AGREEMENT AND PLAN OF MERGER

 

Exhibit 10.1

 

 

AGREEMENT AND PLAN OF MERGER

dated as of September 13, 2008

among

RENAISSANCE ACQUISITION CORP.,

FCI MERGER SUB I, INC.,

FCI MERGER SUB II, LLC,

FIRST COMMUNICATIONS, INC.

and

THE STOCKHOLDERS’ REPRESENTATIVE NAMED HEREIN

 

 

 

 

 

 

TABLE OF CONTENTS

 

			Page

 

I.	DEFINITIONS		2
II.	THE MERGERS		14
	2.1.	Effective Times of the Mergers	14
	2.2.	Closing	15
	2.3.	Effects of the Mergers	15
	2.4	Governing Documents	15
	2.5	Directors and Officers	16
III.	CONVERSION OF SECURITIES		16
	3.1	Effect on Capital Stock; Merger Consideration	16
	3.2	Fractional Shares	19
	3.3	Appraisal Rights	19
	3.4	Payment of Merger Consideration; Surrender of Certificates	20
	3.5	Escrow	23
IV.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY		24
	4.1	Organization, Qualification, and Corporate Power	24
	4.2	Subsidiaries	24
	4.3	Capitalization	24
	4.4	Validity and Execution; Stockholder Approval	25
	4.5	Real and Tangible Personal Properties	25
	4.6	No Litigation	26
	4.7	Noncontravention	26
	4.8	Tax Matters	27
	4.9	Financial Statements	28
	4.10	Undisclosed Liabilities	29
	4.11	Material Contracts	29
	4.12	Intellectual Property	29
	4.13	Insurance	30
	4.14	Employees	31
	4.15	Employee Benefits	31
	4.16	Environmental Matters	33

 

 

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TABLE OF CONTENTS

(continued)

 

			Page
	4.17	Compliance with Laws	34
	4.18	Accounts Receivable	34
	4.19	No Brokers	34
	4.20	No Material Changes	34
	4.21	Permits and Licenses	36
	4.22	Warranties	36
	4.23	Major Suppliers and Customers	36
	4.24	Related Party Transactions	37
	4.25	Prohibited Payments	37
	4.26	Books and Records	38
	4.27	Proxy Statement	38
	4.28	Disclaimer	38
V.	REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER SUBS		39
	5.1	Organization of Parent and the Merger Subs	39
	5.2	Validity and Execution	39
	5.3	Noncontravention	39
	5.4	No Litigation	40
	5.5	No Brokers	40
	5.6	Disclosure	40
	5.7	SEC Filings	40
	5.8	Capitalization	41
	5.9	Undisclosed Liabilities	41
	5.10	Material Contracts	42
	5.11	Intellectual Property	42
	5.12	Compliance with Laws	42
	5.13	Related Party Transactions	42
	5.14	Tax Matters	42
	5.15	Business Activities	43
	5.16	Title to Property	43

 

 

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TABLE OF CONTENTS

(continued)

 

			Page
	5.17	Indebtedness	43
	5.18	Trust Funds	43
	5.19	No Material Changes	43
	5.20	Board Approval	44
VI.	COVENANTS		44
	6.1	Mutual Joint Covenants	44
	6.2	Company’s Covenants	51
	6.3	Parent Covenants	57
	6.4	Proxies and Dissent Rights	59
	6.5	Stock Symbol	59
	6.6	Further Assurances	59
VII.	CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE MERGER		60
	7.1	Parent Stockholder Approval	60
	7.2	Parent Common Stock	60
	7.3	Effectiveness of Registration Statement	60
	7.4	NASDAQ Listing Approval	60
	7.5	No Litigation	60
	7.6	Hart-Scott-Rodino Act; Governmental Approvals	60
	7.7	Board Composition and Parent Officers	61
	7.8	Frustration of Closing Conditions	61
VIII.	ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND THE MERGER SUB		61
	8.1	Representations True	61
	8.2	Consents Obtained	61
	8.3	Performance of Obligations	61
	8.4	Dissenting Stockholders	62
	8.5	Receipt of Documents by Parent	62
	8.6	No Material Adverse Effect	62
	8.7	Credit Agreement Amendment	62
	8.8	GCI Merger	62

 

 

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TABLE OF CONTENTS

(continued)

 

			Page
IX.	CONDITIONS PRECEDENT TO OBLIGATIONS OF COMPANY		62
	9.1	Representations True	62
	9.2	Performance of Obligations	62
	9.3	Consents Obtained	63
	9.4	Merger Consideration	63
	9.5	Parent Stockholder Consent	63
	9.6	Receipt of Documents	63
	9.7	SEC Compliance	63
	9.8	No Material Adverse Effect	63
X.	SURVIVAL OF REPRESENTATIONS AND WARRANTIES		63
	10.1	Nonsurvival of Representations and Warranties	63
XI.	TERMINATION		63
	11.1	Termination	63
	11.2	Effect of Termination	64
XII.	MISCELLANEOUS		65
	12.1	Applicable Law	65
	12.2	Construction; Entire Agreement; Amendment	65
	12.3	Assignment	65
	12.4	Binding Effect	65
	12.5	Interpretation	65
	12.6	Waiver	66
	12.7	Counterparts	66
	12.8	Severability	66
	12.9	Notices	66
	12.10	Consent to Jurisdiction	67
	12.11	WAIVER OF JURY TRIAL	68
	12.12	Specific Performance	68
	12.13	Expenses	68
	12.14	Stockholders’ Representative	68

 

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement” ) is entered into as of this 13th day of September, 2008 by and among RENAISSANCE ACQUISITION CORP., a Delaware corporation ( “Parent” ), FCI MERGER SUB I, INC., a Delaware corporation and wholly owned subsidiary of Parent ( “Merger Sub I” ), FCI MERGER SUB II, LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (“ Merger Sub II ”, and, together with the Merger Sub I, collectively, the “ Merger Subs ”), FIRST COMMUNICATIONS, INC., a Delaware corporation (the “Company” ) and The Gores Group LLC, solely in its capacity as the exclusive representative of the stockholders of the Company (“ Stockholders’ Representative ”).

RECITALS:

A.      The parties hereto desire to effect a business combination of Parent and the Company by means of (i) the merger (the “ First Merger ”) of Merger Sub I with and into the Company, with the Company continuing as the surviving corporation of the First Merger (the “ First Merger Surviving Corporation ”), and (ii) immediately following the effectiveness of the First Merger, and as part of the same plan of merger and reorganization, the merger (the “ Second Merger ” and, together with the First Merger, collectively, the “ Mergers ”) of the First Merger Surviving Corporation with and into Merger Sub II, with Merger Sub II continuing as the surviving entity of the Second Merger (the “ Second Merger Surviving Entity ”).

 

B.      The boards of directors of each of the parties hereto (or in the case of Merger Sub II, Parent, as its sole managing member) have determined that this Agreement and the Mergers and such other transactions contemplated hereby (collectively, the “ Transactions ”) are fair to and in the best interests of their respective stockholders or members, as applicable, and have declared it advisable and approved this Agreement and the Transactions on the terms and conditions set forth in this Agreement.

 

C.      The holders of a majority of the outstanding shares of the Company’s Series A Preferred Stock have approved this Agreement and the Transactions on the terms and conditions set forth in this Agreement.  The holders of T1 Warrants have delivered irrevocable notices of exercise of their warrant contingent upon the consummation of the Transactions and all the holders of the T2 Warrants and certain of the holders of the T3 Warrants have entered into an exchange agreement for the exercise of their warrants in the form attached hereto as Exhibit A (the “ Exchange Agreement ”).

D.      Simultaneously with the execution and delivery of this Agreement, the Company shall obtain a voting agreement (the “ Voting Agreement ”) in the form attached hereto as Exhibit B executed by the holders of at least 75% of Company Common Stock whereby each holder irrevocably agrees to vote all of its voting shares of Company Common Stock (as defined herein) held by it in favor of delisting the Company Common Stock from the Alternative Investment Market on the London Stock Exchange (the “ AIM ”).

 

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E.      Immediately following and within forty-eight (48) hours of the execution and delivery of this Agreement, the Company shall obtain the affirmative written consent of the holders of at least a majority of Company Common Stock (as defined herein) to approve this Agreement and the First Merger.

