ASSET PURCHASE AGREEMENT

Exhibit 10.4

 

ASSET PURCHASE AGREEMENT

 

dated as of

 

August 8, 2005

 

by and among

 

QUALITY INVESTMENT PROPERTIES ATLANTA TECH CENTRE, L.L.C.,

E^QUALITY, L.L.C.,

and

QUALITY INVESTMENT PROPERTIES—WILLIAMS CENTRE, L.L.C.,

 

as Purchasers,

 

and

 

INTERSTATE FIBERNET, INC.

 

and

 

ITC^DELTACOM COMMUNICATIONS, INC.,

 

as Sellers

TABLE OF CONTENTS

 

 

- i -

 

- ii -

ANNEX AND EXHIBITS

 

EXECUTION COPY

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of the 8th day of August, 2005, by and among QUALITY INVESTMENT PROPERTIES ATLANTA TECH CENTRE, L.L.C., a Georgia limited liability company (“ QIPATC ”), E^QUALITY, L.L.C., a Georgia limited liability company (“ e^Quality ”) and QUALITY INVESTMENT PROPERTIES—WILLIAMS CENTRE, L.L.C., a Kansas limited liability company (“ QIPWC ”), and INTERSTATE FIBERNET, INC., a Delaware corporation (“ IFN ”), and ITC^DELTACOM COMMUNICATIONS, INC., an Alabama corporation (“ ITC ”). Each of QIPATC, e^Quality and QIPWC shall be referred to in this Agreement individually as a “ Purchaser ” and collectively as “ Purchasers .” Each of IFN and ITC shall be referred to in this Agreement individually as a “ Seller ” and collectively as “ Sellers .”

 

Recitals

 

A. IFN owns and operates a data center facility located at 300 Satellite Boulevard, Suwanee, Georgia (the “ Data Center Facility ”) in which it provides managed collocation, hosting, security, data storage, monitoring and networking services and hardware solutions (the “ e^deltacom Business” ).

 

B. ITC owns certain assets located at the Data Center Facility that are primarily used by IFN in the conduct of the e^deltacom Business and provides certain services to IFN in the conduct of the e^deltacom Business.

 

C. Purchasers wish to purchase from Sellers, and Sellers wish to sell to Purchasers, the Assets, all in accordance with and subject to the terms and conditions set forth in this Agreement.

 

D. Purchasers wish to assume from Sellers, and Sellers wish to assign to Purchasers, the Assumed Liabilities, all in accordance with and subject to the terms and conditions set forth in this Agreement.

 

E. Purchasers and Sellers (collectively, the “ Parties ”) wish to evidence their agreement to the terms and conditions of the purchase and sale of the Assets and the assignment and assumption of the Assumed Liabilities as set forth in this Agreement.

 

In consideration of the recitals and the representations, warranties and covenants set forth in this Agreement, the Parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Capitalized terms used in this Agreement shall for all purposes of this Agreement have the respective meanings assigned to such terms in Annex I attached hereto.

ARTICLE II

PURCHASE AND SALE

 

2.1 Assets . At the Closing, upon the terms and subject to the conditions contained in this Agreement, each Seller shall sell, transfer, assign, convey and deliver to Purchasers, and Purchasers shall purchase, accept, assume and acquire from such Seller, all of such Seller’s right, title and interest in and to all of the following assets primarily used in, and primarily relating to, the e^deltacom Business (collectively, the “ Assets ”), but excluding the Excluded Assets:

 

(a) the land, building, structures, improvements, fixtures, easements, rights of way, public and private parking lots, streets, roads, avenues, highways, alleys and passageways, opened or proposed, on or abutting the land, and any condemnation award made to or to be made and any unpaid award for damage to the real property, the improvements or fixtures by reason of any change of grade of any parking lot, street, road, avenue, highway, alley or passageway, all and singular the estates, rights, privileges, easements and appurtenances belonging or in any wise appertaining to the land, improvements or fixtures, and more particularly described on Schedule 2.1(a)(i) (the “ Real Property ”) and all other improvements now or hereafter actually or constructively attached to the Real Property, and all modifications, additions, restorations, or replacements of the whole or any part thereof (the “ Conveyed Improvements ”), but excluding those described in Schedules 2.1(a)(ii) (the “ Excluded Improvements ”);

 

(b) the furniture, fixtures, machinery, equipment and other personal property (i) physically located within the Data Center Facility, including the items listed on Schedule 2.1(b)(i) and (ii) listed on Schedule 2.2(b)(ii) and located at Sellers’ facilities at 55 Park Place, Atlanta, Georgia and 2020 Live Oak, Suite 200, Dallas, Texas (collectively, the “ Equipment ”);

 

(c) as landlord, in and to all leases and subleases, if any, of the Real Property or the Equipment listed on Schedule 2.1(c) , and any and all amendments, modifications, supplements, renewals and extensions thereof (the “ Leases ”);

 

(d) the patents, trademarks, copyrights, trade names, mask works, service marks, service names, technology, know-how, processes, trade secrets, inventions, proprietary data, formulae, research and development data (including all intellectual property relating to work in process), computer software programs and other intangible property and any applications for the same, in each case owned or licensed by such Seller, primarily used in, and primarily relating to, the e^deltacom Business to the extent listed on Schedule 2.1(d) (the “ Intellectual Property ”);

 

(e) all user manuals, training materials, technical specifications and other documentation in such Seller’s possession with respect to the Equipment, the Intellectual Property and Assigned Contracts to the extent such Seller has the right to transfer the same to Purchasers;

 

