STOCK PURCHASE AGREEMENT
by and between
CITYNET TELECOMMUNICATIONS, INC.
and
UNIVERSAL ACCESS GLOBAL HOLDINGS INC.
April 7, 2003
TABLE OF CONTENTS
Page
Section 1 SALE OF SHARES AND FIBER RING ASSETS AND PURCHASE PRICE 1
1.1. Company Approval; Proxy Statement 1
1.2. Stockholders' Meeting 2
1.3. Issuance and Sale of Shares and Other Consideration 3
1.4. Purchase Price 4
1.5. Time and Place of Closing 4
1.6. Transfer Taxes 4
Section 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
2.1. Organization and Qualifications of the Company 5
2.2. Capital Stock of the Company; Beneficial Ownership 5
2.3. Subsidiaries 5
2.4. Authority of the Company 6
2.5. SEC Reports; Financial Statements; Liabilities 7
2.6. Absence of Certain Changes or Events 9
2.7. Real and Personal Property. 10
2.8. Taxes 11
2.9. Certain Loans 13
2.10. Inventories 13
2.11. Intellectual Property 14
2.12. Contracts 15
2.13. Litigation 17
2.14. Compliance with Laws 18
2.15. Insurance 18
2.16. Warranty or Other Claims 18
2.17. Finder's Fee 18
2.18. Permits 18
2.19. Transaction with Interested Persons. 19
2.20. Employee Benefit Programs 19
2.21. Environmental Matters 21
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TABLE OF CONTENTS
(continued)
Page
2.22. Employees: Labor Matters. 22
2.23. Customers, Distributors and Suppliers 22
2.24. Unlawful or Undisclosed Payments 23
Section 3 REPRESENTATIONS AND WARRANTIES OF BUYER 23
3.1. Organization of Buyer 23
3.2. Authority of Buyer 23
3.3. Title to Fiber Ring Assets; Sufficiency of Assets. 24
3.4. Intellectual Property. 25
3.5. No Fraudulent Transfer. 25
3.6. Contracts 25
3.7. Litigation 25
3.8. Compliance with Laws 26
3.9. Finder's Fee 26
3.10. Permits 26
3.11. Customers 26
3.12. No Condemnation. 26
3.13. Environmental Matters. 26
3.14. Investment Intention; Experience. 27
3.15. Accredited Investor Status. 27
Section 4 COVENANTS OF THE COMPANY 28
4.1. Conduct of Business 28
4.2. Satisfaction of Conditions; Receipt of Necessary Approvals 28
4.3. Notice of Default 29
4.4. Cooperation of the Company 29
4.5. No Solicitation; Other Offers 29
4.6. Certain Filings 31
4.7. Confidentiality 31
4.8. Maintenance of Listing. 32
Section 5 COVENANTS OF BUYER 32
5.1. Maintenance of Fiber Ring Assets and Assumed Liabilities. 32
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TABLE OF CONTENTS
(continued)
Page
5.2. Satisfaction of Conditions; Receipt of Necessary Approvals 32
5.3. Notice of Default; Update 33
5.4. Cooperation of Buyer 33
5.5. Certain Filings 33
5.6. Confidentiality 33
Section 6 MUTUAL COVENANTS OF THE PARTIES. 34
6.1. Cooperative Efforts. 34
6.2. Employees; Continuation of Benefits. 34
Section 7 CONDITIONS 35
7.1. Conditions to the Obligations of Each Party 35
7.2. Conditions to the Obligations of Buyer 36
7.3. Conditions to Obligations of the Company 39
Section 8 TERMINATION OF AGREEMENT 39
8.1. Termination 39
8.2. Effect of Termination 41
Section 9 SURVIVAL 41
9.1. Survival of Representations, Warranties Etc 41
Section 10 INDEMNIFICATION. 41
10.1. Indemnification by the Company 41
10.2. Limitations on Indemnification by the Company 42
10.3. Indemnification by Buyer 43
10.4. Limitation on Indemnification by Buyer 43
10.5. Notice; Defense of Claims 44
Section 11 MISCELLANEOUS 45
11.1. Knowledge 45
11.2. Fees and Expenses 45
11.3. Governing Law 45
11.4. Notices 45
11.5. Further Assurances 46
11.6. Entire Agreement 46
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TABLE OF CONTENTS
(continued)
Page
11.7. Assignability, Binding Effect 46
11.8. Captions and Gender 46
11.9. Execution in Counterparts 46
11.10. Amendments 46
11.11. Publicity and Disclosures 47
11.12. Consent to Jurisdiction; Waiver of Jury Trial 47
11.13. Specific Performance 47
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EXHIBITS
EXHIBIT TITLE
Exhibit A Assumed Liabilities
Exhibit B Description of Fiber Ring Assets
Exhibit C Term Sheet for Maintenance Agreement
Exhibit D Registration Rights Agreement
Exhibit E Stockholders' Agreement
Exhibit F ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Legal Opinion
Exhibit G ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ Legal Opinion
SCHEDULES
SCHEDULE TITLE
Schedule 1.3 Reimbursements Payable at Closing
Schedule 2.2 Capital Stock of the Company; Beneficial Ownership
Schedule 2.3 Subsidiaries
Schedule 2.4 Authority of the Company
Schedule 2.5(d) Minimum Revenue Contracts
Schedule 2.6 Absence of Certain Changes or Events
Schedule 2.7(a) Real Property
Schedule 2.7(b) Personal Property
Schedule 2.8 Taxes
Schedule 2.9 Certain Loans
Schedule 2.11 Intellectual Property
Schedule 2.12 Contracts
Schedule 2.13 Litigation
Schedule 2.14 Compliance with Laws
Schedule 2.15 Insurance
Schedule 2.16 Warranty or Other Claims
Schedule 2.19 Transaction with Interested Persons
Schedule 2.20 Employee Benefit Programs
Schedule 2.21 Environmental Matters
Schedule 2.23 Customers, Distributors and Suppliers
Schedule 3.1 Organization of Buyer
Schedule 3.2 Authority of Buyer
Schedule 3.6 Contracts
Schedule 3.7 Litigation
Schedule 3.11 Customers
v
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT entered into as of April 7, 2003 by and between
CityNet Telecommunications, Inc., a Delaware corporation ("Buyer"), and
Universal Access Global Holdings Inc., a Delawarecorporation (the "Company").
WITNESSETH
----------
WHEREAS, certain Subsidiaries (as defined below) of the
Company are independent providers of network infrastructure services that
facilitate the interconnection of communications networks between disparate and
competing service providers and facilitate the process by which users of
communications circuits obtain circuits dedicated for their specific use from
multiple vendors;
WHEREAS, Buyer desires to sell the Fiber Ring Assets (as
defined below) to the Company in exchange for Shares (as defined below) and the
Company desires to buy the Fiber Ring Assets;
WHEREAS, the Company desires to issue and sell the Shares (as
defined below) to Buyer, and Buyer desires to acquire the Shares; and
WHEREAS, simultaneously herewith, Buyer and certain
stockholders of the Company are entering into agreements regarding such
stockholders' undertaking to vote in favor, and to take certain other actions in
furtherance, of the Transactions (as defined below).
NOW, THEREFORE, in order to consummate said purchase and sale
and in consideration of the mutual agreements set forth herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1 SALE OF SHARES AND FIBER RING ASSETS AND PURCHASE PRICE.
-------------------------------------------------------------------------
1.1. Company Approval; Proxy Statement. The Company hereby
approves of and consents to the sale of the Shares to Buyer in exchange for the
purchase price set forth in Section 1.4 and represents that the Board of
Directors of the Company, at a meeting duly called and held, has (i) unanimously
approved this Agreement and other Transaction Documents (as defined below) and
each of the transactions contemplated hereby and thereby, including, without
limitation, the sale of the Shares to Buyer (collectively, the "Transactions"),
(ii) unanimously determined that as of the date hereof the Transactions are fair
to and in the best interests of the Company's stockholders and (iii) unanimously
resolved to recommend that the stockholders of the Company approve the
Transactions; provided, however, that such recommendation may be withdrawn,
modified or amended if, in the opinion of a majority of the disinterested
members of the Board of Directors of the Company, after receipt of a written
opinion from its outside legal counsel, such recommendation could reasonably be
deemed inconsistent with its fiduciary duties to
1
the Company's stockholders under applicable law. The Company hereby consents to
the inclusion in the Proxy Statement (as defined below) of the recommendation of
the Board of Directors described above.
1.2. Stockholders' Meeting.
(a) As soon as practicable (and, in any event, within
90 days or, in the caseof the applicable portion of clause (ii) below only,
within 20 days) following the date hereof, the Company shall, in accordance with
applicable law:
(i) duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Special
Meeting") for the purpose of considering and taking action
upon this Agreement and approving the Transactions;
(ii) prepare, and file (within 20 days
following the date hereof) with the Securities and Exchange
Commission (the "SEC") a preliminary proxy statement related
to the approval of the Transactions, obtain and furnish the
information required to be included by the SEC in the Proxy
Statement (as defined below), notify Buyer of the receipt of
any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the
Proxy Statement or for additional information and will supply
Buyer with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC or
its staff, on the other hand, with respect to the preliminary
proxy statement or the Transactions and, after consultation
with Buyer, respond promptly to any comments made by the SEC
with respect to the preliminary proxy statement and cause a
definitive proxy statement (the "Proxy Statement") to be
mailed to its stockholders and obtain the necessary
stockholder approval of this Agreement and the Transactions;
and
(iii) subject to the fiduciary obligations
of the Board of Directors under applicable law as determined
by the Board of Directors after consultation with its legal
counsel, include in the Proxy Statement the recommendation of
the Board that the stockholders of the Company vote in favor
of approval of the Transactions and the adoption of this
Agreement.
(b) Buyer agrees that it will provide the Company
with the information concerning Buyer, its business, Fiber Ring Assets (as
defined below) and Assumed Liabilities (as defined below) and other information
reasonably requested by the Company that is required to be included in the Proxy
Statement and other filings with the SEC that contain disclosure regarding the
Transactions (the "Buyer Filing Information") or in other documents required to
be delivered to the Company's stockholders.
(c) If at any time prior to the Closing (as defined
below), any event with respect to the Company or any Subsidiary should occur
which is required to be described in a supplement to the Proxy Statement, such
event shall be so described, and the
2
Company shall promptly file such supplement with the SEC and, as required by
law, disseminate the same to the stockholders of the Company. With respect to
the information relating to the Company, the Proxy Statement will comply as to
form and substance in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and other
applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company further agrees promptly to correct any information in
the Proxy Statement if and to the extent that it shall have become false and
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Proxy Statement as so corrected to be filed with
the SEC and disseminated to the Company's stockholders, in each case as and to
the extent required by applicable federal securities laws.
1.3. Issuance and Sale of Shares and Other Consideration.
(a) At the Closing (as defined below), subject to the
fulfillment or waiver of the conditions of this Agreement, the Company shall
issue to Buyer such number of authorized but unissued shares (the "Shares") of
Common Stock, par value $0.01 per share, of the Company (the "Common Stock") or
such other number of shares as shall at the Closing represent 55% of the
outstanding Common Stock on a fully diluted basis (including the Shares, the
shares of Common Stock issuable to Broadmark Capital, LLC("Broadmark") upon
Broadmark's exercise of warrants issued to Broadmark by the Company pursuant to
the Financial Advisory/Investment Banking Agreement referred to in Section 2.17,
the exercise or conversion of all other then outstanding Rights (as defined
below) to purchase Common Stock and the issuance pursuant to all other
outstanding obligations of the Company to issue Common Stock).
(b) At the Closing, subject to the fulfillment or
waiver of the conditions of this Agreement, the Company shall assume all of
Buyer's obligations in respect of those liabilities set forth in Exhibit A
hereto and those contracts, agreements and other obligations of Buyer related to
the Fiber Ring Assets set forth in Exhibit B hereto except to the extent such
liabilities and obligations, but for an uncured and unwaived breach or default
by Buyer, would have been paid, performed or otherwise discharged on or prior to
the Closing Date or to the extent such liabilities and obligations arise out of
any such uncured and unwaived breach or default (collectively, the "Assumed
Liabilities"). The Company shall not assume any liabilities of Buyer or its
affiliates or subsidiaries, whether or not presently known or hereafter arising,
whether or not fixed, contingent or otherwise, including, without limitation,
any contracts, employee benefits or other employee-related liabilities, except
for the Assumed Liabilities (collectively, the "Excluded Liabilities"). The
Company will, at the Closing, reimburse Buyer for the amount of all security and
other deposits, and the amount of all funds held in escrow by the obligees of,
or otherwise in connection with, the Assumed Liabilities, each of which is set
forth in Schedule 1.3.
3
1.4. Purchase Price. (a) In consideration of the issuance by
the Company to Buyer of the Shares and assumption of the Assumed Liabilities,
and in reliance upon the representations and warranties of the Company contained
herein and in the other Transaction Documents (as defined below), and subject to
the satisfaction of all of the conditions contained herein, Buyer agrees that at
the Closing it will (a) pay to the Company $16,000,000 by wire transfer of
immediately available funds and (b) transfer to the Company all of Buyer's
right, title and interest in (i) the tangible assets comprising its fiber optic
telecommunications rings in Albuquerque, New Mexico and Indianapolis, Indiana
and (ii) its rights under contracts and other agreements with customers related
to such rings, including but not limited to the assets set forth in Exhibit B
hereto, but excluding the Buyer Intellectual Property (as defined below) and the
Maintenance Assets (as defined below) (the "Fiber Ring Assets").
(b) The Company and the Buyer agree that, as between
themselves, the value of the Fiber Ring Assets shall be $700,000 (the "Fiber
Ring Value"). Neither the Company nor Buyer shall take any position, for tax
purposes or otherwise inconsistent with this valuation.
1.5. Time and Place of Closing. The closing of the purchase
and sale provided for in this Agreement (herein called the "Closing") shall be
held at the offices of ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ as soon as practicable following satisfaction or waiver of the
conditions set forth in Section 7 (such date and time, the "Closing Date").