F.      The Company, First Global Telecom, Inc., GCI Globalcom Holdings, Inc. (“ GCI ”) and M. Gavin McCarty, as stockholders’ representative, have entered into an Agreement and Plan of Merger, dated July 18, 2008 (the “ GCI Merger Agreement ”), pursuant to which the Company has agreed to acquire all of the outstanding capital stock of GCI (the “ GCI Acquisition ”).

G.      The Company shall effect the consummation of the GCI Acquisition prior to the Mergers.

H.      For United States federal income tax purposes, the parties hereto intend that the Mergers qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the regulations promulgated thereunder.

NOW, THEREFORE, in exchange for the mutual promises contained herein, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

I.      DEFINITIONS

“Acquired Companies” means the Company and the Company Subsidiaries.

“ Acquisition ” means the purchase by the Company or following the Second Merger, the Second Merger Surviving Entity, outside of the ordinary course of business, of another company or any of its assets, securities or business by means of a merger, consolidation, joint venture, exchange offer or purchase or sale of stock or assets.

“ Additional Warrant Stock ” shall have the meaning set forth in Section 3.1(c)(ii)(2).

“Affiliate” means, with respect to any specified Person: (1) any other Person which, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such specified Person; and (2) any immediate family member of the specified Person.  For these purposes, an immediate family member shall mean a natural Person’s spouse, parents or children.

“Aggregate Consideration” means the total cash amount and other consideration received (which shall be deemed to include amounts paid into escrow) by the target and/or its shareholders upon the consummation of an Acquisition (including payments made in installments), inclusive of cash, securities, notes, consulting agreements and agreements not to compete, plus the total value of liabilities assumed and to the extent such Aggregate Consideration is paid in stock, then the Fair Market Value of such stock.

 

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“ Agreement” has the meaning set forth in the preamble.

“ AIM ” has the meaning set forth in the recitals.

“Businesses” means the business and operations carried out by the Company and the Company Subsidiaries.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to remain closed.

“Cash Merger Consideration” shall have the meaning set forth in Section 3.1(a)(ii).  

“Certificates” shall have the meaning set forth in Section 3.4(b).  

“Closing” shall have the meaning set forth in Section 2.2.

“Closing Date” shall have the meaning set forth in Section 2.2.

“Closing Form 8-K” shall have the meaning set forth in Section 6.1(g)(ii).  

“Closing Press Release” shall have the meaning set forth in Section 6.1(g)(ii).  

“ Closing Price ” for each day shall be the last reported sales price regular way on that day or, in case no such reported sale takes place on such day, the reported closing bid price regular way, in either case as reported on a national securities exchange or other public exchange on which the stock is admitted to trading or listed, or if not so listed or admitted to trading, the last quoted bid price or, if not quoted, the average of the high bid and the low asked prices in the over-the-counter market or such other system then in use.

“Closing Stock Payment” shall have the meaning set forth in Section 3.1(a)(iii)(1)(x).

“Code” has the meaning set forth in the recitals.

“Common Stock Merger Consideration” shall have the meaning set forth in Section 3.1(a)(iii)(1)(2).

“Company” has the meaning set forth in the preamble.

“ Company Audit ” shall have the meaning set forth in Section 4.9.

“Company Common Stock” shall have the meaning set forth in Section 3.1.

“ Company Financial Statements ” shall have the meaning set forth in Section 4.9.

“Company Group” shall have the meaning set forth in Section 6.1(i)(ii).

“Company Preferred Stock” shall have the meaning set forth in Section 3.1.

 

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“Company Stock” shall have the meaning set forth in Section 3.1.

“Company Subsidiaries” means all Subsidiaries of the Company.

“Company’s Knowledge” means the actual knowledge of Ray Hexamer, Joe Morris, Jessica Newman, Rick Buyens, Ryan Wiegner and Frank Lomanno, in each case, after a reasonable investigation and inquiry, only with respect to the period of time each such person was employed by the Company.

“ Company Third Party Acquisition ” means (I) any sale of 15% or more of the consolidated assets of the Company and its subsidiaries, or 15% or more of the equity or voting securities of the Company or any subsidiary whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company (each, a “ Material Subsidiary ”), (II) any tender offer or exchange offer that, if consummated, would result in a third party beneficially owning 15% or more of the equity or voting securities of the Company or of any Material Subsidiary, (III) a merger, consolidation, business combination, share exchange, sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any Material Subsidiary, in each such case in this clause (III) that would result in either (x) a third party beneficially owning 15% or more of any class of equity or voting securities of the Company or any Material Subsidiary, or 15% or more of the consolidated assets of the Company or (y) the stockholders of the Company receiving securities traded in the U.S. on any nationally-recognized exchange or over-the-counter market; “Company Third Party Acquisition” shall not include the GCI Acquisition or any other transaction pursuant to which the Company or a Material Subsidiary is the acquiring party, provided that, except in the case of the GCI Acquisition, such purchase shall not materially impede the consummation of the Acquisition.

“Contract” means with respect to any Person, any agreement, indenture, debt instrument, contract, guarantee, loan, note, mortgage, license, lease, purchase order, delivery order, commitment or other arrangement, understanding or undertaking, whether written or oral, including all amendments, modifications and options thereunder or relating thereto, to which such Person is a party, by which it is bound, or to which any of its assets or properties is subject.

“Credit Agreement” means that certain that certain Amended and Restated Loan and Security Agreement, dated as of March 7, 2008 among the Company and JPMorgan Chase Bank, National Association.

“Debt” means, as at any date of determination thereof (without duplication), all obligations or liabilities (other than intercompany obligations between the Acquired Companies) of the Acquired Companies in respect of: (a) any borrowed money or funded indebtedness or issued in substitution for or exchange for borrowed money or funded indebtedness (including obligations with respect to principal, accrued interest, and any applicable prepayment charges or premiums) including, without limitation, the aggregate principal balance of, and all accrued and unpaid interest on, the loans outstanding under the Credit Agreement as of the Closing Date, together with all other indebtedness, fees, liabilities, obligations, covenants and duties of the

 

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Company of every kind, nature and description under or in respect of the Credit Agreement; (b) any indebtedness evidenced by any note, bond, debenture or other debt security; (c) capital lease obligations; (d) any indebtedness guaranteed by the Acquired Companies (excluding intercompany debt and letters of credit and guarantees by one Acquired Company of performance obligations of another Acquired Company); (e) any obligations with respect to any interest rate hedging or swap agreements; (f) any obligations for the deferred purchase price of property or services (including, without limitation, deferred purchase price liabilities from past acquisitions); (g) any commitment by which an Acquired Company assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit); (h) any liabilities of an Acquired Company under conditional sale or other title retention agreements; (i) any liabilities of an Acquired Company under or in connection with letters of credit (whether or not drawn), bankers acceptances or similar items; (j) any liabilities with respect to vendor advances or any other advances made to an Acquired Company; (k) any indebtedness or liabilities secured by a Lien on an Acquired Company’s assets; (1) any amounts owed by an Acquired Company to any Person or entity under any noncompetition, consulting or deferred compensation arrangements; and (m) any “success fees” or bonuses, change in control or severance payments arising from or otherwise triggered by the Transactions, and any amounts payable to offset any excise Taxes imposed under Section 4999 of the Code and any related income Taxes.

“Delaware LLC Act” shall have the meaning set forth in Section 2.3(b).

“DGCL” shall have the meaning set forth in Section 2.3(b).

“Disclosing Party” shall have the meaning set forth in Section 6.1(c).  

“ Dissenting Shares ” shall have the meaning set forth in Section 3.3.

“ EBITDA ” means for the applicable fiscal quarter, using results taken from the unaudited reviewed financial statements of the Second Merger Surviving Entity, the following calculation:  income before provision for income taxes, plus interest expense, less interest income, plus depreciation and amortization, plus amortization of intangible assets, plus any expenses arising solely from the First Merger and the Second Merger charged to income in such fiscal quarter and any subsequent acquisition or transaction costs expensed in connection with FASB Rule No. 141R charged to income in such fiscal quarter.