(f) (i) the customer contracts primarily relating to the e^deltacom Business to the extent listed on Schedule 2.1(f)(i) (the “ Customer Contracts ”), (ii) the contracts pursuant to which any of the Intellectual Property is licensed to the extent listed on Schedule 2.1(f)(ii) (the “ IP Licenses ”), (iii) the vendor, supplier, utility and other contracts primarily relating to the e^deltacom Business to the extent listed on Schedule 2.1(f)(iii) (the “ Other Contracts ”), (iv) any open purchase orders for goods and services relating to the e^deltacom Business to the extent listed on Schedule 2.1(f)(iv) (the “ Purchase Orders” ) and (v) the Additional Agreements, if any, pursuant to Section 5.1(b)(iii) (such Additional Agreements, together with the Customer Contracts, the IP Licenses, the Other Contracts, and Purchase Orders, the “ Assigned Contracts ”);

 

2

(g) the inventory, fuel, supplies, spare parts, raw materials, work-in-progress, packaging materials, samples, finished goods and other inventories owned, leased, used, held for use or otherwise held by a Seller in connection with the e^deltacom Business;

 

(h) all prepaid expenses, prepaid license fees, prepaid support contracts, prepaid maintenance contracts, customer deposits, manufacturer or supplier benefits, credits and rebates to the extent listed on Schedule 2.1(h) ;

 

(i) the cash and cash equivalents of the e^deltacom Business (i) received after Closing in lock box #402293 at Bank of America (the “ Lockbox Account ”) and (ii) in account #3752134946 at Bank of America (the “ Operating Account ”) as of the Closing Date in accordance with Section 2.7(a) ;

 

(j) all of the accounts receivable, rent, notes receivable, expense reimbursements and other rights to payment (the “ Accounts Receivable ”) under the Customer Contracts and the Leases as of the Closing Date;

 

(k) all goodwill associated with the e^deltacom Business or the Assets, together with the right to represent to third parties that Purchasers are the successor to the e^deltacom Business;

 

(l) all of the automotive equipment and motor vehicles maintained, owned, leased, used or held for use by a Seller primarily in connection with the e^deltacom Business to the extent listed on Schedule 2.1(l) ;

 

(m) all of the engineering, business and other books, papers, accounting records, customer records, and other files and records primarily pertaining to the e^deltacom Business, but not the certificate of incorporation, bylaws, minute books, stock transfer records, or other corporate records of either Seller;

 

(n) all manufacturers’, resellers’ and vendors’ warranties with respect to the Assets to the extent such Seller has the right to transfer the same to Purchasers, including those listed on Schedule 2.1(n) ; and

 

(o) all IP addresses and domain names listed on Schedule 2.1(o) to the extent such Seller has the right to transfer the same to Purchasers.

 

2.2 Excluded Assets . The assets that Sellers shall sell, transfer, assign, convey and deliver to Purchasers, and that Purchasers shall purchase, assume, accept and acquire from Sellers, at the Closing are the Assets set forth in Section 2.1 . Each Seller is not selling, transferring, assigning, conveying or delivering to Purchasers, and Purchasers are not purchasing, accepting, assuming or acquiring from such Seller, such Seller’s right, title or interest in or to any other assets (the “ Excluded Assets ”), including the following:

 

(a) all cash and cash equivalents, securities, and negotiable instruments of such Seller or any of its Affiliates on hand, in lock boxes, in financial institutions or elsewhere, including

 

3

the Lockbox Account and its contents on the Closing Date, but excluding the cash and cash equivalents of the e^deltacom Business received after Closing in the Lockbox Account in accordance with Section 2.1(i) and excluding the cash and cash equivalents in the Operating Accounting in accordance with Section 2.1(i) and Section 2.7(a) ;

 

(b) the Excluded Improvements set forth on Schedule 2.1(a)(ii) ;

 

(c) all assets and properties of every kind and description owned, leased (pursuant to leases in which a Seller is not the lessor) or otherwise held for use by third parties, including customers under the Customer Contracts, located at the Data Center Facility;

 

(d) (i) all fiber optic facilities, equipment and elements of such Seller, other than any of such facilities set forth on Schedule 2.1(b)(i) , and (ii) all rights provided to Sellers by the Declaration of Easement;

 

(e) all contracts of insurance and the prepaid business insurance (including liability, business interruption and the like) premiums and the prepaid group insurance premiums of such Seller;

 

(f) all of such Seller’s rights under manufacturers’, resellers’ and vendors’ warranties other than such Seller’s rights under manufacturers’, resellers and vendors warranties transferred pursuant to Section 2.1(n) ;

 

(g) all rights to Tax refunds, credits and similar benefits, and to any Tax attributes, relating to or attributable to periods ending, or relating to an event occurring prior to, the Closing Date;

 

(h) the minute books from the meetings of the boards of directors and stockholders of such Seller, the stock records and corporate seal of such Seller and the Tax returns and records relating to Taxes of such Seller;

 

(i) all rights of such Seller under this Agreement and the other Transaction Agreements;

 

(j) all prepaid commissions owed to Sellers in connection with the e^deltacom Business to the extent earned prior to the Closing Date and to the extent listed on Schedule 2.2(j) ;

 

(k) the Dinix Agreement; and

 

(l) any other assets identified on Schedule 2.2(l) .

 

2.3 Escrow Deposit .

 

For and in partial consideration of the execution and delivery of this Agreement, simultaneously with the execution and delivery of this Agreement, Purchasers are depositing in escrow with the Deposit Escrow Agent an additional amount equal to One Hundred Thousand Dollars ($100,000) in cash, said amount to be held as an earnest money deposit (the “ Deposit ”), in accordance with the terms and conditions of this Agreement and the Deposit Escrow Agreement.