1.6. Transfer Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the consummation of the Transactions (including,
without limitation, the sale and issuance of the Shares to Buyer and the sale
and transfer of the Fiber Ring Assets to the Company) shall be borne and paid by
the Company, and the Company shall promptly reimburse the Buyer for any such
tax, fee, charge, penalty or interest that the Buyer is required to pay under
applicable law.
Section 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
----------------------------------------------------------------
As a material inducement to Buyer to enter into this Agreement and
consummate the Transactions, except as expressly disclosed in (i) the Draft Form
10-K (as defined below), and (ii) the Schedules referred to herein, the Company
hereby makes the representations and warranties in this Section 2. Subject to
the rights of Buyer under Section 8 hereof, the Company may amend any Schedule
to this Agreement after the execution of this Agreement, but prior to the
Closing, to reflect updated information, events, agreements, transactions,
circumstances, developments and occurrences. Subject to the rights of Buyer
under Section 8 hereof, any amendment permitted above will be deemed to have
amended the Schedule, to have qualified the representations and warranties of
the Company to which the Schedule relates and to have cured any
misrepresentation or breach of warranty by the Company that otherwise might have
existed hereunder or thereunder prior to the amendment.
4
2.1. Organization and Qualifications of the Company. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Delaware with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted or proposed to be conducted. The copies of the Company's Certificate
of Incorporation, as amended to date, certified by the Delaware Secretary of
State, and of the Company's By-laws, as amended to date, certified by the
Company's Secretary, and heretofore delivered to Buyer's counsel, are complete
and correct, and no amendments thereto are pending. The Company is not in
violation of any term of its Certificate of Incorporation or By-laws. The
Company is duly qualified to do business as a foreign corporation in each
jurisdiction in which it is required to be licensed or qualified to conduct its
business or own its property except to the extent that the Company's failure to
be so licensed or qualified could not reasonably be expected to have a material
adverse effect on the business, operations, condition (financial or otherwise)
or future prospects of the business currently being conducted by the Company and
its Subsidiaries, taken as a whole, other than any effect (a) relating to or
arising out of an event, matter, occurrence or action (i) affecting the United
States or global economy generally; (ii) primarily caused by or related to the
announcement or pendency of the Transactions or (iii) resulting from actions
taken by the Company or a Subsidiary at the request of Buyer; or (b) arising
solely from the decline in the price of the Company's stock (a "Material Adverse
Effect").
2.2. Capital Stock of the Company; Beneficial Ownership. As of
the date hereof, the authorized capital stock of the Company consists of (i)
1,000,000,000 shares of Common Stock, of which 99,112,549 shares are duly and
validly issued, outstanding, fully paid and non-assessable, and (ii) 20,000,000
shares of Preferred Stock, of which no shares have been issued but shares are
issuable pursuant to the Company's Preferred Stock Rights Agreement dated July
31, 2000. Except as set forth in Schedule 2.2, and other than options to
purchase up to 12,237,079 shares of Common Stock held by current or former
employees, directors and consultants of the Company and the Subsidiaries as
described in the Company SEC Reports (as defined below), there are no
outstanding options, warrants, rights, commitments, preemptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of any class of the
Company (collectively "Rights"). None of the Company's capital stock has been
issued in violation of any federal or state law or the rights of any individual,
corporation, partnership, limited liability company, association, trust or any
other entity or organization of any kind or character, including a governmental
department, authority or agency or subdivision thereof (any of the foregoing, a
"Person"). Except as set forth in Schedule 2.2 or as contemplated by this
Agreement and the Transactions, there are no voting trusts, voting agreements,
proxies or other agreements, instruments or undertakings with respect to the
voting of the Common Stock to which the Company is a party, or, to the Company's
knowledge, among any other Persons.
2.3. Subsidiaries. Except as set forth in Schedule 2.3, the
Company does not, directly or indirectly, control whether through the ownership
of voting securities, by contract or otherwise any corporation, limited
liability company, partnership, joint venture
5
or other entity (collectively, the "Subsidiaries" or individually, a
"Subsidiary") or have any Investment. As used herein, the term "Investment"
shall mean (A) any direct or indirect purchase or other acquisition or ownership
by a Person of any notes, obligations, instruments, stock, securities or
ownership interest (including partnership interests and joint venture interests)
of any other Person and (B) any capital contribution by such Person to any other
Person.
Except as set forth in Schedule 2.3, each Subsidiary is a duly
organized, validly existing corporation in good standing under the laws of the
state of its incorporation with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is currently
conducted or proposed to be conducted.
Except as set forth in Schedule 2.3, all of the outstanding
shares of capital stock and other equity interests of each Subsidiary are owned
beneficially and of record by the Company free of any lien, restriction or
encumbrance and said shares have been duly and validly issued and are
outstanding, fully paid and non-assessable. The copies of each Subsidiary's
Certificate of Incorporation (or similar governing instrument), as amended to
date, certified by the Secretary of State of the jurisdiction in which such
Subsidiary is organized and of each Subsidiary's By-laws, as amended to date,
certified by the Company's and such Subsidiary's Secretary, and heretofore
delivered to Buyer's counsel, are complete and correct, and no amendments
thereto are pending. No Subsidiary is in violation of any term of its
Certificate of Incorporation (or similar governing instrument) or By-laws. Each
Subsidiary is duly qualified to do business as a foreign corporation in each
jurisdiction where such qualification is required except to the extent that the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect, and no Subsidiary is required to be licensed or qualified to
conduct its business or own its property in any other jurisdiction.
Except as set forth in Schedule 2.3, there are no outstanding
warrants, options or other rights to purchase or acquire any of the shares of
capital stock of any Subsidiary, or any outstanding securities convertible into
such shares or outstanding warrants, options or other rights to acquire any such
convertible securities.
2.4. Authority of the Company. The Company has full right,
authority and power to enter into this Agreement and each other agreement,
document and instrument to be executed and delivered by the Company pursuant to
this Agreement or in connection with the Transactions including, without
limitation, the Stockholders' Agreement (as defined below), the Registration
Rights Agreement (as defined below) and the Maintenance Agreement (as defined
below) (collectively the "Transaction Documents"), and, subject only to
obtaining approval of the holders of a majority of the outstanding Common Stock,
to carry out the Transactions. The execution, delivery and performance by the
Company of this Agreement and each such other Transaction Document and the
consummation of the Transactions have been duly authorized by all necessary
action of the Company and no other action on the part of the Company (other than
the stockholder approval referred to above) is required in connection therewith.
6
(a) This Agreement has been duly and validly executed
and delivered by the Company. This Agreement and each other Transaction Document
constitutes, or when executed and delivered will constitute, valid and binding
obligations of the Company enforceable in accordance with their respective
terms. Except as set forth in Schedule 2.4, the execution, delivery and
performance by the Company of this Agreement and each other Transaction Document
and the consummation of the Transactions:
(i) do not and will not violate any
provision of the Certificate of Incorporationor By-laws of the
Company;
(ii) do not and will not violate any laws of
the United States, or any state or other jurisdiction
applicable to the Company, or require the Company to obtain
any approval, consent or waiver of, or make any filing with,
any Person (governmental or otherwise); and
(iii) do not and will not result in a breach
of, constitute a default under, accelerate any obligation
under, or give rise to a right of termination of any indenture
or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or
arbitration award to which the Company is a party or by which
the property of the Company is bound or affected, or result in
the creation or imposition of any mortgage, pledge, lien,
security interest or other charge or encumbrance on any of the
Company's assets or the Shares.
(b) The Board of Directors of the Company has
approved this Agreement and the Transactions for all purposes under Section 203
of the Delaware General Corporation Law (the "DGCL"), and the Company has
heretofore furnished to Buyer a true and correct copy of resolutions duly
adopted by the unanimous vote of the Board on April 6, 2003 and the resolutions
are in full force and effect on the date hereof. Such action is the only action
necessary so that the restrictions on business combinations contained in Section
203 of the DGCL will not apply with respect to or as a result of this Agreement
or any of the Transactions.
(c) The Board of Directors of the Company has amended
the Company's Preferred Stock Rights Agreement dated July 31, 2000 such that
Buyer, as a result of the Transactions, cannot become an "Acquiring Person" as
defined therein.
(d) The affirmative vote of the holders of a majority
of the outstanding shares of Common Stock is the only vote of the holders of any
class of the Company's capital stock necessary to approve this Agreement and the
Transactions.
2.5. SEC Reports; Financial Statements; Liabilities.
(a) The Company and the Subsidiaries have filed all
reports required to be filed by any of them with the SEC pursuant to the U.S.
federal securities laws and the SEC rules and regulations thereunder
(collectively, the "Company SEC
7
Reports"), all of which as of their respective dates complied in form and
substance in all material respects with applicable requirements of the Exchange
Act. None of the Company SEC Reports, including, without limitation, any
financial statements or schedules included therein, as of their respective dates
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
(including the related notes thereto) of the Company included in the Company SEC
Reports comply in form and substance in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a basis consistent with prior periods
(except as otherwise noted therein and except that unaudited financial
information may not contain all footnotes required by GAAP), and present fairly
the financial position of the Company and the Subsidiaries as of their
respective dates, and the consolidated results of their operations and their
cash flows for the periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
(c) The Company has delivered to Buyer a draft of the
Company's Form 10-K for the year ended December 31, 2002 (the "Draft Form 10-K")
which includes, among other things, the consolidated balance sheets for the
Company and its Subsidiaries as of December 31, 2002 and consolidated statements
of cash flows, operations and changes in stockholders' equity of the Company and
its Subsidiaries for the year ended December 31, 2002 (the consolidated balance
sheet included in the Draft Form 10-K shall be the "Balance Sheet"). The Draft
Form 10-K delivered to Buyer will not materially differ from the Company's Form
10-K for the year ended December 31, 2002 filed with the SEC. Except as set
forth in the Company SEC Reports and the Draft Form 10-K, and except for
liabilities and obligations incurred since the date of the Company SEC Reports
and the Draft Form 10-K, in the ordinary and usual course of business consistent
with past practice, neither the Company nor any Subsidiary has any material
liabilities or obligations of any nature whether accrued, absolute, contingent
or otherwise, including without limitation, liabilities as a guarantor or
otherwise with respect to obligations of other Persons, liabilities for Taxes
due or then accrued or to become due, or contingent or potential liabilities
relating to activities of the Company or any Subsidiary or the conduct of their
business prior to December 31, 2002 (regardless of whether claims in respect
thereof had been asserted as of such date), required by GAAP to be set forth on
a consolidated balance sheet of the Company and the Subsidiaries or in the notes
thereto.
(d) Each contract of the Company or any Subsidiary
with telecommunications providers requiring the Company or any Subsidiary to
make a minimum revenue commitment regardless of its use or purchase of products
or services (each a "Minimum Revenue Contract") is set forth in Schedule 2.5(d).
8
2.6. Absence of Certain Changes or Events. Except as set forth
in Schedule 2.6, since December 31, 2002, (i) the business of the Company and
the Subsidiaries has been carried on only in the ordinary and usual course, and
(ii) there has not occurred any change, effect, occurrence or action which has
resulted or would reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, provided, however, that any change,
effect, occurrence or action relating to or arising from any item set forth in
Schedule 2.6 shall not constitute, give rise to or be considered to be a
Material Adverse Effect. Except as set forth in the Company SEC Reports, Draft
Form 10-K or in Schedule 2.6, between December 31, 2002 and the date hereof,
there has not been:
(a) any circumstance or event that, by itself or in
conjunction with all other circumstances or events, whether or not arising in
the ordinary and usual course of business, has had or would reasonably be
expected to have a Material Adverse Effect;
(b) any contingent liability incurred by the Company
or any Subsidiary as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, the Company or any Subsidiary;
(c) any mortgage, encumbrance or lien placed on any
of the properties of the Company or any Subsidiary;
(d) any issuance by the Company or any Subsidiary of
any capital stock or other security or other right convertible into, or
exercisable or exchangeable for, capital stock;
(e) any purchase, sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other disposition, of
any of the properties or assets of the Company or any Subsidiary other than in
the ordinary and usual course of business;
(f) any damage, destruction or loss, whether or not
covered by insurance, affecting the properties, assets or business of the
Company or any Subsidiary which has, had or would reasonably be likely to have a
Material Adverse Effect;
(g) any declaration, setting aside or payment of any
dividend by the Company or any Subsidiary, or the making of any other
distribution in respect of its capital stock, or any direct or indirect
redemption, purchase or other acquisition by the Company or any Subsidiary of
its own capital stock;
(h) other than in the ordinary and usual course of
business (i) any labor trouble or claim of unfair labor practices involving the
Company or any Subsidiary, (ii) any change in the compensation payable or to
become payable by the Company or any Subsidiary to any of its officers,
employees, agents or independent contractors, or (iii) any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors;
9
(i) any adverse change with respect to the employment
of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇;
(j) any payment or discharge of a material lien or
liability of the Company or any Subsidiary which was not shown on the Balance
Sheet or incurred in the ordinary and usual course of business thereafter;
(k) any obligation or liability incurred by the
Company or any Subsidiary to any of its officers, directors, stockholders or
employees, or any loans or advances made by the Company or any Subsidiary to any
of its officers, directors, stockholders or employees, except normal
compensation and expense allowances payable to officers or employees;
(l) any change in the outside auditors or the
accounting methods or practices, credit practices or collection policies used by
the Company or any Subsidiary;
(m) any other transaction entered into by the Company
or any Subsidiary which has or would reasonably be likely to have a Material
Adverse Effect; or
(n) any agreement or understanding whether in writing
or otherwise, for the Company or any Subsidiary to take any of the actions
specified in paragraphs (a) through (m) above other than this Agreement and the
Transaction Documents.
2.7. Real and Personal Property.
(a) Real Property. Neither the Company nor any
Subsidiary, nor any of their respective successors owns, or has in the past
owned, any real property. All real property leased by the Company or any
Subsidiary is set forth in Schedule 2.7(a) (the "Real Property").