“EBITDA Condition” shall have the meaning set forth in Section 3.1(a)(iii)(2).

“EBITDA Escrow Release Date” shall have the meaning set forth in Section 3.5.

“EBITDA Stock” shall have the meaning set forth in Section 3.1(a)(iii)(1)(y).

“ EBITDA Target” shall mean $50 million plus the sum of any Target Increases.

 

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“Environmental Laws” shall mean all Laws, including all common law, orders, judgments, and all other provisions having the force or effect of law, concerning occupational health or safety, pollution or the protection of the environment, including any laws governing the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of, or exposure to, any Hazardous Materials.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Affiliate ” means any corporation or trade or business (whether or not incorporated) which is treated with any of the Acquired Companies as a single employer within the meaning of Section 414 of the Code.

“Escrow Account” shall have the meaning set forth in Section 3.5.

“Escrow Agent” shall have the meaning set forth in Section 3.5.

“Escrow Agreement” shall have the meaning set forth in Section 3.5.

“Escrowed Stock” shall have the meaning set forth in Section 3.5.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Agent” shall have the meaning set forth in Section 3.4(a).  

“ Exchange Agreement ” has the meaning set forth in the recitals.

“Exchange Fund” shall have the meaning set forth in Section 3.4(a).  

“Exclusivity Period” shall have the meaning set forth in Section 6.1(i).

“ Fair Market Value " means at any date, the average of the daily Closing Prices (as defined below) for such share of stock for the five (5) consecutive Trading Days immediately preceding the date of the closing of the Acquisition or if the stock is not publicly held or so listed or traded, the fair market value per share shall be as determined in good faith by the board of directors of the Second Merger Surviving Entity, whose determination shall be conclusive absent manifest abuse or error, and described in a resolution of the board of directors of the Second Merger Surviving Entity certified by the secretary of the Second Merger Surviving Entity.

“FCC” means the Federal Communications Commission.

“FCC Consents” means the applications, notices, reports, registrations and other filings and/or consents required to be filed with or obtained from the FCC in connection with the consummation of the Transactions.

“ First Merger ” shall have the meaning set forth in the recitals.

 

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“ First Merger Certificate of Merger ” shall have the meaning set forth in Section 2.1(a).

“ First Merger Effective Time ” shall have the meaning set forth in Section 2.1(a).

“ First Merger Surviving Corporation ” shall have the meaning set forth in the recitals.

“ First Merger Surviving Corporation Common Stock ” has the meaning set forth in Section 3.1(a)(i).

“GAAP” means generally accepted accounting principles as applied in the United States of America.

“ GCI ” has the meaning set forth in the recitals.

“GCI Acquisition” shall have the meaning set forth in the recitals.  

“GCI Merger Agreement” shall have the meaning set forth in the recitals.  

“GCI Subsidiaries” means GCI’s two wholly-owned subsidiaries, Globalcom, Inc., an Illinois corporation, and Globalcom Equipment, Inc., a Delaware corporation.

“Governmental Authority” means any federal, state, local or foreign government or any political subdivision thereof or any department, commission, board, bureau, agency, court, panel or other instrumentality of any kind of any of the foregoing.

“Governmental Prohibition” shall have the meaning set forth in Section 7.5.

“Hazardous Material” means any chemical, substance, waste, material, pollutant, or contaminant, the exposure to, presence of, release of, use of, or storage, disposal, treatment or transportation of which may give rise to liability under, is regulated under, or is defined by any Law, including any Environmental Law, including petroleum and petroleum products.

“Intellectual Property” means any of the following in any jurisdiction throughout the world: (a) patents, patent applications, patent disclosures and inventions, including any provisionals, continuations, divisionals, continuations-in-part, renewals and reissues for any of the foregoing; (b) Internet domain names, trademarks, service marks, trade dress, trade names, logos, slogans and corporate names and registrations and applications for registration thereof together with all of the goodwill associated therewith; (c) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof; (d) mask works and registrations and applications for registration thereof; (e) software, data, data bases and documentation thereof; (f) trade secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information); and (g) copies and tangible embodiments thereof (in whatever form or medium).

 

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“Interim Company Financial Statements” shall have the meaning set forth in Section 4.9.

“Law” means all applicable laws of any country or any political subdivision thereof, including, without limitation, all foreign, federal, state and local statutes, regulations, ordinances, codes, orders or decrees or any other laws, common law theories or reported decisions of any court thereof.

“Leased Real Property” shall have the meaning set forth in Section 4.5(a).

“Leases” shall have the meaning set forth in Section 4.5(a).

“Lien” means any charge, claim, right of first refusal, restriction on transfer, mortgage, security deed, deed to secure debt, deed of trust, title defect, mechanic’s lien, judgment lien or other similar lien (except for any lien for Taxes not yet due and payable), pledge, assessment, security interest or other encumbrance.

“Material Adverse Effect” means (x) as to any Person, a material adverse effect on the business, assets, results of operations or financial condition of such Person, and (y) as to any Acquired Company, a material adverse effect on the business, assets, results of operations or financial condition of the Acquired Companies taken as a whole; provided, however, that none of the following shall be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or would be, a “Material Adverse Effect” with respect to any Person (including any Acquired Company): any facts, changes, developments, events, occurrences, actions, omissions or effects (i) generally affecting (A) the economy, or financial or capital markets, in the United States or elsewhere in the world, to the extent that they do not disproportionately affect such Person in relation to other companies in the industry in which such Person primarily operates or (B) the industry in which such Person operates to the extent that they do not disproportionately affect such Person in relation to other companies in the industry in which such Person primarily operates, or (ii) arising out of, resulting from or attributable to (1) changes (after the date of this Agreement) in Law or in generally accepted accounting principles or in accounting standards or (2) any decline in the market price, or change in trading volume, of the capital stock of such Person or any failure to meet publicly announced revenue or earnings projections or internal projections (it being understood that, without limiting the applicability of the provisions contained in clause (i) or (ii) above, the cause or causes of any such decline, change or failure may be deemed to constitute, in and of itself and themselves, a Material Adverse Effect and may be taken into consideration when determining whether a Material Adverse Effect has occurred).

“Material Contract” means the agreements of the following types to which any Person is a party (which is effective and binding on such Person) or by which any material assets of any Person is bound or are subject:

 

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(a)       Contracts or group of related Contracts which involve commitments to make capital expenditures or which provide for the purchase of assets, goods or services by such Person from any one Person under which the undelivered balance of such goods or services has a purchase price in excess of $300,000 in any consecutive twelve (12) month period after the date hereof or which are not terminable by such Person without a penalty;

(b)       Contracts or group of related Contracts which provide for the sale of goods or services by such Person and under which the undelivered balance of such goods or services has a sale price in excess of $150,000 in any consecutive twelve (12) month period after the date hereof or which are not terminable by such Person without penalty;

(c)       joint venture agreements, partnership agreements, and limited liability company agreements and each similar type of Contract (however named) involving a sharing of profits, losses, costs or liabilities with any other Person;

(d)       Contracts that involve the material acquisition or disposition, directly or indirectly, by merger, consolidation or acquisition of stock or assets, between such Person and any another Person;

(e)       employment, non-competition, non-solicitation and profit-sharing plan agreements with any officer or director of such Person;

(f)       Contracts which presently limit in any material respect the freedom of any Acquired Company to engage in any business anywhere in the world or compete with any Person;

(g)       Contracts pursuant to which such Person is a lessor or a lessee of any personal or real property (including the Leases), or holds or operates any tangible personal property owned by another Person, except for any such Leases under which the aggregate annual rent or lease payments do not exceed $50,000 or which are terminable by such Person without penalty;

(h)       Contracts not included in subsection (e) providing for severance (including contractual notice of termination or pay in lieu thereof), retention, deferred compensation, change in control or other similar payments;

(i)       Contracts with any stockholder, officer or director of such Person, or any Affiliate of any of the foregoing, or in the case of any individual, any immediate family member of any of the foregoing;

(j)       Contracts with material dealers, distributors or sales representatives;

 

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(k)       Contracts under which such Person has made material advances or loans to any other Person, other than expense re-imbursement done in the Ordinary Course of Business;

(l)       Contracts regarding interconnection and carrier agreements with telecommunication and data service providers;

(m)       Contracts relating to material Debt; or

(n)       any settlement or similar agreements relating to any material litigation to which an Acquired Company was a party.