 

4

2.4 Purchase Price .

 

For and in consideration of the conveyances and assignments described in this Agreement and in addition to the assumption of liabilities as set forth in Section 2.6 , at the Closing, Purchasers shall pay to Sellers Twenty Nine Million, Four Hundred Forty Five Thousand Dollars ($29,445,000) (the “ Initial Purchase Price ”), plus or minus the amount of any adjustment made pursuant to Section 2.7 (the “ Purchase Price ”). Upon satisfaction or waiver of each condition set forth in Article VI (other than delivery of the Initial Purchase Price), Purchasers shall pay the Initial Purchase Price (as adjusted pursuant to Section 5.5(a) )at Closing by wire transfer to an account or accounts designated in writing by Sellers. At the Closing, after satisfaction or waiver of each condition set forth in Article VI and delivery by Purchasers of the Initial Purchase Price to Sellers, Purchasers and Sellers shall cause the Deposit to be returned to Purchasers in accordance with the joint written instructions of Purchasers and Sellers. The Purchase Price shall be subject to adjustment following the Closing in accordance with Section 2.7 .

 

2.5 Delivery of Assets . Title to and possession of the Assets shall be delivered and transferred by Sellers to Purchasers at the Closing in accordance with the terms of this Agreement.

 

2.6 Assumption of Liabilities; Excluded Liabilities .

 

(a) At the Closing, upon the terms and subject to the conditions contained herein, Purchasers shall assume, and agree to pay, perform and discharge when due, the following (collectively, the “ Assumed Liabilities ”):

 

(i) all of Sellers’ duties, obligations and liabilities arising under the Assigned Contracts and the Leases relating to the operation of the e^deltacom Business or the Assets after the Closing Date, including all of Sellers’ duties, obligations and liabilities under the Purchase Orders and Additional Agreements entered into pursuant to Section 5.1(b)(iii) ;

 

(ii) all liabilities and obligations of Purchasers as set forth in Section 5.5 , Section 5.7 and Section 5.11 ;

 

(iii) all liabilities and obligations arising out of, or related to, the ownership of the Assets or the ownership or operation of the e^deltacom Business but only to the extent such liabilities arise after, or relate to the period after, the Closing Date and which are not otherwise reserved to Sellers under this Agreement; and

 

(iv) all liabilities included in Final Working Capital.

 

(b) Other than the Assumed Liabilities, Purchasers shall not assume any duties, debts, liabilities or obligations (absolute or contingent) of any kind of Sellers of any nature whatsoever.

 

2.7 Working Capital Adjustment .

 

(a) On or prior to the Closing Date, Sellers shall prepare and deliver to Purchasers a written estimate of Working Capital to be transferred to Purchasers as of the Closing Date in accordance with Schedule 2.7 (the “ Estimated Working Capital ”). The Estimated Working

 

5

Capital shall be no less than Three Million Five Hundred Ninety Thousand Dollars ($3,590,000) (the “ Working Capital Target ”) of which at least Two Million Two Hundred Thousand Dollars ($2,200,000) shall consist of cash and cash equivalents in the Operating Account.

 

(b) As soon as reasonably practicable following the Closing Date (but in no event more than 30 Business Days following the Closing Date), Purchasers shall prepare and submit to Sellers a statement setting forth in reasonable detail Purchasers’ calculation of Working Capital as of the Closing Date (the “ Proposed Final Working Capital Statement ”) and any relevant documentation relevant to such calculation. Purchasers’ calculation of Working Capital shall be made in a manner consistent with Schedule 2.7 . The Proposed Final Working Capital Statement shall become final and binding upon the Parties unless, within 30 Business Days following its receipt by Sellers, Sellers shall provide written notice to Purchasers of their objection thereto. If Sellers so notify Purchasers of their objection to the Proposed Final Working Capital Statement, Purchasers and Sellers shall negotiate in good faith to resolve any differences. If within 30 Business Days following the receipt of such notice by Sellers, any differences have not been resolved, the parties shall submit the dispute to a mutually-agreed upon nationally recognized accounting firm (the “ Independent Accounting Firm ”) to resolve any differences. The Independent Accounting Firm’s resolution of any differences shall be set forth in writing, shall be rendered within 20 Business Days following the final submission of the Parties, and shall be final and binding on the parties and not subject to any appeal. Purchasers shall revise the Proposed Final Working Capital Statement as appropriate to reflect the resolution of any differences. The fees and expenses of the Independent Accounting Firm shall be paid one-half by Purchasers and one-half by Sellers. Working Capital as of the Closing Date, as finally determined pursuant to this Section 2.7(b) (whether by failure of Sellers to deliver notice of objection, by agreement of Sellers and Purchasers or by determination of the Independent Accounting Firm), is referred to herein as the “ Final Working Capital .”

 

(c) Purchasers shall make the work papers and back-up materials used in preparing the Proposed Final Working Capital Statement and the books, records and financial staff of the e^deltacom Business, available to Sellers and their accountants and attorneys at reasonable times and upon reasonable notice at any time during (i) the preparation by Purchasers of the Proposed Final Working Capital Statement, (ii) the review by Sellers of the Proposed Final Working Capital Statement, and (iii) the resolution by the Parties of any objections thereto.

 

(d) If the Final Working Capital is less than the Working Capital Target, Sellers will pay Purchasers the amount of such difference, with simple interest thereon from the Closing Date to the date of payment at a rate per annum of 6%. If the Final Working Capital is greater the Working Capital Target, Purchasers will pay to Sellers the amount of such difference with simple interest thereon from the Closing Date to the date of payment at a rate per annum of 6%. All payments under this Section 2.7(d) shall be made within 10 days after the Final Working Capital shall have been finally determined in accordance with Section 2.7(b) .