(i) Status of Leases. All leases of Real
Property are set forth in Schedule 2.7(a), and true and
complete copies thereof have been delivered to Buyer. Each of
the leases has been duly authorized and executed by the
parties and is in full force and effect. Neither the Company
nor any Subsidiary is in default under any of the leases, nor,
to the Company's knowledge, has any event occurred which, with
notice or the passage of time, or both, would give rise to
such a default. To the Company's knowledge, no other party to
any of the leases is in default under any of the leases and
there is no event which, with notice or the passage of time,
or both, would give rise to such a default.
(ii) Quiet Enjoyment. The Company has the
right to quiet enjoyment of the Real Property for the full
term of its lease (and any renewal option related thereto) and
the leasehold interest of the Company in the Real Property is
not subject or subordinate to any lien (or if subordinate, a
non-disturbance agreement has been obtained by the Company
from the holder of the lien). Neither the whole nor any part
of the Real Property is subject to any pending suit for
condemnation or other taking by any public
10
authority or any other matter materially or adversely
affecting the current use, occupancy or value thereof and, to
the knowledge of the Company, no such condemnation, taking or
other matter is currently threatened or contemplated.
(iii) Consents. Except as set forth in
Schedule 2.7(a), no consent or approval is required with
respect to the Transactions from the other parties to any
lease of the Real Property. No consent or approval from, and
no filing with, any governmental or regulatory authority is
required with respect to the Real Property in connection with
the Transactions.
(iv) Condition of Real Property. Except as
set forth in Schedule 2.7(a), the Real Property is sufficient
for the Company to conduct its operations as currently
conducted and as contemplated by the Plan (as defined below).
There has not been any interruption of the operations of the
Company due to inadequate maintenance of the Real Property.
(b) Personal Property. Except as specifically set
forth in Schedule 2.7(b), the Company and each Subsidiary has good and
marketable title to all of its personal property, and such personal property,
together with the Real Property and the Company's Intellectual Property (as
defined below), constitutes all of the assets necessary to conduct the business
of the Company and the Subsidiaries as presently conducted and as contemplated
by the Plan. None of such personal property or assets is subject to any
mortgage, pledge, lien, conditional sale agreement, security title, encumbrance
or other charge except as specifically set forth in Schedule 2.7(b). Except as
otherwise set forth in Schedule 2.7(b) hereto, all leasehold improvements,
furnishings, machinery and equipment of the Company and each Subsidiary are in
good repair and good working order.
2.8. Taxes.
(a) The Company and each Subsidiary has filed all Tax
Returns (as defined below) that it was required to file under applicable laws
and regulations. All such Tax Returns were correct and complete in all material
respects and have been prepared in substantial compliance with all applicable
laws and regulations. Each of the Company and its Subsidiaries: (i) has paid
(or, in the case of amounts becoming due after the date hereof and prior to the
Closing, will have paid prior to the Closing) all Taxes due or claimed to be due
by any taxing authority in connection with any of the Tax Returns; or (ii) have
established (or, in the case of amounts becoming due after the date hereof, and
prior to the Closing, will have established) in the Balance Sheet adequate
reserves (in conformity with GAAP consistently applied) for the payment of such
Taxes. The amounts set up as reserves for Taxes on the Balance Sheet are
sufficient for the payment of all unpaid Taxes, whether or not such Taxes are
disputed or are yet due and payable, for or with respect to the period and for
which the Seller or any Subsidiary may be liable. Except as set forth in
Schedule 2.8, neither the Company nor any Subsidiary currently is the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where the Company or
any
11
Subsidiary does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no liens or other security interests for Taxes
(other than Taxes not yet due and payable) upon any of the assets of the Company
or any Subsidiary.
(b) The defined term "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof. The defined term "Tax" means any federal, state, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Section 59A of the Internal Revenue Code of 1986, as
amended (the "Code")), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not
and including any obligations to indemnify or otherwise assume or succeed to the
Tax liability of any other Person.
(c) The Company and each Subsidiary has withheld and
paid all Taxes required to have been withheld and paid in connection with any
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(d) To the Company's knowledge, neither the Company
nor any Subsidiary expects any authority to assess any additional Taxes for any
period for which Tax Returns have been filed. Except as set forth in Schedule
2.8, no foreign, federal, state, or local tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to the
Company or any Subsidiary. Neither the Company nor any Subsidiary has received
from any foreign, federal, state, or local taxing authority (including
jurisdictions where the Company or a Subsidiary has not filed Tax Returns) any
(i) written notice indicating an intent to open an audit or other review, (ii)
request for information related to Tax matters, or (iii) notice of deficiency or
proposed adjustment for any amount of Tax proposed, asserted, or assessed by any
taxing authority against the Company or any Subsidiary. The Company has
delivered to Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by the Company or any Subsidiary filed on or after, or received since,
December 31, 1999. Set forth in Schedule 2.8 is a list of all federal, state,
local and foreign income Tax Returns filed with respect to any of the Company
and its Subsidiaries for taxable period ended on or after December 31, 1999,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit.
(e) Neither the Company nor any Subsidiary has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(f) Neither the Company nor any Subsidiary has filed
a consent under Section 341(f) of the Code concerning collapsible corporations.
Neither the
12
Company nor any Subsidiary is a party to any agreement, contract, arrangement,
or plan that has resulted or would result, separately or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Section 280G
of the Code (or any similar provision of state, local, or foreign law). Neither
the Company nor any Subsidiary has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Neither the
Company nor any Subsidiary is a party to or bound by any Tax allocation or
sharing agreement. Neither the Company nor any Subsidiary (i) has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which is the Company) or (ii) has any
liability for the Taxes of any Person (other than any of the Company and the
Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(g) Neither the Company nor any Subsidiary will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any (i) change in method of accounting for a
taxable period ending on or prior to the Closing Date, (ii) "closing agreement"
as described in Section 7121 of the Code (or any similar provision of state,
local, or foreign law) executed on or prior to the Closing Date, (iii)
intercompany transactions or any excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any similar provision of state,
local, or foreign law), (iv) installment sale or open transaction disposition
made on or prior to the Closing Date, or (v) prepaid amount received on or prior
to the Closing Date.
(h) Neither the Company nor any Subsidiary has
distributed stock of another Person, or has had its stock distributed by another
Person, in a transaction that was purported or intended to be governed in while
or in part by Section 355 or 361 of the Code.
(i) Except as set forth in Schedule 2.8, there will
be no sales, transfer or other Taxes (other than Taxes on the income of the
parties hereto) due or payable on or in respect of the issuance and sale of the
Shares to Buyer or the sale and transfer of the Fiber Ring Assets to the
Company.
2.9. Certain Loans. Neither the Company nor any Subsidiary has
any accounts or loans receivable from any Person which is affiliated with the
Company or any Subsidiary or from any director or officer or, other than in the
ordinary and usual course of business, any employee of the Company or any
Subsidiary, except as set forth in Schedule 2.9.
2.10. Inventories. Neither the Company nor any Subsidiary
maintains any inventory for resale in the ordinary and usual course of business.
13
2.11. Intellectual Property.
(a) Except as set forth in Schedule 2.11, the Company
and each Subsidiary owns or has the right to use all patent, copyright, trade
secret, trademark or other proprietary rights (collectively, "Intellectual
Property") used in the business of the Company or such Subsidiary as presently
conducted or as proposed to be conducted. Except for the pending federal
intent-to-use trademark applications set forth in Schedule 2.11, all of the
rights of the Company and each Subsidiary in its owned Intellectual Property are
freely transferable. There are no claims or demands of any other person
pertaining to its use or ownership of the Intellectual Property and no
proceedings have been instituted, or are pending or, to the Company's knowledge,
threatened, which challenge the rights of the Company or any Subsidiary in
respect thereof, except as set forth in Schedule 2.11. The Company and each
Subsidiary has the right to use, in accordance with the terms of any applicable
agreement, all customer lists, designs, manufacturing or other processes,
computer software, systems, data compilations, research results and other
information (including, without limitation, the data comprising the Company's
so-called "UIXDatabase") required for or incident to its products or its
business as presently conducted or as proposed to be conducted.
(b) All patents, patent applications, trademarks,
trademark applications and registrations and registered copyrights which are
owned by or licensed to the Company or any Subsidiary or used or to be used by
the Company or any Subsidiary in their businesses as presently conducted or as
proposed to be conducted are set forth in Schedule 2.11. The patents, patent
applications, trademark registrations, trademark applications and registered
copyrights set forth in Schedule 2.11 and owned by the Company or any Subsidiary
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights, or the corresponding
offices of other jurisdictions as set forth in Schedule 2.11, and, except as set
forth in Schedule 2.11, have been properly maintained and renewed in accordance
with all applicable provisions of law and administrative regulations of the
United States and each such jurisdiction.
(c) All licenses or other agreements (other than
standard "shrink wrap" or similar licenses for widely disseminated, commercially
available software) under which the Company or any Subsidiary is granted rights
in Intellectual Property and are, individually or in the aggregate, material to
the business are set forth in Schedule 2.11. All said licenses or other
agreements are in full force and effect and will not be affected by reason or
consummation of the Transactions, and to the Company's knowledge, there is no
material default by any party thereto. To the Company's knowledge, the licensors
under said licenses and other agreements have and had all requisite power and
authority to grant the rights purported to be conferred thereby. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Buyer.
(d) All licenses or other agreements under which the
Company or any Subsidiary has granted rights to others in Intellectual Property
owned or licensed by the Company or such Subsidiary (other than the Company's
standard license agreement for use of its Lattis database software ("Lattis
Licenses") and its pricing and ordering
14
applications) are set forth in Schedule 2.11. All of said licenses, including,
without limitation, Lattis Licenses, or other agreements are in full force and
effect and will not be affected by reason of the consummation of the
Transactions, and, to the Company's knowledge, there is no material default by
any party thereto. True and complete copies of all such licenses or other
agreements (other than Lattis Licenses and the licenses associated with its
pricing and ordering applications), and any amendments thereto, have been
provided to Buyer.
(e) The Company and each Subsidiary have taken all
steps required in accordance with sound business practice to establish and
preserve their ownership of all Intellectual Property rights with respect to
their products, services and technology. The Company and each Subsidiary have
required all professional and technical employees having access to valuable
non-public information of the Company and such Subsidiary, to execute agreements
under which such employees are required to convey to the Company or such
Subsidiary ownership of all inventions and developments conceived or created by
them in the course of their employment and to maintain the confidentiality of
all such information of the Company and the Subsidiaries. Neither the Company
nor any Subsidiary has made any such information available to any person other
than employees of the Company and the Subsidiaries except pursuant to written
agreements requiring the recipients to maintain the confidentiality of such
information and appropriately restricting the use thereof. The Company has no
knowledge of any infringement by others of any Intellectual Property rights of
the Company or any Subsidiary.
(f) To the Company's knowledge, the present business,
activities and products of the Company and the Subsidiaries do not infringe any
Intellectual Property of any other person. No proceeding charging the Company or
any Subsidiary with infringement of any adversely held Intellectual Property has
been filed or is threatened to be filed. To the Company's knowledge, there
exists no unexpired patent or published patent application which includes claims
that would be infringed by or otherwise adversely affect the products,
activities or business of the Company or any Subsidiary. To the Company's
knowledge, neither the Company nor any Subsidiary is making unauthorized use of
any confidential information or trade secrets of any person, including without
limitation, any former employer of any past or present employee of the Company
or any Subsidiary. Except as set forth in Schedule 2.11, neither the Company or
any Subsidiary nor, to the knowledge of the Company, any of their employees have
any agreements or arrangements with any persons other than the Company or the
Subsidiaries related to confidential information or trade secrets of such
persons or restricting any such employee's ability to engage in the business
conducted by the Company. The activities of their employees on behalf of the
Company or any Subsidiary do not violate any such agreements or arrangements
known to the Company.
2.12. Contracts. Except for contracts, commitments, plans,
agreements, instruments and licenses explicitly described in the Company SEC
Reports (true and complete copies of which are included as exhibits to the
Company SEC Reports or have been delivered to Buyer), or as set forth in
Schedule 2.12 and specifically excluding individual circuit orders, neither the
Company nor any Subsidiary is a party to or subject to:
15
(a) any plan or contract providing for bonuses,
pensions, options, stock purchases, deferred compensation, retirement payments,
profit sharing, collective bargaining or the like other than those plans or
contracts set forth in Schedule 2.12, or any contract or agreement with any
labor union;
(b) any employment contract or contract for services
which requires the payment of more than $100,000annually (or which are not
otherwise in the aggregate for all such contracts or agreements, material to the
Company) or which is not terminable within 30 days by the Company or a
Subsidiary without liability for any penalty or severance payment;
(c) any Employee Program (as defined below);
(d) any contract or agreement for the purchase of
telecommunications capacity ("Capacity Contracts") except those Capacity
Contracts in the ordinary and usual course requiring the payment of less than
$400,000 per year, or $7,000,000 per year in the aggregate for all Capacity
Contracts;
(e) any (i) contract or agreement for the purchase of
any commodity, material or equipment other than Capacity Contracts or (ii)
purchase orders requiring the payment of more than $155,000 per year or which,
in the aggregate with all other such contracts, agreements and purchase orders,
is material to the Company;
(f) any other contract or agreement (other than
Capacity Contracts) which is not otherwise disclosed elsewhere under this
Agreement or which by its terms does not terminate or is not terminable without
penalty by the Company or the Subsidiary party thereto or their successors
within one year after the date hereof that (i) creates obligations of the
Company or any Subsidiary in excess of $155,000 per year or (ii) in the
aggregate with all other such contracts or agreements, is material to the
Company;
(g) any contract or agreement providing for the
purchase of all or substantially all of its requirements of a particular product
from a supplier;
(h) any contract or agreement for the sale or lease
of the Company's or Subsidiary's products not made in the ordinary and usual
course of business;
(i) any contract with any sales agent or distributor
of products of the Company or any Subsidiary;
(j) other than in the ordinary and usual course of
business, any contract containing covenants limiting the freedom of the Company
or any Subsidiary to compete in any line of business or with any Person or to
disclose information about any party other than the Company or a Subsidiary (a
"Non-Disclosure Agreement");
(k) any contract or agreement for the purchase of any
fixed asset, whether or not such purchase is in the ordinary and usual course of
business, for a price (i) in excess of $155,000 per year or (ii) which, in the
aggregate with all other such contracts or agreements, is material to the
Company;
16
(l) any license agreement (as licensor or licensee)
other than (i) those license agreements set forth in Schedule 2.11; (ii) those
licenses granted pursuant to Universal Transport Exchange contracts or similar
collocation contracts including but not limited to "meet me room" contracts;
(iii) standard "shrink wrap" or similar licenses for widely disseminated,
commercially available software; and (iv) those licenses for the Company's or
any Subsidiary's commercially available pricing or ordering applications.