“Merger Consideration” means the Cash Merger Consideration and the Common Stock Merger Consideration.

“Mergers” shall have the meaning set forth in the recitals.

“ Merger Sub I ” has the meaning set forth in the preamble.

“ Merger Sub II ” has the meaning set forth in the preamble.

“ Merger Subs ” has the meaning set forth in the preamble.

“Most Recent Company Balance Sheet” shall have the meaning set forth in Section 4.9.

“New Warrant” shall have the meaning set forth in Section 3.1(c)(ii)(1).

“Ordinary Course of Business” means the ordinary course of business of an applicable Person consistent with past custom and practice (including with respect to quantity and frequency).

“Other Filings” shall have the meaning set forth in Section 6.1(e)(i).

“ Outside Date ” shall have the meaning set forth in Section 11.1(b).

“ Owned Intellectual Property ” shall have the meaning set forth in Section 4.12.

“Owned Real Property” shall have the meaning set forth in Section 4.5(a).

“Parent” has the meaning set forth in the preamble.

“Parent Common Stock” means the common stock, par value $0.0001 per share, of Parent.

“Parent Group” shall have the meaning set forth in Section 6.1(i)(i).

 

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“Parent Knowledge ” means the actual knowledge of Barry Florescue, Mark Seigel and Richard Bloom, in each case after a reasonable investigation and inquiry.

“Parent Preferred Stock” shall have the meaning set forth in Section 5.8(a).

“Parent SEC Documents” shall have the meaning set forth in Section 5.7.

“Parent Stock Options” shall have the meaning set forth in Section 5.8(b).

“Parent Stockholder Approval” shall have the meaning set forth in Section 6.1(e)(i).

“Parent Stockholders’ Meeting” shall have the meaning set forth in Section 4.27.

“ Parent Third Party Acquisition ” means: (I) any purchase of 15% or more of the consolidated assets of a third party and its subsidiaries, or 15% or more of the equity or voting securities of a third party or a Material Subsidiary (as defined in Company Third Party Acquisition definition) thereof, (II) any tender offer or exchange offer that, if consummated, would result in Parent beneficially owning 15% or more of a third party’s equity or voting securities or any Material Subsidiary thereof, (III) a merger, consolidation, business combination, share exchange, purchase of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Parent and any third party, in each such case in this clause (III) that would result in Parent beneficially owning 15% or more of any class of equity or voting securities of such third party or any Material Subsidiary thereof, or 15% or more of the consolidated assets of such third party.

“Parent Warrants” shall have the meaning set forth in Section 5.8(b).

“Permit” means a license, permit or other authorization or registration required by any Governmental Authority or applicable Law to carry out a Business, other than those licenses, permits or other authorizations or registrations the absence of which would not cause a Material Adverse Effect with respect to such Business.

“Permitted Liens” shall mean (a) liens for Taxes not yet due and payable or that are being contested in good faith through appropriate proceedings and for which adequate reserves are reflected in the Company Financial Statements in accordance with GAAP, (b) with respect to any Acquired Company asset, encumbrances, imperfections of title and title defects that will not materially interfere with the use of such asset or materially impair the value thereof, including mechanics’ liens, materialmen’s liens and other inchoate liens, provided that the obligations in respect of which such encumbrances were created are not delinquent, (c) all rights-of-way, licenses, easements, encroachments, covenants, reservations, restrictions, conditions, Leases, tenancies and other encumbrances of record that do not materially interfere with the existing use of the Businesses or materially impair the value thereof, provided that the obligations in respect of which such encumbrances are not delinquent, (d) unrecorded easements, Leases, tenancies, license agreements, covenants, rights-of-way and other encumbrances and similar restrictions on the Real Property that do not materially interfere with the existing use thereof, provided that the

 

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obligations in respect of which such encumbrances were created are not delinquent, (e) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance, old age pension programs mandated under applicable laws or other social security regulations, and (f) all zoning, building, subdivision and other statutory or regulatory conditions and restrictions relating to the use of real property.

“Person” means any individual, corporation, proprietorship, joint venture, firm, partnership, trust, limited liability company, association or other entity.

“Plans” shall have the meaning set forth in Section 4.15(a).

“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

“Proxy Statement” shall have the meaning set forth in Section 4.27.  

“Real Property” shall have the meaning set forth in Section 4.5(a).  

“Receiving Party” shall have the meaning set forth in Section 6.1(c).  

“Registration Statement” shall have the meaning set forth in Section 4.27.

“Replacement Company Financial Statements” shall have the meaning set forth in Section 6.2(e).

“ Company Audit ” shall have the meaning set forth in Section 4.9.

“Schedule Update” shall have the meaning set forth in Section 6.2(e).  

“SEC” means the U.S. Securities and Exchange Commission.

“ Second Merger ” shall have the meaning set forth in the recitals.

“ Second Merger Certificate of Merger ” shall have the meaning set forth in Section 2.1(b).

“ Second Merger Effective Time ” shall have the meaning set forth in Section 2.1(b).

“ Second Merger Surviving Entity ” shall have the meaning set forth in the recitals.

“Securities Act” means the Securities Act of 1933, as amended.

“Signing Form 8-K” shall have the meaning set forth in Section 6.1(g)(i).  

“Signing Press Release” shall have the meaning set forth in Section 6.1(g)(i).  

“State PUC” means any state or local public service or public utilities commission having regulatory authority over the Acquired Companies, in any given jurisdiction.

 

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“State PUC Consents” means the applications, notices, reports, registrations and other filings and/or consents to be filed with or obtained from any State PUC in connection with the consummation of the Transactions or the Credit Agreement.

“Straddle Period” means any taxable period that includes but does not end on the Closing Date.

“Stockholders’ Representative ” shall have the meaning set forth in the preamble.

“Subsidiary” means, with respect to any Person, any other Person of which equity securities or other ownership interests having ordinary power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned or controlled by such Person.

“Target Increase” with respect to any Acquisition is equal to 1/7 of the Aggregate Consideration paid by the Company or the Second Merger Surviving Entity, as applicable, for any Acquisition consummated between the date hereof and June 30, 2011, other than the GCI Acquisition, provided, however, for determining whether the EBITDA Condition has been satisfied for the fiscal quarter during which such Acquisition is consummated the Target Increase shall be 1/7 of such Aggregate Consideration multiplied by a fraction (A) the numerator of which shall be the number of days beginning on the date of the consummation of such Acquisition and ending on the last day of such fiscal quarter and (B) the denominator of which shall be the total number of days in such fiscal quarter.  By way of example, if the Company purchases a target company for $70 million, the Target Increase with respect to such Acquisition shall be $10 million ($70 million divided by 7).  If such Acquisition is consummated on the 30 ^th day of a 90-day fiscal quarter, the Target Increase for such quarter will be $6.7 million ($10 million multiplied by 2/3) and for all subsequent quarters will be $10 million.

“ T1 Warrant ” shall mean the warrants to purchase a total of 5,333,333 shares of the Company Common Stock at an exercise price of $0.05 per share and with an expiration date of five years from the date of issuance.

“ T2 Warrant ” shall mean the warrants to purchase a total of 8,000,000 shares of the Company Common Stock at an exercise price of $7.50 per share and with an expiration date of three years following the redemption of all the Series A Preferred Stock held by the holder of such warrant.

“ T3 Warrant ” shall mean the warrants to purchase a total of 2,000,000 shares of the Company Common Stock at an exercise price of $7.50 per share and with an expiration date of three years following the redemption of all the Series A Preferred Stock.

“Tax” means any taxes, assessments, fees and other governmental charges imposed by any Governmental Authority, including income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment,

 

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disability, workers’ compensation, 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.

“Tax Returns” means any report, return, declaration or other information required to be supplied to any Governmental Authority in connection with Taxes (including any attached schedules thereto and any amendments thereof), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

“Taxing Authority” means any domestic, foreign, federal, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising Tax regulatory authority.