 

2.8 Allocation of Purchase Price . The Purchase Price shall be allocated among the classes of Assets for all purposes (including financial, accounting and Tax purposes) as set forth in the Schedule 2.8 . Without limiting the generality of the foregoing, Sellers and Purchasers agree, pursuant to Section 1060 of the Code, that all Tax returns and reports shall be filed consistent with such allocation. Notwithstanding any other provision of this Agreement, the provisions of this Section 2.8 shall survive the Closing Date without limitation.

 

6

ARTICLE III

CLOSING

 

3.1 Closing . Subject to the terms and conditions of this Agreement, the consummation of the purchase and sale of the Assets shall take place at a closing (the “ Closing ”) to be held at the offices of King & Spalding LLP, 191 Peachtree Street, NE, Atlanta, Georgia 30303-1763, as soon as practicable, but no later than three Business Days, following the satisfaction or, to the extent permitted by this Agreement, waiver of each condition set forth in Article VI or at such other time and place as the Parties may agree (the day on which the Closing takes place, the “ Closing Date ”).

 

3.2 Closing Deliveries by Sellers . At the Closing, Sellers shall deliver or cause to be delivered to Purchasers the following:

 

(a) a Bill of Sale and Assignment and Assumption Agreement, dated as of the Closing Date and executed by Sellers, substantially in the form of Exhibit A (the “ Bill of Sale ”);

 

(b) an Assignment and Assumption of Leases, dated as of the Closing Date and executed by Sellers, substantially in the form of Exhibit B (the “ Assignment and Assumption of Leases ”);

 

(c) a limited warranty deed with respect to the Real Property, dated as of the Closing Date and executed by IFN, substantially in the form of Exhibit C (the “ Limited Warranty Deed ”);

 

(d) a Telecommunications Services Agreement, dated as of the Closing Date and executed by IFN, substantially in the form of Exhibit D (the “ Telecom Services Agreement ”);

 

(e) a Master Services Agreement, dated as of the Closing Date and executed by ITC, substantially in the form of Exhibit E (the “ Master Services Agreement ”);

 

(f) (i) a Collocation Agreement, dated as of the Closing Date and executed by ITC, substantially in the form of Exhibit F-1 and (ii) the Telecommunications and Battery Room Collocation Agreement, dated as of the Closing Date and executed by ITC, substantially in the form of Exhibit F-2 (collectively, the “ Collocation Agreements ”);

 

(g) a ITC^DeltaCom Dark Fiber Agreement, dated as of the Closing Date and executed by Sellers, substantially in the form of Exhibit G (the “ Dark Fiber Agreement ”);

 

(h) an Exchange of Services and Indemnification Agreement, dated as of the Closing Date and executed by Sellers, substantially in the form of Exhibit H (the “ Exchange of Services Agreement ”);

 

(i) a Lease Agreement, dated as of the Closing Date and executed by Sellers, substantially in the form of Exhibit I (the “ Office Lease ”) together with a subordination, non-disturbance and attornment agreement in a form reasonably satisfactory to Sellers and Purchasers’ lender, if requested by such lender;

 

(j) a Post-Closing Escrow Agreement, dated as of the Closing Date and executed by Sellers substantially in the form of Exhibit J (the “ Post-Closing Escrow Agreement ”);

 

7

(k) the opinions of Sellers’ outside counsel and general counsel substantially in the forms set forth in Exhibit K ;

 

(l) certificates of title with respect to the motor vehicles listed on Schedule 2.1(l) or, if any such motor vehicles are leased by Sellers, an assignment of such lease;

 

(m) the certificates to be delivered by Sellers pursuant to Article VI ;

 

(n) (i) the Tenant Estoppel Certificates executed by all Material Customers substantially in the form of Exhibit L-1 and (ii) the Subordination and Non Disturbance Agreements executed by all Material Customers substantially in the form of Exhibit L-2 ;

 

(o) the Assignment and Assumption of Contracts, dated as of the Closing Date and executed by Sellers, substantially in the form of Exhibit M (the “ Assignment and Assumption of Contracts ”);

 

(p) an Affidavit of Sellers with respect to Real Property title matters in form and substance mutually agreed upon by Sellers and Purchasers;

 

(q) an Affidavit of Sellers, certifying that the transactions contemplated under this Agreement are exempt from withholding under Section 1445 of the Code in form and substance mutually agreed upon by Sellers and Purchasers;

 

(r) an Affidavit of Georgia Residency in form and substance mutually agreed upon by Sellers and Purchasers;

 

(s) a Georgia Real Estate Transfer Tax Declaration (filed by Sellers online);

 

(t) evidence of Sellers authority to enter into the transactions contemplated under this Agreement reasonably satisfactory to Purchasers’ title company; and

 

(u) such other instruments of assignment, conveyance and transfer and lien waivers from all brokers and advisers as shall reasonably be requested by Purchasers, Purchasers’ title company or Purchasers’ lender to effect or evidence the transactions contemplated by this Agreement.