(m) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment, in each case, for the
borrowing of money;
(n) any contract or agreement with any officer,
director or stockholder or, other than in the ordinary and usual course of
business, any employee of the Company or any Subsidiary or with any persons or
organizations controlled by or affiliated with any of them; or
(o) any contract, agreement or other instrument,
pursuant to which any consent or waiver is required of any Person in connection
with the Transactions, or under which the Transactions would constitute a change
of control granting the other party to the contract, agreement or other
instrument the right to exercise a remedy or take any action which is or would
reasonably be likely to have a Material Adverse Effect.
Neither the Company nor any Subsidiary is in default under any such
contracts, commitments, plans, agreements or licenses set forth in Schedule 2.12
or has any knowledge of conditions or facts which with notice or passage of
time, or both, would constitute a default and neither the Company, nor any
Subsidiary has ever been in breach or violation of any Non-Disclosure Agreement
with any telecommunication carrier, other than such breaches or violations as
have been cured or otherwise waived by the carrier counterparty thereto and the
Company and the Subsidiaries released from liability for such breaches and other
violations.
2.13. Litigation. Set forth in Schedule 2.13 are all currently
pending litigation and governmental or administrative proceedings or
investigations to which the Company or any Subsidiary is a party. Except for
matters set forth in Schedule 2.13, there is no litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of the
Company, threatened, against the Company or any Subsidiary or their affiliates
which may have a Material Adverse Effect or which would prevent or hinder the
consummation of the Transactions. With respect to each matter set forth therein,
Schedule 2.13 or the Company SEC Reports set forth a description of the matter,
the forum (if any) in which it is being conducted, the parties thereto and the
type and amount of relief sought.
2.14. Compliance with Laws. Except as set forth in the Company
SEC Reports or in Schedule 2.14, the Company and each Subsidiary is in
compliance in all material respects with all applicable statutes, ordinances,
orders, judgments, decrees, rules and regulations promulgated by any federal,
state, municipal entity, agency, court or other governmental authority which
apply to the Company or any Subsidiary or to the conduct of
17
its business, and neither the Company nor any of the Subsidiaries has received
notice of a violation or alleged violation of any such statute, ordinance,
order, rule or regulation.
2.15. Insurance. Set forth in Schedule 2.15 is a complete and
accurate list of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies in effect that are owned by the
Company and each Subsidiary or under which the Company or any Subsidiary is a
named insured (the "Insurance Policies"). All Insurance Policies are in full
force and effect, all premiums with respect thereto are currently paid, and the
Company and each Subsidiary is in compliance in all material respects with the
terms thereof. The Insurance Policies are adequate and customary for the
business engaged in by the Company and each Subsidiary and is sufficient for
compliance by the Company and each Subsidiary with all requirements of law and
all agreements and leases to which the Company or any Subsidiary is a party. The
directors' and officers' errors and omissions insurance coverage set forth in
Schedule 2.15 is in full force and effect and the Company and the Subsidiaries
are in full compliance with the terms of each such policy. The Company has no
reason to believe that any such coverage will be denied for any reason.
2.16. Warranty or Other Claims. There are no existing, or, to
the Company's knowledge, threatened, product liability, warranty or other
similar claims, or, to the Company's knowledge, any facts upon which a claim of
such nature could be based, against the Company or any Subsidiary for products
or services which are defective or fail to meet any product or service
warranties and which, individually or in the aggregate, would reasonably be
likely to result in a Material Adverse Effect, except as set forth in Schedule
2.16. No claim or claims which would, individually or in the aggregate,
reasonably be likely to result in a Material Adverse Effect has been asserted
against the Company or any Subsidiary for renegotiation or price redetermination
of any business transaction, and, to the Company's knowledge, there are no facts
upon which any such claim could be based.
2.17. Finder's Fee. Other than the fee payable to Broadmark
pursuant to that certain Financial Advisory/Investment Banking Agreement, dated
December 12, 2002, consisting of a fee of $750,000, a retainer of $30,000 and
expenses and warrants to purchase 1,000,000 shares of Common Stock, neither the
Company nor any Subsidiary has incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the Transactions.
2.18. Permits. The Company and each Subsidiary has obtained
all material permits, registrations, licenses, franchises, certifications and
other approvals (collectively, the "Approvals") required from federal, state or
local authorities in order for the Company and each Subsidiary to conduct its
business except to the extent that the Company's or Subsidiary's failure to so
obtain such Approvals could not reasonably be expected to have a Material
Adverse Effect. All the Approvals are valid and in full force and effect, and
the Company and the Subsidiaries are operating in material compliance therewith.
Such Approvals include, but are not limited to, those material Approvals
required under federal, state or local statutes, ordinances, orders,
requirements, rules,
18
regulations, or laws pertaining to environmental protection, public health and
safety, worker health and safety, buildings, highways or zoning.
2.19. Transaction with Interested Persons. Except as set forth
in the Company SEC Reports or in Schedule 2.19, no executive officer or director
of the Company or any Subsidiary, or any of their respective immediate family
members has engaged in any transaction which would be required to be disclosed
by the Company in the Company SEC Reports under Item 404 of Regulation S-K
promulgated under the Securities Act of 1933, as amended.
2.20. Employee Benefit Programs
(a) Each Employee Program which has ever been maintained by the Company
or any Subsidiary and which has at any time been intended to qualify under
Section 401(a) or 501(c)(9) of the Code (i) has received a favorable
determination or approval letter from the Internal Revenue Service ("IRS")
regarding its qualification under such section, or (ii) is a prototype plan that
is within the remedial amendment period for seeking such determination or
approval letter, and has, in fact, been operated in all material respects in
compliance with the applicable section of the Code from the effective date of
such Employee Program through and including the date hereof (or, if earlier, the
date that all of such Employee Program's assets were distributed). No event or
omission has occurred which would cause any such Employee Program to lose its
qualification under the applicable section of the Code.
(b) The Company does not know of any failure of any party to comply in
all material respects with any laws applicable to the Employee Programs that
have been maintained by the Company or any Subsidiary. No litigation,
arbitration, or governmental administrative proceeding (or investigation) or
other proceeding (other than those relating to routine claims for benefits) is
pending or, to the Company's knowledge, threatened with respect to any such
Employee Program.
(c) Neither the Company nor any Subsidiary nor any Affiliate (as
defined below) (i) has ever maintained any Employee Program which has been
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (including, but not limited to, any Multi-employer Plan (as
defined below)) or (ii) has ever provided health care or any other non-pension
benefits to any employees after their employment is terminated or has ever
promised to provide such post-termination benefits (other than as required by
part 6 of subtitle B of title I of ERISA).
(d) With respect to each Employee Program maintained by the Company or
any Subsidiary within the three years preceding the date hereof, complete and
correct copies of the following documents (if applicable to such Employee
Program) have previously been delivered, or made available, to Buyer: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements) as
they may have been amended; (ii) the most recent IRS determination or approval
letter with respect to such Employee Program under Sections 401 or 501(c)(9) of
the Code, and any applications for determination or approval
19
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules and accountants' opinions attached thereto;
(iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; and (vi) any
documents evidencing any loan to an Employee Program that is a leveraged
employee stock ownership plan.
(e) Except as set forth in Schedule 2.20, neither the execution and
delivery of this Agreement by the Company, nor the consummation of the
Transactions will constitute a change of control (or any similar event) under
any Employee Program or result in, or give any Person the right to any,
acceleration of any benefits or amounts payable under or in connection with any
Employee Program (including, without limitation, any employment or consulting
agreement).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited
to, multiple employer welfare arrangements (within the meaning of ERISA
Section 3(40)), plans to which more than one unaffiliated employer
contributes and employee benefit plans (such as foreign or excess
benefit plans) which are not subject to ERISA; and (B) all stock option
plans, bonus or incentive award plans, severance pay policies or
agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above. In the case of
an Employee Program funded through an organization described in Section
501(c)(9) of the Code, each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by
agreement or under applicable law) to contribute to or provide benefits
under such Employee Program, or if such Employee Program provides
benefits to or otherwise covers employees of such entity, or their
spouses, dependents, or beneficiaries.
(iii) An entity is an "Affiliate" of the Company or a
Subsidiary if it would have ever been considered a single employer with
the Company or any Subsidiary under ERISA Section 4001(b) or part of
the same "controlled group" as the Company or any Subsidiary for
purposes of ERISA Section 302(d)(8)(C).
(iv) "Multi-employer Plan" means a (pension
or non-pension) employee benefit plan to which more than one
employer contributes and which is maintained pursuant to one
or more collective bargaining agreements.
20
2.21. Environmental Matters.
(a) Except as set forth in Schedule 2.21 hereto, (i)
neither the Company nor any Subsidiary has ever generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Waste (as defined below);
and (ii) to the Company's knowledge, no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by the Company or any Subsidiary in connection with
the presence of any Hazardous Material (as defined below).
(b) Except as set forth in Schedule 2.21 hereto, the
Company is, and has at all times been, in compliance in all material respects
with all applicable Environmental Laws (as defined below). The Company has not
received any written communication that alleges the Company is not in such
compliance.
(c) There is no Environmental Claim (as defined
below) pending or, to the knowledge of the Company, threatened against the
Company.
(d) To the Company's knowledge, neither PCB's nor
asbestos containing materials are present on or in the Real Property.
(e) As used in this Agreement, the defined terms:
(i) "Hazardous Material" shall mean and
include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the
environment or to human health or safety, as defined or
regulated under any Environmental Law;
(ii) Hazardous Waste" shall mean and include
any hazardous waste as defined or regulated under any
Environmental Law;
(iii) "Environmental Claim" means any
material claim, action, cause of action, investigation or
written notice by any Person alleging potential liability
(including potential liability for investigatory costs,
cleanup and removal costs, governmental enforcement and
response costs, natural resources damaged, property damages,
economic loss, personal injuries, or penalties) arising out
of, based on or resulting from (A) the presence, discharge or
release or threatened discharge or release into the
environment, of any Materials of Environmental Concern at any
location leased or operated by the Company, or (B)
circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law by the Company.
(iv) "Environmental Law" means all material
federal, state, and local laws (as of the relevant applicable
date, but in no event as of a date later than the Closing
Date) primarily relating to pollution or protection of human
health from pollution or the protection of the
21
environment (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata),
navigable waters, waters of contiguous and exclusive economic
zones, ocean waters and international waters, including laws
relating to emissions, discharges, releases or threatened
discharge or releases of non-permitted non-consumer quantities
of Materials of Environmental Concern or the dredging,
handling and disposal of river sediments, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
non-permitted or non-consumer quantities of Materials of
Environmental Concern; and
(v) "Materials of Environmental Concern"
means any hazardous substance defined as such under the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
2.22. Employees: Labor Matters. The Company and the
Subsidiaries generally enjoy good employer-employee relationships. Neither the
Company nor any Subsidiary is delinquent in payments to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Neither the Company, any Subsidiary nor Buyer will
by reason of the Transactions or anything done prior to the Closing be liable to
any of said employees for so-called "severance pay" or any other payments,
except as set forth in Schedule 2.20. The Company and each Subsidiary is in
compliance in all material respects with all applicable laws and regulations
respecting labor, employment, fair employment practices, work place safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair labor practices, nor are there
any strikes, slowdowns, stoppages of work, or any other concerted interference
with normal operations which are existing, pending or, to the Company's
knowledge, threatened against or involving the Company or any Subsidiary. No
collective bargaining agreement is in effect or is currently being negotiated by
the Company or any Subsidiary. Neither the Company nor any Subsidiary has
received any information indicating that any of its employment policies or
practices is currently being audited or investigated by any federal, state or
local government agency. The Company and each Subsidiary is, and at all times
has been, in compliance in all material respects with the requirements of the
Immigration Reform Control Act of 1986.
2.23. Customers, Distributors and Suppliers. The relationships
of the Company and each Subsidiary with their respective material customers,
distributors and suppliers are good commercial working relationships within the
context of the telecommunications industry. Except as set forth in Schedule
2.23, or in connection with the customer's, distributor's or supplier's prior
bankruptcy proceedings, no material customer, distributor or supplier of the
Company or any Subsidiary, has cancelled, materially modified, or otherwise
terminated its relationship with the Company or any Subsidiary, or has during
the last twelve months decreased materially its services, supplies or materials
to the Company or any such Subsidiary or its usage or purchase of the services
or products of the Company or any Subsidiary, nor, to the knowledge of the
Company,
22
does any customer, distributor or supplier have any plan or intention to do any
of the foregoing other than disconnections and non-renewals of circuits in the
ordinary and usual course of business.
2.24. Unlawful or Undisclosed Payments. In connection with the
conduct of the business of the Company and the Subsidiaries, neither the
Company, any Subsidiary nor, to the Company's knowledge, anyone acting on any of
their behalf, has, in the course of acting for, or on behalf of, the Company or
its Subsidiaries, (i) directly or indirectly used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) directly or indirectly made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) directly or
indirectly made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government or party official or
employee.