“ Trading Day ” shall be any day on which the principal national securities exchange on which the stock is admitted to trading or listed is open or, if the stock is not so admitted to trading or so listed, any day except Saturday, Sunday, a legal holiday or any day on which banking institutions in the City of New York are obligated or authorized to close.

“Transactions” shall have the meaning set forth in the recitals.

“Treasury Regulations” means the regulations promulgated under the Code from time to time, as amended.

“ Trust Fund ” shall have the meaning set forth in Section 5.8.

“ Voting Agreement ” has the meaning set forth in the recitals.

“ Warrants ” shall have the meaning set forth in Section 3.1(a)(iii)(3).

“Warrant Agreement” shall have the meaning set forth in Section 3.1(a)(iii)(3).

“Warrant Condition” shall have the meaning set forth in Section 3.1(a)(iii)(3).

“Warrant Escrow Release Date” shall have the meaning set forth in Section 3.5.

“Warrant Stock” shall have the meaning set forth in Section 3.1(a)(iii).

II.      THE MERGERS

2.1.            Effective Times of the Mergers .

(a)       On the terms and subject to the conditions of this Agreement, the parties hereto shall cause the First Merger to be consummated at the Closing by the filing of a certificate of merger (the “ First Merger Certificate of Merger ”) in a form mutually acceptable to Parent and the Company with the Secretary of State of Delaware as required by, and executed in accordance with, the relevant provisions of the DGCL.  The

 

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First Merger shall become effective at the time of the filing of the First Certificate of Merger with the Secretary of State of the State of Delaware or at such time thereafter which the parties hereto shall have agreed upon as is provided in the Certificate of Merger (the “First Merger Effective Time” ).

(b)       Immediately following the First Merger Effective Time, Parent shall cause the Board of Directors of the First Merger Surviving Corporation to adopt this Agreement and approve the Second Merger (and shall adopt this Agreement and approve the Second Merger as sole shareholder of the Second Merger Surviving Entity).  Immediately following such approval, the parties hereto shall cause the Second Merger to be effected by the filing of a certificate of merger (the “ Second Merger Certificate of Merger” ) in a form that is mutually acceptable to Parent and the Company with the Secretary of State of Delaware as required by, and executed in accordance with, the relevant provisions of the Delaware LLC Act.  The Second Merger shall become effective at the time of the filing of the Second Certificate of Merger with the Secretary of State of the State of Delaware or at such time thereafter which the parties hereto shall have agreed upon as is provided in the Second Certificate of Merger (the “Second Merger Effective Time” ).

2.2.            Closing .  Upon the terms and subject to the conditions of this Agreement, the closing of the Transactions (the “Closing” ) will take place remotely via the exchange of documents and signatures on the date that is two (2) Business Days following the satisfaction or waiver of all conditions to the Closing set forth in Articles VII, VIII and IX (such date, the “ Closing Date ”).

2.3.            Effects of the Mergers .

(a)       Upon the terms and subject to the conditions of this Agreement, at the First Merger Effective Time, Merger Sub I shall be merged with and into the Company and the separate existence of Merger Sub I shall cease and the Company shall continue as the First Merger Surviving Corporation  Upon the terms and subject to the conditions of this Agreement, at the Second Merger Effective Time and as part of the same plan of merger and reorganization, the First Merger Surviving Corporation shall be merged with an into Merger Sub II, the separate corporate existence of the First Merger Surviving Corporation shall cease and Merger Sub II shall continue as the Second Merger Surviving Entity under a name that shall be mutually agreeable to Parent and the Company.

(b)       The First Merger shall have the effects set forth in this Agreement, the First Merger Certificate of Merger and the applicable provisions of the Delaware General Corporation Law (“ DGCL ”).  The Second Merger shall have the effects set forth in this Agreement, the Second Merger Certificate of Merger and the applicable provisions of the Delaware Limited Liability Company Act (“ Delaware LLC Act ”).

2.4.            Governing Documents .  The certificate of incorporation of the Company as in effect immediately prior to the First Merger Effective Time shall be the certificate of incorporation of the First Merger Surviving Corporation.  The initial certificate of formation and limited liability company operating agreement of Merger Sub II shall be the certificate of formation and limited liability company operating agreement of the Second Merger Surviving Entity.

 

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2.5.            Directors and Officers .   The directors and officers of the Company immediately prior to the Effective Time shall be the directors and officers of the First Merger Surviving Corporation as of the First Merger Effective Time.  Merger Sub II shall take all actions necessary so that the directors and officers of the First Merger Surviving Corporation immediately prior to the Second Merger Effective Time shall be the initial directors and officers of the Second Merger Surviving Entity.

III.      CONVERSION OF SECURITIES

3.1.            Effect on Capital Stock; Merger Consideration .  

(a)       First Merger .  At the First Merger Effective Time, by virtue of the First Merger and without any action on the part of the holders of any shares of common stock of the Company, par value $0.001 per share (“ Company Common Stock ”), Series A Preferred Stock of the Company, par value $0.001 per share (“ Company Preferred Stock ” and together with the Company Common Stock, the “ Company Stock ”), or any shares of capital stock of Merger Sub I, said shares shall be converted as follows, and the Merger Consideration to be paid to the holders of Company Stock shall be as follows:

(i)       Capital Stock of the Merger Sub .  Each issued and outstanding share of the capital stock of Merger Sub I shall be converted into and become one fully paid and nonassessable share of common stock, $.001 par value per share, of First Merger Surviving Corporation (“ First Merger Surviving Corporation Common Stock ”), so that after the First Merger Effective Time, Parent shall be the holder of all of the issued and outstanding shares of the First Merger Surviving Corporation.

(ii)       Company Preferred Stock .  Each issued and outstanding share of Company Preferred Stock shall, by virtue of the First Merger and without any action on the part of the holder thereof, be converted into the right to receive, in cash, an amount equal to the Company Redemption Price as set forth in the Certificate of the Designations, Powers, Preferences and Rights of the Company Preferred Stock (the “ Cash Merger Consideration ”).

(iii)       Company Common Stock .  Each issued and outstanding share of Company Common Stock (other than any Dissenting Shares) shall, by virtue of the First Merger and without any action on the part of the holder thereof, be converted into the right to receive:

(1)       (x) 0.57361 of a single validly issued, fully paid and nonassessable share of Parent Common Stock (“ Closing Stock Payment ”), plus

 

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(y) the proportionate share amount of 9,950,000 shares of Parent Common Stock issuable pursuant to Section 3.1(a)(iii)(2) below, if any, which such amount shall be deposited into the Escrow Account pursuant to Section 3.5 hereof (“ EBITDA Stock ”), plus (z) the proportionate share amount of 8,500,000 shares of Parent Common Stock issuable pursuant to Section 3.1(a)(iii)(3) below, if any, which such amount shall be deposited into the Escrow Account pursuant to Section 3.5 hereof (“ Warrant Stock ”, which, together with the Closing Stock Payment and EBITDA Stock, shall be referred to collectively, as the “ Common Stock Merger Consideration ”);

(2)       If, for any fiscal quarter from the date hereof through June 30, 2011, the Second Merger Surviving Entity has an annualized adjusted EBITDA (i.e., the actual quarterly EBITDA multiplied by four (4)) equal to or greater than the EBITDA Target, Parent shall cause the Escrow Agent to release from the Escrow Account, in accordance with this Section 3.1(a)(iii)(2), Section 3.5 hereof and the Escrow Agreement, 9,950,000 shares of Parent Common Stock (reduced by the number of shares that would have been issuable to holders of Dissenting Shares in respect of such Dissenting Shares if the stockholder holding such Dissenting Shares had not exercised its appraisal rights pursuant to Section 3.3) (the “ EBITDA Condition ”).  If the EBITDA Condition is satisfied, the holders of Company Common Stock shall be entitled to receive that number of shares of Parent Common Stock equal to (x) 9,950,000 (reduced by the number of shares that would have been issuable to holders of Dissenting Shares in respect of such Dissenting Shares if the stockholder holding such Dissenting Shares had not exercised its appraisal rights pursuant to Section 3.3).  If the EBITDA Condition is not satisfied by June 30, 2011, then Parent and the Stockholders’ Representative shall deliver joint written instructions to the Escrow Agent to release the remaining shares held in Escrow pursuant to the EBITDA Condition to the Company on August 31, 2011 and such securities shall be cancelled in accordance with Section 3.5.

(3)       If Parent shall have the right to redeem the warrants (the “ Warrants ”) issued pursuant to its Warrant Agreement dated September 19, 2006, by and between Parent and Continental Stock Transfer & Trust Company (the “ Warrant Agreement ”), Parent shall cause the Escrow Agent to release from the Escrow Account, in accordance with this Section 3.1(a)(iii)(3), Section 3.5 hereof and the Escrow Agreement, 8,500,000 shares of Parent Common Stock (reduced by the number of shares that would have been issuable to holders of Dissenting Shares in respect of such Dissenting Shares if the stockholder holding such Dissenting Shares had not exercised its appraisal rights pursuant to Section 3.3) (the “ Warrant Condition ”).  Subject to the terms and conditions of the Warrant Agreement, Parent has the right to redeem the Warrants at any time prior to their exercise and at any time after the Warrants become exercisable if the last sale price of the Parent Common Stock has been at least $8.50 per share, on each

 

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of twenty (20) trading days within any thirty (30) trading day period ending on January 28, 2011.  For the avoidance of doubt, even if all Warrants are exercised prior to the date the Warrant Condition is satisfied, Parent remains obligated to pay such 8,500,000 shares of Parent Common Stock (other than any shares that would otherwise be payable in respect of the Dissenting Shares) upon satisfaction of the Warrant Condition.  If the Warrant Condition is not satisfied by January 28, 2011, then on or prior to January 31, 2011, Parent and the Stockholders’ Representative shall deliver joint written instructions to the Escrow Agent to release all the shares subject to the Warrant Condition deposited into the Escrow Account to Parent and such securities shall be cancelled in accordance with Section 3.5.

(4)       If either the EBITDA Condition or the Warrant Condition has been met, Parent shall notify the Stockholders’ Representative in writing within five (5) Business Days.

(5)       All such shares of Company Stock (other than any Dissenting Shares (as defined in Section 3.3 hereof)), when so converted, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive a portion of the Merger Consideration as determined pursuant to the calculation principles set forth in Section 3.1 payable with respect thereto, when and as provided herein upon the surrender of such certificate in accordance with Section 3.3.

(b)       Second Merger .  Upon the terms and subject to the conditions of this Agreement, at the Second Merger Effective Time, by virtue of the Second Merger and without any action on the part of any holder of First Merger Surviving Corporation Common Stock or any holder of membership interests of Merger Sub II (the “ Merger Sub Interests ”):

(i)       First Merger Surviving Corporation Common Stock .  Each share of First Merger Surviving Corporation Common Stock issued and outstanding immediately prior to the Second Merger Effective Time shall be cancelled and cease to exist and no consideration shall be payable in respect thereof.

(ii)       Merger Sub II Membership Interests .  The issued and outstanding Merger Sub II Interests (all of which shall be held by Parent) shall remain as the membership interests of the Second Merger Surviving Entity.

(c)       Company Warrants .

(i)       T1 Warrants .  Each of the holders of the T1 Warrants has agreed pursuant to a separate agreement irrevocably to make a cashless exercise of their T1 Warrants, immediately prior to the Closing of the Transactions contingent

 

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upon the Closing of the Transactions.  The Company Common Stock shall have a fair market value of $5.00 for purposes of such cashless exercise.  Each such share of Company Common Stock received upon the exercise of the T1 Warrant without any further action on the part of the holder thereof shall be converted into the Merger Consideration pursuant to Section 3.1(a)(iii).  

(ii)       T2 Warrants and T3 Warrants .  Certain holders of the T2 Warrants and T3 Warrants have entered into Exchange Agreements in the form attached hereto as Exhibit A providing for the exchange of their T2 Warrants and T3 Warrants for:

(1)       for each share of Company Common Stock for which such T2 Warrant or T3 Warrant is currently exercisable (A) a warrant in the form attached hereto as Exhibit C (the “ New Warrant ”), providing that such holder shall have the right to receive a warrant to acquire 0.25 shares of Parent Common Stock exercisable at $9.00 per share expiring on January 28, 2011 for a total number of New Warrants not to exceed 2,500,000 in the aggregate and (B) the right to receive 1/10 ^th of a share of Parent Common Stock upon the satisfaction of the Warrant Condition for a total number of shares of Parent Common Stock not to exceed 1,000,000 in the aggregate.

(2)       Parent shall deposit into the Escrow Account up to 1,000,000 shares of Parent Common Stock pursuant to Section 3.5 hereof  to satisfy its obligations under (B) above (“ Additional Warrant Stock ”).  If the Warrant Condition is not satisfied by January 28, 2011, then on January 31, 2011, all the shares of Additional Warrant Stock deposited into the Escrow Account shall be released to Parent and cancelled pursuant to Section 3.5.

(iii)      The Company shall use its reasonable efforts to cause all remaining holders of the T3 Warrants who have not previously exercised their T3 Warrants, to exchange their T3 Warrants on the same terms and conditions as the exchanging holders pursuant to the Exchange Agreement.  To the extent such holders still do not exercise their rights, such T3 Warrants shall remain outstanding in accordance with their terms.

3.2.            Fractional Shares .  No fraction of a share of Parent Common Stock will be issued by virtue of the First Merger, but in lieu thereof Parent shall pay to each holder of shares of Company Common Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such holder (other than those that would be received pursuant to Section 3.1 hereof)), upon surrender of such holder’s Certificate(s), an amount of cash (rounded to the nearest whole cent), without interest, equal to the product of: (i) such fraction, multiplied by (ii) six dollars ($6.00).

 

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3.3.            Appraisal Rights .  Shares of Company Common Stock outstanding immediately prior to the First Effective Time and held by a holder who has not voted in favor of the Mergers or consented thereto in writing and who has demanded appraisal for such shares in accordance with the DGCL (collectively, the “ Dissenting Shares ”) shall not be converted into a right to receive Parent Common Stock, unless such holder fails to perfect, withdraws or otherwise loses such holder’s right to appraisal under the DGCL.  If, after the First Merger Effective Time, such holder fails to perfect, withdraws or otherwise loses such holder’s right to appraisal, each such share shall be treated as if it has been converted as of the First Merger Effective Time into a right to receive Parent Common Stock as set forth in Section 3.1(a)(iii)(1).  The Company shall give Parent (i) prompt notice of (A) any demands for appraisal pursuant to the DGCL received by the Company, (B) withdrawals of such demands, and (C) any other instruments served pursuant to the DGCL and received by the Company in connection with such demands and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands for appraisal under the DGCL prior to the First Merger Effective Time.  The Company shall not, except with the prior written consent of Parent, which shall not be unreasonably withheld, conditioned or delayed, or as otherwise required by any applicable law, make any payment with respect to any such demands for appraisal or offer to settle or settle any such demands and shall not distribute any portion of the Common Stock Merger Consideration to any holder that has not lost its appraisal rights.

3.4.            Payment of Merger Consideration; Surrender of Certificates .

(a)       At or prior to the First Merger Effective Time, Parent shall engage a nationally-recognized financial institution reasonably satisfactory to the Company to act as exchange agent in connection with the Merger (the “ Exchange Agent ”).  At the First Merger Effective Time, Parent shall deposit with the Exchange Agent, in trust for the benefit of the holders of shares of Company Common Stock immediately prior to the First Merger Effective Time, for exchange in accordance with this Article III, through the Exchange Agent, certificates representing the shares of Parent Common Stock issuable pursuant to the Closing Stock Payment pursuant to Section 3.1(a)(iii)(1)(x) (other than any Dissenting Shares) and for the benefit of the holders of Company Preferred Stock immediately prior to the First Merger Effective Time, for exchange in accordance with Article III, through the Exchange Agent, the Cash Merger Consideration.  In addition, Parent shall make available by depositing with the Exchange Agent, as necessary from time to time after the First Merger Effective Time, cash in an amount sufficient to make the payments in lieu of fractional shares pursuant to Section 3.2 and any dividends or distributions to which holders of shares of Company Common Stock may be entitled pursuant to Section 3.4(c).  All cash and Parent Common Stock deposited with the Exchange Agent shall hereinafter be referred to as the “ Exchange Fund .”

(b)       Promptly after the First Merger Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the First Merger Effective Time represented outstanding shares of Company Stock (other than any Dissenting Shares) (the “ Certificates ”), which at the

 

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First Merger Effective Time were converted into the right to receive the Merger Consideration pursuant to Section 3.1(a)(ii) or (iii) hereof, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration, cash in lieu of any fractional shares pursuant to Section 3.2 and any dividends or other distributions payable pursuant to Section 3.4(c).  Upon surrender of Certificates for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificates shall be entitled to receive in exchange therefor Cash Merger Consideration to which such holder is entitled pursuant to Section 3.1(a)(ii) and a certificate or certificates representing that number of whole shares of Parent Common Stock (after taking into account all Certificates surrendered by such holder) to which such holder is entitled pursuant to Section 3.1(a)(iii) (which shall be in uncertificated book entry form unless a physical certificate is requested), payment in lieu of fractional shares which such holder is entitled to receive pursuant to Section 3.2 and any dividends or distributions payable pursuant to Section 3.4(c), and the Certificates so surrendered shall forthwith be cancelled.  In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, certificates representing the proper number of shares of Parent Common Stock may be issued to a Person other than the Person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such issuance shall pay any transfer or other taxes required by reason of the issuance of shares of Parent Common Stock to a Person other than the registered holder of such Certificate or establish to the satisfaction of Parent that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.4(b), each Certificate shall be deemed at any time after the First Merger Effective Time to represent only the right to receive the Merger Consideration pursuant to Section 3.1(a)(iii) hereof (and any amounts to be paid pursuant to Section 3.2 or Section 3.4(c)) upon such surrender.  No interest shall be paid or shall accrue on any amount payable pursuant to Section 3.2 or Section 3.4(c).

(c)       No dividends or other distributions with respect to Parent Common Stock with a record date after the First Merger Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 3.2 hereof, until such Certificate has been surrendered in accordance with this Article III.  Subject to applicable Law, following surrender of any such Certificate, there shall be paid to the recordholder thereof, without interest, (i) promptly after such surrender, the number of whole shares of Parent Common Stock issuable in exchange therefor pursuant to this Article III, together with any cash payable in lieu of a

 

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fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 3.2 and the amount of dividends or other distributions with a record date after the First Merger Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the First Merger Effective Time and a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Stock, less the amount of any withholding Taxes that may be required thereon.

(d)       All shares of Parent Common Stock, issued upon the surrender for exchange of Certificates in accordance with the terms of this Article III and any cash paid pursuant to Section 3.1(a)(ii), Section 3.2 or Section 3.4(c) and all shares of Parent Common Stock placed into Escrow shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the shares of Company Stock previously represented by such Certificates.  At the First Merger Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers on the stock transfer books of the First Merger Surviving Corporation of the shares of Company Stock which were outstanding immediately prior to the First Merger Effective Time.  If, after the First Merger Effective Time, Certificates are presented to the First Merger Surviving Corporation or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article III.

(e)       Any portion of the Exchange Fund (other than any shares of Parent Common Stock held in Escrow) which remains undistributed to the holders of Certificates six months after the First Merger Effective Time shall be delivered to the Second Merger Surviving Entity, upon demand, and any holders of Certificates who have not theretofore complied with this Article III (other than Dissenting Shares) shall thereafter look only to the Surviving Corporation for payment of their claim for the Merger Consideration, any cash in lieu of fractional shares of Parent Common Stock pursuant to Section 3.2 and any dividends or distributions pursuant to Section 3.4(c).

(f)       None of Parent, Merger Subs, the Company or the Exchange Agent or any of their respective directors, officers, employees and agents shall be liable to any Person in respect of any shares of Parent Common Stock (or dividends or distributions with respect thereto), or cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.  If any Certificate shall not have been surrendered prior to five years after the First Merger Effective Time, or immediately prior to such earlier date on which any shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock, or any dividends or distributions with respect to Parent Common Stock issuable in respect of such Certificate would otherwise escheat to or become the property of any Governmental Authority, any such shares, cash, dividends or distributions in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interests of any Person previously entitled thereto.

 

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(g)       The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent on a daily basis; provided that no such investment or loss thereon shall affect the amounts payable to former stockholders of the Company after the First Merger Effective Time pursuant to this Article III.  Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable pursuant to this Article III shall promptly be paid to Parent.

(h)       Parent and the Exchange Agent shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement to any Person who was a holder of Company Stock immediately prior to the First Merger Effective Time such amounts as Parent or the Exchange Agent may be required to deduct and withhold with respect to the making of such payment under the Code or any other provision of federal, state, local or foreign tax law.  To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such consideration would otherwise have been paid.

(i)       In the event any Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit (without the posting of a bond) of that fact by the holder thereof, such shares of Parent Common Stock as may be required pursuant to Section 3.4(b), cash for fractional shares pursuant to Section 3.2 and any dividends or distributions payable pursuant to Section 3.4(c); provided, however, that Parent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver an agreement of indemnification in form reasonably satisfactory to Parent, or a bond in such sum as Parent may reasonably direct as indemnity against any claim that may be made against Parent or the Exchange Agent in respect of the Certificates alleged to have been lost, stolen or destroyed.

3.5.            Escrow .  At the Closing, Parent, the Stockholder’s Representative and the escrow agent (“ Escrow Agent ”) shall enter into an escrow agreement in the form attached hereto as Exhibit D (the “ Escrow Agreement ”), pursuant to which the EBITDA Stock and Warrant Stock portions of the Common Stock Merger Consideration (other than portions in respect of the Dissenting Shares) and Additional Warrant Stock  (such amount being defined as the “ Escrowed Stock ”) shall be deposited into escrow (the “ Escrow Account ”), shall be subject in all events to the provisions of this Agreement and the Escrow Agreement and shall be distributed to the holders of Company Common Stock as follows:  (i) an amount equal to EBITDA Stock of the Escrowed Stock on or prior to the EBITDA Escrow Release Date (as defined below) shall be distributed to the holders of Company Common Stock in the percentages set forth in Schedule 3.1(a)(iii) hereof within 60 days following the end of a fiscal quarter in which the EBITDA Condition has been satisfied (the “ EBITDA Escrow Release Date ”), and (ii) an amount equal to Warrant Stock of the Escrowed Stock on or prior to the Warrant Escrow Release Date (as defined below) shall be distributed to the holders of Company Common Stock in the percentages set forth in Schedule 3.1(a)(iii) hereof within 30 days following the satisfaction of the Warrant Condition (the “ Warrant Escrow Release Date ”), all as more specifically set forth in the Escrow Agreement.

 

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IV.      REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to Parent and the Merger Subs to enter into this Agreement, the Company represents and warrants to Parent and the Merger Subs that:

4.1.            Organization, Qualification, and Corporate Power .  Each of the Acquired Companies is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, with full power and authority to conduct its business as owned and conducted on the date hereof and at the Closing.  Each of the Acquired Companies is duly qualified or licensed to do business as a foreign corporation in, and is in good standing in, each jurisdiction in which the nature of its business or its ownership of its properties requires it to be so qualified or licensed, except where the failure to be so qualified or licensed would not have a Material Adverse Effect.  Each of the Acquired Companies has all requisite organizational power and authority and all Permits from Governmental Authorities and from all other Persons that are necessary and/or appropriate to carry on its Business and to own and use the properties owned and used by it, except for such Permits the absence of which would not result in a Material Adverse Effect.

4.2.            Subsidiaries .  Except for the Company Subsidiaries, the Company does not have has any subsidiaries nor does it own any securities issued by any other Person except temporary investments in the ordinary course of business.

4.3.            Capitalization .  The authorized capital stock of each of the Acquired Companies and the number and kind of issued and outstanding shares of each of the Acquired Companies and, other than with respect to the Company Common Stock, the holders of record thereof are set forth on Schedule 4.3 and were validly issued, fully paid and nonassessible and were issued in compliance with all applicable federal and state securities laws and any preemptive rights or rights of first refusal of any Person.  Except as set forth in Schedule 4.3 :  (A) to the Company’s Knowledge, there are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any shares of capital stock of the Acquired Companies; (B) there does not exist nor is there outstanding any right or security granted to, issued to, or entered into with, any Person to cause the Acquired Companies to issue, grant or sell any shares of capital stock of the Acquired Companies to any Person (including any warrant, stock option, call, preemptive right, convertible or exchangeable obligation, subscription for stock or securities convertible into or exchangeable for stock of the Acquired Companies, or any other similar right, security, instrument or agreement), and there is no commitment or agreement to grant or issue any such right or security; (C) there is no obligation, contingent or otherwise, of the Acquired Companies to:  (1) repurchase, redeem or otherwise acquire any share of the capital stock or other equity interests of the Acquired Companies; or (2) provide funds to, or make any investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of any other Person (other than the other Acquired Companies); and (D) there are no bonds, debentures, notes or other indebtedness which have the right to vote (or are convertible into, or exchangeable for, securities having the right to vote) on any matters on which the Company’s stockholders are entitled to vote.

 

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4.4.            Validity and Execution; Stockholder Approval .  The Company has the right, power and authority to enter into this Agreement and perform its obligations hereunder.  All necessary corporate action of the Company has been taken to authorize the Company to execute and deliver this Agreement and to consummate the Transactions.  The board of directors (including any required committee or subgroup thereof) and stockholders of the Company have, as of the date of this Agreement, duly approved this Agreement and the Transactions.  This Agreement constitutes the legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject only to applicable bankruptcy, insolvency, reorganization, moratorium or other Laws of general application affecting enforcement of creditors’ rights.  The execution, delivery and performance by the Company of this Agreement and all other instruments, agreements, certificates and documents contemplated hereby:  (a) do not, and will not, violate or conflict with any provision of the Company’s certificate of incorporation or bylaws; (b) do not, and will not, violate or constitute a default under any Law or any contract to which any Acquired Company is a party, or by which it or any Company Stock or equity interests in any Acquired Company is bound; and (c) do and will not result in the creation of any Lien, other than Permitted Liens.

4.5.            Real and Tangible Personal Properties .

(a)             Schedule 4.5(a) identifies (i) all of the real property, including all, land, buildings, towers, structures, improvements and fixtures located thereon, and all easements and other rights and interests appurtenant thereto, owned by any of the Acquired Companies (collectively, the “ Owned Real Property ”); and (ii) all of the real property devised by leases, subleases, licenses, concessions, co-locations and other agreements (written or oral) (collectively, the “ Leases ”) pursuant to which the Acquired Companies hold any leased real property (collectively, the “ Leased Real Property ,” and together with the Owned Real Property, the “ Real Property ”).

(b)            Each Acquired Company (i) has good and marketable indefeasible fee simple title to the Owned Real Property, free and clear of all Liens, except for Permitted Liens, (ii) has not leased or otherwise granted to any Person the right to use or occupy such Owned Real Property or any portion thereof, (iii) has not granted any outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or any portion thereof or interest therein, and (iv) is not a party to any agreement or option to purchase any real property or interest therein.

(c)            Each applicable Acquired Company holds a valid and existing leasehold interest under each of the Leases to which it is a party for the terms set forth therein.   Schedule 4.5(a) contains a true and complete listing of all of the Leases, and the Acquired Companies have made available to Parent a complete and accurate copy of each of the Leases, and in the case of any oral Lease, a written summary of the material terms of such Lease, including all amendments, extensions, renewals and other agreements with respect thereto.  With respect to each of the

 

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Leases and except as set forth in Schedule 4.5(c) :  (i) the applicable Acquired Company has not subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof; (ii) such Lease is legal, valid, binding, enforceable against such Acquired Company and in full force and effect, subject to proper authorization and execution of such Lease by the other party thereto and the application of any bankruptcy or other creditor’s rights Laws; (iii) such Acquired Company is not in breach or default under such Lease and no event has occurred or circumstances exist which, with the delivery of notice, the passage of time or both, would constitute such a breach or default, except to the extent such breach or default would not have a Material Adverse Effect; (iv) such Acquired Company has not collaterally assigned or granted any other security interest in such Lease or any interest therein; and (v) there are no Liens or encumbrances on the estate or interest created by such Lease.

(d)             The Acquired Companies own or have a valid leasehold interest in each of the items of tangible personal property reflected on the Most Recent Balance Sheets, or acquired thereafter (except for assets reflected thereon or acquired thereafter that have been disposed of in the Ordinary Course of Business since the date of the Most Recent Balance Sheets), free and clear of all Liens, except for Permitted Liens, and such tangible personal property constitutes all material equipment, machinery, fixtures, improvements and other tangible personal property used in or necessary for the conduct of each of the Businesses of the Acquired Companies as it is currently conducted by the Acquired Companies.  All of the tangible personal property, equipment, machinery, fixtures, improvements and other tangible assets (whether owned or leased) owned by the Acquired Companies are in good condition and repair (ordinary wear and tear excepted).

4.6.            No Litigation .  Except as set forth on Schedule 4.6 , there is no litigation, claim, investigation or proceeding pending, or to the Company’s Knowledge, threatened, against or relating to any Acquired Company or its Business, nor to the Company’s Knowledge is there any reasonable basis for any such litigation, claim, investigation or proceeding.  No Acquired Company is named in any order, judgment, decree, stipulation or consent of or with any court or other Governmental Authority that affects or may affect the Company Stock or the Transactions.

4.7.            Noncontravention .  Except for the FCC Consents and PUC Consents and as set forth on Schedule 4.7 , neither the execution and the delivery of this Agreement by the Company, nor the consummation of the Transactions by any of the Acquired Companies, will:  (i) violate any material applicable Law or any injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Authority to which any Acquired Company or a Business is subject or any provision of any Acquired Company’s certificate of incorporation, bylaws, or other governing instrument, as amended, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any Person the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which any Acquired Company is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Lien upon any capital stock or assets of any Acquired Company).  Except as set forth on Schedule 4.7 and except where failure to meet such requirement would not result in a Material Adverse Effect, no

 

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Acquired Company is required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Authority in order for the parties to consummate the Transactions.

4.8.            Tax Matters .  Except as set forth on Schedule 4.8 :

(a)            All income, franchise and all material other Tax Returns required to have been filed by or with respect to the Acquired Companies have been timely filed (taking into account applicable extensions of time to file) and all such Tax Returns (including information provided therewith or with respect thereto) are true, accurate and complete in all material respects.  All income Taxes and all other Taxes of the Acquired Companies, whether or not shown as due on any Tax Returns, have been timely paid, other than Taxes that are not yet due and payable or that are being contested in good faith by appropriate proceedings (and are so identified on Schedule 4.8) and for which adequate reserves are reflected in the Company Financial Statements in accordance with GAAP.

(b)            Each of the Acquired Companies has complied in all material respects with all applicable Laws, rules and regulations relating to the withholding of Taxes and has duly and timely withheld and paid over to the appropriate Taxing Authorities all amounts required to be so withheld and paid over for all periods under all applicable Laws.  No deficiency for any material amount of Taxes has been assessed with respect to any of the Acquired Companies that has not been abated or paid in full or adequately provided for in the Company Financial Statements.

(c)            There are no Tax claims, audits, examinations, disputes, investigations, administrative or judicial proceedings by any Taxing Authority pending, or threatened in writing, or as to which any of the Acquired Companies has Knowledge in connection with any Taxes due from or with respect to the Acquired Companies, including without limitation, any claim made by a Taxing Authority in a jurisdiction where any of the Acquired Companies does not file a particular Tax Return such that it is or may be subject to taxation by that jurisdiction.

(d)            There are not currently in force any (i) waivers of any statute of limitations with respect to Taxes or agreements binding upon any of the Acquired Companies for the extension of time for the assessment, reassessment, deficiency or payment of any Tax for any taxable period, and no request for any such waiver or extension is currently pending, (ii) any power of attorney with respect to any Tax matter, or (iii) any Tax allocation or Tax sharing agreement, or any similar agreement pursuant to which any Acquired Company could have an obligation with respect to Taxes of another person or entity following the Closing.

(e)            There are no Liens for Taxes (other than Taxes not yet due and payable or that are being contested in good faith) upon any of the assets of the Acquired Companies.

(f)   &nbs