 

3.3 Closing Deliveries by Purchasers . At the Closing, Purchasers shall deliver or cause to be delivered to Sellers:

 

(a) the Initial Purchase Price;

 

(b) the Bill of Sale, executed by Purchasers;

 

(c) the Assignment and Assumption of Leases, executed by Purchasers;

 

(d) the Telecom Services Agreement, executed by Purchasers;

 

(e) the Master Services Agreement, executed by Purchasers;

 

(f) the Collocation Agreements, executed by Purchasers;

 

8

(g) the Dark Fiber Agreement, executed by Purchasers;

 

(h) the Exchange of Services Agreement, executed by Purchasers;

 

(i) the Office Lease, executed by Purchasers;

 

(j) the Post-Closing Escrow Agreement, executed by Purchasers;

 

(k) the opinions of Purchasers’ outside counsel substantially in the form set forth in Exhibit N ;

 

(l) the certificates to be delivered by Purchasers pursuant to Article VI ;

 

(m) the Assignment and Assumption of Contracts; and

 

(n) such other instruments of assumption, conveyance, acceptance and receipt and lien waivers as shall reasonably be requested by a Seller or Purchasers’ title company to effect or evidence the transactions contemplated by this Agreement.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

 

4.1 Representations and Warranties of Sellers . Each Seller, jointly and severally, represents and warrants to Purchasers as follows:

 

(a) Organization . Such Seller is a corporation, duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has the requisite power and authority to own, lease and operate its properties, to conduct its business as it is presently being conducted, and to enter into and perform its obligations under this Agreement and the other Transaction Agreements. Such Seller is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Material Adverse Effect.

 

(b) Authority; Valid and Binding Effect . (i) Such Seller has the corporate power and corporate authority to execute and deliver this Agreement and the other Transaction Agreements to which such Seller shall be a party, and to perform its obligations hereunder and thereunder, and (ii) the execution, delivery and performance by such Seller of this Agreement and the other Transaction Agreements to which such Seller shall be a party have been duly authorized by all necessary corporate actions of such Seller, and no further corporate action is necessary on the part of such Seller for such Seller to execute and deliver this Agreement and to consummate and perform such Seller’s obligations hereunder. This Agreement has been duly executed and delivered on behalf of such Seller and the other Transaction Agreements shall have been duly and validly executed and delivered by such Seller at or prior to the Closing. Assuming this Agreement constitutes and the other Transaction Agreements when executed and delivered at or prior to the Closing shall constitute legal, valid and binding agreements of the other parties hereto and thereto, this Agreement constitutes a legal, valid and binding agreement of such Seller, and each of the other Transaction Agreements

 

9

when executed and delivered prior to the Effective Time by such Seller shall constitute legal, valid and binding agreements of such Seller, in each case, enforceable against such Seller in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity.

 

(c) Non-contravention . Except as set forth on Section 4.1(c) of the written disclosure schedule previously delivered by Sellers to Purchasers and incorporated herein by this reference (the “ Sellers’ Disclosure Schedule ”), neither the execution and delivery by such Seller of this Agreement or the other Transaction Agreements to which such Seller shall be a party, nor the consummation or performance by such Seller of any of the transactions to be consummated or performed by it under this Agreement or such other Transaction Agreements, shall (i) violate or constitute a breach of any provision of the articles of incorporation or bylaws of such Seller, (ii) violate in any material respect any Laws applicable to such Seller, (iii) conflict with, give rise to a right of acceleration or termination under, result in any payment or benefit becoming due under, or result in a material breach of or constitute (with due notice or lapse of time or both) a material default under, any material Assigned Contract, note, indenture, agreement, lease or other instrument directly relating to the e^deltacom Business, the Assets or such Seller, or (iv) result in the creation or imposition of any Lien (other than a Permitted Lien) upon the Assets.

 

(d) Title to Properties; Absence of Liens; Condition and Sufficiency of Assets.

 

(i) At the Closing, Sellers shall transfer and convey to Purchasers good and marketable title to, or a valid leasehold interest in, all of the Assets, free and clear of all Liens, except for Permitted Liens.

 

(ii) No portion of the Real Property or any Improvements is the subject of, or affected by, any condemnation or eminent domain proceedings currently instituted or pending, and to the knowledge of Sellers, no such proceedings are threatened.

 

(iii) Except as set forth on Section 4.1(d)(iii) of the Sellers’ Disclosure Schedule, neither the Real Property, the Improvements nor the other Assets are subject to any Liens (other than Permitted Liens or any Liens that shall be released on or prior to Closing) or to any covenant or other restriction preventing or limiting Sellers’ right to convey Sellers’ right, title and interest in the Real Property, the Improvements and the other Assets.

 

(iv) To the knowledge of Sellers, Sellers have not received written notice of any pending or threatened claims against Sellers asserting that Sellers’ use of the Intellectual Property in the e^deltacom Business infringes upon the rights of third parties.

 

(v) EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THE BILL OF SALE, THE LIMITED WARRANTY DEED AND THIS SECTION 4.1 , (A) SUCH SELLER MAKES NO, AND THE ASSETS ARE BEING SOLD WITHOUT ANY, WARRANTY, EXPRESS OR IMPLIED, REGARDING TITLE TO THE ASSETS, INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES BY THE ASSETS, OR THE OPERATION, FITNESS FOR A PARTICULAR PURPOSE, OR MERCHANTABILITY OF THE ASSETS AND (B) PURCHASERS ARE BUYING THE ASSETS “AS IS” AND “WHERE IS” AND WITH ALL FAULTS. EACH SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING THE PROFITABILITY OF THE E^DELTACOM BUSINESS.

 

10

(e) Compliance with Law. Such Seller is in compliance with all Laws applicable to the Assets (other than the Real Property and the Conveyed Improvements) or the e^deltacom Business, except for violations that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Such Seller has not received any written notice from any governmental authority that such Seller is not in compliance with any Laws applicable to the Assets or the e^deltacom Business. Such Seller is in compliance in all material respects with all Laws applicable to the Real Property and the Conveyed Improvements and Seller has not received any written notice from any governmental authority that such Seller is not in compliance with any Laws applicable to the Real Property and the Conveyed Improvements.

 

(f) Litigation . Except as set forth on Section 4.1(f) of the Sellers’ Disclosure Schedule, as of the date hereof, there is no pending or, to the knowledge of such Seller, threatened litigation, arbitration, administrative proceeding or other legal action, investigation or proceeding against such Seller with respect to the e^deltacom Business or any Asset which, individually or in the aggregate, would reasonably be expected to have a material adverse impact on the e^deltacom Business or any Asset. As of the date hereof, such Seller is not aware of any event, cause or condition that might reasonably be expected to give rise to or properly form the basis of any such suit, action, investigation, arbitration or proceeding which, individually or in the aggregate, would reasonably be expected to have a material adverse impact on the e^deltacom Business or any Asset. No portion of the e^deltacom Business and no Asset is subject to any material order, writ, judgment, injunction, decree, determination, award or settlement agreement (each, an “ Order ”).

 

(g) No Other Liabilities or Contingencies . Except for the Assumed Liabilities and except as set forth on Section 4.1(g) of the Sellers’ Disclosure Schedule, (i) there exist no liabilities or obligations of any nature (whether direct or indirect, known or unknown, absolute or contingent, liquidated or nonliquidated, due or to become due, accrued or unaccrued, matured or unmatured), of such Seller that relate to the e^deltacom Business or the Assets, except for such liabilities and obligations as, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect and (ii) notwithstanding the foregoing, except for the Permitted Liens and Liens that shall be released prior to Closing, there exist no liabilities or obligations of any nature (whether direct or indirect, known or unknown, absolute or contingent, liquidated or nonliquidated, due or to become due, accrued or unaccrued, matured or unmatured), of such Seller that relate to the Real Property or Conveyed Improvements.

 

(h) Consents and Approvals .

 

(i) The execution, delivery and performance by such Seller of this Agreement do not and shall not require any action by or in respect of, consent or approval of, or filing with, any governmental body, agency, official or authority other than (A) filings pursuant to the Uniform Commercial Code or otherwise in connection with the release of Liens on the Assets; (B) as may be necessary as a result of any facts or circumstances relating solely to Seller or its Affiliates; and (C) other actions, consents, approvals, filings and notifications, the failure of which to make or obtain would not prevent or materially delay such Seller from performing its obligations under this Agreement, or that are otherwise immaterial to Sellers, taken as a whole, and the consummation of the transactions contemplated by this Agreement.

 

11

(ii) Except as set forth on Section 4.1(h)(ii) of the Sellers’ Disclosure Schedule, no consent, waiver, agreement, approval, or authorization of any Person (other than a governmental body, agency, official or authority) is required for the execution, delivery and performance by such Seller of this Agreement.

 

(i) Tax Matters . Except as set forth on Section 4.1(i) of the Sellers’ Disclosure Schedule:

 

(i) Such Seller has timely filed or caused to be filed with the appropriate taxing authorities all tax returns required to be filed through the date hereof and shall timely file or cause to be filed any such tax returns required to be filed on or prior to the Closing Date. Such tax returns are true, complete and accurate in all material respects. No claim has ever been made by a taxing authority in a jurisdiction where a Seller does not file tax returns that Seller is or may be subject to taxation by that jurisdiction.

 

(ii) All material Taxes due and payable for which such Seller is liable have been paid in full. All material Taxes required to be withheld by Sellers have been collected and withheld and have been timely paid to the respective governmental agencies.

 

(iii) No deficiencies for Taxes have been claimed, proposed or assessed by any taxing authority against such Seller and there are no pending audits, examinations or other proceedings in respect of any Taxes. No extension or waiver of a statute of limitations relating to Taxes is in effect with respect to such Seller.

 

(iv) There are no Liens for Taxes on any of the Assets, other than Liens for current Taxes not yet due and payable.

 

(v) None of the Assets directly or indirectly secures any debt the interest on which is tax-exempt under Section 103(a) of the Code. None of the Assets is property required to be treated as being owned by any other Person pursuant to the “safe harbor lease” provisions of former Section 168(f)(8) of the Code. None of the Assets is “tax exempt use property” within the meaning of Section 168(h) of the Code.

 

(vi) Notwithstanding the foregoing, the representations and warranties set forth in Section 4.1(i)(i) , Section 4.1(i)(ii) and Section 4.1(i)(iii) hereof shall not encompass or be applicable to any Tax or to any return relating to a Tax to the extent that, under applicable Tax law, the Assets cannot be subjected to Liens for such Tax and Purchasers cannot be liable for such Tax.

 

(j) Employee Benefit Plans . Neither the execution and delivery by such Seller of this Agreement or the other Transaction Agreements to which such Seller shall be a party, nor the consummation of the transactions contemplated hereby or thereby, shall result in any liability to Purchasers under any “employee benefits plans,” as defined in Section 3(3) of ERISA, or any pension, retirement, profit sharing, deferred compensation, bonus, severance, vacation, commission, incentive compensation (including cash, stock and option plans or arrangements), life insurance, health and disability insurance, hospitalization or other employee benefit plans, agreements or arrangements (including any contracts or agreements with trustees, insurance companies or other Person relating to any such employee benefit plans or arrangements) and the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”)) (whether written or oral) established, maintained or contributed to by such Seller or any ERISA Affiliate, or with respect to which such Seller or any

 

12

ERISA Affiliate could have liability, in each case, with respect to the current or former employees, directors, officers or consultants or other independent contractors of the e^deltacom Business (the “ Employee Benefit Plans ”).

 

(k) Labor Matters . (i) Except as set forth in Section 4.1(k)(i) of the Sellers’ Disclosure Schedule, as of the date hereof, there are no (A) labor strikes, disputes, slowdowns, representation or certification campaigns known to such Seller with respect to the e^deltacom Business, work stoppages or other concerted activities with respect to employees of such Seller, pending or, to the knowledge of such Seller, threatened against or affecting the e^deltacom Business, (B) grievance or arbitration proceedings, decisions, side letters, letter agreements, letters of understanding or settlement agreements, in each case, arising out of collective bargaining agreements to which such Seller is a party or (C) to the knowledge of such Seller, activities or proceedings of any labor union or employee association to organize any such employees.

 

(ii) Except as set forth in Section 4.1(k)(ii) of the Sellers’ Disclosure Schedule, as of the date hereof, with respect to the e^deltacom Business, there are no pending administrative matters with any federal, provincial, state or local agencies regarding (A) violations or alleged violations of any federal, provincial, state or local wage and hour law or any federal, provincial, state or local law with respect to discrimination on the basis of race, color, creed, national origin, religion or any other basis under such federal, provincial, state or local law, (B) any claimed violation of Title VII of the 1964 Civil Rights Act, as amended, (C) any allegation or claim arising out of Executive Order 11246 or any other applicable order relating to governmental contractors or state contractors or (D) any violation or alleged violation of the Age Discrimination and Employment Act, as amended, or any other federal, provincial, state or local statute or ordinance, or any other applicable laws with respect to wages, hours, employment practices and terms and conditions of employment.

 

(iii) As of the date hereof, such Seller is not a party to or subject to, and is not currently negotiating in connection with entering into, any collective bargaining agreement or other contract or understanding with a labor union or labor organization.

 

(l) Assigned Contracts . All Assigned Contracts are, as of the date hereof, valid, binding and in full force and effect and are enforceable by IFN or ITC, as applicable, in accordance with their respective terms, except as may be limited by bankruptcy laws and other similar laws affecting creditors’ rights generally and general principles of equity. Except as set forth in Section 4.1(l) of the Sellers’ Disclosure Schedule, as of the date hereof, neither Seller nor, to the knowledge of such Seller, any other party thereto, is or is alleged to be in material violation of or in material default in respect of, nor has there occurred any event or condition which (with or without notice or lapse of time or both) would constitute a material violation of or material default under, any material Assigned Contract. As of the date hereof, none of the counterparties to any Assigned Contract has given notice of termination of such Assigned Contract. Complete and correct copies of the top thirty (30) Customer Contracts (excluding that of any Material Customer), based upon monthly recurring charges as of June 1, 2005, have been provided to Purchasers.

 

(m) Financial and Other Performance Statements . Section 4.1(m) of the Sellers’ Disclosure Schedule sets forth true and accurate copies of (i) the unaudited statements of operations of the e^deltacom Business for the fiscal year ended December 31, 2004 and the six months ended June 30, 2005 (the “ Operating Financial Statements ”) prepared in accordance with GAAP with the exceptions noted within the attached Operating Financial Statements, (ii) the unaudited details of

 

13

certain selling, general and administrative expenses of the e^deltacom Business for the six months ended June 30, 2005 (the “ Detailed SG&A Breakdown ”) prepared in accordance with GAAP with the exceptions noted within the attached Detailed SG&A Breakdown, (iii) a schedule of Working Capital as of June 30, 2005 (the “ June Working Capital Schedule ”), and (iv) a summary of the invoiced charges and credits and categorization of those charges and credits amongst services as invoiced to customers of the e^deltacom Business in each of the months specified in such summary (the “ Invoice Summary ”). The June Working Capital Schedule fairly presents, in all material respects, the Working Capital as of June 30, 2005. The Invoice Summary fairly presents, in all material respects, a summary of the invoiced charges and credits and categorization of those charges and credits amongst services as invoiced to customers of the e^deltacom Business in each of the months specified in the Invoice Summary.

 

(n) Environmental . Except as set forth in Section 4.1(n) of the Sellers’ Disclosure Schedule, to the knowledge of such Seller, as of the date hereof:

 

(i) there are no pending or, to the knowledge of such Seller, threatened actions, suits, claims, legal proceedings or any other proceedings based on Hazardous Materials or the Environmental Laws at the Real Property or otherwise arising from either Sellers’ activities at the Real Property involving Hazardous Materials;

 

(ii) to the knowledge of such Seller, there are no conditions, facilities, procedures or any other facts or circumstances which could reasonably be expected to give rise to claims, expenses, losses, liabilities, or governmental action against Purchasers in connection with any Hazardous Materials present at or disposed from the Real Property, from any Environmental Laws, or otherwise arising from Sellers’ activities at the Real Property involving Hazardous Materials;

 

(iii) to the knowledge of such Seller, neither polychlorinated biphenyls nor asbestos-containing materials are present on or in the Real Property; and

 

(iv) such Seller does not operate any tanks, impoundments, vessels or other containers used for the storage of Hazardous Substances on or below the surface of the Real Property, the operation of which requires certification or licensure by any governmental or regulatory agency.

 

(o) Absence of Changes . Except as set forth on Section 4.1(o) of the Sellers’ Disclosure Schedule and except as has not had and would reasonably not be expected to have a Material Adverse Effect, from June 30, 2005 through the date hereof, there has not been any transaction or occurrence in which either Seller, with respect to the e^deltacom Business, has:

 

(i) incurred any obligations or liabilities of any nature other than items incurred in the ordinary course of business consistent with past practice, or increased (or experienced any change in the assumptions underlying or the methods of calculating) any bad debt, contingency or other reserve, other than in the ordinary course of its business consistent with past practice;

 

(ii) paid, discharged, or satisfied any claim, Lien, obligation, or liability (whether absolute, accrued, contingent, and whether due or to become due), other than the payment, discharge, or satisfaction in the ordinary course of business consistent with past practice;

 

14

(iii) written down or written up the value of any inventory (including write-downs by reason of shrinkage or markdowns), determined as collectible any accounts receivable or any portion thereof which were previously considered uncollectible, or written off as uncollectible any accounts receivable under the Customer Contracts and the Leases or any portion thereof, except for write-downs, write-ups, and write-offs, none of which is material in amount, in the ordinary course of business consistent with past practice;

 

(iv) waived any material claims or rights other than in the ordinary course of business consistent with past practice;

 

(v) paid, loaned, distributed or advanced any amounts to, sold, transferred or leased any properties or assets (real, personal or mixed, tangible or intangible) to, purchased, leased, licensed, or otherwise acquired any properties or assets from, or entered into any other agreement or arrangement with any Employee, except for routine travel advances to Employees in the ordinary course of business consistent with past practice;

 

(vi) sold, transferred or otherwise disposed of any of the rights or assets primarily attributable to the e^deltacom Business that involved an amount in excess of One Hundred Thousand Dollars ($100,000) in the aggregate, except in the ordinary course of business consistent with past practice;

 

(vii) granted or incurred any obligation for any increase in the compensation of any Employee (including, without limitation, any increase pursuant to any Employee Benefit Plan), except for annual or more frequent increases to Employees in the ordinary course of business consistent with past practice;

 

(viii) suffered any material damage, material destruction or material loss, whether or not covered by insurance, affecting the Assets or the e^deltacom Business;

 

(ix) leased, licensed or granted to any Person any material rights in or to the Assets or the e^deltacom Business outside the ordinary course of business consistent with past practice;

 

(x) received or become aware of any notice of termination or potential termination of any material Assigned Contract;

 

(xi) entered into or consummated on behalf of the e^deltacom Business, except in the ordinary course of business consistent with past practice, any contract, commitment or transaction that involved, in any case, an amount in excess of One Hundred Thousand Dollars ($100,000) in the aggregate;

 

(xii) materially amended any Assigned Contract other than in the ordinary course of business consistent with past practice;

 

(xiii) made any change in any method of accounting or accounting principle, practice or policy;

 

(xiv) experienced any labor union organizing activity, or any actual or threatened employee strikes, work stoppages or lockouts, or received any complaint by any of its Employees or by any federal, state or local government regulator or agency with respect to any alleged material violation by a Seller of any Laws governing labor standards, including, without limitation, wages, safety standards, discrimination of any nature or sexual harassment;

 

15

(xv) failed to replenish its inventories and supplies in a normal and customary manner consistent with its prior practice, or made any purchase commitment of a material amount in excess of the normal, ordinary and usual requirements of its business or at any price materially in excess of the then current market price available to Sellers, or made any material change in its selling, pricing, advertising or personnel practices other than in the ordinary course of business consistent with past practice;

 

(xvi) instituted, settled or agreed to settle any litigation, action or proceeding before any governmental entity relating to it other than in the ordinary course of business consistent with past practice, but not in any case involving amounts in excess of Twenty-Five Thousand Dollars ($25,000) individually or Fifty Thousand Dollars ($50,000) in the aggregate; or

 

(xvii) entered into any contract or agreement to do or engage in any of the foregoing.

 

(p) Assigned Leases . Complete and correct copies of all Leases described in Seller’s Disclosure Schedule 2.1(c) have been provided to Purchasers. All Leases are, as of the date hereof, valid, binding and in full force and effect and are enforceable by IFN or ITC, as applicable, in accordance with their respective terms, except as may be limited by bankruptcy laws and other similar laws affecting creditors’ rights generally and general principles of equity. Except as set forth in Section 4.1(p) of the Sellers’ Disclosure Schedule, as of the date hereof, neither Seller nor, to the knowledge of such Seller, any other party thereto, is or is alleged to be in violation of or in default in respect of, nor has there occurred any event or condition which (with or without notice or lapse of time or both) would constitute a violation of or default under, any such Lease. As of the date hereof, none of the counterparties to any Lease has given notice of termination of such Lease.

 

4.2 Representations and Warranties of Purchasers . Each Purchaser represents and warrants to each Seller as follows:

 

(a) Organization of Purchasers . Each Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to own, lease and operate its properties, to conduct its business as it is presently being conducted, and to enter into and perform its obligations under this Agreement and the other Transaction Agreements.

 

(b) Authority; Validity and Binding Effect . (i) Each Purchaser has the corporate power and authority to execute and deliver this Agreement and the other Transaction Agreements, and to perform its obligations hereunder and thereunder, and (ii) the execution, delivery and performance of this Agreement and the other Transaction Agreements by each Purchaser have been duly authorized by all necessary corporate actions of such Purchaser, and no further action is necessary on the part of such Purchaser for such Purchaser to execute and deliver this Agreement and to consummate and perform such Purchaser’s obligations hereunder. This Agreement has been duly executed and delivered on behalf of each Purchaser and the other Transaction Agreements shall have been duly and validly executed and delivered by each Purchaser at or prior to the Closing. Assuming this Agreement constitutes and the other Transaction Agreements when executed and delivered at or prior to the Closing shall constitute legal, valid and binding agreements of the other parties hereto

 

16

and thereto, this Agreement constitutes a legal, valid and binding agreement of each Purchaser, and each of the other Transaction Agreements when executed and delivered prior to the Closing by each Purchaser shall constitute legal, valid and binding agreements of each Purchaser, in each case, enforceable against each Purchaser in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the enforcement of creditors’ rights generally and general equitable principles, regardless of whether enforceability is considered in a proceeding at law or in equity.

 

(c) Non-contravention . Neither the execution and delivery by any Purchaser of this Agreement or the other Transaction Agreements, nor the consummation or performance by any Purchaser of any of the transactions to be consummated or performed