Section 3 REPRESENTATIONS AND WARRANTIES OF BUYER.
--------------------------------------------------
As a material inducement to the Company to enter into this Agreement
and consummate the Transactions, except as disclosed in the Schedules referred
to herein, Buyer hereby makes the representations and warranties in this Section
3. Subject to the rights of the Company under Section 8 hereof, Buyer may amend
any Schedule to this Agreement after the execution of this Agreement, but prior
to the Closing, to reflect updated information, events, agreements,
transactions, circumstances, developments, and occurrences. Subject to the
rights of the Company under Section 8 hereof, any amendment permitted above will
be deemed to have amended the Schedule, to have qualified the representations
and warranties of Buyer to which the Schedule relates, and to have cured any
misrepresentation or breach of warranty by buyer that otherwise might have
existed hereunder or thereunder prior to the amendment.
3.1. Organization of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware with
full corporate power to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is conducted by it. Except as set forth in Schedule 3.1 hereto,
Buyer is not in violation of any term of its Certificate of Incorporation or
By-laws.
3.2. Authority of Buyer. Subject only to obtaining approval of
the holders of its Series A Preferred Stock, Buyer has full right, authority and
power to enter into this Agreement and each other Transaction Document to which
it is a party, and, to carry out the Transactions. The execution, delivery and
performance by Buyer of this Agreement and each such other Transaction Document
and the consummation of the Transactions have been duly authorized by all
necessary action of Buyer and no other action on the part of Buyer (other than
the stockholder approval referred to above) is required in connection therewith.
23
This Agreement and each other Transaction Document
executed and delivered by Buyer pursuant to this Agreement constitute, or when
executed and delivered will constitute, valid and binding obligations of Buyer
enforceable in accordance with their terms. Except as set forth on Schedule 3.2,
the execution, delivery and performance by Buyer of this Agreement and each such
Transaction Document and the consummation of the Transactions:
(i) does not and will not violate any
provision of the Certificate of Incorporation or By-laws of
Buyer;
(ii) does not and will not violate any laws
of the United States or of any state or any other jurisdiction
applicable to Buyer or require Buyer to obtain any approval,
consent or waiver of,or make any filing with, any person or
entity (governmental or otherwise); and
(iii) does not and will not result in a
breach of, constitute a default under, accelerate any
obligation under, or give rise to a right of termination of
any indenture, loan or credit agreement or other agreement,
mortgage, lease, permit, order, judgment or decree to which
Buyer is a party or by which Buyer is bound or affected, or
result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance having
a material adverse effect on the operation or condition
(financial or otherwise) of the Fiber Ring Assets or result in
a material change in the obligations of Buyer under the
Assumed Liabilities, taken as a whole, other than any effect
relating to or arising out from an event, matter, occurrence
or action (a) affecting the United States or global economy
generally; (b) primarily caused by or related to the
announcement or pendency of the Transactions; or (c) resulting
from actions taken by Buyer at the request of the Company (a
"Buyer Material Adverse Effect").
3.3. Title to Fiber Ring Assets; Sufficiency of Assets. A
complete description of the machinery, equipment and all other material items of
tangible personal property of Buyer constituting the Fiber Ring Assets are set
forth in Exhibit B hereto. All such machinery, equipment and personal property
set forth in Exhibit B, together with the Buyer Intellectual Property and the
Maintenance Assets, constitutes all of the assets necessary to operate the Fiber
Ring Assets as presently conducted by Buyer (other than franchises, licenses,
permits and other approvals). Except as otherwise set forth in Exhibit B, Buyer
has good and marketable title to the machinery, equipment and all other items of
personal property constituting the Fiber Ring Assets. Except for the security
interest held by Alacatel/ElectroBanque in the Fiber Ring Assets located in
Albuquerque, New Mexico, and the leasehold and other rights of customers, none
of such Fiber Ring Assets is subject to any mortgage, pledge, lien, conditional
sale agreement, security, title, encumbrance or other charge. Except as
otherwise set forth in Exhibit B, all Fiber Ring Assets are in good repair and
good working order. As used herein, the term "Maintenance Assets" shall mean
those tangible and intangible assets of Buyer used in connection with the
maintenance and operation of the Fiber Ring Assets as will be necessary or
usable in the performance of its obligations under the Maintenance Agreement.
24
3.4. Intellectual Property. Buyer owns or has the right to use
all patent, copyright, trade secret, trademark or other proprietary rights
(collectively, "Buyer Intellectual Property") necessary to perform its
obligations under the Maintenance Agreement. There are no claims or demands of
any other person pertaining to the use by Buyer of any of such Buyer
Intellectual Property and no proceedings have been instituted or are pending,
or, to Buyer's knowledge, threatened, which challenge the rights of the Buyer in
respect thereof.
3.5. No Fraudulent Transfer. Buyer has entered into this
Agreement and the Transaction Documents without any intent to hinder, delay or
defraud any of its creditors. Buyer has received reasonably equivalent value in
exchange for the Fiber Ring Assets transferred to the Company. Immediately prior
to and after the Closing, the value of Buyer's assets is and will be greater
than the amount of its debts, and Buyer is and will be generally able to pay its
debts as they become due.
3.6. Contracts. Each of the material contracts, agreements and
other obligations of Buyer related to the Fiber Ring Assets (including, without
limitation, any contracts granting to Buyer a lease, license or other right to
use real property) are set forth in Exhibit B (the "Fiber Ring Contracts") (true
and complete copies of each contract have been given to the Company). Each Fiber
Ring Contract constitutes a valid and binding obligation of Buyer or its
subsidiary party thereto, and to Buyer's knowledge each other party thereto, and
is legally enforceable against Buyer or its subsidiary party thereto, and to
Buyer's knowledge each other party thereto, is in full force and effect, and has
not been modified, amended or altered, in writing or otherwise. Except as set
forth in Schedule 3.6 hereto, the Fiber Ring Contracts to be transferred to the
Company (as set forth in Exhibit B) may be transferred to the Company pursuant
to this Agreement, and will continue in full force and effect thereafter, in
each case without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without the consent, approval or act of,
or the making of any filing with, any other party. Buyer is not currently in
breach of any of its obligations under each of the Fiber Ring Contracts, and
except as set forth in Schedule 3.6, and to the knowledge of Buyer, no other
party to any of the Fiber Ring Contracts is currently in breach or default
thereunder.
3.7. Litigation. Except for matters set forth in Schedule 3.7
hereto, there are no claims or proceedings pending or, to Buyer's knowledge,
threatened against Buyer or its affiliateswhich can reasonably be expected to
result in any material liability of Buyer with respect to the Fiber Ring Assets
or the Assumed Liabilities or which would prevent or hinder the consummation of
the Transactions, transfer of the Fiber Ring Assets or assumption of the Assumed
Liabilities.
3.8. Compliance with Laws. Buyer is in compliance in all
material respects with all applicable statutes, ordinances, orders, judgments,
decrees, rules and regulations promulgated by any federal, state, municipal
entity, agency, court or other governmental authority which applies to Buyer's
ownership and operation of the Fiber Ring Assets and to the Assumed Liabilities,
and Buyer has not received notice of any violation or alleged violation of any
such statute, ordinance, order, rule or regulation.
25
3.9. Finder's Fee. Buyer has not incurred or become liable for
any broker's commission or finder's fee relating to or in connection with the
Transactions.
3.10. Permits. Buyer has obtained all material permits,
registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state or local
authorities in order for Buyer to own, operate and maintain the Fiber Ring
Assets except to the extent that Buyer's failure to so obtain such Approvals
could not reasonably be expected to have a Buyer Material Adverse Effect. All
the Approvals are valid and in full force and effect, and Buyer is operating the
Fiber Ring Assets in material compliance therewith. Such Approvals include, but
are not limited to, those material Approvals required under federal, state or
local statutes, ordinances, orders, requirements, rules, regulations or laws
pertaining to environmental protection, public health and safety, worker health
and safety, buildings, highways or zoning.
3.11. Customers. Set forth in Schedule 3.11 is a list of all
of the customers of Buyer relating to the Fiber Ring Assets. Except as set forth
in Schedule 3.11, the relationships of Buyer with such customers are good
commercial working relationships. Except as set forth in Schedule 3.11, or in
connection with the customer's prior bankruptcy proceedings, no such customer
has cancelled, materially modified, or otherwise terminated its relationship
with Buyer, or has threatened to cancel, materially modify or otherwise
terminate its relationship with Buyer.
3.12. No Condemnation. To Buyer's knowledge, neither the whole
nor any portion of the Fiber Ring Assets is subject to any governmental decree
or order to be sold or is being condemned, expropriated or otherwise taken by
any public authority, with or without payment of compensation therefor, nor, to
Buyer's knowledge, has any such condemnation, expropriation or taking been
proposed.
3.13. Environmental Matters.
(a) In connection with Buyer's ownership and
operation of the Fiber Ring Assets, (i) Buyer has never generated, transported,
used, stored, treated, disposed of, or managed any Hazardous Waste; and (ii) to
Buyer's knowledge, no lien has ever been imposed by any governmental agency on
any property, facility, machinery, or equipment owned, operated, leased, or used
by Buyer in connection with the presence of any Hazardous Material.
(b) In connection with Buyer's ownership and
operation of the Fiber Ring Assets, Buyer is, and has at all times been, in
compliance in all material respects with all applicable Environmental Laws.
Buyer has not received any written communication that alleges that Buyer is not
in such compliance.
(c) There is no Environmental Claim, in connection
with Buyer's ownership and operation of the Fiber Ring Assets, pending or, to
the knowledge of Buyer, threatened against Buyer.
26
(d) To Buyer's knowledge, neither PCB's nor asbestos
containing materials are present on or in the Fiber Ring Assets.
3.14. Investment Intention; Experience.
(a) Buyer understands and acknowledges that the
Shares have not been and will not be registered under the Securities Act of
1933, as amended, or the securities laws of any state or other jurisdiction
(together "Securities Laws"); that the Shares will be issued in reliance on
exemptions from the registration requirements thereof; and that the Company's
reliance upon such exemptions is predicated in part on the representations and
covenants contained in this Section 3.14.
(b) Buyer represents and warrants that:
(i) the Shares are being and will be
acquired for the account of Buyer and not, directly or
indirectly, on behalf of any other person or persons and not
with a view to, or for sale in connection with, any, direct or
indirect, distribution thereof in violation of applicable
Securities Laws;
(ii) it will not, directly or indirectly,
transfer the Shares except in compliance with applicable
Securities Laws and any applicable rules and regulations
promulgated thereunder;
(iii) it has such knowledge and experience
in financial and business matters that it is capable of
evaluating the merits and risks of its investment in the
Shares; and
(iv) it has had access to or received such
information with respect to the Company and the Shares as it
deems advisable in connection with making a decision to invest
in the Shares; that it has had the opportunity to review the
Company SEC Reports; and that it has had the opportunity to
question and receive answers from representatives of the
Company with respect to the terms and conditions of the sale
of the Shares.
3.15. Accredited Investor Status. Buyer is an "accredited
investor" as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
27
Section 4 COVENANTS OF THE COMPANY.
------------------------------------------
4.1. Conduct of Business. Between the date of this Agreement
and the Closing Date, the Company will, and will cause each Subsidiary to:
(a) conduct its business only in the ordinary and
usual course and refrain from changing or introducing any method of management
or operations except in the ordinary and usual course of business and consistent
with prior practices;
(b) refrain from (i) making any purchase, sale,
disposition, lease or sublease of any asset or property other than in the
ordinary and usual course of business and other than subleases or dispositions
of (A) the Company's interest in its leases in the Sears Tower, Chicago,
Illinois and on Madison Avenue in New York, New York and (B) UTX facilities,
(ii) purchasing any capital asset not reflected in the Company's budget, as set
forth in Schedule 4.1, and (iii) mortgaging, pledging, subjecting to a lien or
otherwise encumbering any of its properties or assets other than in the ordinary
and usual course of business or to Buyer;
(c) refrain from making any change or incurring any
obligation to make a change in its Certificate of Incorporation, By-laws or
authorized or issued capital stock other than as contemplated hereby;
(d) use its commercially reasonable efforts to
prevent any adverse change with respect to the continued employment of ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇;
(e) diligently operate its business substantially as
previously operated and diligently preserve intact its organization, goodwill
and relationships with suppliers, customers, independent contractors and others
having business relations with it;
(f) furnish Buyer with unaudited monthly balance
sheets and statements of income and retained earnings and cash flows of the
Company and each Subsidiary on a consolidated and consolidating basis within
thirty (30) days after each month end;
(g) furnish Buyer with copies of all filings and
submissions to be made by the Company or any Subsidiary with or to the SEC a
reasonable time prior to such filing or submission, and reflect therein all
reasonable comments of Buyer and its counsel thereon; and
(h) refrain from taking any action that could
reasonably be expected to cause the representation contained in Section 2.6 to
be untrue as of the Closing.
4.2. Satisfaction of Conditions; Receipt of Necessary
Approvals. Subject to the terms and conditions herein provided, the Company
shall, and shall cause the Subsidiaries to, use their respective commercially
reasonable efforts to (i) promptly effect all necessary registrations,
submissions and filings required or requested by governmental authorities, in
connection with the consummation of the Transactions, (ii) defend any
28
lawsuit or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the Transactions, including,
without limitation, seeking to have any stay or temporary restraining order
entered by any court or other governmental entity vacated or reversed, (iii) use
all reasonable efforts to take all other action and to do all other things
necessary, proper or advisable to satisfy the conditions precedent to the
Closing, to consummate and make effective as promptly as practicable the
Transactions, and to fully carry out the purposes of, this Agreement and (iv)
use all reasonable efforts to obtain all other necessary or appropriate waivers,
consents and approvals (including but not limited to such filings, consents,
approvals, orders, registrations and declarations as may be required under the
laws of any foreign country in which the Company or any of the Subsidiaries
conducts any business or owns any assets) and to lift any injunction or other
legal bar to the Transactions (and, in such case, to proceed with the
Transactions as expeditiously as possible), subject, however, to the requisite
vote of the stockholders of the Company.
4.3. Notice of Default.
(a) Promptly upon the occurrence of, or promptly upon
the Company becoming aware of the impending or threatened occurrence of, any
event which would cause or constitute a breach or default, or would have caused
or constituted a breach or default had such event occurred or been known to the
Company prior to the date hereof, of any of the representations, warranties or
covenants of the Company contained in or referred to in this Agreement or in any
Schedule or Exhibit referred to in this Agreement, the Company shall give
detailed written notice thereof to Buyer and the Company shall use its best
efforts to prevent or promptly remedy the same.
(b) Promptly upon the occurrence of, or promptly upon
the Company becoming aware of the impending or threatened occurrence of, any
event with regard to the Company or a Subsidiary which if such event had
occurred prior to the execution of this Agreement would have been required to be
disclosed by the Company on a Schedule to this Agreement, the Company shall
promptly update any such Schedule and deliver such Schedule to Buyer.
4.4. Cooperation of the Company. The Company shall cooperate
with all reasonable requests of Buyer and Buyer's counsel in connection with the
consummation of the Transactions.
4.5. No Solicitation; Other Offers.
(a) The Company shall not, and shall not permit any
Subsidiary to, and shall use its best efforts to ensure that its officers,
directors or employees, or any investment bankers, consultants or other agents
retained by it or any Subsidiary to not, solicit, initiate or encourage the
submission of any Acquisition Proposal (as defined below) or engage in
discussions or negotiations or furnish to any Person any information with
respect to an Acquisition Proposal or knowingly facilitate any effort or attempt
to make an Acquisition Proposal. The Company will notify Buyer within 48 hours
of receipt by the Company or any Subsidiary of any Acquisition Proposal or any
request for nonpublic
29
information relating to the Company or any Subsidiary by any Person who, to the
knowledge of the Company, is making or considering making or who has made, an
Acquisition Proposal. The Company shall provide such notice orally and in
writing including the terms and conditions of any such Acquisition Proposal or
request. The Company shall, and shall cause the Subsidiaries and directors,
employees and other agents of the Company and the Subsidiaries to, cease
immediately and cause to be terminated all activities, discussions and
negotiations, if any, with any Persons conducted prior to the date hereof with
respect to any Acquisition Proposal. Nothing contained in this Agreement shall
prevent the Board of Directors of the Company from complying with applicable
rules and regulations under the Exchange Act with respect to any Acquisition
Proposal or making any disclosure to the Company's stockholders if, in the good
faith judgment of a majority of the disinterested members of the Board of
Directors of the Company after receipt of a written opinion from its outside
legal counsel, failure to so disclose could reasonably be deemed to be
inconsistent with its fiduciary duties under applicable law. For purposes of
this Section, a "disinterested member of the Board of Directors" is a member of
the Board of Directors who is not an "interested director" as defined under
DGCL.
(b) Notwithstanding the first sentence of this
Section 4.5, the Company may negotiate or otherwise engage in substantive
discussions with, and furnish nonpublic information to, any Person in response
to an unsolicited Acquisition Proposal by such Person if the Company has
complied with the terms of this Section 4.5, a majority of the disinterested
members of the Board of Directors of the Company reasonably determines in good
faith that such Acquisition Proposal could reasonably be expected to result in a
Superior Proposal and, after receipt of a written opinion from its outside legal
counsel, that the failure to take such action could reasonably be deemed to be
inconsistent with its fiduciary duties under applicable law, and such person
executes a confidentiality agreement in customary form (including standstill
provisions).
(c) Except as permitted by the second sentence of
this Subsection 4.5(c), neither the Board of Directors of the Company nor any
committee thereof shall withdraw or modify, or publicly propose to withdraw or
modify, in a manner adverse to Buyer, or take any action not explicitly
permitted by this Agreement that would be inconsistent with its approval of the
Transactions, approve or recommend, or publicly propose to approve or recommend,
any Acquisition Proposal or cause the Company to enter into any letter of
intent, agreement in principle, acquisition agreement or similar agreement
related to any Acquisition Proposal. The Board of Directors of the Company shall
be permitted (i) not to recommend to its stockholders acceptance of the
Transactions and/or approval of this Agreement, (ii) to withdraw, or modify in a
manner adverse to Buyer, its recommendation to its stockholders referred to in
Section 1.1 hereof, (iii) approve or recommend any Superior Proposal or (iv)
terminate this Agreement and in connection therewith enter into an agreement
with respect to such Superior Proposal, but only if (x) the Company has complied
with the terms of this Section 4.5, (y) the Company has received an unsolicited
Acquisition Proposal which a majority of the disinterested members of the Board
of Directors determines in good faith constitutes a Superior Proposal, and (z) a
majority of the disinterested members of the Board of Directors of the Company
determines in good faith, after receipt of a written opinion from its outside
legal
30
counsel, that the failure to take such action could reasonably be deemed to be
inconsistent with its fiduciary duties under applicable law.
(d) For purposes of this Agreement:
"Acquisition Proposal" means any offer or proposal
for a merger, reorganization, consolidation, share exchange,
business combination, or other similar transaction involving
the Company or any Subsidiary or any proposal or offer to
acquire, directly or indirectly, securities representing more
than 25% of the voting power of the Company, or all or
substantially all of the assets of the Company and the
Subsidiaries taken as a whole, other than the Transactions.
"Superior Proposal" means any bona fide written
Acquisition Proposal which (i) a majority of the disinterested
members of the Board of Directors of the Company determines in
good faith (after consultation with a financial advisor of
nationally recognized reputation and taking into account all
the terms and conditions of the Acquisition Proposal) is more
favorable to the Company's stockholders (in their capacities
as stockholders) and/or, if applicable, the Company's
creditors than the Transactions; and (ii) any conditions to
such Acquisition Proposal are reasonably capable of being
satisfied promptly, including a conclusion that financing for
such Acquisition Proposal, to the extent required, is then
committed or is in the good faith judgment of a majority of
the disinterested members of the Board of Directors of the
Company, reasonably available to the person making such
Acquisition Proposal.
4.6. Certain Filings. The Company shall and shall
cause the Subsidiaries to, reasonably cooperate with Buyer (a) in connection
with the preparation of the Proxy Statement and any filings required to be made
by Buyer with governmental authorities, (b) in determining whether any action by
or in respect of, or filing with, any governmental body, agency or official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the Transactions, and (c) in seeking any such actions,
consents, approvals, or waivers or making any such filings, furnishing
information required in connection therewith or with the Proxy Statement and
such other filings and seeking timely to obtain any such actions, consents,
approvals or waivers.
4.7. Confidentiality. The Company agrees that, unless and
until the Closing has been consummated, each of the Company, the Subsidiaries
and their officers, directors, agents and representatives will hold in strict
confidence, and will not use, any confidential or proprietary data or
information of, or relating to, Buyer with respect to its business or financial
condition except for the purpose of evaluating, negotiating and completing the
Transactions. Notwithstanding the foregoing, the obligations specified above
will not apply to any confidential or proprietary information that: (a) is or
becomes publicly available without breach of this Agreement; (b) is rightfully
received from a third party without, to the knowledge of the Company, a similar
restriction on the third party's
31
rights; (c) is required to be disclosed in response to a valid judicial or
governmental order or otherwise required by law; or (d) is disclosed with the
prior consent of Buyer. If the Transactions are not consummated, the Company and
the Subsidiaries will return to Buyer (or certify that they have destroyed) all
copies of such data and information, including but not limited to financial
information, customer lists, business and corporate records, worksheets, test
reports, tax returns, lists, memoranda and other documents prepared by or made
available to the Company or the Subsidiaries by Buyer in connection with the
Transactions, provided, however, that nothing herein shall require the Company
or any Subsidiary to return (or certify that they have destroyed) any data or
information that the Company or any Subsidiary is required to retain under
applicable law.
4.8. Maintenance of Listing. The Company shall use all
commercially reasonable efforts to maintain the listing of the Common Stock on
the Nasdaq Small Cap Market, including, but not limited to, the authorization
and consummation of a reverse stock split of the Common Stock.
Section 5 COVENANTS OF BUYER.
------------------------------------
5.1. Maintenance of Fiber Ring Assets and Assumed Liabilities.
Between the date of this Agreement and the Closing Date, Buyer will:
(a) maintain the Fiber Ring Assets in good repair and
working order;
(b) refrain from (i) making any sale, disposition,
lease or sublease of any the Fiber Ring Assets other than in the ordinary and
usual course of business; and (ii) from mortgaging, pledging, subjecting to a
lien or otherwise encumbering any of the Fiber Ring Assets other than in the
ordinary and usual course of business;
(c) diligently operate the Fiber Ring Assets in the
ordinary and usual course, in compliance with the terms and conditions of the
Fiber Ring Contracts and in material compliance with all laws applicable to the
operation of the Fiber Ring Assets the failure of which would result in a Buyer
Material Adverse Effect or constitute a breach of default under the Fiber Ring
Contracts; and
(d) refrain from taking any action or incurring any
obligation that would result in a Buyer Material Adverse Effect.
5.2. Satisfaction of Conditions; Receipt of Necessary
Approvals.
(a) Subject to the terms and conditions herein
provided, Buyer shall use commercially reasonable efforts to (i) promptly effect
all necessary registrations, submissions and filings required or requested by
governmental authorities, in connection with the consummation of the
Transactions, (ii) defend any lawsuit or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the Transactions, including, without limitation, seeking to have any stay or
temporary restraining order entered by any court or other governmental entity
vacated or reversed, (iii) use all reasonable efforts to take all other action
and to do all other things
32
necessary to consummate and make effective as promptly as practicable the
Transactions, and to fully carry out the purposes of, this Agreement and (iv)
use all reasonable efforts to obtain all other necessary waivers, consents and
approvals (including but not limited to, in connection with the Fiber Ring
Assets and Assumed Liabilities and such filings, consents, approvals, orders,
registrations and declarations as may be required under the laws of any foreign
country in which Buyer conducts any business or owns any assets) and to lift any
injunction or other legal bar to the Transactions (and, in such case, to proceed
with the Transactions as expeditiously as possible).
5.3. Notice of Default; Update.
(a) Promptly upon the occurrence of, or promptly upon
Buyer becoming aware of the impending or threatened occurrence of, any event
which would cause or constitute a breach or default, or would have caused or
constituted a breach or default had such event occurred or been known to Buyer
prior to the date hereof, of any of the representations, warranties or covenants
Buyer contained in or referred to in this Agreement or in any Schedule or
Exhibit referred to in this Agreement, Buyer shall give detailed written notice
thereof to the Company and Buyer shall use its best efforts to prevent or
promptly remedy the same.
(b) Promptly upon the occurrence of, or promptly upon
Buyer becoming aware of the impending or threatened occurrence of, any event
with respect to Buyer which if such event had occurred prior to the execution of
this Agreement would have been required to be disclosed by Buyer on a Schedule
to this Agreement, Buyer shall promptly inform the Company.
5.4. Cooperation of Buyer. Buyer shall cooperate with all
reasonable requests of the Company and Company's counsel in connection with the
consummation of the Transactions.
5.5. Certain Filings. Buyer shall reasonably cooperate with
the Company (a) in connection with the preparation of the Proxy Statement and
any filings required to be made by the Company with governmental authorities,
(b) in determining whether any action by or in respect of, or filing with, any
governmental body, agency or official, or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the Transactions, and
(c) in seeking any such actions, consents, approvals, or waivers or making any
such filings, furnishing information required in connection therewith or with
the Proxy Statement and such other filings and seeking timely to obtain any such
actions, consents, approvals or waivers.
5.6. Confidentiality. Buyer agrees that, unless and until the
Closing has been consummated, Buyer and its officers, directors, agents and
representatives will hold in strict confidence, and will not use, any
confidential or proprietary data or information of, or relating to, the Company
or it Subsidiaries with respect to their business or financial condition except
for the purpose of evaluating, negotiating and completing the Transactions.
Notwithstanding the foregoing, the obligations specified above will not
33
apply to any confidential or proprietary information that: (a) is or becomes
publicly available without breach of this Agreement; (b) is rightfully received
from a third party without, to the knowledge of Buyer, a similar restriction on
the third party's rights; (c) is required to be disclosed in response to a valid
judicial or governmental order or otherwise required by law; or (d) is disclosed
with the prior consent of the Company or its Subsidiary, as the case may be. If
the Transactions are not consummated, Buyer will return to the Company and its
Subsidiaries (or certify that it has destroyed) all copies of such data and
information, including but not limited to financial information, customer lists,
business and corporate records, worksheets, test reports, tax returns, lists,
memoranda, and other documents prepared by or made available to Buyer by the
Company and its Subsidiaries in connection with the Transactions.
5.7. Transferred Employees. From and after the time that a
current employee of Buyer is determined (upon agreement of Buyer and the
Company) to be a Transferred Employees, Buyer shall not alter the terms or
conditions of employment or change the compensation of or benefits available to
or grant or declare any bonus payable to any such employee. Nothing in this
Agreement shall be deemed to create a contract of employment or to limit the
ability of Buyer to terminate the employment of any Transferred Employee.
Section 6 MUTUAL COVENANTS OF THE PARTIES.
-------------------------------------------------
6.1. Cooperative Efforts. To the extent that an approval or
consent necessary to transfer all or any portion of the Fiber Ring Assets to the
Company is not obtained, or any person shall commence litigation or other
proceedings seeking to restrict, or obtain an order of a court or other
governmental authority restricting, such transfer, then (i) the Company and
Buyer shall use all commercially reasonable efforts to obtain such consent or
have such litigation or other proceeding dismissed or such order withdrawn, and
(ii) if they are unsuccessful in such efforts, the affected Fiber Ring Assets
shall not be required to be transferred at the Closing, and the Company and
Buyer shall in good faith seek to transfer to the Company the economic benefit
and cost of the ownership of the affected Fiber Ring Assets and shall close the
remainder of the Transactions notwithstanding such event. In the event that the
Company and Buyer proceed under clause (ii) of the immediately preceding
sentence, then, unless otherwise agreed to by the Company and Buyer, following
the Closing, they shall continue to use commercially reasonably efforts to
transfer the affected Fiber Ring Assets to the Company.
6.2. Employees; Continuation of Benefits.
(a) Prior to the Closing, Buyer and the Company shall
mutually agree on those current employees of Buyer who shall become employees of
the Company as of the Closing (the "Transferred Employees"). From and after the
Closing Date, the Company shall provide or cause to be provided to the
Transferred Employees compensation opportunities (consisting of base pay,
commissions, equity compensation and bonus opportunities) and employee benefits
that are comparable, in the aggregate, to the compensation and the benefits
(exclusive of any such compensation and benefits consisting of or based on any
equity securities) provided to similarly situated employees of
34
the Company and the Subsidiaries (after consideration of qualifications and job
performance) immediately prior to the Closing.
(b) Subject to clause (c) below, each Transferred
Employee shall be given full credit for all service with Buyer under any plans
or arrangements providing vacation, sick pay, severance, retirement, pension or
retiree welfare benefits maintained by the Company or for all purposes (other
than for benefit accrual purposes under any defined benefit pension plan).
(c) The Company agrees to employ all Transferred
Employees on substantially the same terms and conditions as provided in such
employee's written employment agreement with the Buyer (true and complete copies
of which have been delivered to the Company), provided, however, that the
Company shall not be required to create any new or alter any of its existing
benefit plans or policies.
Section 7 CONDITIONS.
----------------------------
7.1. Conditions to the Obligations of Each Party. The
respective obligations of each party to effect the Transactions are subject to
the satisfaction at or prior to the Closing of the following conditions
precedent:
(a) This Agreement and the issuance of the Shares
hereunder shall have been duly approved by the stockholders of the Company
entitled to vote with respect thereto in accordance with applicable law and the
Certificate of Incorporation and By-laws of the Company;
(b) Subject to the terms and provisions of Section
6.1 hereof, there shall not be in effect any statute, rule, regulation,
executive order, decree, ruling or injunction or other order of a court or
governmental or regulatory agency of competent jurisdiction directing that the
Transactions not be consummated, or making such consummation unlawful; provided,
however, that, subject to the terms and provisions herein provided, prior to
invoking this condition each party shall use its reasonable efforts to have any
such decree, ruling, injunction or order vacated;
(c) Subject to the terms and provisions herein
provided, all third party and governmental consents, orders and approvals
legally required for the consummation of the Transactions shall have been
obtained and be in effect at the Closing, including, without limitation, any
consent necessary to provide that the Transactions will not result in the
acceleration or vesting of any rights of any third party in agreements with the
Company or any Subsidiary or otherwise, as a result of the Transactions
(provided that only those third party consents necessary to vest in the Company
title to the Fiber Ring Assets or those consents, orders or approvals, the
failure of which to obtain would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on the Company or which
would prohibit or materially limit or restrict the consummation of the
Transactions, shall serve as conditions precedent to the obligations of either
party); and
35
(d) The Company and Buyer (or one or more affiliates
of Buyer) shall have entered into a mutually acceptable maintenance and
transition services agreement related to the Fiber Ring Assets (the "Maintenance
Agreement"), containing terms as set forth in Exhibit C hereto.
7.2. Conditions to the Obligations of Buyer. In addition to
the conditions set forth in Section 7.1, the obligation of Buyer to consummate
this Agreement and the Transactions are subject to the fulfillment, at or prior
to the Closing, of the following additional conditions precedent:
(a) Each of the representations and warranties of the
Company contained in Section 2 shall be true and correct in all material
respects (except for such representations and warranties that are qualified by
their terms as to materiality, which representations and warranties as so
qualified shall be true and correct in all respects) as of the date of this
Agreement and as of the Closing as though made on and as of the Closing; and the
Company shall, on or before the Closing, have performed all of its obligations
hereunder which by the terms hereof are to be performed on or before the
Closing.
(b) There shall have been no event or series of
events that has had or could reasonably be expected to have a Material Adverse
Effect since the date hereof.
(c) The Company shall have delivered to Buyer a
certificate of the Company's President and Chief Financial Officer dated as of
the Closing (i) to the effect that the statements set forth in paragraphs (a)
and (b) above and paragraphs (k), (l), (n) and (o) below in this Section 7.2 are
true and correct, and (ii) certifying as to the number of shares of Common Stock
outstanding on a fully diluted basis (after giving effect to the issuance of
Common Stock upon the exercise or conversion of all outstanding Rights and other
securities, other than any such Rights or other securities having an exercise or
strike price that equates to more than $1.00 per share).
(d) The Company shall have executed and delivered to
Buyer the agreement (the "Registration Rights Agreement"), substantially in the
form set forth in Exhibit D hereto, relating to the registration of the Shares
under applicable federal and state securities laws.
(e) Buyer shall have received the agreement (the
"Stockholders' Agreement"), substantially in the form set forth in Exhibit E
hereto, of certain stockholders of the Company, including but not limited to ICG
Holdings, Inc., Communication Ventures III, L.P., Communication Ventures III CEO
& Entrepreneurs' Fund, L.P., ComVen III, L.L.C., ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇, not to transfer or in any way dispose of any shares of Common Stock owned
by each such stockholder for a term not less than twelve months, tovote for
Buyer's designees for a majority of the members of the Board of Directors of the
COMPANY, and as to those other matters set forth therein.
(f) The Board of Directors of the Company shall
consist of nine members, five of whom shall be those
36
persons designated by Buyer and four shall be those persons designated by the
Company. The Chairman of the Board shall be a director designated by Buyer.
(g) The Company shall have issued to Buyer one or
more certificates representing the Shares.
(h) The Company shall have assumed the Assumed
Liabilities by execution and delivery of an instrument reasonably satisfactory
to Buyer and its counsel (including the agreement to require that all subsequent
transferees of any of the Fiber Ring Assets agree to be bound by, comply with
and perform all of Buyer's (and its affiliates') obligations (i) to
municipalities and other governmental authorities under city rights grants and
agreements and (ii) under customer and other agreements, in each case related to
such transferred assets) and Buyer shall have been released or otherwise
indemnified to its reasonable satisfaction from all obligations related thereto.
(i) The Company and Buyer shall have mutually agreed
upon the identity of the Transferred Employees and the compensation and benefits
to be made available to each of such individuals.
(j) The Company shall have consolidated its
obligation to satisfy the minimum revenue commitments that apply regardless of
its use or purchase of products or services pursuant to the following
agreements: (i) GTE Telecom Incorporated Capacity Agreement (CA No.
Universal-99001) with Level 3 Communications, LLC (pursuant to an assignment
from Genuity Telecom Inc.) dated August 20, 1999, as amended and (ii) Terms and
Conditions for Delivery of Service with Level 3 Communications, LLC executed by
Universal Access, Inc. on November 15, 1999, as amended or supplemented, into
one minimum revenue commitment totaling no more than $175,000 per month. The
aggregate cash payments (other than cash payments for actual services utilized
and billed at then fair market value) paid by the Company and the Subsidiaries
for the consolidation of such minimum revenue commitments shall not exceed
$1,400,000.
(k) The Company shall have been dismissed from the
litigation between the Company and Qwest described in the Company SEC Reports
pursuant to that Settlement Agreement by and between the Company and Qwest dated
March 24, 2003 and such Settlement Agreement shall be in full force and effect
and shall not have been modified, amended or supplemented in any manner adverse
to the Company.
(l) The Company shall have completed its financial
statements for the fiscal year ending December 31, 2002 and received an
unqualified audit opinion of PriceWaterhouseCoopers which does not contain any
exceptions relating to the scope of the audit or the ability of the Company to
continue as a "going concern."
(m) As of the Closing, the Company and the
Subsidiaries shall have cash and cash equivalents (including restricted and
unrestricted cash and cash equivalents on a consolidated basis) of not less
than:
(i) $5,000,000 if the Closing occurs prior
to June 1, 2003;
37
(ii) $4,000,000 if the Closing occurs on or
after June 1, 2003 but prior to July 1, 2003; or
(iii) $2,000,000 if the Closing occurs on or
after July 1, 2003.
(n) As of the Closing, the Company and the
Subsidiaries shall have net working capital (consisting of cash, cash
equivalents and accounts receivable (net of reserves), less current liabilities,
in each case, calculated in accordance with GAAP and consistent with past
practice and the Company's audited financial statements included in the Company
SEC Reports and Draft Form 10-K), on a consolidated basis, of not less than:
(i) $(22,000,000) if the Closing occurs
prior to June 1, 2003;
(ii) $(23,000,000) if the Closing occurs on
or after June 1, 2003 but prior to July 1, 2003; or
(iii) $(25,000,000) if the Closing occurs on
or after July 1, 2003.
(o) All actions, proceedings, instruments and
documents required to carry out this Agreement and the Transactions and all
related legal matters contemplated by this Agreement shall have been approved by
▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇, as counsel for Buyer, and such counsel shall have
received on behalf of Buyer such other certificates, opinions, and documents in
form satisfactory to such counsel, as Buyer may reasonably require from the
Company to evidence compliance with the terms and conditions hereof as of the
Closing and the correctness as of the Closing of the Company's representations
and warranties and the fulfillment of the covenants by the Company.
(p) Buyer shall have received from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Ltd., counsel for the Company, an opinion as of said date, in form set forth in
Exhibit F hereto.
(q) On the Closing Date, the Buyer shall have
received written evidence satisfactory to it evidencing (i) the Company's
assumption of Two Million Dollars in principal amount of that Promissory Note
executed by Buyer and made to Electro Banque dated December 30, 2002 (the
"Note") on the same terms and conditions (including, without limitation,
interest rate and maturity) set forth in the Note as in effect on the date
hereof, (ii) the release of Buyer from its obligations on account of the portion
of the Note so assumed and (iii) the release of any assets to be retained by
Buyer after the Closing Date as collateral security for the portion of the Note
so assumed. It is understood and agreed that the Company shall have no
obligation on account of the portion of the Note not so assumed by it and that
no assets of the Company (after giving effect to the Transaction) shall secure
the portion of the Note that is not so assumed by it.
7.3. Conditions to Obligations of the Company. In addition to
the conditions set forth in Section 7.1, the obligation of the Company to
consummate this
38
Agreement and the Transactions are subject to the fulfillment, at or prior to
the Closing, of the following additional conditions precedent:
(a) Each of the representations and warranties of
Buyer contained in Section 3 shall be true and correct in all material respects
(except for such representations and warranties that are qualified by their
terms as to materiality, which representations and warranties as so qualified
shall be true and correct in all respects) as of the date of this Agreement and
as of the closing as though made on and as of the Closing; Buyer shall, on or
before the Closing, have performed all of its obligations hereunder which by the
terms hereof are to be performed on or before the Closing.
(b) There shall have been no event or series of
events that has had or would reasonably be expected to have a Buyer Material
Adverse Effect.
(c) All actions, proceedings, instruments and
documents required to carry out this Agreement and the transactions contemplated
hereby and all related legal matters contemplated by this Agreement shall have
been approved by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd., as counsel for the Company, and such
counsel shall have received on behalf of the Company such other certificates,
opinions and documents in form satisfactory to such counsel as the Company may
reasonably require from Buyer to evidence compliance with the terms and
conditions hereof as of the Closing and the correctness as of the Closing of the
representations and warranties of Buyer and the fulfillment of its covenants.
(d) On the Closing Date, the Company shall have
received from Buyer a ▇▇▇▇ of sale, in form and substance reasonably
satisfactory to the Company and its counsel, transferring all of Buyer's right,
title and interest in and to the Fiber Ring Assets to the Company.
(e) On the Closing Date, the Company shall have
received from ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇, counsel for Buyer, an opinion as of said
date, in form set forth in Exhibit G hereto.
Section 8 TERMINATION OF AGREEMENT.
------------------------------------------
8.1. Termination. This Agreement may be terminated and the
Transactions may be abandoned at any time prior to the Closing, whether before
or after stockholder approval thereof:
(a) by the mutual consent of Buyer and the Company.
(b) by either the Company or Buyer:
(i) if the Closing shall not have occurred
on or prior to August 31, 2003; 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; or
39
(ii) if any governmental entity of competent
jurisdiction in the United States shall have issued an order,
decree or ruling or taken any other action (which order,
decree, ruling or other action the parties hereto shall use
their respective reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final
and non-appealable.
(c) by the Board of Directors of the Company, if,
prior to the Closing, (i) the Board of Directors of the Company shall have
entered into or shall have publicly announced its intention to enter into an
agreement or an agreement in principle with respect to any Acquisition Proposal
that the Board of Directors determines, in good faith after consultation with
its financial advisors, is a Superior Proposal; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(c) shall not be
available (A) if the Company has breached its obligations under Section 4.5, (B)
if, prior to, concurrently with or immediately after any purported termination
pursuant to this Section 8.1(c), the Company shall not have paid any fee that
may have been required to be paid pursuant to Section 8.2, or (C) if the Company
has not provided Buyer with three (3) business days prior written notice of its
intention to so terminate this Agreement; (ii) any representation or warranty
made by Buyer in this Agreement shall not have been true and correct in all
material respects when made, or Buyer shall have failed to observe or perform in
any material respect any of its material obligations under this Agreement,
provided, that prior to exercising such right of termination, the Company shall
give prompt written notice to Buyer of such misrepresentation or breach of
warranty or failure to observe or perform; provided, further, that the Company
shall not have such right of termination if the condition resulting in such
misrepresentation or breach of warranty or failure to observe or perform is
cured not later than ten (10) business days following delivery of such notice;
or (iii) Buyer shall have made any amendments to the Schedules delivered
pursuant to Section 3 of this Agreement other than amendments that are, in the
reasonable judgment of the Company, positive or in the aggregate, immaterial;
(d) by Buyer, if, prior to the Closing, (i) the Board
of Directors of the Company (A) shall have withdrawn, or modified or changed in
a manner adverse to Buyer its approval or recommendation of the Transactions or
(B) shall have recommended an Acquisition Proposal or shall have executed, or
shall have announced its intention to enter into, an agreement in principle or
definitive agreement relating to an Acquisition Proposal with a person or entity
other than Buyer or its affiliates (or the Board of Directors of the Company
resolves to do any of the foregoing); (ii) any person or group (as defined in
Section 13(d)(3) of the Exchange Act) (other than Buyer or any of its
affiliates) shall have become, after the date of this Agreement, the beneficial
owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of the outstanding shares of Common Stock; (iii) the Company shall have
made any amendments to the Schedules delivered pursuant to Section 2 of this
Agreement other than amendments that are, in the reasonable judgement of Buyer,
positive or in the aggregate, immaterial, or (iv) any representation or warranty
made by the Company in this Agreement shall not have been true and correct in
all material respects when made and shall have resulted in, or is reasonably
likely to result in, a Material Adverse Effect, or the Company shall have failed
40
to observe or perform in any material respect any of its material obligations
under this Agreement; provided, that prior to exercising such right of
termination, Buyer shall give prompt written notice to the Company of such
misrepresentation or breach of warranty or failure to observe or perform;
provided, further, that Buyer shall not have such right of termination if the
condition resulting in such misrepresentation or breach of warranty or failure
to observe or perform is cured not later than ten (10) business days following
delivery of such notice.
8.2. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 8.1, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall forthwith
terminate, and there shall be no further liability or obligations on the part of
Buyer or the Company or their respective directors, officers, employees,
representatives, agents, advisors or stockholders, except that the agreements
contained in Sections 4.7, 5.6 and Section 11 shall survive the termination
hereof; provided, however, that if this Agreement is terminated (a) pursuant to
Section 8.1(c)(i) or 8.1(d), immediately following such termination, the Company
shall pay to Buyer a termination fee of $750,000, and (b) pursuant to Section
8.1(b)(i), 8.1 (c)(i) or 8.1(d) and if at any time within the twelve-month
period following such termination, the Board of Directors of the Company accepts
an Acquisition Proposal or the Company otherwise enters into a transaction
contemplated by the definition of the term "Acquisition Proposal," the Company
shall, promptly upon accepting such Acquisition Proposal or entering into such
transaction, pay to Buyer a termination fee (in addition to any fee payable
pursuant to clause (a) of this Section 8.2) of $2,250,000. Nothing contained in
this Section 8.2 shall relieve any party from liability for fraud or for willful
breach of this Agreement.
Section 9 SURVIVAL.
--------------------------
9.1. Survival of Representations, Warranties Etc. Each of the
representations, warranties, agreements, covenants and obligations herein or in
any Schedule, Exhibit, certificate or financial statement delivered by any party
to the other party incident to the transactions contemplated hereby are
material, shall be deemed to have been relied upon by the other party and shall
survive the Closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto; provided, however, that
such representations and warranties, shall expire on the same dates as and to
the extent that the rights to indemnification with respect thereto under Section
10 shall expire.
Section 10 INDEMNIFICATION.
---------------------------
10.1. Indemnification by the Company.
(a) The Company agrees subsequent to the Closing to
indemnify and hold the Buyer and its subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually a
"Buyer Indemnified Party" and collectively the "Buyer Indemnified Parties")
harmless from and against any damages, liabilities, losses, taxes, fines,
penalties, costs, and expenses (including, without limitation,
41
reasonable fees of counsel) of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in
investigation, defense or settlement of the foregoing) which may be sustained or
suffered by any of them arising out of or based upon (i) any breach of any
representation, warranty or covenant of the Company under this Agreement or in
any certificate, Schedule or Exhibit delivered pursuant hereto, or by reason of
any claim, action or proceeding asserted or instituted growing out of any matter
or thing constituting a breach of such representations, warranties or covenants,
(ii) the Assumed Liabilities, (iii) the operation of the Fiber Ring Assets
following the Closing (if not caused solely by the action or inaction of Buyer
or its affiliates (other than the Company)), (iv) any untrue or alleged untrue
statement of a material fact contained in the Proxy Statement or any other
report filed by the Company with the SEC in connection with consummating the
Transactions or any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading except to the extent
that such untrue or alleged untrue statement or omission or alleged omission was
made in reliance on, and in conformity with, the Buyer Filing Information, or
(v) any transfer taxes related to the sale and issuance of the Shares to Buyer
or the sale and transfer of the Fiber Ring Assets to the Company.
(b) Buyer hereby acknowledges and agrees that (except
in the case of fraud or willful breach of covenant, in which case Buyer reserves
any and all rights and remedies available to it) its sole and exclusive remedy
with respect to any and all claims relating to the subject matter of this
Agreement and the Transactions shall be pursuant to the indemnification
provisions set forth in this Section 10 and specific performance as contemplated
by Section 11.13.
10.2. Limitations on Indemnification by the Company.
Notwithstanding the foregoing, the right of Buyer Indemnified Parties to
indemnification under Section 10.1 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to
Section 10.1 above to any Buyer Indemnified Party, unless the total of all
claims for indemnification pursuant to Section 10.1 shall exceed $150,000 in the
aggregate, whereupon the full amount of such claims shall be recoverable in
accordance with the terms hereof, provided, however that in no event shall the
Company's liability under Section 10.1 exceed $16,000,000; and
(b) No indemnification shall be payable to a Buyer
Indemnified Party with respect to claims asserted pursuant to Section 10.1 after
the first anniversary of the Closing Date (the "Indemnification Cut-Off Date"),
other than claims asserted (i) pursuant to Sections 10.1(a)(ii), (a)(iii),
(a)(iv) and (a)(v) which may be asserted at any time prior to the expiration of
the statute of limitations, (ii) pursuant to Sections 2.5, 2.8, 2.19, 2.20, 2.21
and 2.24, which may be asserted at any time prior to six months after the
expiration of the applicable statute of limitations, and (iii) with regard to
the Assumed Liabilities or pursuant to Sections 2.2, 2.4(b), 2.4(c) and 2.4(d),
which may be asserted at any time.
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10.3. Indemnification by Buyer.
(a) Buyer agrees subsequent to the Closing to
indemnify and hold the Company and its Subsidiaries and affiliates and persons
serving as officers, directors, partners or employees thereof (individually, a
"Company Indemnified Party" and collectively, the "Company Indemnified Parties")
harmless from and against any damages, liabilities, losses, taxes, fines,
penalties, costs and expenses (including, without limitation, reasonable fees of
counsel) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) which may be sustained or suffered by any of them
arising out of or based upon (i) any breach of any representation, warranty or
covenant made by Buyer in this Agreement or in any certificate delivered by
Buyer hereunder, or by reason of any claim, action or proceeding asserted or
instituted growing out of any matter or thing constituting a breach of such
representations, warranties or covenants, (ii) any claim made by or with respect
to any employee of Buyer who is identified as a Transferred Employee who resigns
or is or was terminated by Buyer prior to the Closing Date or is on a leave of
absence from Buyer and does not return to active service, (iii) any claim made
by any employee of Buyer who is identified as a Transferred Employee or any
former employee of Buyer for severance pay or other post-termination benefits by
reason of the transactions contemplated by this Agreement, (iv) any Excluded
Liabilities, or (v) any untrue or alleged untrue statement of a material fact
contained in the Proxy Statement or any other report filed by the Company with
the SEC in connection with consummating the Transactions or any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading to the extent, but only to the extent that such untrue or
alleged untrue statement or omission or alleged omission was made in reliance
on, and in conformity with, the Buyer Filing Information.
(b) The Company hereby acknowledges and agrees that
(except in the case of fraud or willful breach of any covenant, in which case
the Company reserves any and all rights and remedies available to it) its sole
and exclusive remedy with respect to any and all claims relating to the subject
matter of this Agreement and the Transactions shall be pursuant to the
indemnification provisions set forth in this Section 10.
10.4. Limitation on Indemnification by Buyer. Notwithstanding
the foregoing, the right of the Company Indemnified Parties to indemnification
under Section 10.3 shall be subject to the following provisions:
(a) No indemnification pursuant to Section 10.3(a)(i)
shall be payable to any Company Indemnified Parties, unless the total of all
claims for indemnification pursuant to Section 10.3(a)(i) shall exceed $150,000
in the aggregate, whereupon the full amount of such claims shall be recoverable
in accordance with the terms hereof, provided, however that in no event shall
Buyer's liability under Section 10.3 exceed $4,000,000; and
43
(b) No indemnification shall be payable to the
Company Indemnified Party with respect to claims asserted pursuant to Section
10.3 above after the Indemnification Cut-Off Date other than claims described in
Section 10.3(a)(ii), (a)(iii) and (a)(v) which may be asserted at any time prior
to the expiration of the statute of limitations, and other than claims pursuant
to Section 3.4 and claims asserted regarding the Excluded Liabilities which may
be asserted at any time.
10.5. Notice; Defense of Claims. An indemnified party may make
claims for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within 20 days after
receipt of notice thereof, it shall be deemed to have accepted and agreed to the
claim, which shall become immediately due and payable. The indemnifying party
shall be entitled to direct the defense against a third party claim or liability
with counsel selected by it (subject to the consent of the indemnified party,
which consent shall not be unreasonably withheld) as long as the indemnifying
party is conducting a good faith and diligent defense. The indemnified party
shall at all times have the right to fully participate in the defense of a third
party claim or liability at its own expense directly or through counsel;
provided, however, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and the indemnified party
is advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
44
Section 11 MISCELLANEOUS.
-------------------------
11.1. Knowledge. As used in this Agreement, the term
"KNOWLEDGE OF THE COMPANY" mean the actual or constructive knowledge or
awareness of any executive officer of the Company.
11.2. Fees and Expenses. Except as set forth in Section 8.2,
each of the parties will bear its own expenses in connection with the
negotiation of this Agreement, the Transaction Documents and the consummation of
the transactions contemplated hereunder and thereunder.
11.3. Governing Law. This Agreement shall be construed under
and governed by the internal laws of the state of Delaware without regard to its
conflict of laws provisions.
11.4. Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be in writing and shall be
deemed to have been given if delivered or sent by facsimile transmission, upon
receipt, if by hand delivery, upon receipt, if sent by nationally recognized
overnight courier service, one day after deposit with such, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
TO BUYER: CityNet Telecommunications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
TO COMPANY: Universal Access Global Holdings Inc.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Ltd.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
11.5. Further Assurances. The parties hereto from time to time
after the Closing at the request of another party and without further
consideration shall execute and deliver further instruments of transfer and
assignment and take such other action as the requesting party may reasonably
require to more effectively transfer and assign to, and vest in, Buyer the
Shares and all rights thereto, and to fully implement the provisions of this
Agreement and to consummate the Transactions.
11.6. Entire Agreement. This Agreement, including the
Schedules and Exhibits referred to herein and the other writings specifically
identified herein or contemplated hereby including, without limitation, the
Company SEC Reports and Draft Form 10-K, is complete, reflects the entire
agreement of the parties with respect to its subject matter, and supersedes all
previous written or oral negotiations, commitments and writings. No promises,
representations, understandings, warranties and agreements have been made by any
of the parties hereto except as referred to herein or in such Schedules and
Exhibits or in such other writings; and all inducements to the making of this
Agreement relied upon by either party hereto have been expressed herein or in
such Schedules or Exhibits or in such other writings.
11.7. Assignability, Binding Effect. This Agreement shall only
be assignable by Buyer to a corporation or partnership controlling, controlled
by or under common control with Buyer upon written notice to the Company. This
Agreement may not be assigned by the Company without the prior written consent
of Buyer. This Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
11.8. Captions and Gender. The captions in this Agreement are
for convenience only and shall not affect the construction or interpretation of
any term or provision hereof. The use in this Agreement of the masculine pronoun
in reference to a party hereto shall be deemed to include the feminine or
neuter, as the context may require.
11.9. Execution in Counterparts. For the convenience of the
parties and to facilitate execution, this Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
11.10. Amendments. This Agreement may not be amended or
modified, nor may compliance with any condition or covenant set forth herein be
waived, except by a writing duly and validly executed by each party hereto, or
in the case of a waiver, the party waiving compliance.
46
11.11. Publicity and Disclosures. No press releases or public
disclosure, either written or oral, of the Transactions, shall be made by a
party to this Agreement without the prior knowledge and written consent of Buyer
and the Company. Buyer and the Company agree to jointly prepare a press release
related to the Transactions, to be issued by both of them upon execution of this
Agreement.
11.12. Consent to Jurisdiction; Waiver of Jury Trial. Each of
the parties hereby agrees that any dispute among them or any claim, suit or
proceeding arising under this Agreement shall be brought before the federal or
state courts sitting in Delaware, and hereby consents to personal jurisdiction,
service of process and venue in the federal or state courts of Delaware for such
claim, suit or proceeding, or in the case of a third party claim subject to
indemnification hereunder, in the court where such claim is brought.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH OF BUYER AND THE
COMPANY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING
BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
11.13. Specific Performance. The parties agree that it would
be difficult to measure damages which might result from a breach of this
Agreement by the Company and that money damages would be an inadequate remedy
for such a breach. Accordingly, if there is a breach or proposed breach of any
provision of this Agreement by the Company, and Buyer does not elect to
terminate under Section 8, Buyer shall be entitled, in addition to any other
remedies which it may have, to an injunction or other appropriate equitable
relief to restrain such breach without having to show or prove actual damage to
Buyer.
47
IN WITNESS WHEREOF the parties hereto have caused this Stock Purchase Agreement
to be executed as of the date set forth above by their duly authorized
representatives.
CITYNET TELECOMMUNICATIONS, INC.
By: _______________________________
Name:
Title:
UNIVERSAL ACCESS GLOBAL HOLDINGS INC.
By: _______________________________
Name:
Title: