modifying or refusing to renew or threatening to revoke,
modify or refuse to renew any Permit or providing notice of violations
under any Permit.
SECTION 2.13 Taxes.
(a) The Seller Group and each of the Transferred
Companies have (i) timely filed, will timely file or there has or will have
been timely filed on their behalf, all federal and other material Tax
Returns required to be filed by them through the Closing Date (taking into
account applicable extensions) and all such Tax Returns were (or will be)
true, correct and complete in all material respects when filed and (ii)
paid or accrued (in accordance with GAAP) all material Taxes (whether or
not shown to be due on such Tax Returns through the date hereof) other than
such Taxes as are being contested in good faith.
(b) There are no material ongoing federal, state,
local or foreign audits or examinations of any Tax Return of the
Transferred Companies.
(c) There are no material outstanding written
requests, agreements, consents or waivers to extend the statutory period of
limitations applicable to the assessment of any material Taxes against any
of the Transferred Companies.
(d) None of the Transferred Companies is a party to
any agreement providing for the allocation or sharing of Taxes that will
survive the Closing (other than this Agreement).
(e) There are no material liens existing, pending or
proposed for Taxes upon the assets of any of the Transferred Companies or
upon the Purchased Assets, except for liens for Taxes not yet due and
payable and liens for Taxes that are being contested in good faith.
(f) There are not now any extensions of time in
effect with respect to the dates on which any Tax Returns of any of the
Transferred Companies were or are due to be filed.
(g) All deficiencies asserted as a result of any
examination of any Tax Returns of any of the Transferred Companies have
been paid in full, accrued on the books of the Seller Group or the
Transferred Companies, as applicable, or finally settled.
(h) None of the Transferred Companies has received
notice of a claim from an authority in a jurisdiction in which any of the
Transferred Companies does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.
(i) The Transferred Companies have withheld and paid
all material Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(j) The Transferred Companies have not been a member
of an affiliated group filing a consolidated U.S. federal income tax return
(other than the Seller Group) for any open tax year.
(k) "Taxes" shall mean any and all taxes, fees,
levies or other assessments, including, without limitation, federal, state,
local, or foreign income, gross receipts, excise, real or personal
property, sales, withholding, social security, occupation, use, service,
service use, value added, license, net worth, payroll, franchise or similar
taxes, imposed by any Taxing Authority together with any interest,
penalties or additions to tax and additional amounts imposed with respect
thereto. "Taxing Authority" shall mean any governmental entity responsible
for the imposition or collection of any Taxes. "Tax Return" shall mean any
report, return, document, declaration or other information or filing
required to be supplied to any Taxing Authority or jurisdiction (foreign or
domestic) with respect to Taxes.
(l) "Seller Group" shall mean the affiliated group,
within the meaning of Section 1504 of the Code (and any similar group
defined under a similar provision of state, local or foreign law), the
common parent of which is McLeodUSA.
The representations and warranties set forth in this Section 2.13
shall constitute Sellers' only representations with respect to Taxes.
SECTION 2.14 Intellectual Property. Except for such
claims that would not have a Business Material Adverse Effect, there are no
pending or threatened claims of which any Transferred Company or any
Seller has been given written notice by any person against Telecom's, IBS's
or a Transferred Company's use of any material Intellectual Property Rights
that are either owned by a Transferred Company, Telecom or IBS or
primarily used in the Business. To the knowledge of Sellers, Telecom, IBS
or a Transferred Company owns or possesses adequate rights to use all
Intellectual Property Rights necessary for the operation of the Business,
except where the failure to have such rights would not have a Business
Material Adverse Effect. None of the Transferred Companies, Telecom or IBS,
has received actual notice alleging or otherwise has actual knowledge that
it has misappropriated, infringed upon, or violated any Intellectual
Property Rights of any third party in connection with the Business and, to
the knowledge of Sellers, no third party has misappropriated, infringed
upon, or violated any Intellectual Property Rights of the Transferred
Companies, Telecom, or IBS, except in each case for such misappropriations,
infringements or violations as would not in the aggregate have a Business
Material Adverse Effect.
SECTION 2.15 Contracts.
(a) Section 2.15 (a) of the Disclosure Schedule sets
forth a complete list, as of the date hereof, of the following agreements,
understandings, contracts, leases, purchase orders, arrangements,
commitments, and licenses whether written or oral (collectively,
"Agreements"), to which any Transferred Company is a party or by which any
of its assets or operations may be bound or to which Telecom or IBS is a
party with respect to the Services Business or by which any of the
Purchased Assets may be bound:
(i) each lease relating to real property with a
term of one year or longer;
(ii) each Agreement involving annual payments in
excess of $250,000 per year, unless cancelable on 60 days or less
notice for a nominal payment;
(iii) each Agreement that contains a covenant
not to compete or similar covenants for which a Transferred
Company or Service Business is the obligor thereunder;
(iv) each Agreement concerning a partnership or
joint venture;
(v) each Agreement containing an earnout or
other provision which has as its purpose the sharing of revenue or
profits for which the aggregate payment thereunder would exceed
$25,000;
(vi) each Agreement creating an Encumbrance
securing payment of an amount in excess of $50,000 per year in any
one case or $250,000 in the aggregate for all such Agreements; and
(vii) each other Agreement which is material to
the conduct of the Business.
(b) The Sellers have made available to the Purchaser
true and complete copies of such written Agreements and summaries of such
oral Agreements, or standard forms thereof. Except as would not in the
aggregate have a Business Material Adverse Effect, (i) all of such
Agreements are valid and binding obligations of the Transferred Companies
or Services Business and, to Sellers' knowledge, the other party thereto
and (ii) neither the Transferred Companies nor Telecom or IBS nor, to the
Sellers' knowledge, the other party thereto is in breach of any such
Agreement.
SECTION 2.16 Title to Assets. Each of the Transferred
Companies has good and valid title to or, in the case of leased properties
and assets, valid leasehold interests in, all of its material properties
and assets (real and personal) (other than Intellectual Property Rights
which are covered by Section 2.14), and either Telecom or IBS has good and
valid title to or, in the case of leased properties and assets, valid
leasehold interests in all of its material properties and assets (real and
personal) included in the Purchased Assets (other than Intellectual
Property Rights which are covered by Section 2.14), in each case free and
clear of all Encumbrances, except for (a) zoning laws and other land use
restrictions that do not materially impair the present use or occupancy of
the property subject thereto; (b) any Encumbrances for Taxes, assessments
and other governmental charges not yet due and payable or due but not
delinquent or due and being contested in good faith; (c) any mechanics',
workmen's, repairmen's, warehousemen's, carriers' or other similar
Encumbrances relating to amounts not yet due and payable and arising in the
ordinary course of business, consistent with past practice or being
contested in good faith; (d) any Encumbrances that alone or in the
aggregate would not materially impair the value or use of the asset in
question; and (e) with respect to any real property, any defects,
easements, rights of way, restrictions, covenants, claims or other similar
charges, that do not, individually or in the aggregate, have a material
adverse effect on the use or possession of such real property ((a) through
(e) collectively, the "Permitted Encumbrances").
SECTION 2.17 Insurance. As of the date hereof, the
Business is covered by valid and currently effective insurance policies
issued in favor of McLeodUSA, Sellers and/or the Transferred Companies
that, in the judgment of Sellers, are customary for subsidiaries and
affiliates of companies of similar size and business as McLeodUSA. None of
the Transferred Companies, Telecom, or IBS, has been refused any insurance
with respect to any aspect of the operations of the Transferred Companies
or the Services Business, nor has coverage been limited by any insurance
carrier to which an application for insurance has been made or with which
insurance has been carried during the last three years.
SECTION 2.18 Sufficiency of Assets. The Purchased Assets
together with the assets and properties of the Transferred Companies as of
the Closing include all of the assets, properties and other rights, whether
tangible or intangible, that are required for the continued conduct by
Purchaser of the Business substantially as now being conducted, except for
(i) the goods and services currently provided by Sellers or their
affiliates to the Business listed on Section 2.18 of the Disclosure
Schedule; and (ii) the Excluded Assets listed on Schedule 1.2(x).
SECTION 2.19 Transactions with Affiliates. Section 2.19
of the Disclosure Schedule sets forth each material written Agreement
between the Sellers and their respective affiliates (other than the
Business, including the Transferred Companies), on the one hand, and the
Business, including the Transferred Companies, on the other hand.
SECTION 2.20 Auxiliary Business Section 2.20 of the
Disclosure Schedule contains an accurate statement from the Sellers'
billing system of (i) the amount of revenue, the number of long distance
minutes of use and the number of access lines (except for MAX billing which
may be by customer count) for the long distance business included in the
Auxiliary Business, (ii) the amount of revenue and number of ending dial-up
and DSL customers for the internet service provider business included in
the Auxiliary Business and (iii) the amount of revenue and number of
customers for the private line business included in the Auxiliary Business,
in each case, for each month in the five month period ended May 31, 2002.
SECTION 2.21 Real Property. Each item of real property
owned by a Transferred Company ("Business Real Property"), and all present
uses and operations thereof, complies with all applicable zoning, land-use
and building Laws and Permits and all deed or other title covenants and
restrictions applicable thereto, except where the failure to comply would
not, in the aggregate, have a Business Material Adverse Effect. Except for
proceedings that would not have a Business Material Adverse Effect, there
is not pending or, to Seller's knowledge, threatened any condemnation,
expropriation, requisition (temporary or permanent) or similar proceeding
with respect to any Business Real Property or any part thereof. All
buildings and structures constituting a portion of the Business Real
Property lie wholly within the boundaries of the real property owned by the
Transferred Companies and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other person or entity,
except for encroachments or conflicts that would not, in the aggregate,
have a Business Material Adverse Effect.
SECTION 2.22 McLeod Plan of Reorganization; Solvency. The
Plan of Reorganization of McLeodUSA Incorporated, as amended, modified
and/or supplemented (collectively, the "Plan"), has been confirmed by the
United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court") exercising jurisdiction in the McLeodUSA Incorporated
chapter 11 bankruptcy case. The Bankruptcy Court order confirming the Plan
has not been amended, stayed, reversed or vacated since the entry thereof.
The Plan has been "substantially consummated" (as such term is used in the
United States Bankruptcy Code). Upon the consummation of the transactions
contemplated hereby, (i) no Seller will be insolvent as defined in Section
101 of Title 11 of the United States Code; (ii) no Seller will be left with
unreasonably small capital; (iii) no Seller will have incurred debts beyond
its ability to pay such debts as they mature and (iv) the capital of each
Seller will not be impaired.
SECTION 2.23 Brokers or Finders. Sellers represent, as to
themselves and the Transferred Companies, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this
Agreement, except J.P. Morgan Securities Inc. and Salomon Smith Barney
Inc., whose fees and expenses will be paid by Sellers in accordance with
the agreement with such firm.
SECTION 2.24 No Other Representations or Warranties.
EXCEPT AS SPECIFICALLY AND EXPRESSLY SET FORTH IN THIS ARTICLE II, (A)
SELLERS MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR
IN EQUITY, RELATING TO THE PURCHASED ASSETS, THE TRANSFERRED COMPANIES,
THE ASSUMED LIABILITIES, THE SERVICES BUSINESS OR THE BUSINESS, INCLUDING,
WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO VALUE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR FOR ORDINARY PURPOSES,
OR ANY OTHER MATTER, (B) SELLERS MAKE NO, AND HEREBY DISCLAIM ANY, OTHER
REPRESENTATION OR WARRANTY REGARDING THE PURCHASED ASSETS, THE TRANSFERRED
COMPANIES, THE ASSUMED LIABILITIES, THE SERVICES BUSINESS OR THE BUSINESS
AND (C) THE PURCHASED ASSETS, THE TRANSFERRED COMPANIES, THE ASSUMED
LIABILITIES, THE SERVICES BUSINESS AND THE BUSINESS BEING TRANSFERRED TO
PURCHASER ARE CONVEYED ON AN "AS IS, WHERE IS" BASIS AS OF THE CLOSING, AND
PURCHASER SHALL RELY UPON ITS OWN EXAMINATION THEREOF.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
SECTION 3.1 Organization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and
authority would not reasonably be expected to hinder, impair or delay
Purchaser's ability to consummate the transactions contemplated by this
Agreement. Purchaser is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not reasonably be
expected to hinder, impair or delay Purchaser's ability to consummate the
transactions contemplated by this Agreement.
SECTION 3.2 Authorization; Validity of Agreement.
Purchaser has full corporate power and authority to execute and deliver
this Agreement and the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and the Ancillary Agreements,
and the consummation of the transactions contemplated hereby and thereby,
have been duly authorized by its Board of Directors and no other corporate
action on the part of Purchaser is necessary to authorize the execution and
delivery by Purchaser of this Agreement and the Ancillary Agreements and
the consummation by it of the transactions contemplated hereby and thereby.
This Agreement has been, and upon execution thereof, each Ancillary
Agreement will be, duly executed and delivered by Purchaser and (assuming
due and valid authorization, execution and delivery hereof and thereof by
the applicable Seller) is a valid and binding obligation of Purchaser
enforceable against it in accordance with its terms, except that (a) such
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, affecting creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
SECTION 3.3 Consents and Approvals; No Violations. Except
for filings pursuant to the HSR Act and as described in this Agreement or
as set forth on Section 3.3 of the Disclosure Schedule, neither the
execution, delivery or performance of this Agreement or the Ancillary
Agreements by Purchaser nor the consummation by Purchaser of the
transactions contemplated hereby or thereby will (a) violate any provision
of the articles of incorporation or by-laws of Purchaser; (b) result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Purchaser or
any of its subsidiaries is a party or by which any of them or any of their
properties or assets may be bound; (c) violate any Law applicable to
Purchaser, any of its subsidiaries or any of their properties or assets or
(d) require on the part of Purchaser any filing or registration with,
notification to, or authorization, consent or approval of, any Governmental
Entity; except in the case of clauses (b), (c) or (d) for such violations,
breaches or defaults that, or filings, registrations, notifications,
authorizations, consents or approvals, the failure of which to obtain would
not reasonably be expected to hinder, impair or delay Purchaser's ability
to consummate the transactions contemplated by this Agreement.
SECTION 3.4 Sufficient Funds; Solvency. Purchaser has
obtained binding commitments for financing sufficient to permit Purchaser
to consummate the transactions contemplated by this Agreement. A true and
correct copy of the commitment letter from Co Bank, ACB (such commitment
letter or replacement commitment letter as provided in Section 4.5(a), the
"Financing Commitment") with respect to such financing has been provided to
Sellers. As of the Closing, subject to the availability of funds in the
amount and on the terms provided by such Financing Commitment, Purchaser
will have sufficient funds available to enable it to consummate the
transactions contemplated by this Agreement. Concurrently with the
execution of this Purchase Agreement, Providence Equity Partners and
Spectrum Equity Investors and an affiliate of Richard Lumpkin have entered
into a limited liability company agreement with respect to Homebase
Acquisition LLC (the "LLC"), the parent company of the Purchaser, and
committed therein to contribute in the aggregate an amount equal to $93
million to the LLC, subject to satisfaction of the closing conditions
listed in Sections 6.1 and 6.2. A true and correct copy of such agreement
has been provided to Sellers. Upon the consummation of the transactions
contemplated hereby, (i) Purchaser will not be insolvent as defined in
Section 101 of Title 11 of the United States Code, (ii) Purchaser will not
be left with unreasonably small capital, (iii) Purchaser will not have
incurred debts beyond its ability to pay such debts as they mature and (iv)
the capital of Purchaser will not be impaired. To the Purchaser's
knowledge, the Purchase Price is a reasonably equivalent value in exchange
for the Shares and the Purchased Assets.
SECTION 3.5 Qualifications. Purchaser and its affiliates
comply and have complied with all applicable Laws, except for such Laws
with respect to which the failure to comply would not reasonably be
expected to hinder, impair or delay Purchaser's ability to consummate the
transactions contemplated by this Agreement. Purchaser is eligible under
all applicable Laws to hold and have assigned to it all Services Permits
being transferred pursuant to Section 1.1(b)(vii) and to obtain control
(through its purchase of the Shares) over all of the Permits held by the
Transferred Companies, and no waivers or disposition of any Services
Permits, Permits held by the Transferred Companies, or Permits held by
Purchaser or any of its affiliates shall be required for the consummation
of the transactions contemplated hereby or the grant of all necessary
regulatory consents hereunder. Each holder of an equity interest in
Purchaser is qualified to hold the interest held by it in Purchaser after
consummation of the transactions contemplated hereby. Without limiting the
foregoing, Purchaser has no knowledge of any basis pertaining to it or
holders of equity interests in it, including any direct or indirect
ownership of Purchaser, for the FCC or the ICC to delay or deny granting
their consents to the transactions contemplated hereby.
SECTION 3.6 Litigation. There is no action, suit,
proceeding or, to the knowledge of Purchaser, investigation pending or, to
the knowledge of Purchaser, action, suit, proceeding or investigation
threatened, by or before any Governmental Entity (a) in connection with or
relating to the transactions contemplated by this Agreement or (b) that
would reasonably be expected to hinder, impair or delay Purchaser's ability
to consummate the transactions contemplated by this Agreement.
SECTION 3.7 Investment Purpose. Purchaser is acquiring
the Shares solely for the purpose of investment and not with a view to, or
for offer or sale in connection with, any distribution thereof.
SECTION 3.8 Brokers or Finders. Purchaser represents, as
to itself and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement for
which any Seller may become liable.
SECTION 3.9 Investigation by Purchaser. In entering into
this Agreement, Purchaser:
(a) acknowledges that, except as otherwise expressly
provided herein, none of Sellers or any of their directors, officers,
employees, affiliates, agents, advisors or representatives makes or shall
be deemed to have made any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information
(including, without limitation, any estimates, projections, forecasts or
other forward-looking information) provided or made available to Purchaser
or its agents or representatives (including, without limitation, in any
management presentations, information, offering or descriptive memorandum,
supplemental information or other materials or information with respect to
any of the above);
(b) agrees, to the fullest extent permitted by Law,
that none of Sellers or any of their directors, officers, employees,
shareholders, affiliates, agents, advisors or representatives shall have
any liability or responsibility whatsoever to Purchaser on any basis
(including, without limitation, in contract or tort, under federal or state
securities laws or otherwise) based upon any information provided or made
available, or statements made, to Purchaser, except that the foregoing
limitations shall not apply to the extent Sellers make the specific
representations and warranties and covenants set forth in this Agreement
and other agreements executed in connection therewith, but always subject
to the limitations and restrictions contained herein; and
(c) acknowledges that it has had the opportunity to
visit Sellers and the Transferred Companies and meet with their respective
officers and other representatives to discuss the Services Business, the
Business and the assets, liabilities, financial condition, cash flow and
operations of the Transferred Companies; and that all materials and
information provided to Purchaser to date have been provided to Purchaser's
reasonable satisfaction.
ARTICLE IV
COVENANTS
SECTION 4.1 Interim Operations. Sellers covenant and
agree that, except (i) as contemplated by this Agreement; (ii) as required
by Law; (iii) as disclosed in the Disclosure Schedule; or (iv) with the
prior written consent of Purchaser, such consent not to be unreasonably
withheld, after the date hereof and prior to the Closing Date:
(a) Sellers shall use commercially reasonable
efforts consistent with Sellers' past practices and, as applicable, in all
material respects in accordance with the 2002 budget for the Business
previously provided to Purchaser (the "2002 Budget") to preserve the
Business and the Auxiliary Business, including its customer and supplier
relationships, and the Purchased Assets intact in all material respects and
generally conduct the Business and the Auxiliary Business in the ordinary
course of business consistent with past practice and, as applicable, in all
material respects in accordance with the 2002 Budget;
(b) Sellers shall continue the marketing efforts and
customer retention practices of the Business and the Auxiliary Business
consistent with past practices and, as applicable, in all material respects
in accordance with the 2002 Budget, shall continue to maintain the network
assets and systems of ICTC and the Purchased Assets consistent with past
practices and, as applicable, in all material respects in accordance with
the 2002 Budget, and shall continue to implement its capital expenditure
budget in all material respects in accordance with the 2002 Budget;
(c) no Transferred Company shall amend its articles
of incorporation or by-laws or similar organizational documents;
(d) no Transferred Company shall (i) split, combine
or reclassify shares of its capital stock; (ii) issue or sell any
additional shares of, or securities convertible into or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire,
the shares of its capital stock; or (iii) redeem, purchase or otherwise
acquire directly or indirectly any of its capital stock;
(e) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom nor IBS shall, (i) adopt any new
employee benefit plan, program, policy or arrangement (including any stock
option, stock benefit or stock purchase plan) or amend any Benefit Plan in
any material respect or (ii) increase any compensation or enter into or
amend in a material way any employment, severance, termination or similar
agreement with any of its present officers or directors, except for normal
increases in the ordinary course of the conduct of the Business and the
payment of cash bonuses to employees pursuant to and consistent with
existing plans, programs, policies or arrangements;
(f) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom nor IBS shall, acquire, sell,
lease or dispose of any assets that, in the aggregate, are material to the
Business;
(g) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom or IBS shall, change in any
material respect any of the accounting principles, methods or practices
used by it (except as required by GAAP or applicable Law);
(h) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom or IBS shall, modify, amend or
terminate, or waive, release or assign any material rights or claims with
respect to, any Agreement other than in the ordinary course of business
consistent with past practices;
(i) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom or IBS shall, enter into any
material non-compete Agreements under which it is an obligor, or modify or
waive rights under any existing material confidentiality or noncompete
Agreement under which it is the beneficiary except in the ordinary course
consistent with past practices;
(j) Sellers agree to keep Purchaser apprised of any
material amendment, extension, renewal or modification of, or material
default under, any Agreement identified on Section 2.15(a) of the
Disclosure Schedule. With respect to any such amendments, extensions,
renewals or modifications, Sellers shall promptly provide Purchaser, to the
extent reasonably possible, information concerning the revised terms;
(k) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom or IBS shall, cancel any debt or
waive any claims or right thereto except in the ordinary course consistent
with past practices;
(l) no Transferred Company shall, and with respect
to the Services Business neither Telecom or IBS shall, incur any additional
indebtedness which may constitute Closing Indebtedness, whether or not in
the ordinary course of business;
(m) no Transferred Company shall, and, with respect
to the Services Business, neither Telecom nor IBS shall, authorize or enter
into an agreement to do any of the foregoing;
(n) Sellers shall maintain in full force and effect
its current insurance policies for the Business (or comparable insurance
policies) until the Closing; and
(o) Sellers and the Transferred Companies use
commercially reasonable efforts to (i) manage each item included in the
calculation of Net Working Capital for the Business in the ordinary course
of business consistent with past practice and the 2002 Budget and (ii) not
take any action to accelerate the monetization of non-cash assets or defer
the payment of expenses relating to current liabilities.
Notwithstanding the provisions of this Section 4.1,
nothing in this Agreement shall prevent (i) any of Telecom, IBS or any of
the Transferred Companies from (A) paying or making dividends or other
distributions consisting of cash or cash equivalents, (B) making or
accepting inter-company or intra-company advances to, from or with one
another or with Sellers or any of their affiliates in the ordinary course
of business or (C) engaging in any transaction incident to the normal cash
management procedures of Sellers and their affiliates or (ii) Telecom or
IBS from engaging in any activity with respect to any of its businesses
other than the Services Business.
SECTION 4.2 Access to Information.
(a) Telecom and IBS with respect to the Services
Business shall, and Sellers shall cause the Transferred Companies to,
afford Purchaser's officers, employees, accountants and counsel access
during normal business hours throughout the period prior to the Closing
Date or the date of termination of this Agreement, to their properties,
contracts, commitments, books and records and to use their reasonable
efforts to cause their respective representatives to furnish promptly to
Purchaser such additional financial and operating data and other
information as to their businesses and properties as Purchaser or its duly
authorized representatives may from time to time reasonably request;
provided, however, that nothing herein shall require Sellers or any of the
Transferred Companies to disclose any information to Purchaser if such
disclosure (i) would contravene any Law, fiduciary duty or agreement
entered into prior to the date of this Agreement or the provisions of any
confidentiality agreement to which Sellers or any of the Transferred
Companies is or becomes a party, or (ii) jeopardize any attorney-client or
other legal privilege. All requests for such access shall be made to such
representatives of Sellers as Sellers shall designate in writing to
Purchaser. It is further understood and agreed that neither Purchaser nor
its representatives shall contact any of the employees, customers or
suppliers of the Business in connection with the transactions contemplated
hereby without the specific prior written authorization of Sellers.
(b) Purchaser will hold any such information in
accordance with the provisions of the Confidentiality Agreement between
McLeodUSA Incorporated, Homebase Acquisition Corp. and Richard Lumpkin,
dated as of April 6, 2002 (the "Confidentiality Agreement").
(c) Purchaser agrees that it shall preserve and keep
all the Services Business Books and Records (together with the other books
and records of the Business as of the Closing Date, the "Books and
Records") in Purchaser's possession for a period of at least eight years
from the Closing Date. After such eight-year period, before Purchaser shall
dispose of any of such Books and Records, at least 90 calendar days' prior
written notice to such effect shall be given by Purchaser to Sellers, and
Sellers shall be given an opportunity, at their cost and expense, to remove
and retain all or any part of such Books and Records as Sellers may select.
Purchaser agrees that it will cooperate with and make available to Sellers,
during normal business hours, all Books and Records, information and
employees (without substantial disruption of employment) after the Closing
Date which are necessary or useful in connection with any Tax inquiry,
audit, investigation or dispute, any claim, litigation or investigation
(including any claim or litigation by Purchaser against Sellers) or any
other matter requiring any such Books and Records, information or employees
for any reasonable business purpose. Sellers shall bear all of the out-of-
pocket costs and expenses (excluding reimbursement for salaries and
employee benefits) reasonably incurred in connection with providing such
Books and Records, information or employees. Sellers may require certain
financial information relating to the Business for periods prior to the
Closing Date for the purpose of filing federal, state, local and foreign
Tax Returns and other governmental reports, and Purchaser agrees to furnish
such information to Sellers at Sellers' request and expense.
(d) Sellers shall, as promptly as practicable after
the end of each calendar month prior to the Closing (and in any event
within 30 days of the end of such month and promptly following signing in
the case of April and May), provide to Purchaser with the monthly
management accounting package for the Business and each of the Auxiliary
Businesses substantially in the form previously provided to Purchaser
(which in the case of the Auxiliary Business shall be in the form of
Section 2.20 of the Disclosure Schedules), which shall be prepared
consistent with past practices. In the case of the Services Businesses, the
balance sheet information included in such package shall consist of the
information set forth on Section 4.11 of the Disclosure Schedules (except
for such package for the final month of any fiscal quarter which shall
contain a full balance sheet).
SECTION 4.3 Employees.
(a) Prior to the Closing Date, Purchaser shall make
a Qualifying Offer of Employment (as defined below), to be effective
immediately following the Closing, to each employee of Telecom or IBS who
works primarily in the Services Business as of the Closing (including those
individuals on vacation, disability or leave of absence, paid or unpaid, as
of the Closing Date; provided, however, except as otherwise provided in an
employment agreement or similar agreement, the employment of each
Transferred Employee (as defined below) shall be employment at will and
Purchaser shall not have an obligation to continue any such employment for
a specified period. An offer of employment shall be deemed a "Qualifying
Offer of Employment" if (A) the proposed base salary and level of incentive
compensation is no less than the employee's base salary and level of
incentive compensation immediately prior to the Closing Date and (B) the
proposed principal place of employment is within ten miles of the
employee's principal place of employment immediately prior to the Closing
Date. Each employee of a Transferred Company as of the Closing Date, and
each other employee of Telecom or IBS described above who accepts the offer
of employment described in the preceding sentence within 30 days of the
Closing Date and that returns to active employment (hereinafter
"Transferred Employees") shall be given credit for service with Purchaser
(or any affiliate) for purposes of (i) determining eligibility to
participate, entitlement to benefits, satisfaction of any waiting periods,
evidence of insurability requirements, or the application of any
preexisting condition limitations under each "employee welfare benefit
plan" (as defined in Section 3(1) of ERISA) of Purchaser (or an affiliate)
in which such Transferred Employee participates following the Closing Date
(such plans hereinafter, "Purchaser Welfare Plans"), (ii) determination of
severance benefits under any applicable severance plan of Purchaser (or an
affiliate), and (iii) determination of vacation benefits under Purchaser's
vacation policy; provided, however, that, in each case such service shall
not be recognized to the extent that such recognition would result in a
duplication of benefits. Transferred Employees shall also be given credit
for amounts paid under a Benefit Plan or otherwise during the same period
for purposes of applying deductibles, copayments and out-of-pocket maximums
as though such amounts had been paid in accordance with the terms and
conditions of a comparable Purchaser Welfare Plan.
(b) Purchaser shall maintain for a period of at
least one year after the Closing Date, without interruption, such employee
compensation, welfare and benefit plans, programs, policies and fringe
benefits as will, in the aggregate, provide benefits to the Transferred
Employees that are no less favorable than those provided pursuant to such
employee compensation, welfare and benefit plans, programs, policies and
fringe benefits of the Seller as in effect on the Closing Date.
(c) On or as soon as practicable after the Closing
Date, Purchaser shall establish or designate a defined contribution plan
and trust intended to qualify under Section 401(a) and Section 501(a) of
the Code (the "Buyer Savings Plan"). Upon receipt of evidence satisfactory
to the Sellers' counsel that the terms of the Buyer Savings Plan and
related trust qualify under Section 401(a) and Section 501(a) of the Code
(which Buyer shall provide within 120 days following the Closing Date), the
Sellers shall take all necessary actions to provide for the full vesting of
all accounts of Transferred Employees as of the Closing Date under the
McLeodUSA Incorporated 401(k) profit sharing plan (the "McLeod Plan") and
direct the trustee of the McLeod Plan to transfer to the trustee of the
Buyer Savings Plan such vested account balances (in cash or in kind) under
the McLeod Plan in respect of the Transferred Employees. Upon such
transfer, the Buyer Savings Plan shall assume all liabilities for such
vested account balances under the McLeod Plan in respect of the Transferred
Employees and the McLeod Plan shall be relieved of all such liabilities.
The parties shall cooperate in the filing of the documents required by the
transfer of assets and liabilities described herein.
(d) Purchaser agrees to indemnify Sellers and their
respective directors, officers, employees, consultants and agents for, and
to hold them harmless from and against, any and all Losses (as defined
below) arising or resulting, or alleged to arise or result from the
notification or other requirements of the Workers Adjustment and
Retraining Notification Act of 1988, as amended, and any similar foreign,
state or local Laws with respect to actions taken or omitted to be taken by
Purchaser.
SECTION 4.4 Publicity. Prior to the Closing, neither
Purchaser nor Sellers nor any of their respective affiliates shall issue or
cause the publication of any press release with respect to the transactions
contemplated hereby or this Agreement without the prior agreement of the
other party, except as may be required by Law or by any listing agreement
with a national securities exchange or market. The initial press releases
with respect to the execution of this Agreement shall be reasonably
acceptable to Purchaser and Sellers.
SECTION 4.5 Approvals and Consents; Cooperation;
Notification.
(a) The parties hereto shall use their respective
commercially reasonable efforts, and cooperate with each other, to obtain
as promptly as practicable all governmental and third party authorizations,
approvals, consents or waivers required in order to consummate the
transactions contemplated by this Agreement. Each party further agrees to
use its commercially reasonable efforts to insure that the conditions set
forth in Article VI are satisfied insofar as such matters are within the
control of such party. Without limiting the nature of the foregoing,
Purchaser agrees that it will not terminate or voluntarily permit its
Financing Commitments to lapse, except (i) upon Purchaser's obtaining
replacement commitments reasonably acceptable to Seller or (ii) in
connection with any termination of this Agreement.
(b) Sellers and Purchaser shall take all actions
necessary to file as soon as practicable all notifications, filings and
other documents required to obtain all governmental authorizations,
approvals, consents or waivers, including, without limitation, under the
HSR Act, the Communications Act of 1934, as amended, and the Illinois
Public Utilities Act, as amended, and to respond as promptly as practicable
to any inquiries received from the Federal Trade Commission, the Antitrust
Division of the Department of Justice, the FCC, the ICC and any other
Governmental Entity for additional information or documentation and to
respond as promptly as practicable to all inquiries and requests received
from any State Attorney General or other Governmental Entity in connection
therewith. Sellers and Purchaser shall (and shall cause their respective
affiliates, employees, agents, attorneys, accountants and representatives
to) consult and fully cooperate with each other and use commercially
reasonable efforts to obtain all governmental authorizations, approvals,
consents and waivers required in order to cause any of the conditions to
each party's obligations to consummate the transactions contemplated by
this Agreement to be fully satisfied; provided that in obtaining any such
governmental authorizations, approvals, consents and waivers, it shall not
be required to pay any consideration (other than customary filing fees and
the like), divest or otherwise rearrange the composition of any assets or
businesses or agree to any conditions, restrictions, requirements or other
obligations which are or are reasonably likely to be materially adverse or
materially burdensome to it.
(c) Sellers shall give prompt notice to Purchaser of
the occurrence of any Business Material Adverse Effect, and Purchaser shall
give prompt notice to Sellers of any circumstances that would reasonably be
expected to hinder, impair or delay Purchaser's ability to consummate the
transactions contemplated by this Agreement. Each of Sellers and Purchaser
shall give prompt notice to the other of the occurrence or failure to occur
of an event that would, or, with the lapse of time would, cause any
condition to the consummation of the transactions contemplated hereby not
to be satisfied.
SECTION 4.6 Further Assurances. Each of the parties
hereto agrees to use its commercially reasonable efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated by this Agreement. If at any time
after the Closing Date any further action is necessary to carry out the
purposes of this Agreement, the parties hereto shall (at the cost and
expense of the requesting party) take or cause to be taken all such
necessary action, including, without limitation, the execution and delivery
of such further instruments and documents as may be reasonably requested by
the other party for such purposes or otherwise as may be reasonably
requested by the other party for such purposes or otherwise to consummate
and make effective the transactions contemplated hereby.
SECTION 4.7 Supplements to the Disclosure Schedule. From
time to time prior to the Closing, Sellers will promptly supplement or
amend the sections of the Disclosure Schedule with respect to any matter,
condition or occurrence hereafter arising which, if existing or occurring
at the date of this Agreement, would have been required to be set forth or
described therein by sending Purchaser a written notice clearly describing
the requested changes. If Purchaser objects to a supplement or amendment
within five business days after receipt of such written notice, such
supplement or amendment by Sellers shall not have any effect for the
purpose of determining satisfaction by Sellers of the conditions set forth
in Article VI or indemnification under Articles V or VI. Notwithstanding
the foregoing, Sellers shall not be permitted to supplement or amend
Schedules 1.2(x) or 1.5 or Sections 2.2, 2.4, 2.8, 2.18 or 4.11 of the
Disclosure Schedules pursuant to this Section 4.7.
SECTION 4.8 Intercompany Arrangements. Except as
otherwise provided in the Transition Services Agreement and the Operating
Agreements and except as set forth in Section 4.8 of the Disclosure
Schedule, effective upon the Closing, all intercompany accounts and
agreements among Sellers and their respective affiliates (other than the
Business, including the Transferred Companies), on the one hand, and the
Business, including the Transferred Companies, on the other hand, will be
voided, cancelled, terminated and discharged. Any holder of a note or other
evidence of indebtedness, obligation or account, if any, that is deemed
voided, cancelled, terminated and discharged in accordance with this
Section 4.8 shall surrender such note or other evidence, if any, to the
obligor thereon.
SECTION 4.9 Insurance Coverage. Effective as of the
Closing, the Purchased Assets and the Transferred Companies shall cease to
be insured by Sellers' insurance policies, and Purchaser and its affiliates
shall have no rights or obligations with respect to any such policies. With
respect to any casualty insurance policy of Sellers or any of their
affiliates outstanding prior to the Closing insuring any material tangible
personal property or material real property included in the Purchased
Assets or owned by one of the Transferred Companies, under the terms of
which policy a Seller or an affiliate of a Seller is required to file
claims, the Seller shall cause such affiliate to file promptly and
prosecute diligently such claims relating to any casualty event occurring
prior to the Closing in accordance with Sellers' past practices. To the
extent, if any, that any Seller or any of affiliate of Seller receives
payment in respect of any such claim, such Seller shall pay over (or cause
such affiliate to pay over) such amounts to the Purchaser at or after the
Closing. The Seller shall procure for the benefit of Purchaser and at the
Purchaser's expense (i) directors and officer insurance covering directors
and officers of the Transferred Companies for pre-closing matters and (ii)
professional liability coverage and employment practices liability coverage
for pre-closing matters.
SECTION 4.10 Sellers' Names. Notwithstanding any other
provision of this Agreement to the contrary, no interest in or right to use
the name "McLeod" or "McLeodUSA", or any other corporate name of McLeodUSA,
Sellers or their affiliates (other than those listed in Section 4.10 of the
Disclosure Schedule), or any logo, trademark, service mark, domain name or
trade name or any derivation thereof of McLeodUSA, Sellers or their
affiliates with respect to, or associated with, the foregoing
(collectively, the "Retained Names and Marks") is being transferred to
Purchaser pursuant to the transactions contemplated hereby, and, except as
expressly provided below, the use of any Retained Names and Marks in
connection with the Business shall cease as of the Closing Date. Purchaser,
will, and will cause its affiliates to (a) as promptly as practicable
following the Closing Date, but in any event within 60 days thereafter,
remove or obliterate all the Retained Names and Marks from its signs,
purchase orders, invoices, sales orders, labels, letterheads, shipping
documents and other items and materials of the Business and otherwise, and
(b) not put into use after the Closing Date any such items and materials
that bear any Retained Name or Mark or any name, mark or logo similar
thereto. Notwithstanding the foregoing, for a period of 60 days after the
Closing Date, Purchaser may use any purchase orders, invoices, sales
orders, labels, letterheads or shipping documents existing on the Closing
Date that bear any Retained Name or Mark or any name, mark or logo similar
thereto; provided, however, that such items shall be stickered or otherwise
marked to clearly indicate that none of McLeodUSA, Sellers or any of their
affiliates are party to such documents. As promptly as practicable after
the Closing Date, but in any event within 15 days thereafter, Purchaser
will change the corporate name of each Transferred Company whose corporate
name includes the name "McLeod" or "McLeodUSA" or any name, mark or logo
similar thereto, to another corporate name that does not include the
name "McLeod" or "McLeodUSA" or any name, mark or logo similar thereto.
Notwithstanding the foregoing, Purchaser agrees that Sellers shall have no
responsibility for claims by third parties arising out of, or relating to,
the use by Purchaser, the Transferred Companies or any affiliate thereof of
any Retained Name or Mark after the Closing Date, and Purchaser agrees to
indemnify and hold harmless the Seller from any and all Losses that may
arise out of the use thereof by Purchaser, the Transferred Companies or any
affiliate thereof.
SECTION 4.11 Working Capital.
(a) Sellers shall cause the Net Working Capital (as
defined below) as of the close of business on the date immediately
preceding the Closing Date to be not less than $3.2 million. At least five
(5) business days prior to the Closing Date, the Sellers shall prepare and
deliver to the Purchaser a statement of its reasonable, good faith estimate
of the Net Working Capital (as hereinafter defined) (the "Preliminary Net
Working Capital Statement"). The Purchaser and its representatives,
including the Purchaser's independent accountants, will be entitled to
review all work papers, if any, of the Sellers and their representatives,
including the Sellers' independent accountants, prepared in connection with
the delivery of the Preliminary Net Working Capital Statement.
(b) The parties agree that the sole and exclusive
remedy for disputes arising under this Section 4.11 shall be to submit such
disputes for resolution to an independent accounting firm to which the
parties may mutually agree, or failing such agreement, to a firm or a
partner at a firm appointed at the request of any party by the American
Arbitration Association (the "Arbiter"). All proceedings conducted by the
Arbiter shall take place in Chicago, Illinois. The Arbiter shall act as an
arbitrator to determine, based solely on the presentations by the Seller
and the Buyer, and not by independent review, whether the Net Working
Capital as of the Closing Date was calculated in the manner provided in
this Section 4.11, and, if necessary, the correct amount of Net Working
Capital based on such presentations. The fees, costs and expenses of the
Arbiter shall be borne equally by the Seller and the Buyer. The
determination of the Arbiter shall be final and binding upon the parties.
(c) "Net Working Capital" shall mean the amount
obtained by subtracting the Current Liabilities of the Business from the
Current Assets of the Business, in each case on the close of business on
the day immediately preceding the Closing Date. "Current Assets" shall mean
the sum of (w) inventory, net of allowances, (x) accounts receivable -
customers, billed and unbilled, net of allowance for bad debts and other
adjustments, (y) deferred charges, and (z) prepaid expenses, in each case
determined using the same accounting methods, principles, policies,
practices, and procedures with consistent judgments, classifications and
valuation and estimation methodologies used for normal month end closing of
the books consistent with the calculations set forth on Section 4.11 of the
Disclosure Schedule, but excluding (i) any intercompany accounts and (ii)
any income tax assets, including deferred income taxes. "Current
Liabilities" shall mean the sum of (v) accounts payable - other (excluding
any outstanding checks to the extent deducted in determining Closing Net
Cash and the account captioned "A/P Miscellaneous" - "current year
reserve"), (w) other current liabilities, (x) accrued liabilities, (y)
short-term capital lease obligations and (z) advance billings and customer
deposits, in each case determined using the same accounting methods,
principles, policies, practices, and procedures with consistent judgments,
classifications and valuation and estimation methodologies used for normal
month end closing of the books consistent with the calculations set forth
on Section 4.11 of the Disclosure Schedule, but excluding (i) any
intercompany accounts (other than the payables listed on Section 4.8 of the
Disclosure Schedules) including accrued income taxes and (ii) any income
tax liability, including reserves for income taxes and deferred income
taxes. Notwithstanding anything to the contrary contained herein, at
Sellers' option, Sellers may elect to include cash or cash equivalents of
the Business as a "Current Asset" for purposes of determining the Net
Working Capital; provided that the amount of any cash or cash equivalents
included in the calculation of Net Working Capital shall not be included in
the calculation of Closing Net Cash.
SECTION 4.12 Certain Assets. Subject to applicable Laws,
Sellers shall use commercially reasonable efforts to transfer and assign or
cause to be transferred and assigned to Purchaser at the Closing the rights
and interests in the service agreements and customer accounts, including
customer lists and historical records between Telecom (or its affiliates
(other than ICTC)) and its customers who are billed by ICTC for private
line services, Internet Service Provider and long distance services.
Transfer of these agreements and accounts shall not involve the transfer of
any physical assets. All fees and out-of-pocket, third party costs associated
with any transferred service agreement or account for services
rendered prior to the closing (billed or unbilled) will be for the account
of Sellers. After the Closing, Purchaser will cause ICTC to collect and
remit such fees, net of such costs, to Sellers in accordance with past
practice. Purchaser shall indemnify Sellers and their affiliates and hold
Sellers and their affiliates harmless from and against any and all Losses,
liabilities and obligations with respect to such rights and interests
related to the post-Closing period in accordance with Article VII.
SECTION 4.13 Vendor Contracts. With respect to the vendor
contracts listed on Section 4.13 of the Disclosure Schedule, Sellers agree
to cooperate in good faith with Purchaser in Purchaser's efforts to obtain
replacement contracts for the benefit of the Business after the Closing.
SECTION 4.14 Title Insurance and Estoppel Certificates.
Sellers agree to cooperate in good faith with Purchaser's efforts to
obtain, at its own costs and expense, (a) a title insurance policy (ALTA
Owner's Title Insurance Policy - Form B), and a corresponding lender's
title insurance policy, and all reasonably necessary endorsements with
respect to the Business Real Property and (b) such landlord and/or tenant
estoppel certificates as Purchaser or Purchaser's prospective lenders shall
reasonably request.
ARTICLE V
TAX MATTERS
SECTION 5.1 Preparation and Filing of Tax Returns.
(a) Sellers shall prepare and duly file (or cause to
be prepared and duly filed) all Tax Returns with respect to the Services
Business and the Transferred Companies for all taxable periods ending on
or before the Closing Date (each, a "Pre-Closing Tax Period"), including,
without limitation, for those jurisdictions that permit or require a short
period Tax Return, such period ending on the Closing Date. All Tax Returns
with respect to the Services Business and the Transferred Companies (other
than Tax Returns filed on a consolidated, combined, unitary or other
similar basis) shall be prepared and filed in a manner consistent with
prior practice, except as required by applicable Law. Purchaser shall have
the right to review and comment on any such Tax Returns (other than Tax
Returns filed on a consolidated, combined, unitary or other similar basis).
Purchaser shall, or shall cause the Transferred Companies to, furnish
information to McLeodUSA as reasonably requested by McLeodUSA to effectuate
the provisions of this section.
(b) Purchaser shall prepare and duly file (or cause
to be prepared and duly filed) all Tax Returns with respect to the Services
Business and the Transferred Companies for which no Seller has filing
responsibility pursuant to Section 5.1(a). Purchaser shall provide Sellers
with the basis and calculations upon which such Tax Returns with respect to
periods for which Sellers have or may have any liability under this Article V
are to be filed, and Sellers shall have the right to review, comment on
and consent to any such Tax Returns. Neither the Transferred Companies nor
Purchaser shall make any elections with respect to Taxes or amend any Tax
Returns of the Transferred Companies for periods ending on or before the
Closing Date without Sellers' prior written consent (not to be unreasonably
withheld).
SECTION 5.2 Tax Allocation and Indemnity.
(a) Sellers shall be liable for, and indemnify and
hold Purchaser and its affiliates harmless, on a net, after-Tax basis, from
and against any loss, liability or expense incurred by Purchaser for any
breach of the representations set forth in Section 2.13 and any liability
for the following Taxes with respect to the Transferred Companies, but only
for Taxes in excess of amounts (A) previously paid or (B) accrued or
reserved for on the books and records of the Transferred Companies (minus
amounts previously indemnified for under this Article V): (x) Taxes
(including withholding Taxes) imposed on or with respect to the Transferred
Companies (i) for Pre-Closing Tax Periods or (ii) as a result of any of the
Transferred Companies being or having been a member of the Seller Group
(without duplication of clause (i)) and (y) Taxes imposed on Purchaser, the
Transferred Companies or their respective affiliates resulting from
Sellers' failure to comply with their obligations under this Article V.
(b) Purchaser shall be liable for, and indemnify and
hold Sellers and their affiliates harmless, on a net, after-Tax basis, from
and against liability for any and all Taxes imposed (x) on or with respect
to the Transferred Companies for all taxable periods beginning after the
Closing Date (each, a "Post-Closing Period"), and (y) on or with respect to
the Transferred Companies, Sellers or their affiliates as a result of
Purchaser's failure to comply with its obligations under this Article V.
(c) With respect to any taxable period that begins
before and ends after the Closing Date (a "Straddle Period"), Sellers shall
be liable for, and indemnify Purchaser and its affiliates harmless from and
against liability for any and all Taxes of the Transferred Companies
attributable to the portion of a Straddle Period that begins before and
ends on the Closing Date, but only to the extent that the amount of such
Taxes, together with all other Taxes previously indemnified for under this
Article V, exceeds the amounts previously paid by Sellers or accrued or
reserved for on the books and records of the Transferred Companies.
Purchaser shall be liable for, and indemnify Sellers and their affiliates
harmless from and against liability for any and all other Taxes of the
Transferred Companies attributable to a Straddle Period. For purposes of
this Agreement, the portion of any Tax that is attributable to the portion
of a Straddle Period that begins before and ends on the Closing Date shall
be-
(i) in the case of a Tax that is based on net
income or receipts, the amount of such Tax that would be due with
respect to the portion of the Straddle Period beginning before and
ending on the Closing Date if such portion were a separate taxable
period, except that exemptions, allowances, deductions or credits
that are calculated on an annual basis (such as the deduction for
depreciation or capital allowances) shall be apportioned on a per
diem basis; provided, however, that, with respect to such Taxes,
the Parties shall, to the extent permitted by applicable Law,
elect to treat the Closing Date as the last day of a taxable year
or period of the Transferred Companies, and such year or period as
a short taxable year and a Pre-Closing Tax Period; and
(ii) in the case of any Tax not described in
subparagraph (i) above, the amount of such Tax for the period in
question multiplied by a fraction, the numerator of which is the
number of days in the Straddle Period beginning before and ending
on the Closing Date, and the denominator of which is the total
number of days in such Straddle Period.
(d) All personal property Taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a
Straddle Period shall be apportioned between Telecom and IBS on the one
hand, and Purchaser, on the other hand, in the manner described in Section
5.2(c)(ii).
(e) Notwithstanding any other provision of this
Agreement, if Purchaser causes or permits the Transferred Companies or any
affiliate thereof to take any action on the Closing Date not in the
ordinary course of business (other than as contemplated by this Agreement),
including, without limitation, the distribution of any dividend or the
effectuation of any redemption, Purchaser shall indemnify Sellers for any
Tax liability resulting from such action.
SECTION 5.3 Cooperation on Tax Matters. Purchaser,
Sellers and their respective affiliates shall cooperate in the preparation
of all Tax Returns for any Tax periods for which one party could reasonably
require the assistance of the other party in obtaining any necessary
information. Such cooperation shall include furnishing prior years' Tax
Returns or return preparation packages (including packages in the format
historically provided), to the extent related only to the Transferred
Companies, information illustrating previous reporting practices or
containing historical information relevant to the preparation of such Tax
Returns, and furnishing such other information within such Party's
possession requested by the Party filing such Tax Returns as is relevant to
their preparation. Such cooperation and information also shall include
forwarding copies of appropriate notices and forms or other communications
received from or sent to any applicable Taxing Authority responsible for
the imposition of Taxes which relate only to the Transferred Companies or
the Services Business and providing copies of all relevant Tax Returns to
the extent related only to the Transferred Companies or the Services
Business, together with accompanying schedules and related workpapers,
documents relating to rulings or other determinations by any such Taxing
Authority and records concerning the ownership of property, which the
requested party may possess. Such cooperation shall be at the requesting
party's expense. Notwithstanding any provision of this Agreement to the
contrary, but subject to Section 5.7, nothing in this Agreement shall (i)
require Sellers to disclose the contents of or provide any Tax Returns (and
related documents or information) filed on a consolidated, combined,
unitary or similar basis or (ii) limit or otherwise affect Sellers' or
McLeodUSA's ability to file any such Tax Return in the manner they see fit.
SECTION 5.4 Contests. Whenever any Governmental Authority
asserts a claim, makes an assessment or otherwise disputes the amount of
Taxes for which Sellers are or may be liable under this Agreement,
Purchaser shall, if informed of such an assertion, inform the relevant
Seller within ten business days, and the relevant Seller shall have the
right to control any resulting proceedings and to determine whether and
when to settle any such claim, assessment or dispute to the extent such
proceedings or determinations affect the amount of Taxes for which such
Seller may be liable under this Agreement, except that Purchaser shall have
the right to consent, which consent will not be unreasonably withheld or
delayed, to any settlement to the extent such proceedings or settlement
materially affect the amount of Taxes for which Purchaser may be liable
under this Agreement. If Purchaser fails to provide such notice and such
failure shall materially prejudice a Seller's ability to defend such
assessment, then the Seller's indemnification obligations shall be null and
void with regard to such assessment. Whenever any Taxing Authority asserts
a claim, makes an assessment or otherwise disputes the amount of Taxes for
which Purchaser is liable under this Agreement Seller shall if informed of
such an assertion, inform Purchaser within 10 business days, and, in any
case, Purchaser shall have the right to control any resulting proceedings
and to determine whether and when to settle any such claim, assessment or
dispute, except that Sellers shall have the right to consent, which consent
shall not be unreasonably withheld or delayed, to any settlement to the
extent such proceedings settlement affects the amount of Taxes for which
Sellers are or may be liable under this Agreement. If Seller fails to
provide such notice and such failure materially prejudices Purchaser's
ability to defend such assessment, then the Purchasers indemnification
obligation shall be null and void with regard to such assessment.
SECTION 5.5 Written Notices. All claims for
indemnification under this Article V must be asserted in a written notice,
describing the claim in reasonable detail, the basis on which
indemnification is sought, and all written materials related to such claim.
Any claim not made in such manner shall not be entitled to indemnification
pursuant to this Article V.
SECTION 5.6 Refund and Carrybacks. Sellers shall be
entitled to any credits or refunds of Taxes of the Transferred Companies or
the Services Business (including interest thereon) payable with respect to
all periods (or portions thereof) ending on or before the Closing Date.
Purchaser shall be entitled to all other credits and refunds of Taxes of
the Transferred Companies or with respect to the Services Business
(including interest thereon).
SECTION 5.7 Section 338(h)(10) Election.
(a) Purchaser shall, and Sellers shall cause
McLeodUSA to, jointly make or cause to be made an election under
Section 338(h)(10) of the Code (and any corresponding elections under state,
local, or foreign tax law (including an election similar to Section 338(g)
of the Code with respect to a jurisdiction that allows such an election but
not an election similar to Section 338(h)(10) of the Code)) (collectively
the "Section 338(h)(10) Elections") with respect to the purchase and sale
of the Shares of all or any of the Transferred Companies hereunder. Sellers
shall cause McLeodUSA to pay any income Tax attributable to the making of
the Section 338(h)(10) Elections.
(b) Purchaser shall be responsible for the
preparation and timely filing of all Section 338 Forms (as defined below).
Sellers shall (or shall cause their affiliates to) execute and deliver to
Purchaser such documents or forms as are reasonably requested and are
required by any Tax laws to properly complete the Section 338 Forms at
least 90 days prior to the date such Section 338 Forms are required to be
filed. "Section 338 Forms" means all returns, documents, statements, and
other forms that are required to be submitted to any federal, state or
local Taxing Authority in connection with the Section 338(h)(10) Elections.
Section 338 Forms shall include, without limitation, IRS Form 8023
(together with any schedules or attachments thereto that are required
pursuant to Treasury Regulations Section 1.338(h)(10)-1).
(c) Purchaser and Sellers shall use their best
efforts to agree, as soon as practicable after the Closing, on the
computation of the aggregate deemed sale price (as defined under Treasury
Regulations Section 1.338-4) and any corresponding items for state and
local Tax purposes (the "ADSP"). Purchaser shall perform or cause to be
performed an initial valuation of assets and allocation of the portion of
the Purchase Price (and other relevant items) allocable to the Shares of
each of the Transferred Companies, as set forth on Schedule 1.7, among the
assets of the Transferred Companies for the Section 338(h)(10) Elections,
in accordance with applicable law. Purchaser shall provide Sellers with
drafts of such valuation and allocations (which shall be prepared on a
basis consistent with this Section 5.7(c)) within sixty days after the
Closing Date. Sellers shall have thirty days to provide Purchaser with any
objections to such drafts. If a Seller objects to the computation or
allocation by Purchaser of such amounts, and Purchaser and Sellers cannot
reach agreement on the computation or allocation within thirty business
days after notification of the objection, Purchaser and Sellers shall
submit the issue to arbitration by a nationally recognized accounting firm
as shall be mutually acceptable to Purchaser and Sellers for resolution of
the disagreement within ten days, it being agreed that Purchaser and
Sellers will jointly share the fees and expenses of such accounting firm.
The valuations and allocations determined pursuant to this Section 5.7(c)
shall be used for purposes of all relevant Tax Returns, reports and
filings.
(d) The parties shall cooperate with each other to
take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules and other documents) as may
be required to effect and preserve timely Section 338(h)(10) Elections in
accordance with the provisions of the Treasury regulations promulgated
under Code Section 338 (or any comparable provisions of state or local tax
law) or any successor provisions. The parties shall (and shall cause their
respective affiliates to) report the purchase by Purchaser of the Shares
pursuant to this Agreement consistent with the Section 338(h)(10) Elections
and take no position inconsistent therewith in any Tax Return, any
proceeding before any taxing authority or otherwise.
SECTION 5.8 No Right of Set-Off or Off-Set. Neither
Purchaser nor Sellers shall have any right to set-off any payment due under
this Agreement against any other payments to be made pursuant this
Agreement or otherwise (including against indemnification payments).
SECTION 5.9 Mitigation. Each party seeking
indemnification under this Article V shall consult with the other party and
shall take all other actions as may be reasonably required or necessary to
mitigate, to the extent practical, the other party's indemnification
obligations under this Article V.
SECTION 5.10 Exclusive Remedies. Notwithstanding any
other provisions of this Agreement, the parties acknowledge and agree that
the indemnification provisions of this Article V shall be their sole and
exclusive remedies with respect to Taxes, and that no breach of any
representation, warranty, covenant or agreement contained herein shall give
rise to any right, after the consummation of the transactions contemplated
by this Agreement, to rescind this Agreement or any of the transactions
contemplated hereby.
SECTION 5.11 Adjustment to Purchase Price. Sellers and
Purchaser agree that to the extent permitted by applicable Law any
indemnity payment made pursuant to this Article V shall be treated as an
adjustment to the Purchase Price.
SECTION 5.12 Transfer Taxes. Notwithstanding anything to
the contrary contained herein, Purchaser shall be responsible for the
timely payment of all sales (including, without limitation, bulk sales),
use, value added, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other similar taxes
and fees ("Transfer Taxes"), arising out of or in connection with or
attributable to the transactions effected pursuant to this Agreement.
Purchaser shall prepare and in a timely manner file all Tax Returns in
respect of Transfer Taxes relating to the Shares; provided, however, that
any such Tax Returns shall be subject to the approval of Sellers, which
approval shall not be unreasonably withheld or delayed. Sellers shall
prepare and in a timely manner file all Tax Returns in respect of the
Transfer Taxes relating to the Purchased Assets; provided, however, that
any such Tax Returns shall be subject to the approval of Purchaser, which
approval shall not be unreasonably withheld or delayed.
SECTION 5.13 Conflicts and Survival. To the extent that
the provisions of this Article V conflict with any other provisions of this
Agreement then, with respect to Taxes, the provisions of this Article V
shall control. The obligations of the parties under this Article V shall
survive the Closing until the expiration of all applicable statutes of
limitations.
ARTICLE VI
CONDITIONS
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Closing. The obligations of Sellers, on the one hand, and Purchaser, on the
other hand, to consummate the Closing are subject to the satisfaction (or,
if permissible, waiver by the party for whose benefit such conditions
exist) of the following conditions:
(a) no Governmental Entity shall have issued any
order, decree or ruling, and there shall not be any statute, rule or
regulation, restraining, enjoining or prohibiting the consummation of the
material transactions contemplated by this Agreement;
(b) any waiting period applicable to the
transactions contemplated hereby under the HSR Act shall have expired or
been terminated; and
(c) all consents, approvals, orders and permits of,
and registrations, declarations and filings with, any Governmental Entity
that are legally required in order to enable Sellers and Purchaser to
consummate the transactions contemplated hereby and listed on Schedule
6.1(c) shall have been made or obtained and shall be in full force and effect.
SECTION 6.2 Conditions to the Obligations of Purchaser.
The obligations of Purchaser to consummate the transactions contemplated
hereby are subject to the satisfaction (or waiver by Purchaser) of the
following further conditions:
(a) the representations and warranties of Sellers
shall be true and accurate as of the Closing Date as if made at and as of
such time (other than those representations and warranties that address
matters only as of a particular date or only with respect to a specific
period of time, which need only be true and accurate as of such date or
with respect to such period), except where the failure of such
representations and warranties to be so true and accurate (without giving
effect to any limitation as to "materiality," "Business Material Adverse
Effect" or "material adverse effect" or similar qualifications set forth
therein) would not individually or in the aggregate have a Business
Material Adverse Effect;
(b) Sellers shall have performed in all material
respects their obligations hereunder required to be performed by them at or
prior to the Closing Date;
(c) the Net Working Capital as of the close of
business on the date immediately preceding the Closing Date shall be at
least $3.2 million;
(d) Purchaser shall have received a certificate
signed by an officer of each Seller, dated as of the Closing Date, to the
effect that, to the best of such officer's knowledge, the conditions set
forth in Sections 6.2(a), 6.2(b) and 6.2(c) have been satisfied; and
(e) The conditions to the Financing Commitment shall
have been satisfied in full or waived, and immediately available funds in
the amount and on the terms contemplated by such Financing Commitment shall
have been provided or be available to the Purchaser.
SECTION 6.3 Conditions to the Obligations of Sellers. The
obligations of Sellers to consummate the transactions contemplated hereby
are subject to the satisfaction (or waiver by Sellers) of the following
further conditions:
(a) the representations and warranties of Purchaser
shall be true and accurate as of the Closing Date as if made at and as of
such time (other than those representations and warranties that address
matters only as of a particular date or only with respect to a specific
period of time, which need only be true and accurate as of such date or
with respect to such period), except where the failure of such
representations and warranties to be so true and accurate (without giving
effect to any limitation as to "materiality" or similar qualifications set
forth therein) would not individually or in the aggregate materially
hinder, impair or delay Purchaser's ability to consummate the transactions
contemplated by this Agreement;
(b) Purchaser shall have performed in all material
respects all of the obligations hereunder required to be performed by
Purchaser at or prior to the Closing Date; and
(c) Sellers shall have received a certificate signed
by an officer of Purchaser, dated as of the Closing Date, to the effect
that, to the best of such officer's knowledge, the conditions set forth in
Sections 6.3(a) and 6.3(b) have been satisfied.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Indemnification. None of the provisions of
Sections 7.1(a) - (d) shall apply to claims, indemnifications, obligations,
liabilities, covenants and representations relating to Taxes, which shall
be governed solely and exclusively by the terms of Article V.
(a) Indemnification by Sellers. Subject to the
limits set forth in this Section 7.1, Sellers jointly and severally agree
to indemnify, defend and hold Purchaser, its officers, directors and
affiliates, harmless from and in respect of any and all losses, damages,
costs and reasonable expenses, including reasonable expenses of
investigation and reasonable fees and disbursements of counsel, but
excluding, except in connection with third party claims, consequential
damages, lost profits or punitive damages (collectively, "Losses"), that
they may incur arising out of or due to (i) any inaccuracy of any
representation or the breach of any warranty, covenant, undertaking or
other agreement of Sellers contained in this Agreement or (ii) the Excluded
Liabilities.
(b) Indemnification by Purchaser. Subject to the
limits set forth in this Section 7.1, Purchaser agrees to indemnify, defend
and hold Sellers, their officers, directors and affiliates, harmless from
and in respect of any and all Losses that they may incur arising out of or
due to (i) any inaccuracy of any representation or the breach of any
warranty, covenant, undertaking or other agreement of Purchaser contained
in this Agreement, (ii) the Assumed Liabilities or (iii) the ownership or
operation of the Purchased Assets or the Business after the Closing Date.
(c) Representations and Warranties; Limits on
Indemnification. The several representations and warranties of the parties
contained in this Agreement or in any instrument delivered pursuant hereto
will survive the Closing Date and will remain in full force and effect
thereafter for a period of one year from the Closing Date, except for (i)
the representations and warranties in Sections 2.1, 2.2, 2.3, 3.1 and 3.2,
which shall survive the Closing without limitation as to time, (ii) the
representations and warranties in Section 2.8, which shall survive the
Closing until 90 days after the expiration of the applicable statute of
limitations and (iii) the representations and warranties in Sections 2.9,
the first sentence of 2.15(b) and 2.16 which shall survive the Closing
until the date which is three years after the Closing. The representations
or warranties shall survive beyond the periods described above with respect
to (but only with respect to) any inaccuracy therein or breach thereof,
notice of which shall have been duly given within such applicable period in
accordance with Section 7.1(d) hereof. The covenants and agreements of the
parties hereto shall survive the Closing in accordance with their terms.
Anything to the contrary contained herein notwithstanding, (i) (A) none of
Purchaser or its officers, directors or affiliates shall be entitled to
recover from Sellers for breaches of or inaccuracies in representations or
warranties (other than the representations and warranties in Sections 2.1,
2.2, 2.3, 2.4 and 2.16) or breaches of the covenants contained in Sections
4.1(a), 4.1(b) and 4.1(o) unless and until (1) the total of all such
persons' Losses arising from or relating to any single circumstance or
related circumstances exceeds $25,000 ("Covered Losses") and (2) the total
of all such persons' Covered Losses with respect to such inaccuracies or
breaches exceeds an amount equal to 1% of the Cash Purchase Price and then
only for the amount by which the total of all such Covered Losses exceeds
an amount equal to 1% of the Cash Purchase Price and (B) none of Purchaser
or its officers, directors, agents or affiliates shall be entitled to
recover from Sellers for breaches of or inaccuracies in representations or
warranties (other than the representations and warranties in Sections 2.1,
2.2, 2.3, 2.4 and 2.16) or breaches of the covenants contained in Sections
4.1(a), 4.1(b) and 4.1(o), and Sellers shall have no liability to such
persons for any such inaccuracies or breaches for, more than an amount
equal to 20% of the Cash Purchase Price and (ii) (A) none of Sellers or
their officers, directors or affiliates shall be entitled to recover from
Purchaser for breaches of or inaccuracies in representations or warranties
(other than the representations and warranties in Sections 3.1 and 3.2)
unless and until the total of all such persons' Losses with respect to such
inaccuracies or breaches exceeds an amount equal to 1% of the Cash Purchase
Price and then only for the amount by which the total of all such Losses
exceeds an amount equal to 1% of the Cash Purchase Price and (B) none of
Sellers or their officers, directors, agents or affiliates shall be
entitled to recover from Purchaser for breaches of or inaccuracies in
representations or warranties (other than the representations and
warranties in Sections 3.1 and 3.2), and Purchaser shall have no liability
to such persons for such inaccuracies or breaches for, more than an amount
equal to 20% of the Cash Purchase Price.
(d) Notice and Opportunity to Defend. If there
occurs an event that a party (an "Indemnified Party") asserts is an
indemnifiable event pursuant to Section 7.1(a) or 7.1(b), the Indemnified
Party shall notify in writing the other party obligated to provide
indemnification (an "Indemnifying Party") within 45 days of such
occurrence, with such written notice to (i) state the amount of the Loss,
if known, and the method of computation thereof, and (ii) contain a
reference to the specific section or sections of this Agreement in respect
of which such right to indemnification is asserted; provided, however, that
if such event involves any claim or the commencement of any action or
proceeding by a third person, the Indemnified Party will give such
Indemnifying Party written notice of such claim or the commencement of
such action or proceeding within 30 days of receiving notice of such claim
or the commencement of such action or proceeding. Such notice shall be a
condition precedent to any liability of the Indemnifying Party hereunder;
provided, however, that the failure to provide notice as provided herein
will relieve the Indemnifying Party of its obligations hereunder only to
the extent that such failure materially prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any Indemnified
Party and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein
and, the Indemnifying Party may, by providing written notice to the Indemnified
Party within 30 days of receipt of notice of claim, assume the defense
thereof, with counsel reasonably satisfactory to the Indemnified Party and,
after notice from the Indemnifying Party to the Indemnified Party of such
election so to assume the defense thereof, the Indemnifying Party shall not
be liable to the Indemnified Party for any legal expenses of other counsel
or any other expenses subsequently incurred by such party in connection
with the defense thereof; provided that the Indemnifying Party shall not be
entitled to assume the defense thereof and shall pay the reasonable fees
and expenses of counsel retained by the Indemnified Party if (A) any relief
other than payment of money damages is sought against the Indemnified Party
or (B) the Indemnified Party shall have been advised by its counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party. The
Indemnified Party agrees to cooperate fully with the Indemnifying Party and
its counsel in the defense against any such asserted liability. The
Indemnified Party shall have the right to participate at its own expense in
the defense of such asserted liability. No Indemnifying Party shall consent
to the entry of any judgment or enter into any settlement without the
consent of the Indemnified Party (A) if such judgment or settlement does
not include as an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all liability in
respect to such claim, (B) if such judgment or settlement would result in
the finding or admission of any violation of Law, or (C) if as a result of
such consent or settlement injunctive or other equitable relief would be
imposed against the Indemnified Party or such judgment or settlement could
reasonably be expected to interfere with or adversely affect the business,
operations or assets of the Indemnified Party.
(e) Adjustment for Insurance and Taxes. The amount that
an Indemnifying Party is required to pay to, for or on behalf of any
Indemnified Party pursuant to this Section 7.1 shall be adjusted
(including, without limitation, retroactively) (i) by any insurance
proceeds, indemnity, contribution or similar payment, paid to any
Indemnified Party in reduction of the related indemnifiable loss (the
"Indemnifiable Loss") and (ii) to take account of any tax benefit available
as a result of any Indemnifiable Loss. Amounts required to be paid, as so
reduced, are hereinafter sometimes called an "Indemnity Payment." If an
Indemnified Party shall have received or shall have had paid on its behalf
an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently become eligible for insurance proceeds, or indemnity,
contribution or similar payment, in respect of such Indemnifiable Loss, or
become eligible for any tax benefit as a result of such Indemnifiable Loss,
then the Indemnified Party shall pay to the Indemnifying Party the amount
of such insurance proceeds or tax benefit or, if lesser, the amount of the
Indemnity Payment.
(f) No Right of Set-Off or Off-Set. Neither
Purchaser nor Sellers shall have any right to set-off any payment due under
this Agreement against any other payments to be made pursuant this
Agreement or otherwise (including against indemnification payments).
(g) Mitigation. Each Indemnified Party shall consult
and cooperate with the Indemnifying Party and shall take all other actions
as may be reasonably required or necessary to mitigate, to the extent
practicable, Losses in connection with claims for which an Indemnified
Party seeks indemnification under this Section 7.1; provided that such
obligation to mitigate shall not require the applicable Indemnified Party
to incur any material liability or pay any material consideration in
connection therewith.
(h) Subrogation. After any Indemnity Payment is made
to any Indemnified Party pursuant to this Section 7.1, the Indemnifying
Party shall, to the extent of such Indemnity Payment, be subrogated to all
rights (if any) of the Indemnified Party against any third party in
connection with the Losses to which such Indemnity Payment relates. Without
limiting the generality of the preceding sentence, any Indemnified Party
receiving an Indemnity Payment pursuant to Section 7.1 shall execute, upon
the written request of the Indemnifying Party, any instrument reasonably
necessary to evidence such subrogation rights.
SECTION 7.2 Adjustment to Purchase Price. Sellers and
Purchaser agree that, to the extent permitted under applicable Law, any
Indemnity Payment hereunder shall be treated as an adjustment to the
Purchase Price.
SECTION 7.3 Exclusive Remedies. Purchaser and Sellers
acknowledge and agree that (i) following the Closing, the indemnification
provisions of Articles V and VII shall be the sole and exclusive remedies
of Purchaser and Sellers for any breach of or inaccuracy in any
representation or warranty or any breach, nonfulfillment or default in the
performance of any of the covenants or agreements contained in this
Agreement (but not any such covenants or agreements to the extent they are
by their terms to be performed after the Closing Date) and (ii) anything
herein to the contrary notwithstanding, no breach of any representation,
warranty, covenant or agreement arising out of or related to this Agreement
shall give rise to any right on the part of Purchaser or Sellers, after the
consummation of the transactions contemplated by this Agreement, to
rescind this Agreement or any of the transactions contemplated hereby or to
any further indemnification rights or claims beyond those contained in this
Agreement of any nature whatsoever in respect thereof (whether by contract,
common law, statute, law, regulation or otherwise), all of which the
parties hereby waive; provided, however, that nothing herein is intended to
waive any claims for fraud.
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to the
Closing Date:
(a) by the mutual consent of Sellers and Purchaser;
(b) by either Sellers or Purchaser:
(i) if the Closing shall not have occurred on or
prior to January 16, 2004; provided, however, that the right to
terminate this Agreement under this Section 8.1(b)(i) shall not be
available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or prior to such date;
(ii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action in
each case permanently restraining, enjoining or otherwise
prohibiting the material transactions contemplated by this
Agreement and such order, decree, ruling or other action shall
have become final and non-appealable;
(c) by Sellers if Purchaser breaches any
representation, warranty or covenant contained herein in any material
respect and such breach cannot be cured or has not been cured within 60
days after the delivery of written notice to Purchaser;
(d) by Sellers if the Commitment Letter lapses or is
otherwise terminated or ceases to be a binding obligation of the parties
thereto and Purchaser fails to obtain a binding commitment for alternative
financing, on terms and conditions reasonably acceptable to Sellers,
within 30 days, or
(e) by Purchaser if Sellers breach any
representation, warranty or covenant contained herein in any material
respect and such breach cannot be cured or has not been cured within 60
days after the delivery of written notice to Sellers.
SECTION 8.2 Procedure and Effect of Termination. In the event
of the termination and abandonment of this Agreement by Sellers or Purchaser
pursuant to Section 8.1 hereof, written notice thereof shall forthwith be
given to the other party.
If the transactions contemplated by this Agreement are terminated as
provided herein:
(a) each party will redeliver all documents, work
papers and other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the party furnishing the same;
(b) all information received by any party hereto
with respect to the business of any other party or its subsidiaries or
affiliates shall be treated in accordance with the provisions of the
Confidentiality Agreement, which shall survive the termination of this
Agreement; and
(c) no party to this Agreement will have any
liability under this Agreement to the other except (i) as stated in
subparagraphs (a) and (b) of this Section 8.2; (ii) for any willful breach
of any provision of this Agreement and (iii) as provided in the
Confidentiality Agreement.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Amendment and Modification. Subject to
applicable Law, this Agreement may be amended, modified and supplemented in
any and all respects only by written agreement of the parties hereto at any
time with respect to any of the terms contained herein.
SECTION 9.2 Notices. All notices, consents and other
communications hereunder shall be in writing and shall be deemed to have
been duly given (a) when delivered by hand or by Federal Express or a
similar overnight courier to; (b) when successfully transmitted by
telecopier (with a confirming copy of such communication to be sent as
provided in clause (a) above) to, the party for whom intended, at the
address or telecopier number for such party set forth below (or at such
other address or telecopier number for a party as shall be specified by
like notice; provided, however, that any notice of change of address or
telecopier number shall be effective only upon receipt):
(a) if to Purchaser, to:
Homebase Acquisition Corp.
P.O. Box 1234
Mattoon, IL 61938
Telecopy No. (217) 258-6240
Attention: Richard Lumpkin
with a copy to:
Spectrum Equity Investors IV, L.P.
One International Place
29th Floor
Boston, MA 02110
Telecopy No. (617) 464-4601
Attention: Kevin Maroni
and
Providence Equity Partners III, L.P.
50 Kennedy Plaza
Providence, RI 02903
Telecopy: (401) 751-1790
Attn: Glenn Creamer
and
King & Spalding
1185 Avenue of the Americas
New York, New York 1003 6
Telecopy: (212) 556-2222
Attn: John Graham, Esq.
and
Edwards & Angell, LLP
101 Federal Street
Boston, MA 02110
Telecopy: (888) 325-9120
Attn: Stephen Meredith, Esq.
(b) if to Sellers, to:
McLeodUSA Incorporated
McLeodUSA Technology Park
6400 C Street SW, P.O. Box 3177
Cedar Rapids, IA 52406-3177
Telecopy No. (319) 790-7901
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher &
Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Telecopy No. (312) 407-0411
Attention: Peter C. Krupp, Esq.
SECTION 9.3 Interpretation. The words "hereof," "herein"
and "herewith" and words of similar import shall, unless otherwise stated,
be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Agreement unless otherwise specified.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without
limitation." The words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all
genders and words denoting natural persons shall include corporations and
partnerships and vice versa. The phrase "to the knowledge of Sellers" or
any similar phrase shall mean such facts and other information which as of
the date of determination are actually known to Joseph R. Dively, Brian
Carr, John Woodruff, Michael Smith, Edward Pence, Gary Patrem, William Haas
or the General Counsel of McLeodUSA. As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule l2b-2 of the
Securities Exchange Act of 1934, as amended. As used in this Agreement, the
term "business day" means a day, other than a Saturday or a Sunday, on
which banking institutions in the City of New York or Chicago are required
to be open. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
SECTION 9.4 Counterparts. This Agreement may be executed
in multiple counterparts, all of which shall together be considered one and
the same agreement.
SECTION 9.5 Entire Agreement; Third Party Beneficiaries.
This Agreement (including the documents and the instruments referred to
herein), the equity commitment letter agreement from Purchaser and its
equity sponsors to Sellers, dated as of the date hereof, the
Confidentiality Agreement, and the Disclosure Schedule (a) constitute the
entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided herein, are not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
SECTION 9.6 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or
against its regulatory policy, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
SECTION 9.7 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Illinois
applicable to contracts to be made and performed entirely therein without
giving effect to the principles of conflicts of law thereof or of any other
jurisdiction.
SECTION 9.8 Jurisdiction. Each of the parties hereto
hereby expressly and irrevocably submits to the non-exclusive personal
jurisdiction of the United States District Court for the Northern District
of Illinois and to the jurisdiction of any other competent court of the
State of Illinois located in the County of Cook (collectively, the
"Illinois Courts"), preserving, however, all rights of removal to such
federal court under 28 U.S.C. Section 1441, in connection with all disputes
arising out of or in connection with this Agreement or the transactions
contemplated hereby and agrees not to commence any litigation relating
thereto except in such courts. If the aforementioned courts do not have
subject matter jurisdiction, then the proceeding shall be brought in any
other state or federal court located in the State of Illinois, preserving,
however, all rights of removal to such federal court under 28 U.S.C.
Section 1441. Each party hereby waives the right to any other jurisdiction
or venue for any litigation arising out of or in connection with this
Agreement or the transactions contemplated hereby to which any of them may
be entitled by reason of its present or future domicile. Notwithstanding
the foregoing, each of the parties hereto agrees that each of the other
parties shall have the right to bring any action or proceeding for
enforcement of a judgment entered by the Illinois Courts in any other court
or jurisdiction.
SECTION 9.9 Specific Performance. Each of the parties
hereto acknowledges and agrees that in the event of any breach of this
Agreement, each non-breaching party would be irreparably and immediately
harmed and could not be made whole by monetary damages. It is accordingly
agreed that the parties hereto (a) will waive, in any action for specific
performance, the defense of adequacy of a remedy at law and (b) shall be
entitled, in addition to any other remedy to which they may be entitled at
law or in equity, to compel specific performance of this Agreement in any
action instituted in accordance with Section 9.8 hereof.
SECTION 9.10 Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties; provided, however, that
Purchaser may assign all or any part of its rights under this Agreement and
delegate all or any part of its obligations under this Agreement to one or
more entities all of the capital stock or equity interest of which are
owned by Purchaser, in which case all of the rights and powers of
Purchaser, and remedies available to it hereunder shall extend to and be
enforceable by each such entity. Any such assignment and delegation shall
not release Purchaser from its obligations hereunder, and further Purchaser
guarantees to Sellers the performance by such entity of its obligations
hereunder. Subject to the foregoing, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their
respective permitted successors and assigns.
SECTION 9.11 Expenses. Except as otherwise provided
herein, all costs and expenses incurred in connection with the transactions
contemplated hereby, this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
costs and expenses, whether or not the transactions contemplated hereby are
consummated; provided that none of such expenses shall be borne by any of
the Transferred Companies or otherwise be included in the Assumed
Liabilities..
SECTION 9.12 Headings. Headings of the Articles and
Sections of this Agreement, the Disclosure Schedule and the Table of
Contents are for convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
SECTION 9.13 Waivers. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the
party or parties entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
SECTION 9.14 Schedules. The Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein. Disclosure of any item
or other matter in any section of the Disclosure Schedules shall, if
reasonably apparent from such disclosure, be deemed to be disclosure for
any other section thereof, but no such disclosure shall be deemed to be an
admission or representation as to the materiality of the item so disclosed.
SECTION 9.15 Consequential Damages. Each party hereby
waives any punitive, incidental or consequential damages arising out of or
relating to any breach of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their respective officers as of the date first written
above.
MCLEODUSA TELECOMMUNICATIONS
SERVICES, INC.
By: /s/ Chris A. Davis
----------------------------------------
Name:
Title:
MCLEODUSA HOLDINGS, INC.
By: /s/ Chris A. Davis
----------------------------------------
Name:
Title:
MCLEODUSA INTEGRATED BUSINESS
SYSTEMS, INC.
By: /s/ Chris A. Davis
----------------------------------------
Name:
Title:
MCLEODUSA MARKET RESPONSE, INC.
By: /s/ Chris A. Davis
----------------------------------------
Name:
Title:
HOMEBASE ACQUISITION CORP.
By: /s/ Donald R. Shassian
---------------------------------------
Name:
Title: