AGREEMENT AND PLAN OF MERGER
 
BY
 
AND
 
AMONG
 
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.,
 
FUSION MPHC ACQUISITION CORP.,
 
MEGAPATH HOLDING CORPORATION
 
AND
 
SHAREHOLDER REPRESENTATIVE SERVICES LLC, AS STOCKHOLDER REPRESENTATIVE
 
DATED MAY 4, 2018
 
 
 
 
 

 
ARTICLE I
THE MERGER
1
Section 1.1
The Merger
1
Section 1.2
Closing
2
Section 1.3
Effective Time
2
Section 1.4
Effects
2
Section 1.5
Conversion of Securities
3
Section 1.6
Certificates of Incorporation; Bylaws
4
Section 1.7
Directors
4
Section 1.8
Officers
4
ARTICLE II
DELIVERY OF MERGER CONSIDERATION
4
Section 2.1
Exchange of Shares
4
Section 2.2
Stock Transfer Books
7
Section 2.3
Treatment of Options
7
Section 2.4
Appraisal Rights
7
Section 2.5
Closing Statement
8
Section 2.6
Transactions to Be Effected at the Closing
8
Section 2.7
Merger Consideration Adjustment
8
Section 2.8
Payments from the Holdback Account
10
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
10
Section 3.1
Corporate Organization
11
Section 3.2
Capitalization
12
Section 3.3
Authority; No Violation
13
Section 3.4
Consents and Approvals
14
Section 3.5
Financial Statements
14
Section 3.6
Absence of Company Material Adverse Effect
15
Section 3.7
Legal Proceedings
15
Section 3.8
Taxes and Tax Returns
16
Section 3.9
Employee Benefit Plans; Labor
17
Section 3.10
Compliance with Law
20
Section 3.11
Environmental Matters
20
Section 3.12
Material Contracts
21
Section 3.13
Intellectual Property; Data Privacy
22
Section 3.14
Title to Properties; Assets
25
Section 3.15
Real Property
25
Section 3.16
Regulatory Matters
25
Section 3.17
Interconnection Agreements
27
Section 3.18
Network Facilities
27
Section 3.19
Insurance
28
Section 3.20
Application of Takeover Laws
28
Section 3.21
Affiliate Transactions
29
Section 3.22
Customers and Suppliers
29
Section 3.23
Directors, Officers, Managers
29
Section 3.24
Books and Records
29
Section 3.25
Broker’s Fees
30

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
30
Section 4.1
Parent Corporate Organization
30
Section 4.2
Merger Sub Corporate Organization
30
Section 4.3
Authority; No Violation
30
Section 4.4
Consents and Approvals
31
Section 4.5
Financing
31
Section 4.6
Legal Proceedings
31
Section 4.7
SEC Reports
31
Section 4.8
Parent Common Stock
31

 
 

 
 
Section 4.9
Investment Intent
32
Section 4.10
Broker’s Fees
32
ARTICLE V
PRE-CLOSING COVENANTS
32
Section 5.1
Conduct of Businesses by the Company Prior to the Effective Time
32
Section 5.2
Company Forbearances
32
ARTICLE VI
ADDITIONAL AGREEMENTS
35
Section 6.1
Filings; Other Actions; Notification
35
Section 6.2
Written Consent
37
Section 6.3
No Solicitation of Other Bids
37
Section 6.4
Access to Information
38
Section 6.5
Employee Matters
39
Section 6.6
Advice of Changes
40
Section 6.7
Transaction Litigation
40
Section 6.8
Control of the Other Party’s Business
40
Section 6.9
Subsidiary Compliance
41
Section 6.10
Publicity
41
Section 6.11
Takeover Laws
41
Section 6.12
Indemnification of Officers and Directors
41
Section 6.13
Related Party Agreements
42
Section 6.14
Organizational Integration
42
Section 6.15
Resignations
43
Section 6.16
Rule 144 Reporting
43
ARTICLE VII
CLOSING CONDITIONS
43
Section 7.1
Conditions to Each Party’s Obligation to Effect the Merger
43
Section 7.2
Conditions to Obligations of Parent and Merger Sub
43
Section 7.3
Conditions to Obligations of the Company
45
Section 7.4
Frustration of Closing Conditions
45
ARTICLE VIII
TERMINATION AND AMENDMENT
45
Section 8.1
Termination
45
Section 8.2
Effect of Termination
46
ARTICLE IX
INDEMNIFICATION
46
Section 9.1
Survival
46
Section 9.2
Indemnification By Stockholders and Optionholders
46
Section 9.3
Indemnification By Parent
47
Section 9.4
Certain Limitations
47
Section 9.5
Indemnification Procedures
49
Section 9.6
Payments; Escrow Fund
52
Section 9.7
Tax Treatment of Indemnification Payments
53
Section 9.8
Effect of Investigation
53
Section 9.9
Exclusive Remedies
53
ARTICLE X
GENERAL PROVISIONS
53
Section 10.1
Notices
53
Section 10.2
Interpretation
54
Section 10.3
Counterparts
55
Section 10.4
Entire Agreement; Third Party Beneficiaries
55
Section 10.5
Amendment
55
Section 10.6
Extension; Waiver
56
Section 10.7
Governing Law
56
Section 10.8
Jurisdiction
56
Section 10.9
Fees and Expenses
58
Section 10.10
Assignment
58
Section 10.11
Specific Performance
58
Section 10.12
Waivers
58

 
 

 
 
Section 10.13
Severability
58
Section 10.14
Stockholder Representative
59
Section 10.15
Tax Matters
61
Section 10.16
Definitions
62
Section 10.17
Liability of Financing Source Parties
77

 
 
Exhibits
Exhibit A 

-            
Form of Merger Certificate
Exhibit B    

-            
Amended and Restated Certificate of Incorporation
Exhibit C      

-            
Amended and Restated Bylaws
Exhibit D       

-            
Letter of Transmittal
Exhibit E       

-            
Form of Escrow Agreement
Exhibit F      

-            
Example of Working Capital Calculation
 
Disclosure Schedules
 
 

 

 
AGREEMENT AND PLAN OF MERGER
 
THIS AGREEMENT AND PLAN OF MERGER, dated May 4, 2018 (as may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms, this “Agreement”), by and among Fusion Telecommunications International,
Inc., a Delaware corporation (“Parent”), Fusion MPHC Acquisition Corp., a
Delaware corporation (“Merger Sub”), MegaPath Holding Corporation, a Delaware
corporation (the “Company”) and Shareholder Representative Services LLC, a
Colorado limited liability company, solely in its capacity as the representative
of the Stockholders and Optionholders (the “Stockholder Representative”).
Parent, Merger Sub and the Company are hereinafter sometimes referred to as a
“Party” and collectively as the “Parties.” Capitalized terms used but not
otherwise defined herein have the meanings set forth in Section 10.16.
 
RECITALS
 
A.           The Boards of Directors of each of the Company and Merger Sub have
(1) approved and adopted, and declared advisable and in the best interests of
their respective corporations and stockholders, this Agreement and the
transactions contemplated hereby, including the merger of Merger Sub with and
into the Company (the “Merger”), with the Company being the survivor in the
Merger, as more fully provided for in this Agreement, directed that this
Agreement be submitted to such corporation’s stockholders for approval and
adoption, and (3) recommended that their stockholders approve and adopt this
Agreement.
 
B.           The board of directors of Parent has approved and adopted this
Agreement and the transactions contemplated hereby, and Parent, in its capacity
as the sole stockholder of Merger Sub, will approve and adopt this Agreement
promptly following the execution of this Agreement.
 
C.           It is anticipated that, following the execution and delivery of
this Agreement, the required stockholders of the Company will execute and
deliver to Parent and Merger Sub a written consent approving and adopting this
Agreement.
 
Parent, Merger Sub and the Company hereby agree as follows:
 
ARTICLE I
THE MERGER
 
Section 1.1 The Merger. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
“DGCL”), Merger Sub will be merged with and into the Company at the Effective
Time. At the Effective Time, the separate corporate existence of Merger Sub will
cease, and the Company will continue as the surviving corporation (the
“Surviving Corporation”) and will succeed to and assume all the rights and
obligations of Merger Sub in accordance with the DGCL.
 
 
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Section 1.2 Closing. Subject to the terms and conditions of this Agreement, the
closing (the “Closing”) of the Merger shall take place (i) on the final day of
the calendar month in which the satisfaction or, to the extent permitted by Law,
waiver of the conditions set forth in Article VII occurs (other than those
conditions that by their terms are to be satisfied at the Closing, but subject
to the satisfaction or, to the extent permitted by Law, waiver of those
conditions at Closing), or (ii) such other time and place as Parent and the
Company may mutually agree, provided that if the Closing occurs on any day other
than the last day of a calendar month, then the Working Capital as of 11:59 p.m.
on the last day of the calendar month preceding the Closing shall be deemed to
be the Closing Working Capital. The date on which the Closing occurs is
hereinafter referred to as the “Closing Date.”
 
Section 1.3 Effective Time. On the Closing Date, Parent and the Company will
cause to be filed with the Secretary of State of Delaware a certificate of
merger, substantially in the form attached hereto as Exhibit A to effect the
Merger (collectively, the “Certificate of Merger”) executed in accordance with
the relevant provisions of the DGCL and will make all other filings or
recordings required under the DGCL to effect the Merger. The Merger will become
effective at such time as the Certificate of Merger is duly filed with such
Secretary of State of Delaware, or at such later time as Parent and the Company
shall agree and specify in the Certificate of Merger (the time the Merger
becomes effective being the “Effective Time”).
 
Section 1.4 Effects. The Merger will have the effects provided in this Agreement
and in the applicable provisions of the DGCL.
 
 
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Section 1.5 Conversion of Securities.
 
(a) At the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Merger Sub, the Company or the holders of the Company Capital
Stock, each share of Company Capital Stock (each, a “Share”) issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares and any Shares to be cancelled pursuant to Section 1.5(b)) will be
converted automatically into the right to receive, in accordance with the terms
of this Agreement, (i) the Initial Per Share Merger Consideration, without
interest, to be paid as contemplated by Section 2.1, (ii) the Additional Per
Share Merger Consideration, without interest, payable in the manner set forth in
Section 2.7, (iii) a pro-rata portion of any funds remaining in the Escrow Fund
after the satisfaction of obligations payable therefrom in accordance with this
Agreement and the Escrow Agreement, at the respective times and subject to the
contingencies specified herein and therein, and (iv) a pro-rata portion of any
funds remaining in the Holdback Account after the satisfaction of obligations
payable therefrom in accordance with this Agreement, calculated and payable in
the manner set forth in Section 2.8. Parent, in its sole discretion, may elect
to pay up to an aggregate of $10.0 million of the Initial Merger Consideration
in shares of Parent Common Stock; provided, however, that the Initial Merger
Consideration paid to any Stockholder surrendering Shares shall not be paid in
shares of Parent Common Stock with a value (based on the formula below) that
constitutes more than such Stockholder’s Individual Share Percentage of such
aggregate elected dollar amount; and provided, further, that the Initial Merger
Consideration paid to any Stockholder surrendering Shares that does not
represent in the Letter of Transmittal that such Stockholder is an Accredited
Investor shall be paid only in cash. If Parent elects to pay up to $10.0 million
of the Initial Merger Consideration in shares of Parent Common Stock, the number
of shares of Parent Common Stock shall be calculated based on the greater of (i)
$3.85 per share; or (ii) the weighted average closing price of the Parent Common
Stock during the ten (10) trading day period occurring three (3) Business Days
prior to the date of the public announcement regarding the execution of this
Agreement, in each case as adjusted to give appropriate effect to any stock
split or reverse stock split effectuated by Parent. Except for Dissenting Shares
and any Shares to be cancelled pursuant to Section 1.5(b), as a result of the
Merger, each holder of a certificate or certificates that immediately prior to
the Effective Time represented outstanding Shares (“Certificates”) and each
holder of Shares outstanding immediately prior to the Effective Time that are
not represented by Certificates (“Book-Entry Shares”) will thereafter cease to
have any rights with respect to such Shares except the right to receive the
applicable Merger Consideration, to be paid, without interest, in consideration
therefor upon surrender of such Certificate or Book-Entry Shares in accordance
with Section 2.1(b) (or in the case of a lost, stolen or destroyed Certificate,
Section 2.1(f)).
 
(b) At the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Merger Sub or the Company, each share of Company Capital Stock
held in the treasury of the Company or owned of record by any Company Subsidiary
immediately prior to the Effective Time will automatically be cancelled without
any conversion thereof and no payment or distribution will be made with respect
thereto.
 
(c) Each issued and outstanding share of common stock of Merger Sub will be
converted into and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
 
 
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Section 1.6 Certificates of Incorporation; Bylaws.
 
(a) At the Effective Time, the Company’s certificate of incorporation will, by
virtue of the Merger, be amended and restated in its entirety in the form
attached hereto as Exhibit B, and as so amended and restated will be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided therein or by applicable Law.
 
(b) At the Effective Time, the Company Bylaws will, by virtue of the Merger, be
amended and restated in their entirety in the form attached hereto as Exhibit C,
and as so amended and restated will be the bylaws of the Surviving Corporation,
until thereafter amended as provided therein or by applicable Law.
 
Section 1.7 Directors. The parties will take all necessary action such that,
from and after the Effective Time, the directors of Merger Sub immediately prior
to the Effective Time will be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
 
Section 1.8 Officers. The parties will take all necessary action such that, from
and after the Effective Time, the officers of Merger Sub immediately prior to
the Effective Time will be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may be.
 
ARTICLE II
DELIVERY OF MERGER CONSIDERATION
 
Section 2.1 Exchange of Shares.
 
(a) Exchange Procedures.
 
(i) Prior to the Closing Date, the Company shall distribute to each Person who
is expected to be, at the Effective Time, a holder of record of Shares entitled
to receive the Merger Consideration pursuant to Section 1.5(a): (A) a letter of
transmittal, in substantially the form attached hereto as Exhibit D (the “Letter
of Transmittal”) and containing such provisions as Parent may reasonably specify
(including a provision confirming that delivery will be effected, and risk of
loss and title will pass, only upon proper delivery of the Certificates to
Parent or, in the case of Book-Entry Shares, upon adherence to the procedures
set forth in the Letter of Transmittal; each Stockholder’s agreement to accept
their indemnification obligations set forth in Article IX, the choice of law
provisions in Section 10.7 and the exclusive forum provisions in Section 10.8;
each Stockholder’s representation as to whether or not such Stockholder is an
Accredited Investor; customary investment representations with respect to any
receipt of Parent Common Stock; and an acknowledgement that any certificates
received representing Parent Common Stock will bear legends customary for
unregistered shares), and (B) instructions for use in effecting the surrender of
such holder’s Certificates or Book-Entry Shares in exchange for payment of the
their portion of the Merger Consideration issuable and payable in respect
thereof pursuant to such Letter of Transmittal.
 
 
-4-

 
 
(ii) Each holder of Shares who has, prior to the Effective Time, properly
completed, executed and delivered to the Company (who shall have thereafter
delivered a copy of such documents to Parent at or prior to the Closing) a
Letter of Transmittal and any and all Certificate(s) evidencing such holder’s
Shares (or an Affidavit of Loss in lieu thereof) shall be entitled to receive
from Parent at the Closing, and Parent shall pay or cause to be paid to each
such Stockholder at the Closing, (i) an amount in cash and shares of Parent
Common Stock (to the extent permitted by this Agreement and if such holder is an
Accredited Investor) equal to the product (rounded to the nearest cent) of (A)
the number of Shares represented by such holder’s properly surrendered
Certificates plus the number, if any, of such holders Book-Entry Shares and (B)
the Initial Per Share Merger Consideration.
 
(iii) With respect to each holder of Shares who has not properly completed,
executed and delivered a Letter of Transmittal to the Company, or who has failed
to deliver the Certificate(s) evidencing such Shares (or an Affidavit of Loss in
lieu thereof) to the Company, in each case prior to the Effective Time, Parent
shall (x) deliver or cause to be delivered at the Closing to an account of the
Payments Administrator specified by the Stockholder Representative not less than
two (2) Business Days prior to the Closing Date (the “Stockholder Payment
Account”) an amount in cash equal to (I) the product (rounded to the nearest
cent) of (A) the number of Shares held by all such holders (other than
Dissenting Shares) and (B) the Initial Per Share Merger Consideration, less (II)
the aggregate cash value (based on the formula in Section 1.5(a)) of the shares
of Parent Common Stock to be included in the Initial Merger Consideration that
are to be issued to such holders assuming that all such holders are Accredited
Investors, and (y) cause its transfer agent to issue at the Closing all such
shares of Parent Common Stock and hold such shares deliverable to each such
holder pending such holder’s delivery of the items set forth in the following
sentence. Such cash shall be held in the Stockholder Payment Account and such
shares shall be held by Parent’s transfer agent (in each case, subject to
applicable abandoned property, escheat and similar Laws) for distribution to
each such holder when and as such holder delivers a properly completed and
executed Letter of Transmittal and the Certificate(s) evidencing such holder’s
Shares (or an Affidavit of Loss in lieu thereof) to the Payments Administrator
(who shall promptly thereafter deliver such documents to Parent), at which time
the Payments Administrator shall distribute or cause to be distributed to such
holder from the funds held in the Stockholder Payment Account the same cash
amount (payable in the same manner) as such holder would have received from
Parent under Section 2.1(a)(ii) if such Letter of Transmittal and Certificate(s)
(or Affidavit of Loss in lieu thereof) had been delivered to the Company prior
to the Effective Time and Parent shall cause its transfer agent to deliver to
such holder such shares issued in such holder’s name and held by such transfer
agent. Notwithstanding the foregoing, if any such holder is not an Accredited
Investor (based on such holder’s Letter of Transmittal), then the shares of
Parent Common Stock issued in such holder’s name and held by Parent’s transfer
agent shall be cancelled and, in lieu of delivery of such shares to such holder,
Parent shall deliver to such holder a cash amount equal to the value of such
cancelled shares, as determined in accordance with the formula set forth in
Section 1.5(a) of this Agreement.
 
 
-5-

 
 
(iv) Following the Closing, (A) any holder to which Section 2.1(a)(iii) applies
shall be entitled to look only to the funds in the Stockholder Payment Account
and, if such holder is not an Accredited Investor, only to Parent for any cash
payable in lieu of shares of Parent Common Stock (in each case, subject to
applicable abandoned property, escheat or similar Laws) and only as general
creditors thereof with respect to the cash amount that such holder is entitled
to receive pursuant to Section 2.1(a)(iii) upon delivery to the Payments
Administrator of a properly completed and executed Letter of Transmittal and the
Certificate(s) evidencing such holder’s Shares (or an Affidavit of Loss in lieu
thereof), without any interest thereon, and (B) none of Parent, the Surviving
Corporation or the Stockholder Representative shall be liable to any Stockholder
for any amounts and shares of Parent Common Stock delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Laws.
 
(b) Escrow Fund. In accordance with the Escrow Agreement, Parent shall deposit
into the Escrow Fund the Escrow Amount (such amount, including any interest or
other amounts earned thereon and less any disbursements therefrom in accordance
with the Escrow Agreement, the “Escrow Fund”), to be held for the purpose of
securing the indemnification and other obligations of the Stockholders set forth
in this Agreement.
 
(c) No Further Rights in Company Capital Stock. All Merger Consideration issued
or paid upon surrender of Certificates or transfer of Book-Entry Shares in
accordance with the terms of this Article II will be deemed to have been issued
or paid, as the case may be, in full satisfaction of all rights pertaining to
the Shares formerly represented by such Certificates or Book-Entry Shares.
 
(d) Adjustments. If at any time during the period between the date of this
Agreement and the Effective Time, any change in the outstanding shares of
Company Capital Stock occurs as a result of any reclassification,
recapitalization, stock split (including a reverse stock split) or combination,
exchange or readjustment of shares, or any stock dividend or stock distribution
with a record date during such period, the Initial Per Share Merger
Consideration will be equitably adjusted to reflect such change.
 
(e) Withholding Rights. Each of the Surviving Corporation, Parent and Merger Sub
will be entitled to deduct and withhold from any consideration otherwise payable
pursuant to this Agreement such amount as it is required to deduct and withhold
with respect to the making of such payment under the Code, the Treasury
Regulations, any provision of applicable state, local or foreign Tax Law or any
other Law. To the extent that amounts are so withheld, such withheld amounts
will be treated for purposes of this Agreement as having been paid to the Person
in respect of which such deduction and withholding was made.
 
(f) Lost Certificates. In the event that any Certificate has been lost, stolen
or destroyed, the holder of such Certificate may, in lieu of delivering such
Certificate with the Letter of Transmittal delivered in accordance with Section
2.1(a)(ii) or Section 2.1(a)(iii), complete, execute and deliver to the Payments
Administrator, an affidavit of loss and indemnity in a form reasonably
satisfactory to Parent (an “Affidavit of Loss”).
 
 
-6-

 
 
(g) Termination of Stockholder Payment Account. Any funds remaining in the
Stockholder Payment Account on the date that is six (6) months after the Closing
Date will be delivered to Parent, and any holders of Shares who have not
theretofore complied with this Section 2.1 will thereafter look only to Parent
for the Merger Consideration to which they are entitled pursuant to Section 1.5.
 
Section 2.2 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company will be closed and there will be no further registration of
transfers of Shares thereafter on the records of the Company. On or after the
Effective Time, any Certificates or Book-Entry Shares presented to Parent for
any reason will be cancelled and exchanged for the applicable portion of the
Merger Consideration with respect to the Shares formerly represented by such
Certificates or Book-Entry Shares to which the holders thereof are entitled
pursuant to Section 1.5(a).
 
Section 2.3 Treatment of Options. Prior to the Closing, the Company will take
all actions necessary in accordance with the Company Stock Option Plan so that
all Options outstanding immediately prior to the Effective Time will become
fully vested and exercisable (whether or not currently exercisable) and,
immediately prior to the Effective Time, each Option will be cancelled without
any future liability to the Company or any other Person after the Effective Time
in exchange for the right to receive from the Company the payment described in
the following sentence (such amount payable pursuant to clause (a) in the
following sentence with respect to each Optionholder, such holder’s “Option
Consideration”), subject to applicable withholding. Each holder of an Option
that is cancelled pursuant to the preceding sentence shall, in respect of such
Option and subject to the terms and conditions of this Agreement, be entitled to
(a) a cash payment in an amount equal to the product of (i) the excess, if any,
of the Initial Per Share Merger Consideration over the applicable Exercise Price
of such Option, and (ii) the number of shares of Company Common Stock underlying
such Option, and (b) any amounts payable to such Optionholder pursuant to
Section 2.7 and Section 2.8 (in the case of this clause (b), if, as and when
payable in accordance with Section 2.7 and Section 2.8). Parent will cause the
Company to pay to each Optionholder such Optionholder’s Option Consideration via
payroll less applicable withholding Taxes on the Closing Date.
 
Section 2.4 Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, any Shares that are issued and outstanding immediately prior to the
Effective Time and are held by a Stockholder who is entitled to exercise, and
properly complied with the provisions of Section 262 of the DGCL to demand
appraisal rights with respect to such Shares (each, a “Dissenting Stockholder”)
and not effectively withdrawn or lost its right to appraisal (collectively, the
“Dissenting Shares”), such Dissenting Shares will not be converted into or
exchangeable for or represent the right to receive the applicable Merger
Consideration (except as provided in this Section 2.4) and will entitle such
Dissenting Stockholder only to payment of the fair value of such Dissenting
Shares as may be determined to be due to the holder of such Dissenting Shares in
accordance with the DGCL, unless and until such Dissenting Stockholder
effectively waives such appraisal rights or is otherwise no longer entitled to
payment for such Dissenting Shares in accordance with Section 262 of the DGCL.
If any such Dissenting Stockholder effectively waives such appraisal rights or
is otherwise no longer entitled to payment for the Dissenting Shares held by
such Dissenting Stockholder in accordance with the Section 262 of DGCL, then as
of the later of the Effective Time or the occurrence of such event, the
Dissenting Shares held by such Dissenting Stockholder will be cancelled and
converted into and represent the right to receive, without any interest thereon,
the applicable Merger Consideration in accordance with Article I and this
Article II, less applicable withholding taxes, if any, required to be withheld.
The Company will not, except with the prior written consent of Parent,
voluntarily make (or cause or permit to be made on its behalf) any payment with
respect to, or settle or make a binding offer to settle, or otherwise negotiate
with, any Dissenting Stockholder regarding its exercise of appraisal rights
prior to the Effective Time. The Company will give Parent notice of any such
demands prior to the Effective Time.
 
 
-7-

 
 
Section 2.5 Closing Statement. At least three (3) Business Days prior to the
Closing Date, the Company will deliver to Parent a statement setting forth a
good faith estimate of (a) Closing Working Capital prepared in accordance with
GAAP (the “Working Capital Estimate”) and the resulting Estimated Working
Capital Overage or Estimated Working Capital Underage, if any, (b) Closing Cash
prepared in accordance with GAAP (the “Closing Cash Estimate”), (c) the
Transaction Expenses Payoff Amount, (d) the amount of Closing Indebtedness and
the Indebtedness Payoff Amount, (e) the number of Shares issued and outstanding
as of immediately prior to the Effective Time, (f) the Share Percentage and the
Individual Share Percentage for each Stockholder, (g) with respect to each
Option, the holder of such Option, the number of shares of Company Common Stock
underlying such Option and the Exercise Price of such Option, in each case
immediately prior to the Effective Time, and (h) the Option Percentage and the
Individual Option Percentage for each Optionholder.
 
Section 2.6 Transactions to Be Effected at the Closing. At the Closing, the
following transactions shall be effected by the Parties:
 
(a) Parent will pay the Initial Merger Consideration to the Payments
Administrator and the holders of Shares in accordance with Section 2.1(a);
 
(b) Parent will transfer the Escrow Amount to the Escrow Fund;
 
(c) Parent will transfer the Holdback Amount to an account of the Escrow Agent
(the “Holdback Account”);
 
(d) Parent will pay the Indebtedness Payoff Amount to such parties and in such
amounts as designated in writing (such designation to be made at least two (2)
Business Days prior to the Closing Date) in the Payoff Letters;
 
(e) Parent will pay the Transaction Expenses Payoff Amount, other than such
amount related to Transaction Bonuses, to such parties and in such amounts as
designated by the Company in writing (such designation to be made at least two
(2) Business Days prior to the Closing Date); and
 
(f) Parent will pay the Transaction Expenses Payoff Amount related to
Transaction Bonuses to the Company and cause the Company to pay to each
recipient of a Transaction Bonus via the Company’s payroll system on the Closing
Date an amount equal to such Transaction Bonus less applicable withholding
Taxes.
 
Section 2.7 Merger Consideration Adjustment.
 
(a) Within 60 days after the Closing Date, Parent will deliver to the
Stockholder Representative a statement (the “Statement”) of (i) the Closing
Working Capital and the resulting Working Capital Overage or Working Capital
Underage, if any, (ii) the Closing Cash and the resulting Closing Cash Overage
or Closing Cash Underage, if any, (iii) any Transaction Expenses not included in
the Transaction Expenses Payoff Amount (the “Additional Transaction Expenses”),
and (iv) any Closing Indebtedness of the Company and Company Subsidiaries not
included in the calculation of the Initial Merger Consideration (the “Additional
Indebtedness”)
 
 
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(b) The Statement will become final and binding upon all of the Parties at 5:00
p.m. in New York, New York on the 60th day following the date on which the
Statement was delivered by Parent to the Stockholder Representative, unless the
Stockholder Representative delivers written notice of its disagreement with the
Statement (a “Notice of Disagreement”) to Parent prior to such time. During such
60-day period, Parent shall cause the Surviving Corporation and its Subsidiaries
to provide the Stockholder Representative and the Stockholder Representative’s
advisors with reasonable access (including on-site access and electronic access
to the extent available) during regular business hours and upon reasonable
notice to all relevant books and records and employees (including key accounting
and finance personnel) of the Surviving Corporation and its Subsidiaries to the
extent reasonably necessary to review the matters and information used to
prepare and to support the Statement, all in a manner not unreasonably
interfering with the business of the Surviving Corporation and its Subsidiaries.
All fees, costs and expenses of the Stockholder Representative relating to the
review of the Statement shall be borne by the holders of Shares and Options out
of the Holdback Account and all fees, costs and expenses of Parent or the
Surviving Corporation relating thereto shall be borne by Parent. Any Notice of
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. If a Notice of Disagreement is received by Parent in a timely
manner, then the Statement (as revised in accordance with this Section 2.7(b))
will become final and binding upon Parent and the Stockholder Representative on
the earlier of (i) the date Stockholder Representative and Parent resolve in
writing any differences they have with respect to the matters specified in the
Notice of Disagreement and (ii) the date any disputed matters are finally
resolved in writing by an independent accounting firm (the “Accounting Firm”).
During the 14-day period following the delivery of a Notice of Disagreement, the
Stockholder Representative and Parent will seek in good faith to resolve in
writing any differences that they may have with respect to the matters specified
in the Notice of Disagreement. If at the end of such 14-day period the
Stockholder Representative and Parent have not resolved in writing the matters
specified in the Notice of Disagreement, then, no later than ten (10) days
following such 14-day period, the Stockholder Representative and Parent will
submit to the Accounting Firm for resolution, in accordance with the standards
set forth in this Section 2.7, only matters that remain in dispute. The
Accounting Firm will be UHY, LLP or, if such firm is unable or unwilling to act,
such other nationally recognized independent public accounting firm as shall be
agreed upon by the Stockholder Representative and Parent in writing. The
Stockholder Representative and Parent will use commercially reasonable efforts
to cause the Accounting Firm to render a written decision resolving the matters
submitted to the Accounting Firm within 30 days of the receipt of such
submission. The Accounting Firm may not assign a value greater than the greatest
value for such item claimed by either Party or smaller than the smallest value
for such item claimed by either Party. Judgment may be entered upon the
determination of the Accounting Firm in any court having jurisdiction over the
party against which such determination is to be enforced. The fees, costs and
expenses of the Accounting Firm incurred pursuant to this Section 2.7(b) (the
“Accounting Fees”) shall be borne pro rata as between the Stockholder
Representative (solely on behalf of the Stockholders and Optionholders), on the
one hand, and Parent, on the other hand, in proportion to the final allocation
made by the Accounting Firm of the disputed items weighted in relation to the
claims made by the Stockholder Representative and Parent, such that the
prevailing party pays the lesser proportion of such fees, costs and expenses.
For example, if the Parent claims that the appropriate adjustments are, in the
aggregate, $1,000 greater than the amount determined by the Stockholder
Representative and if the Accounting Firm ultimately resolves the dispute by
awarding to the Parent an aggregate of $300 of the $1,000 contested, then the
fees, costs and expenses of the Accounting Firm will be allocated 30% (i.e., 300
÷ 1,000) to the Stockholder Representative and 70% (i.e., 700 ÷ 1,000) to
Parent. For the avoidance of doubt, the fees, costs and expenses of any Party
incurred in connection with this Section 2.7 (other than the Accounting Fees,
which shall be allocated in accordance with this Section 2.7(b)) shall be paid
by the Party incurring such fees, costs and expenses; provided, that the
Stockholder Representative’s fees, costs and expenses shall be paid by the
Stockholders and Optionholders.
 
 
-9-

 
 
(c) If the Stockholder Adjustment Amount exceeds the Parent Adjustment Amount
(the amount of such excess, the “Excess Amount”), (i) within five (5) Business
Days after a final determination Parent will make payment by wire transfer of
immediately available funds to the Stockholder Representative, or upon written
instruction of the Stockholder Representative, to the Payments Administrator,
for distribution to each holder of Shares, contingent upon such holder’s
delivery of a Letter of Transmittal and Certificates evidencing such holder’s
Shares (or an Affidavit of Loss in lieu thereof) and in accordance with such
holder’s Individual Share Percentage, subject to applicable withholding, an
amount equal to the Share Percentage of any such Excess Amount, and (ii) Parent
will cause the Company to pay to the Optionholders via payroll in accordance
with their respective Individual Option Percentage, and subject to applicable
withholding, an amount equal to the Option Percentage, the applicable portion of
any such Excess Amount.
 
(d) If the Parent Adjustment Amount exceeds the Stockholder Adjustment Amount
(the amount of such excess, the “Deficiency Amount”), within five (5) Business
Days after a final determination in accordance with Section 2.7(b), the
Stockholder Representative shall cause the Escrow Agent to make payment to
Parent by wire transfer of immediately available funds from the Escrow Fund, the
total amount of the Deficiency Amount.
 
Section 2.8 Payments from the Holdback Account. The Holdback Account will be
used for the purposes of paying directly, or reimbursing the Stockholder
Representative for, any third party expenses pursuant to this Agreement and any
agreements ancillary hereto. The Stockholder Representative shall retain control
over the funds in the Holdback Account and shall, promptly following completion
of the Stockholder Representative’s duties, direct the Escrow Agent to pay all
or a portion of any funds that remain in the Holdback Account to the Payments
Administrator for further distribution to (i) the Stockholders, contingent with
respect to each such holder upon such holder’s delivery of a Letter of
Transmittal and Certificates evidencing such holder’s Shares (or an Affidavit of
Loss in lieu thereof), in accordance with such holders’ respective Individual
Share Percentages, and subject to applicable withholding, an aggregate amount
equal to the Share Percentage of any such funds, and (ii) the Company, for
further payment to the Optionholders via payroll in accordance with their
respective Individual Option Percentages, and subject to applicable withholding,
an aggregate amount equal to the Option Percentage of any such funds.
 
ARTIVLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
Except as disclosed in the disclosure letter delivered by the Company to Parent
immediately prior to the execution of this Agreement (it being agreed that any
information set forth in one section of such disclosure letter will be deemed to
apply to each other section thereof to which its relevance as an exception to
(or disclosure for the purposes of) such other section is reasonably apparent)
(the “Company Disclosure Letter”), the Company represents and warrants to Parent
as follows:
 
 
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Section 3.1 Corporate Organization.
 
(a) The Company is a corporation duly formed, validly existing and in good
standing under the Laws of the State of Delaware. The Company has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except for such jurisdictions where the failure to be so licensed or qualified
would not reasonably be expected to have a Material Adverse Effect.
 
(b) Copies of the certificate of incorporation of the Company, as amended and
restated (the “Company Charter”), and the bylaws of the Company, as amended and
restated (the “Company Bylaws”), as in effect as of the date of this Agreement,
have previously been made available to Parent. The Company is not in default
under or in violation of any provision of the Company Charter or the Company
Bylaws.
 
(c) Section 3.1(c) of the Company Disclosure Letter sets forth a list of each
Company Subsidiary, together with the jurisdiction of organization or
incorporation, as the case may be, and the jurisdictions in which each Company
Subsidiary is authorized to conduct business. Each Company Subsidiary (i) is
duly organized/formed and validly existing under the Laws of its jurisdiction of
organization, (ii) is duly qualified to do business and, where such concept is
recognized, in good standing in all jurisdictions in which the conduct of its
business requires it to be so qualified, except for such jurisdictions where the
failure to be so qualified or in good standing would not reasonably be expected
to have a Material Adverse Effect, and (iii) has all the corporate or limited
liability company power and authority to carry on its business as now conducted.
As used in this Agreement, the word “Subsidiary” when used with respect to any
Person means another Person, any amount of the voting securities, other voting
rights or voting partnership interests of which is sufficient to elect at least
a majority of its board of directors or other governing body or, more than 40%
of the Equity Interests of which is owned directly or indirectly by such first
Person; the terms “Company Subsidiary” and “Parent Subsidiary” mean any direct
or indirect Subsidiary of the Company or Parent, respectively, and, in the case
of Parent, will include (A) Merger Sub prior to the Effective Time and (B) the
Surviving Corporation as of and after the Effective Time.
 
(d) Copies of the certificate of incorporation, or similar organizational
document, as applicable, of each Company Subsidiary, as amended and restated,
and the bylaws or operating agreement, or other similar governing document, as
applicable, of each Company Subsidiary, as amended and restated, as in effect as
of the date of this Agreement, have previously been provided to Parent. No
Company Subsidiary is in default under or in violation of any such governing
document.
 
 
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Section 3.2 Capitalization.
 
(a) The authorized capital stock of the Company consists of (i) 23,030,000
shares of common stock, $0.001 par value per share (“Company Common Stock”), of
which 2,082,961 shares are issued and outstanding, and (ii) 20,035,000 shares of
Series B preferred stock, $0.001 par value per share (“Company Preferred
Stock”), of which 19,999,874 shares are issued and outstanding (collectively,
the “Company Capital Stock”). No shares of Company Capital Stock are held in the
Company’s treasury. All of the issued and outstanding shares of Company Capital
Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights.
 
(b) The Company does not have and is not bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling for
the purchase, issuance or registration of any shares of Company Capital Stock or
any other equity securities of the Company or any securities representing the
right to purchase or otherwise receive any shares of Company Capital Stock,
except for Options issued pursuant to the Company Stock Option Plan. 2,988,549
shares of Company Common Stock were originally reserved for issuance under the
Company Stock Option Plan. No Company Stock Option has an Exercise Price in
excess of $0.01. The Company does not have any “phantom equity” plans,
agreements or awards.
 
(c) There are no bonds, debentures, notes or other Indebtedness having the right
to vote on any matters on which stockholders of the Company may vote are issued
or outstanding as of the date of this Agreement.
 
(d) All of the issued and outstanding shares of capital stock or other equity
ownership interests of each Company Subsidiary are owned by the Company,
directly or indirectly, free and clear of any Liens (other than transfer
restrictions under applicable federal and state securities Laws), and all of
such shares or equity ownership interests are duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights. No Company
Subsidiary has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Company Subsidiary or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity security of
such Company Subsidiary. There are no outstanding obligations to which the
Company or any Company Subsidiary is a party restricting the transfer of, or
limiting the exercise of voting rights with respect to, any Equity Interest in
any Company Subsidiary.
 
 
-12-

 
 
Section 3.3 Authority; No Violation.
 
(a) The Company has all necessary corporate power and authority to enter into
this Agreement and to consummate the Merger. The execution, delivery and
performance of this Agreement by the Company have been duly and validly adopted
by the Company Board and, except for (i) the Written Consent and (ii) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or for the
Company to consummate the Merger and the other transactions contemplated by this
Agreement (the “Transactions”). The holders of Company Capital Stock are
authorized to act by the Written Consent and the Written Consent is the only
vote or consent of the holders of any of the Company Capital Stock necessary to
adopt this Agreement and to approve the Merger and the other Transactions
contemplated by this Agreement. There are no Contracts to which the Company or
any Company Subsidiary is a party defining or governing the rights of the
holders of any Company Capital Stock or any of its other equity holders in their
capacities as such, and there are no Contracts between or among the Company or
any Company Subsidiary and the holders of Company Capital Stock defining or
governing the rights of the Company Capital Stock, as applicable. The Company
Board has (i) determined that this Agreement and the Merger are advisable and
fair to and in the best interests of the Company’s stockholders, and (ii)
recommend that the Company’s stockholders that they adopt this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming this Agreement constitutes the valid and binding agreement of Parent
and Merger Sub, constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability (A) may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws affecting or
relating to enforcement of creditors’ rights generally and (B) is subject to
general principles of equity (regardless of whether enforceability is considered
in a proceeding at Law or in equity)
 
(b) Neither the execution and delivery of this Agreement by the Company nor the
consummation of the Transactions, nor compliance by the Company with any of the
terms or provisions of this Agreement, will (i) violate any provision of the
certificate of incorporation or bylaws or other equivalent organizational
document, in each case, as amended, of the Company or any of the Company
Subsidiaries or (ii) assuming that the consents, approvals and filings referred
to in Section 3.4 are duly obtained and/or made and subject to obtaining the
Written Consent, (A) violate any Order or other legal restraint or prohibition
(an “Injunction”), any Law applicable to the Company, any of the Company
Subsidiaries or any of their respective material properties or assets, or any
material Permit of the Company or a Company Subsidiary or by which any of the
assets of the Company or a Company Subsidiary are bound or subject, or (B)
result in a breach of any provision of, or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of, or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien (other than a Permitted Lien) upon any of the
respective properties or assets of the Company or any of the Company
Subsidiaries under, any Company Material Contract.
 
 
-13-

 
 
Section 3.4 Consents and Approvals. Except for (a) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware pursuant to the
DGCL, (b) receipt of such consents from, or registrations, declarations, notices
or filings made to or with State PSCs as are required in order to effect the
transfer of control of the Company Licenses or as are otherwise necessary to
consummate the Merger and other Transactions, including any related financings
by Parent (the “State Approvals”), and (c) receipt of such consents from, or
registrations, declarations, notices or filings made to or with the FCC as are
required in order to effect the transfer of control of the Company Licenses or
as are otherwise necessary to consummate the Merger and the other Transactions,
including any related financings by Parent (the “FCC Approval”), no consents or
approvals of, or filings or registrations with, any Governmental Entity are
necessary in connection with (i) the execution and delivery by the Company of
this Agreement and (ii) the consummation by the Company of the Transactions.
 
Section 3.5 Financial Statements.
 
(a) The audited consolidated financial statements of the Company and the Company
Subsidiaries for the years ended December 31, 2016 and 2015 and the unaudited
consolidated financial statements of the Company and the Company Subsidiaries
for the year ended December 31, 2017 (including in each case, any related notes
and schedules thereto, where applicable) (collectively, the “Company Financial
Statements”), fairly present in all material respects the consolidated financial
position of the Company and the Company Subsidiaries as of the date thereof, and
fairly present in all material respects the results of the consolidated
operations, changes in stockholders’ equity, cash flows and consolidated
financial position of the Company and the Company Subsidiaries for the
respective fiscal periods or as of the date therein set forth, except the
Company Financial Statements for the year ended December 31, 2017 are subject to
normal year-end audit adjustments which, in the aggregate, would not be material
in amount. Each of the Company Financial Statements have been prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in such statements or in the notes thereto. Each of the
representations and warranties in this Section 3.5(a) is qualified as follows:
for the period from January 1, 2015 through March 31, 2015, the Company
Financial Statements reflect only the assets, liabilities, revenue and expenses
of the Company directly attributable to its Cloud Operations division, as well
as allocations deemed reasonable by management to present the Company Financial
Statements for such period on a carve-out basis in accordance with GAAP
standards, and do not necessarily reflect the Company Financial Statements as
they would have been presented for such Cloud Operations division had it been a
separate, stand-alone entity during such period.
 
(b) Except for those liabilities and obligations that are (i) reflected or
reserved against on the December 31, 2017 unaudited consolidated balance sheet
of the Company and the Company Subsidiaries or disclosed in the notes thereto,
or (ii) incurred in the ordinary course of business consistent with past
practice since December 31, 2017, neither the Company nor any of the Company
Subsidiaries has incurred any Indebtedness or liability, obligation or claim of
a type required to be reflected or reserved for on a balance sheet prepared in
accordance with GAAP (excluding immaterial liabilities, obligations and claims
to the extent that, if they were not so reflected, would not cause such balance
sheet, taken as a whole, to not be prepared in accordance with GAAP).
 
 
-14-

 
 
(c) The Company and Company Subsidiaries make and keep and, for all periods
covered by the Company Financial Statements, have made and kept books, records
and accounts which, in reasonable detail, accurately and fairly reflect in all
material respects the transactions and dispositions of the assets of the Company
and Company Subsidiaries. The Company and Company Subsidiaries maintain systems
of internal accounting controls sufficient to provide reasonable assurances
that: (i) transactions are executed in accordance with management’s general or
specific authorization, (ii) transactions are recorded as necessary to permit
the preparation of financial statements in conformity with GAAP and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the actual levels at
reasonable intervals and appropriate action is taken with respect to any
differences.
 
Section 3.6 Absence of Company Material Adverse Effect
 
. Since January 1, 2017 through the date of this Agreement, no event or events
have occurred that have had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
 
Section 3.7 Legal Proceedings.
 
(a) Except as set forth on Section 3.7(a) of the Company Disclosure Letter,
neither the Company nor any of the Company Subsidiaries is a party to any, and
there are no pending or, to the knowledge of the Company, threatened, legal,
administrative, arbitral or other proceedings, claims, actions, suits or
governmental or regulatory investigations of any nature (each, an “Action”),
against the Company or any of the Company Subsidiaries.
 
(b) There is no Injunction or judgment imposed upon the Company, any of the
Company Subsidiaries or the assets of the Company or any of the Company
Subsidiaries.
 
 
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Section 3.8  Taxes and Tax Returns. Each of the Company and the Company
Subsidiaries has duly and timely filed all federal, state, foreign and local Tax
Returns required to be filed by any of them (all such returns being accurate and
complete in all respects) and has duly and timely paid all Taxes (whether or not
such Taxes were shown as due and payable on such Tax Returns) other than Taxes
that are not yet delinquent or that are being contested in good faith, have not
been finally determined and have been adequately reserved against. Any liability
with respect to deficiencies asserted as a result of any audit, examination or
similar proceeding of the Company or any Company Subsidiary Tax Return by the
IRS or any other taxing authority is covered by adequate reserves in accordance
with GAAP in the Company Financial Statements. There are no disputes pending, or
claims asserted (in writing or otherwise), for Taxes or assessments upon the
Company or any of the Company Subsidiaries for which the Company does not have
adequate reserves. Neither the Company nor any of the Company Subsidiaries is a
party to or is bound by any Tax, allocation or indemnification agreement or
arrangement the primary subject matter of which is Taxes (other than such an
agreement or arrangement exclusively between or among the Company and the
Company Subsidiaries). Neither the Company nor any of the Company Subsidiaries
has agreed to or granted any extension or waiver of the limitation period
applicable to any Taxes or Tax Returns. Neither the Company nor any of the
Company Subsidiaries has distributed the stock of any corporation, or had its
stock distributed, in a transaction described in or intended to satisfy the
requirements of Section 355 of the Code. Each of the Company and the Company
Subsidiaries has in all material respects properly and timely withheld or
collected and timely paid over to the appropriate taxing authority (or each is
properly holding for such timely payment) all Taxes required to be withheld,
collected and paid over by applicable Law. There are no Liens for Taxes upon any
asset of the Company or any Company Subsidiary other than Permitted Liens
(within the meaning of clause (c) of such term). Neither the Company nor any of
the Company Subsidiaries is a party to or bound by any advance pricing
agreement, closing agreement or other similar material agreement or ruling
relating to Taxes nor are there any pending requests for such rulings or similar
agreements by or before a taxing authority. Neither the Company nor any of the
Company Subsidiaries will be required to include any item of income in, or
exclude any item of deduction from, taxable income for any period (or any
portion thereof) ending after the Closing Date, as a result of any: (i) change
in method of accounting for a taxable period (or any portion thereof) ending on
or prior to the Closing Date, including under Section 481(a) of the Code or any
similar provision of applicable Law; (ii) installment sale or other open
transaction disposition made on or prior to the Closing Date; (iii) prepaid
amount received on or prior to the Closing Date; (iv) closing agreement
described in Section 7121 of the Code or any similar provision of applicable Law
executed on or prior to the Closing Date; (v) intercompany transaction or excess
loss account described in Treasury Regulations Section 1.1502 (or any similar
provision of applicable Law); or (vi) indebtedness discharged in connection with
any election under Section 108(i) of the Code. Other than the affiliated group
of which the Company is the common parent, neither the Company nor any of the
Company Subsidiaries has any liability under Treasury Regulations Section
1.1502-6 or any similar provision of applicable Law, as a transferee or
successor, or as a result of any contractual obligation for any Taxes of any
other Person. Neither the Company nor any of the Company Subsidiaries has
obtained any consent or clearance from or entered into any settlement or
arrangement with any taxing authority that would be binding on Parent or any of
its Affiliates or result in a material Tax liability for Parent or any of its
Affiliates for any Tax period (or portion thereof) ending after the Closing
Date. Neither the Company nor any Company Subsidiary has engaged in a
“reportable transaction,” as defined in Section 6707A(c)(1) of the Code or
Treasury Regulations Section 1.6011-4(b), or any transaction requiring
disclosure under a similar provision of applicable Law. Since December 31, 2013,
no written claim or nexus inquiry has been made by a taxing authority in a
jurisdiction where the Company or any Company Subsidiary does not file Tax
Returns that any of them is or may be subject to tax by that jurisdiction or
that any of them has a duty to collect Taxes. Each of the Company and the
Company Subsidiaries is in compliance in all material respects with all terms
and conditions of any applicable material Tax exemption, Tax holiday, or other
Tax reduction agreement, and no such applicable material Tax exemption, Tax
holiday, or other Tax reduction agreement will be adversely affected by the
Transactions. None of the Company nor any Company Subsidiary has elected to
relinquish the carryback of any of its respective net operating losses pursuant
to Treasury Regulations Sections 1.502 21(b)(3)(ii)(B) or Section 172(b)(3) of
the Code, or any similar provision of applicable Law.
 
 
-16-

 
 
Section 3.9 Employee Benefit Plans; Labor.
 
(a) Section 3.9(a) of the Company Disclosure Letter contains a true and complete
list of (i) each nonqualified deferred compensation or retirement plan for
employees located in the United States, (ii) each qualified “defined
contribution plan” (as such term is defined under Section 3(34) of ERISA), (iii)
each qualified “defined benefit plan” (as such term is defined under Section
3(35) of ERISA) (the plans set forth in clauses (ii) and (iii) are collectively
referred to herein as the “Pension Plans”), (iv) each “welfare benefit plan” (as
such term is defined under Section 3(1) of ERISA) (the “Welfare Plans”), and (v)
each compensatory or benefit plan or program, or stock option plan, including
written individual contract, employee agreement, plan, program, or arrangement,
in each case, whether funded or unfunded, that currently are maintained or
sponsored in whole or in part, or contributed to by any of the Company, the
Company Subsidiaries or any Company Commonly Controlled Entities, for the
benefit of, providing any remuneration or benefits to, or covering any current
or former employee or retiree, any dependent, spouse or other family member or
beneficiary of such employee or retiree, or any director, independent
contractor, member, officer, consultant of any of the Company or the Company
Subsidiaries, or the Company Commonly Controlled Entities, or under (or in
connection with) which the Company or any Company Subsidiary or any of the
Company Commonly Controlled Entities may have any liability (collectively
clauses (i) through (v) are referred to as “Company Benefit Plans”).
 
(b) Each Pension Plan that is intended to meet the requirements of a “qualified
plan” under Sections 401(a) and 501(a) of the Code has either received a
favorable determination letter from the IRS that such Pension Plan is so
qualified or has requested such a favorable determination letter within the
remedial amendment period of Section 401(b) of the Code, or in the case of a
Pension Plan that is maintained pursuant to the adoption of a master, prototype,
or volume submitter plan document, the sponsor of such master or prototype or
volume submitter plan document has obtained from the National Office of the IRS
an opinion or notification letter stating that the form of the master, prototype
or volume submitter document is acceptable for the establishment of a qualified
retirement plan. The Company Benefit Plans comply in all respects in both form
and in operation with the requirements of the Code, ERISA and all other
applicable Laws.
 
(c) To the knowledge of the Company, there have been no “prohibited
transactions” (as that term is defined in Section 406 of ERISA or Section 4975
of the Code) involving any of the Company Benefit Plans. Except as set forth in
Section 3.9(c) of the Company Disclosure Letter, none of the assets of any
Pension Plan or Welfare Plan trust is an “employer security” (within the meaning
of Section 407(d)(1) of ERISA) or “employer real property” (within the meaning
of Section 407(d)(2) of ERISA).
 
 
-17-

 
 
(d) (i) Neither the Company nor any other Person that, together with the Company
or any Company Subsidiary, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (a “Company Commonly Controlled Entity”) (A)
sponsors, maintains or contributes to, or is obligated to maintain or contribute
to, or has any liability under, or has in the preceding seven (7) years
sponsored, maintained, or contributed to, or had any obligation to maintain or
contribute to, any Pension Plan or any “pension plan” (as defined in Section
3(2) of ERISA) that is subject to Title IV of ERISA, Section 412 or Section 430
of the Code, or any “multiemployer plan” (as defined in Section 3(37) of ERISA)
or (B) has any unsatisfied liability imposed under Title IV of ERISA or Section
412 or Section 430 of the Code and (ii) all contributions (including all
employer contributions and employee salary reduction contributions) or insurance
premiums that are due have been paid with respect to each Company Benefit Plan,
and all contributions or insurance premiums for any period ending on or before
the Closing Date that are not yet due have been paid with respect to each such
Company Benefit Plan or accrued, in each case in accordance with the past custom
and practice of the Company, and with applicable Law and guidance. No Pension
Plan or related trust has been terminated during the last seven years. No assets
of the Company or any Company Subsidiary are subject to any Lien under Section
412(n) or 430(k) of the Code or Section 302(f) or 302(k) or Title IV of ERISA.
 
(e) Neither the Company nor any Company Subsidiary has communicated a
commitment, whether orally or in writing, generally to employees or specifically
to any employee regarding (i) any future increase of benefit levels (or creation
of new benefits) with respect to the Company Benefit Plans beyond those
reflected in such plans, or (ii) the adoption or creation of any new benefit
plan.
 
(f) Except as set forth in Section 3.9(f) of the Company Disclosure Letter, none
of the Welfare Plans obligates the Company or any Company Subsidiary to provide
any current employee or former employee (or any dependent thereof) any life
insurance or health benefits or other welfare benefits after his or her
termination of employment with the Company or any Company Subsidiary, other than
as required under COBRA or any similar state Law.
 
(g) No Company Benefit Plan (excluding for this purpose any individual
employment agreement or arrangement) has a provision, and no commitment (whether
oral or in writing) has been made, that restricts the Company or Company
Subsidiaries from amending or terminating such Company Benefit Plan with respect
to the accrual of future benefits; except that the legal obligation to bargain
over mandatory subjects of bargaining under any Law will not be considered such
a restriction.
 
 
-18-

 
 
(h) Except as set forth in Section 3.9(h)(i) of the Company Disclosure Letter,
no payment or benefit under any Company Benefit Plan that will or may be made by
the Company or any Company Subsidiary in connection with the Merger to any
current employee of the Company or Company Subsidiaries could reasonably be
characterized as an “excess parachute payment” within the meaning of Section
280G(b)(2) of the Code. Except as set forth in Section 3.9(h)(ii) of the Company
Disclosure Letter, as provided in this Agreement or as required by applicable
Law, consummation of the Transactions will not (i) entitle any current employee,
or former employee (or spouse, dependent or other family member of such
employee) of the Company or Company Subsidiaries to severance pay, unemployment
compensation, or any payment contingent upon a change in control or ownership of
the Company or Company Subsidiaries or (ii) accelerate the time of payment or
vesting, or increase the amount, of any compensation due to any such Company
Employee, current employee, or former employee (or any spouse, dependent, or
other family member of such employee), in each case under any Company Benefit
Plan. Except as set forth in Section 3.9(h)(iii) of the Company Disclosure
Letter, neither the Company nor any Company Subsidiary has any obligation to
provide, and no Company Benefit Plan or other agreement provides any Person with
any amount of additional compensation or gross-up if such Person is provided
with amounts subject to excise or additional taxes, interest or penalties
incurred pursuant to Sections 4999 or 409A of the Code or due to the failure of
any payment to be deductible under Section 280G of the Code.
 
(i) The Company and the Company Subsidiaries have correctly classified Persons
engaged as consultants or independent contractors for employment purposes under
applicable Law.
 
(j) Except as would not reasonably be expected to result in a Tax or penalty,
each Company Benefit Plan that is a “nonqualified deferred compensation plan”
(within the meaning of Section 409A(d)(1) of the Code) subject to Section 409A
of the Code is and has been in documentary and operational compliance with
Section 409A of the Code and any guidance issued with respect thereto.
 
(k) The Company has complied in all material respects with all applicable Laws
concerning employment rights and obligations. Neither the Company nor any
Company Subsidiary is a party to a collective bargaining agreement in respect of
the employees of the Company or a Company Subsidiary on the date of this
Agreement, or a member in any employers’ organization which is entitled to
conclude a collective bargaining agreement on behalf of its member companies,
and there is no collective bargaining agreement which, although the Company or
Company Subsidiary is not a party to it, applies due to standard reference in
employment agreements or by state decree as a generally applicable collective
bargaining agreement. No collective bargaining agreement or shop agreement is
being negotiated or renegotiated in any material respect by the Company or any
of the Company Subsidiaries. There is no labor dispute, work stoppage, slow down
or strike against the Company or any of the Company Subsidiaries pending or, to
the knowledge of the Company, threatened which would reasonably be expected to
interfere with the respective business activities of the Company or any of the
Company Subsidiaries (and no work stoppages, slow downs, labor disputes or
strikes occurred during the last five years). As of the date of this Agreement,
to the knowledge of the Company, there is no charge or complaint against the
Company or any of the Company Subsidiaries by the National Labor Relations Board
or any comparable Governmental Entity or in relation to any labor rules and
regulations or any other competent labor authority pending or threatened in
writing.
 
 
-19-

 
 
(l) There is no liability under ERISA or otherwise with respect to any Company
Benefit Plan other than for the payment or provision of the benefits due
thereunder in accordance with its terms, which has been incurred or, based upon
such facts as exist on the date hereof, may reasonably be expected to be
incurred. There are no unresolved claims or disputes under the terms of, or in
connection with, the Company Benefit Plans (other than routine undisputed claims
for benefits under the Company Benefit Plans or other immaterial claims or
disputes that are being handled in the normal course of plan administration),
and no action, legal or otherwise, has been commenced with respect to any claim
(including claims for benefits under Company Benefit Plans). To the knowledge of
the Company, no facts exist which could give rise to any actions, audits, suits
or claims (other than in the ordinary course).
 
(m) No Welfare Plan is or at any time in the past seven years was funded through
a “welfare benefit fund,” as defined in Section 419(e) of the Code, and no
benefits under any Company Benefit Plan are or at any time have within the past
seven years been provided through a “voluntary employees’ beneficiary
association” (within the meaning of Section 501(c)(9) of the Code) or a
“supplemental unemployment benefit plan” (within the meaning of Section
501(c)(17) of the Code).
 
Section 3.10 Compliance with Law. At all times since December 31, 2013, the
Company and each of the Company Subsidiaries have complied in all material
respects with and are not in default under any Law or Order relating to the
Company or any of the Company Subsidiaries or by which any material property or
asset of the Company or any Company Subsidiary is bound. As of the date hereof,
no investigation by any Governmental Entity with respect to the Company or any
Company Subsidiary is pending, nor, to the knowledge of the Company, has any
Governmental Entity indicated to the Company an intention to conduct any such
investigation.
 
Section 3.11 Environmental Matters. The Company and each of the Company
Subsidiaries is, and at all times has been, in compliance in all material
respects with all Environmental Laws. The Company and the Company Subsidiaries
hold all Permits required under applicable Environmental Laws to permit the
Company and the Company Subsidiaries to conduct their businesses as currently
conducted. The business and operations of the Company and the Company
Subsidiaries are in compliance with all such Permits. No notice of violation,
notification of liability, demand, request for information, citation, summons or
order has been received by the Company or any Company Subsidiary, no complaint
has been filed, no penalty or fine has been assessed, and no investigation,
action, claim, suit or proceeding is pending or, to the knowledge of the
Company, threatened by any Person involving the Company or any Company
Subsidiary relating to or arising out of any Environmental Law. There have been
no Releases of Hazardous Substances by the Company or any Company Subsidiary at,
on, above, under or from any properties currently or formerly owned, leased or
operated by the Company, any Company Subsidiary or any predecessors in interest
that, in each case, has resulted in or would reasonably be expected to result in
any material cost, liability or obligation of the Company or any Company
Subsidiary under any Environmental Law. The Company has provided to Parent all
material environmental site assessments, audits, investigations and studies in
their possession, custody or control relating to property or assets currently or
formerly owned, leased, operated or used by the Company or any Company
Subsidiary. Neither the Company nor any Company Subsidiary has been in business
other than those related to the provision of communication services that would
reasonably be expected to present environmental issues of a materially different
scope or magnitude than those presented in the provision of communication
services. Without limiting the generality of the foregoing, neither the Company
nor any Company Subsidiary has operated or currently operates (i) any
manufacturing facilities, (ii) any facilities that are or have been permitted
under the Resource Conservation and Recovery Act or (iii) any business that
manages the hazardous wastes of any unrelated party. The representations
contained in the immediately prior sentence of this Section 3.11 shall not be
deemed to be breached unless the operation or ownership of such other business
or businesses has resulted in any material cost, liability or obligation of the
Company or any Company Subsidiary under any Environmental Law.
 
 
-20-

 
 
Section 3.12 Material Contracts.
 
(a) Except as listed in Section 3.12(a) of the Company Disclosure Letter, or any
Company Benefit Plan that is listed in Section 3.9(a) of the Company Disclosure
Letter, as of the date of this Agreement, neither the Company nor any of the
Company Subsidiaries is a party to or bound by any Contract that is:
 
(i) a “non-compete” or similar agreement that restricts or purports to restrict
the geographic area in which the Company or any of the Company Subsidiaries may
conduct any line of business, or that requires the referral of business
opportunities by the Company or any of the Company Subsidiaries;
 
(ii) a joint venture, partnership or limited liability company agreement or
other similar agreement or arrangement relating to the formation, creation,
operation, management or control of any joint venture, partnership or limited
liability company, other than any such agreement or arrangement solely between
or among the Company and/or the Company Subsidiaries;
 
(iii) an agreement (other than a future contract, option contract or other
derivative transaction) that involves future expenditures or receipts by the
Company or any Company Subsidiary of more than $150,000 in any one year period
that cannot be terminated on less than 90 days’ notice without material payment
or penalty;
 
(iv) an acquisition agreement that contains “earn-out” or other contingent
payment obligations that would reasonably be expected to result in future
payments by the Company or a Company Subsidiary in excess of $150,000;
 
(v) an agreement relating to indebtedness for borrowed money or any financial
guaranty, in each case pertaining to indebtedness in excess of $150,000
individually;
 
(vi) a lease or sublease with respect to real property;
 
(vii) an agreement pursuant to which the Company or any Company Subsidiary (1)
is granted or obtains any right to use any Intellectual Property (excluding
standard form Contracts granting rights to use readily available shrink wrap or
click wrap software), (2) is restricted in its right to use or register any
Company Intellectual Property, or (c) permits any other Person to use, enforce,
or register any Company Intellectual Property, in each case including any
license agreements, coexistence agreements, and covenants not to sue (other than
the ordinary course limited license granted pursuant to the Company’s standard
form of customer agreement);
 
(viii) an employment agreement with an employee of the Company or a Company
Subsidiary, or an agreement with an independent contractor requiring payments in
excess of $75,000 in any calendar year;
 
 
-21-

 
 
(ix) a capital lease;
 
(x) an agreement that involves a forward, future, hedge, swap, collar, put,
call, option or similar derivative transaction;
 
(xi) an agreement of guaranty, surety or indemnification;
 
(xii) an agreement for severance or retention payments or under which the
Company or a Company Subsidiary is obligated to make any payment of Transaction
Bonuses; or
 
(xiii) a Contract relating to (A) the sale, outbound license or outbound lease
by the Company or any Company Subsidiary of any material indefeasible rights of
use of capacity infrastructure or peering arrangements or (B) the purchase,
inbound license or inbound lease by the Company or any Company Subsidiary of any
material indefeasible rights of use of capacity infrastructure or peering
arrangements;
 
(xiv) a collective bargaining agreement; or
 
(xv) an agreement that has not been fully satisfied or terminated in accordance
with its terms relating to the disposition or acquisition by the Company or any
Company Subsidiary of assets or properties in excess of $100,000, not made in
the ordinary course of business consistent with past practice.
 
(all contracts of the type described in this Section 3.12(a), being referred to
herein as a “Company Material Contract”).
 
(b) Neither the Company nor any of the Company Subsidiaries is in material
breach of or default under the terms of any Company Material Contract. To the
knowledge of the Company, no other party to any Company Material Contract is in
any material respect in breach of or default under the terms of any Company
Material Contract. Each Company Material Contract is a valid and binding
obligation of the Company or the Company Subsidiary that is a party thereto and
is in full force and effect; except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws, now or hereafter in effect, relating to creditors’ rights generally; and
(ii) equitable remedies of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought. True, correct
and complete copies of each Company Material Contract (including all
modifications and amendments thereto and waivers thereunder) have been made
available to Parent.
 
Section 3.13 Intellectual Property; Data Privacy.
 
(a) Either the Company or a Company Subsidiary owns, or is licensed or otherwise
possesses all rights necessary to use, all Intellectual Property used in their
respective businesses as currently conducted (collectively, the “Company
Intellectual Property”).
 
 
-22-

 
 
(b) Section 3.13(b)(i) of the Company Disclosure Letter sets forth all Company
Registered Intellectual Property. All required filings and fees related to such
Company Registered Intellectual Property have been timely filed with and paid to
the relevant Governmental Entities and authorized registrars. Section
3.13(b)(ii) of the Company Disclosure Letter sets forth all Intellectual
Property owned or purported to be owned by the Company or any Company Subsidiary
that is not Company Registered Intellectual Property and which is material to
the businesses of the Company and Company Subsidiaries as currently conducted
(collectively, together with the Company Registered Intellectual Property, the
“Company Owned Intellectual Property”).
 
(c) There are no pending or, to the knowledge of the Company, threatened claims
in writing by any Person alleging infringement or misappropriation by the
Company or any Company Subsidiary arising from their use of the Company
Intellectual Property, and to the knowledge of the Company, the conduct of the
businesses of the Company and Company Subsidiaries and their products and
services do not infringe, misappropriate, dilute or otherwise violate any
Intellectual Property rights of any Person.
 
(d) Neither the Company nor any Company Subsidiary has made any claim during the
past three (3) years of any misappropriation or infringement by any third party
of its rights to or in connection with the use of any Company Intellectual
Property; and (ii) to the knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property.
 
(e) The Company and the Company Subsidiaries have taken reasonable measures to
protect the confidentiality of their material Trade Secrets including requiring
employees, contractors and other Persons having access thereto to execute
written nondisclosure agreements. To the knowledge of the Company, none of the
material Trade Secrets of the Company and the Company Subsidiaries have been
disclosed or authorized to be disclosed by the Company or the Company
Subsidiaries to any third party other than pursuant to a valid and enforceable
nondisclosure agreement. To the knowledge of the Company, no third party to any
nondisclosure agreement with the Company or any Company Subsidiary is in
material breach, violation or default.
 
(f) Each Person who contributed, developed or conceived any Company Owned
Intellectual Property has done so pursuant to a valid and enforceable written
agreement that (i) protects the confidential information disclosed by the
Company and its Subsidiaries and (ii) grants the Company and its Subsidiaries
exclusive ownership of the Person’s contribution, development or conception and
waives any non-assignable interests in such contribution, development or
conception, such as moral rights.
 
(g) During the three (3) years prior to the date hereof, to the knowledge of the
Company, there has been no act or omission in respect of the use or enforcement
of the Company Owned Intellectual Property that would reasonably be expected to
result in the abandonment, cancellation or unenforceability of any such
Intellectual Property.
 
 
-23-

 
 
(h) No source code for any Company Proprietary Software has been delivered,
licensed, or made available to any escrow agent or other Person who is not an
employee of the Company or a Company Subsidiary. Neither the Company nor any
Company Subsidiary has any duty or obligation to deliver, license, or make
available the source code for any Company Proprietary Software to any escrow
agent or other Person who is not an employee of the Company or any Company
Subsidiary.
 
(i) No Company Proprietary Software is subject to any “copyleft” or other
obligation or condition (including any obligation or condition under any “open
source” license such as the GNU Public License, Lesser GNU Public License, or
Mozilla Public License) that has been or is used in the businesses of the
Company and its Subsidiaries in a manner that would (i) require or condition the
use or distribution of such Company Proprietary Software on the disclosure,
licensing, or distribution of any source code for any portion of such Company
Proprietary Software or (ii) otherwise impose any limitation, restriction, or
condition on the right or ability of the Company or any Company Subsidiary to
use or distribute any Company Proprietary Software.
 
(j) To the knowledge of the Company, the Company Proprietary Software does not
contain any program routine, device, code or instructions (including any code or
instructions provided by third parties) or other undisclosed feature, including,
without limitation, a time bomb, virus, lock-out device, drop-dead device,
malicious logic, worm, Trojan horse, bug, error, defect or trap door, that is
designed to access, modify, delete, damage, disable, deactivate, interfere with,
or otherwise harm the Company Proprietary Software or any of the Company’s
information technology systems, data or other electronically stored information,
or computer programs or systems.
 
(k) The Company and the Company Subsidiaries, and to the knowledge of the
Company all of its and their providers of information technology services, have
(i) complied in all material respects with their respective published privacy
policies and internal privacy policies and guidelines and all applicable Laws
relating to privacy, data protection, user data or Personal Data, including
Personal Data of customers, employees, contractors and third parties who have
provided information to the Company or any Company Subsidiary; and (ii)
implemented and maintained, in all material respects, a comprehensive security
plan that includes industry standard administrative, technical and physical
safeguards to ensure that Personal Data is protected against loss, damage,
unauthorized access, unauthorized use, unauthorized modification, or other
misuse. To the knowledge of the Company, within the past five (5) years there
has been no material loss, damage, unauthorized access, unauthorized use,
unauthorized modification, or other breach of security of Personal Data
maintained by or on behalf of the Company and the Company Subsidiaries. Within
the past three (3) years, no Person has made any material claim or commenced any
Action with respect to, and the Company and the Company Subsidiaries have not,
to the knowledge of the Company, experienced any incident relating to, any
actual or suspected loss, damage, unauthorized access, unauthorized use,
unauthorized modification, or breach of security of Personal Data maintained or
processed by or on behalf of the Company and the Company Subsidiaries. Except
for disclosures of information permitted or required by privacy Laws or
authorized by the provider of Personal Data, to the knowledge of the Company,
neither the Company nor any of the Company Subsidiaries has shared, sold, rented
or otherwise made available, and does not share, sell, rent or otherwise make
available, to third parties any Personal Data.
 
 
-24-

 
 
(l) The Company and the Company Subsidiaries have implemented business
continuity and disaster recovery plans and have arranged for back-up data
processing services adequate to meet their data processing needs in the event
that the computer systems, networks, hardware, software, databases, websites,
and equipment of the Company or the Company Subsidiaries or any of their
material components is rendered temporarily or permanently inoperative as a
result of a natural or other disaster. The computer systems, networks, hardware,
software, databases, websites, and equipment of the Company or the Company
Subsidiaries have not suffered any failures, errors or breakdowns within the
past three years that have caused any material disruption or interruption in the
business of the Company and the Company Subsidiaries. The computer systems,
networks, hardware, software, databases, websites, and equipment of the Company
or the Company Subsidiaries have not suffered any failures, errors or breakdowns
within the past three (3) years that have caused any material disruption or
interruption in the business of the Company or the Company Subsidiaries.
 
Section 3.14 Title to Properties; Assets. The Company and each of the Company
Subsidiaries have good and valid fee simple title to its owned properties and
tangible assets or good and valid leasehold interests in all of its leasehold
properties and tangible assets except for such as are no longer used or useful
in the conduct of its business or as have been disposed of in the ordinary
course of business consistent with past practices. All properties and assets,
other than properties and assets in which the Company or any Company Subsidiary
have a leasehold interest, are free and clear of all Liens other than Permitted
Liens. The equipment and other tangible assets of the Company and the Company
Subsidiaries are in all material respects in good operating condition, normal
wear and tear and ordinary maintenance requirements excepted.
 
Section 3.15 Real Property. Section 3.15 of the Company Disclosure Letter sets
forth a list of all real property currently owned or leased by the Company or
any Company Subsidiaries. The Company or one of the Company Subsidiaries has
good and fee simple title to all real property owned by the Company or any such
Company Subsidiary as of the date of this Agreement (the “Company Owned Real
Property”) and valid leasehold estates in all real property leased or subleased
(whether as tenant or subtenant) by the Company or any Company Subsidiary as of
the date of this Agreement (including improvements thereon, the “Company Leased
Real Property”). The Company Subsidiaries have exclusive possession of each
Company Leased Real Property and Company Owned Real Property, other than any
Permitted Liens and use and occupancy rights granted to third-party owners,
tenants, guests, hosts or licensees pursuant to agreements with respect to such
real property.
 
Section 3.16 Regulatory Matters.
 
(a) The Company and the Company Subsidiaries hold all Permits issued by the FCC
or the state public service or public utility commissions or other similar state
regulatory bodies (“State PSCs”), and all other material regulatory Permits,
including franchises, ordinances and other agreements granting access to public
rights of way, issued or granted to the Company or any Company Subsidiary by a
Governmental Entity (the “Company Licenses”) that are required for the Company
and each Company Subsidiary to conduct its business, as presently conducted.
Section 3.16(a) of the Company Disclosure Letter sets forth a list of all
Company Licenses, together with the name of the entity holding such Company
License. True correct and complete copies of each Company License (including all
modifications and amendments thereto and waivers thereunder) have been made
available to Parent.
 
 
-25-

 
 
(b) Each Company License is valid and in full force and effect and has not been
suspended, revoked, cancelled or adversely modified. No Company License is
subject to (i) any conditions or requirements that have not been imposed
generally upon licenses in the same jurisdictions, or (ii) any pending
proceeding by or before the FCC or State PSCs to suspend, revoke or cancel such
Company License, or any judicial review of a decision by the FCC or State PSCs
with respect thereto. To the knowledge of the Company, there has not been any
event, condition or circumstance that would preclude any Company License from
being renewed in the ordinary course (to the extent that such Company License is
renewable by its terms).
 
(c) Company License is in compliance in all material respects with such Company
License and has fulfilled and performed all of its obligations with respect
thereto, including all reports, notifications and applications required by the
Communications Act of 1934, as amended (the “Communications Act”), or the rules,
regulations, written policies and orders of the FCC (together with the
Communications Act, the “FCC Rules”) or similar state telecommunications laws
(the “State Telecommunications Laws”) and the rules, regulations, written
policies and Orders of State PSCs (collectively with the State
Telecommunications Laws, the, “PSC Rules”), and the payment of all regulatory
fees and contributions, except for exemptions, waivers or similar concessions or
allowances. Without limiting the foregoing, the licensee of each Company License
is in material compliance with the applicable requirements of the Federal and
state Universal Service Fund programs, the Federal Telecommunications Relay
Service programs, the Federal North American Numbering Plan Administration
program, the Federal Local Number Portability Administration program
(collectively, the “USF Programs”), the Communications Assistance to Law
Enforcement Act (“CALEA”), and the FCC’s regulations concerning treatment and
protection of Customer Proprietary Network Information (“CPNI”). All reports and
other submissions required in connection with the USF Programs, CALEA, CPNI
regulations, including contribution remittances, have been timely filed in
materially true, correct and complete form. To the knowledge of the Company and
the Company Subsidiaries, there are no pending or threatened investigations,
inquiries, audits, examinations or other proceedings in connection with the
performance of the Company and the Company Subsidiaries of their USF Programs,
CALEA and CPNI obligations.
 
(d) Except as set forth in Section 3.16(d) of the Company Disclosure Letter,
neither the Company nor any Company Subsidiary has (i) implemented, or been
alleged or found to have implemented, an unauthorized change of an end user’s
carrier (“Slamming”) or (ii) placed or been alleged or found to have placed an
unauthorized charge on customer billing (“Cramming”).
 
(e) Except as set forth in Section 3.16(e) of the Company Disclosure Letter, the
Company and all Company Subsidiaries have timely complied with any compensation,
restoration, reimbursement, reporting, or other obligations arising in
connection with public and private right-of-way access and pole attachment
agreements.
 
 
-26-

 
 
(f) Except as set forth in Section 3.16(f) of the Company Disclosure Letter, the
Company and all Company Subsidiaries have timely submitted all required
international traffic and circuit status reports in materially true, correct and
complete form. Except as set forth in Section 3.16(f) of the Company Disclosure
Letter, the licensee of each Company License is in material compliance with the
applicable requirements of federal and state network outage reporting (“NOR”)
requirements. All reports and other submissions required in connection with
federal and state NOR requirements have been timely filed in materially true,
correct and complete form. To the knowledge of the Company and the Company
Subsidiaries, there are no pending or threatened investigations, inquiries,
audits, examinations or other proceedings in connection with the performance of
the Company and the Company Subsidiaries of their NOR requirements.
 
(g) The Company or a wholly-owned Subsidiary of the Company directly or
indirectly owns 100% of the Equity Interests and controls 100% of the voting
power and decision-making authority of each holder of the Company Licenses. No
Company License, Order or other agreement, obtained from, issued by or concluded
with any State PSC would impose restrictions on the ability of any Company
Subsidiary to make payments, dividends or other distributions to the Company or
any Company Subsidiary that limits, or would reasonably be expected to limit,
the cash funding and management alternatives of the Company on a consolidated
basis in a manner disproportionate to restrictions applied by other State PSCs.
 
Section 3.17 Interconnection Agreements. The Company or a Company Subsidiary has
entered into, with incumbent local exchange carriers or other non-incumbent
carriers, all interconnection agreements, line sharing agreements, line
splitting agreements and other Contracts (the “Company Interconnection
Agreements”), that are necessary to conduct their respective businesses as
currently conducted. All Company Interconnection Agreements entered into
pursuant to Sections 251 and 252 of the Telecommunications Act of 1996 (the
“Telecommunications Act”), including amendments to implement the FCC’s Triennial
Review Remand Order, to the extent such amendments have been adopted, include
the general terms, conditions and pricing for any unbundled network elements
(“UNEs”), collocation or other network facilities or services provided under
Sections 251 and 252 of the Telecommunications Act. All Company Interconnection
Agreements have been approved by the applicable State PSC. The Company and any
Company Subsidiary, as applicable, that is a party to a Company Interconnection
Agreement has performed in all material respects all obligations required to be
performed by it under such Company Interconnection Agreement.
 
Section 3.18 Network Facilities. Except as set forth in Section 3.18 of the
Company Disclosure Letter:
 
(a) All Company Owned Network Facilities and, to the knowledge of the Company,
all Company leased Network Facilities: (i) are in all material respects in good
working order and condition and are without any material defects individually
and in the aggregate; (ii) are, individually and in the aggregate, operated,
installed, and maintained by the Company, a Company Subsidiary, or their
contractors in a manner that is in compliance in all material respects with (x)
generally accepted industry standards for the United States industry, (y)
performance requirements in service agreements with customers of the Company and
the Company Subsidiaries, and (z) all Laws, and (iii) comply, individually and
in the aggregate, in all material respects with applicable performance
standards.
 
 
-27-

 
 
(b) The Company or a Company Subsidiary owns, free and clear of all Liens (other
than Permitted Liens and Liens to be discharged at the Closing), all right,
title and interest in Company Owned Network Facilities. No third party may
revoke or otherwise encumber or interfere in any material respect with such
right, title, and interest.
 
(c) (i) Each Contract under which any third party provides Network Facilities,
including leases, licenses, indefeasible rights of use of capacity or
infrastructure, pole attachment agreements and Right-of-Way Agreements (a
“Company Network Facility Agreement”), to which the Company or any Company
Subsidiary is a party, is a valid, legally binding and enforceable agreement and
is in full force and effect, and neither the Company nor any Company Subsidiary
is in material breach of or material default under any Company Network Facility
Agreement, (ii) no event has occurred which, with notice or lapse of time, would
constitute a material breach or material default by the Company or any Company
Subsidiary or permit termination, revocation, other interference with
performance of, modification or acceleration by any third party of any Company
Network Facility Agreement, and (iii) as of the date hereof, no third party has
repudiated, revoked, terminated, or otherwise materially interfered with
performance of or has the right to terminate, repudiate, revoke, or otherwise
materially interfere with the performance of any Company Network Facility
Agreement. Any notices or other actions required to be taken to renew the term
of a Company Network Facility Agreement for any upcoming renewal term have been
taken or given in the manner and within the time provided in such Company
Network Facility Agreement (or the time period provided for giving of such
notice or to undertake such action has not expired) to effectively renew the
term of such Company Network Facility Agreement for the upcoming term thereof to
the extent that such Company Network Facility Agreement is renewable by its
terms and the Company or the applicable Company Subsidiary intends to renew such
Company Network Facility Agreement. To the knowledge of the Company, as of the
date of this Agreement, the Company and the Company Subsidiaries hold all
Company Network Facility Agreements necessary to conduct the Company’s business
and no event has occurred, or circumstance exists, that, but for the passage of
time or giving of notice, would preclude any Company Network Facility Agreement
from being renewed in accordance with the terms thereof to the extent the
Company or the applicable Company Subsidiary intends to renew such Company
Network Facility Agreement.
 
Section 3.19 Insurance. The Company and the Company Subsidiaries maintain
insurance in such amounts and against such risks as the Company believes to be
customary for the industries in which it and the Company Subsidiaries operate.
Neither the Company nor any of the Company Subsidiaries has received notice of
any pending or threatened cancellation with respect to any such material
insurance policy, and each of the Company and the Company Subsidiaries is in
compliance in all material respects with all conditions contained therein.
 
Section 3.20 Application of Takeover Laws. The Company and the Stockholders have
taken all necessary action, if any, in order to render inapplicable to the
Transactions any restriction on business combinations contained in any
applicable Takeover Law which is or would reasonably be expected to become
applicable to Parent or Merger Sub as a result of the Transactions, including
the conversion of Company Capital Stock pursuant to Section 1.5(a).
 
 
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Section 3.21 Affiliate Transactions. There are not any transactions, agreements,
arrangements or understandings between the Company or the Company Subsidiaries,
on the one hand, and the Company’s Affiliates (other than wholly-owned
Subsidiaries of the Company) or other Persons on the other hand.
 
Section 3.22 Customers and Suppliers.
 
(a) Section 3.22(a) of the Company Disclosure Letter sets forth (i) the top
thirty customers of the Company based on aggregate consideration paid to the
Company for each of the two (2) most recent fiscal years (collectively, the
“Material Customers”); and (ii) the amount of consideration paid by each
Material Customer during such periods. Except as set forth in Section 3.22(a) of
the Company Disclosure Letter, the Company has not received any notice (in
writing, including by e-mail to the Company’s legal department, or otherwise in
accordance with the terms of any applicable contract with the Material
Customer), that any of its Material Customers has ceased, or intends to cease
after the Closing, to use its goods or services or to otherwise terminate or
materially reduce its relationship with the Company.
 
(b) Section 3.22(b) of the Company Disclosure Letter sets forth (i) each
supplier to whom the Company has paid consideration for goods or services
rendered in an amount greater than or equal to $50,000 for each of the two (2)
most recent fiscal years (collectively, the “Material Suppliers”); and (ii) the
amount of purchases from each Material Supplier during such periods. Except as
set forth in Section 3.22(b) of the Company Disclosure Letter, the Company has
not received any notice (in writing, including by e-mail to the Company’s legal
department, or otherwise in accordance with the terms of any applicable contract
with the Material Supplier), that any of its Material Suppliers has ceased, or
intends to cease, to supply goods or services to the Company or to otherwise
terminate or materially reduce its relationship with the Company.
 
Section 3.23 Directors, Officers, Managers. Section 3.23 of the Company
Disclosure Letter sets forth a list of all officers, directors, partners and/or
managers of the Company and each Company Subsidiary as of the date hereof.
 
Section 3.24 Books and Records. The minute books and stock record books of the
Company and the Company Subsidiaries, all of which have been made available to
Parent, are complete and correct and have been maintained in accordance with
sound business practices. The minute books of the Company and the Company
Subsidiaries contain accurate and complete records of all meetings, and actions
taken by written consent of, the stockholders, the members, the board of
directors, any committee of the board, or the manager, as applicable, and no
meeting, or action taken by written consent, of any such stockholders, members,
board, committee or manager has been held for which minutes have not been
prepared and are not contained in such minute books. At the Closing, all of
those books and records will be in the possession of the Company.
 
 
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Section 3.25 Broker’s Fees. None of the Company, any Company Subsidiary or any
of their respective officers or directors has employed any broker or finder or
incurred any liability for any broker’s fees, commissions or finder’s fees in
connection with the Transactions, other than as set forth on Section 3.25 of the
Company Disclosure Letter. The Company has heretofore provided to Parent a
correct and complete copy of the Company’s engagement letters with the entities
set forth on Section 3.25 of the Company Disclosure Letter, which letters
describe all fees payable to the entities set forth on Section 3.25 of the
Company Disclosure Letter, in connection with the Transactions and all Contracts
under which any such fees or any expenses are payable and all indemnification
and other Contracts with the entities set forth on Section 3.25 of the Company
Disclosure Letter, entered into in connection with the Transactions.
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
 
Parent and Merger Sub represent and warrant to the Company as follows:
 
Section 4.1 Parent Corporate Organization. Parent is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. Parent has the corporate power and corporate authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the character or location
of the properties and assets owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or qualified
would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
 
Section 4.2 Merger Sub Corporate Organization. Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware. All of the issued and outstanding capital stock of Merger Sub is, and
at the Effective Time will be, owned by Parent. Merger Sub has not conducted any
business prior to the date hereof and has, and prior to the Effective Time will
have, no assets, liabilities or obligations of any nature other than those
incident to its formation and pursuant to this Agreement and the Transactions.
 
Section 4.3 Authority; No Violation.
 
(a) Each of Parent and Merger Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the Transactions. The
execution and delivery of this Agreement and the consummation of the
Transactions have been duly and validly authorized by the Board of Directors of
Parent and the sole stockholder of Merger Sub, and, except for the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the consummation of the Transactions. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming this
Agreement constitutes the valid and binding agreement of the Company, this
Agreement constitutes the valid and binding agreement of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Laws affecting or
relating to enforcement of creditors’ rights generally and (ii) is subject to
general principles of equity (regardless of whether enforceability is considered
in a proceeding at Law or in equity).
 
 
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(b) None of the execution and delivery of this Agreement by Parent or Merger
Sub, the consummation of the Transactions, nor compliance by Parent or Merger
Sub, as applicable, with any of the terms or provisions of this Agreement, will
(i) violate any provision of the Parent Charter, the Parent Bylaws, the Merger
Sub Charter or the Merger Sub Bylaws or (ii) assuming that the consents,
approvals and filings referred to in Section 4.4 are duly obtained and/or made,
violate any Injunction or Law applicable to Parent, Merger Sub, any of the
Parent Subsidiaries or any of their respective properties or assets.
 
Section 4.4 Consents and Approvals. Except for (a) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware pursuant to the
DGCL, (b) the State Approvals and (c) the FCC Approval, no consents or approvals
of or filings or registrations with any Governmental Entity are necessary in
connection with (i) the execution and delivery by Parent or Merger Sub of this
Agreement and (ii) the consummation by Parent and Merger Sub, as applicable, of
the Transactions except as would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
 
Section 4.5 Financing. Parent will have at the Effective Time access to
immediately available funds sufficient to pay the amounts required to be paid by
Parent hereunder and to pay all related fees and expenses to be paid by Parent
at the Closing. Parent’s and Merger Sub’s obligations under this Agreement are
not subject to any condition regarding Parent’s or Merger Sub’s ability to
obtain financing to enable Parent to meet its obligations hereunder.
 
Section 4.6 Legal Proceedings.
 
(a) Neither Parent nor any of the Parent Subsidiaries is a party to any, and
there are no pending or, to the knowledge of Parent, threatened, Actions,
against Parent or any Parent Subsidiary except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
 
(b) There is no Injunction or judgment imposed upon Parent, any of the Parent
Subsidiaries or the assets of Parent or any Parent Subsidiary that would
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
 
Section 4.7 SEC Reports. No report on Form 10-K, Form 10-Q or Form 8-K
(including exhibits and all other information incorporated therein) filed by
Parent with, or furnished by Parent to, the SEC during the twenty-four month
period prior to the date hereof contained any untrue statement of material fact
or omitted any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, in each case
determined as of the date of such filing or furnishing of such item.
 
Section 4.8 Parent Common Stock. The shares of Parent Common Stock to be issued
to the Stockholders pursuant to the terms of this Agreement have been duly
authorized, and when issued in accordance with the terms of this Agreement, will
be duly and validly issued, fully paid and non-assessable, will not be issued in
violation of the preemptive or similar rights of any stockholder, and will be
listed for trading on the principal stock exchange on which the shares of common
stock of Parent are traded as of the date of this Agreement.
 
 
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Section 4.9 Investment Intent. Parent is acquiring all of the shares of the
Company Capital Stock for its own account and not with a view to the
distribution of those interests within the meaning of Section 2(11) of the
Securities Act.
 
Section 4.10 Broker’s Fees. None of Parent, any Parent Subsidiary or any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker’s fees, commissions or finder’s fees in
connection with the Merger.
 
ARTILCE V
PRE-CLOSING COVENANTS
 
Section 5.1 Conduct of Businesses by the Company Prior to the Effective Time.
During the period from the date of this Agreement to the earlier of the
termination of this Agreement in accordance with its terms and the Effective
Time (except as contemplated or permitted by this Agreement, as required by a
Governmental Entity or applicable Law or as Parent may otherwise consent in
writing (which consent will not be unreasonably withheld, conditioned or
delayed)), the Company will, and will cause each of the Company Subsidiaries to
use commercially reasonable efforts to (a) conduct, in all material respects,
its business in the ordinary course, including the timely payment in accordance
with historical practice of all Taxes, accounts payable and other liabilities,
(b) preserve intact its business organization and its significant business
relationships and to preserve satisfactory relationships with its employees, (c)
maintain insurance upon all of the material assets of the Company in such
amounts and of such kinds comparable to that in effect on the date of this
Agreement, and (d) maintain all Permits and timely pay all material fees,
charges and other amounts to Governmental Entities.
 
Section 5.2 Company Forbearances. Without limiting the generality of Section
5.1, during the period from the date of this Agreement to the earlier of the
termination of this Agreement in accordance with its terms and the Effective
Time, except as set forth on Section 5.2 of the Company Disclosure Letter or as
contemplated or permitted by this Agreement or as required by applicable Law,
the Company will not, and will not permit any of the Company Subsidiaries to,
without the prior written consent of Parent (which consent will not be
unreasonably withheld, conditioned or delayed):
 
(a) incur any Indebtedness;
 
(b) (i) adjust, split, combine or reclassify any of its capital stock;
 
(ii) make, declare or pay any dividend, or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares of its
capital stock (other than from employees that have ceased to be employed by the
Company or a Company Subsidiary pursuant to Contracts in effect on the date of
this Agreement) or any securities or obligations convertible (whether currently
convertible or convertible only after the passage of time or the occurrence of
certain events) into or exchangeable for any shares of its capital stock except
dividends paid by any of the Company Subsidiaries to the Company or to any of
its wholly owned Subsidiaries; provided that nothing in this Agreement shall
restrict the Company from declaring and paying a cash dividend or making a cash
distribution to its stockholders prior to the Closing Date; or
 
 
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(iii) issue, sell, grant or authorize the issuance, sale or grant of any shares
of Company Capital Stock or other ownership interest in the Company or any
Company Subsidiary or any securities convertible into or exchangeable for any
such shares or ownership interest, or any rights, options, or warrants with
respect to any such shares of Company Capital Stock, ownership interests or
convertible or exchangeable securities;
 
(c) except as required by Law or an agreement (including, any Company Benefit
Plan) in effect on the date of this Agreement, or as otherwise set forth in
Section 5.2(c) of the Company Disclosure Letter:
 
(i) increase any wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any director, executive officer or employee
other than ordinary course annual wage and salary increases for employees (other
than employees with a title of Vice President or a title senior to Vice
President) that do not increase the aggregate amount of such wages and salaries
for all such affected employees by more than $125,000;
 
(ii) enter into or amend any employment or severance agreements with any
director or executive officer;
 
(iii) establish any bonus or incentive plan;
 
(iv) pay any pension or retirement allowance not allowed by any existing plan or
agreement or by applicable Law;
 
(v) pay any bonus to any director or executive officer other than pursuant to
the 2017 Annual Bonus Plans in effect on the date of this Agreement; or
 
(d) become a party to, amend or commit itself to, any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee of the Company or a Company Subsidiary;
 
(e) sell, lease, transfer or otherwise dispose of any of its material properties
or assets to any Person other than a Company Subsidiary, except for the disposal
of obsolete assets or assets sold in the ordinary course of business;
 
(f) compromise, settle or agree to settle any Action in which damages are being
sought against the Company or any Company Subsidiary, other than compromises,
settlements or agreements in the ordinary course of business consistent with
past practice that (i) involve only the payment of monetary damages not in
excess of $50,000 individually or $250,000 in the aggregate, and (ii) do not
involve any imposition of equitable relief on, or any admission of wrongdoing
or, in the context of any actual or potential violation of any criminal Law, any
nolo contendere or similar plea by, the Company or any Company Subsidiaries;
 
 
-33-

 
 
(g) make any acquisition (including by merger) of the capital stock or a
material portion of the assets of any other Person;
 
(h) purchase or otherwise acquire any real property;
 
(i) enter into or renew any contract with a term greater than one year and
annual payments by the Company or any Company Subsidiary greater than $250,000;
 
(j) enter into any new line of business that is material to the Company and the
Company Subsidiaries, taken as a whole, or materially change any of its
technology or operating policies that are material, individually or in the
aggregate, to the Company and the Company Subsidiaries, taken as a whole, except
in the ordinary course of business or as required by applicable Law;
 
(k) amend the Company Charter or the Company Bylaws, except as otherwise
required by Law;
 
(l) except as required by GAAP as concurred in by its independent auditors or in
the ordinary course of business, make any material change in its methods or
principles of accounting;
 
(m) except as required by applicable Law, make, change or rescind any material
Tax election, change any Tax accounting period, adopt or change any Tax
accounting method, amend any material Tax Return, enter into any closing
agreement, settle any Tax claim or assessment relating to the Company or any of
the Company Subsidiaries, obtain any Tax ruling, surrender any right to claim a
refund of material Taxes, or consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment relating to the
Company or any of the Company Subsidiaries;
 
(n) waive or amend in any material respect any of its material rights under any
Company Material Contract;
 
(o) adopt or recommend a plan of complete or partial dissolution, liquidation,
recapitalization, restructuring or other reorganization;
 
(p) fail to maintain, or allow to lapse or abandon, any material foreign or U.S.
registrations in connection with any Company Intellectual Property;
 
(q) except as required by Law, enter into or amend in any material respect any
collective bargaining agreement;
 
(r) make any discretionary contributions to pension or retirement plans in
excess of the minimum required contributions as required by the Pension
Protection Act of 2006 or similar legal requirements for plans outside the
United States;
 
 
-34-

 
 
(s) conduct the businesses of the Company or any Company Subsidiary in a manner
that would cause the Company or any Company Subsidiary to become an “investment
company” subject to registration under the Investment Company Act;
 
(t) terminate or permit any material Permit of the Company to lapse, other than
in accordance with the terms and regular expiration of any such Permit, or fail
to apply on a timely basis for any renewal of any renewable material Permit of
the Company;
 
(u) change recurring or non-recurring rates, promotions, credit policies or
collections procedures, or sales incentives and commission plans for employees
of the Company or a Company Subsidiary or any other agent of the Company or a
Company Subsidiary;
 
(v) accelerate the billing, collection or other realization of accounts
receivable or other sums payable to the Company or any of the Company
Subsidiary;
 
(w) fail to pay or satisfy, or delay the payment or satisfaction of, any
accounts payable or other obligations;
 
(x) take any action outside the ordinary course of business consistent with past
practices that would materially impact the Working Capital of the Company and
the Company Subsidiaries; or
 
(y) agree to take, make any commitment to take, or adopt any resolutions of its
board of directors in support of, any of the actions prohibited by this Section
5.2.
 
ARTICLE VI
ADDITIONAL AGREEMENTS
 
Section 6.1 Filings; Other Actions; Notification.
 
(a) The Company, Parent and Merger Sub will use their respective commercially
reasonable efforts to (i) take, or cause to be taken, all appropriate action and
do, or cause to be done, all things necessary, proper or advisable under
applicable Law, or otherwise to consummate and make effective the Transactions
as promptly as practicable, (ii) obtain from any Governmental Entity any
consents, licenses, permits, waivers, approvals, authorizations or Orders,
including the FCC Approval and State Approvals, required to be obtained by
Parent, Merger Sub or the Company, or any of their respective Subsidiaries, or
to avoid any Action by any Governmental Entity, in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Transactions and (iii) (A) as promptly as reasonably practicable, and in any
event within ten (10) Business Days after the date hereof, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement required in order to obtain the FCC Approval, (B) as promptly as
reasonably practicable, and in any event within seven (7) Business Days after
the date hereof, make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement required in order to obtain
the State Approvals, and (C) as promptly as reasonably practicable after the
date hereof, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement required under any other applicable
Law. The Company and Parent will furnish to each other all information required
for any application or other filing under the rules and regulations of any
applicable Law in connection with the Transactions.
 
 
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(b) The Company will give (or will cause the Company Subsidiaries to give) any
notices to third parties, and use, and cause the Company Subsidiaries to use,
their commercially reasonable efforts to obtain any third party consents (i)
required under the terms of any Company Material Contract or Permit of the
Company or any Company Subsidiary to consummate the Transactions, or (ii)
required to prevent a Company Material Adverse Effect from occurring prior to or
after the Effective Time.
 
(c) Without limiting the generality of anything contained in this Section 6.1,
each Party hereto will: (i) give the other Parties prompt notice of the making
or commencement of any Action with respect to the Merger or any of the other
Transactions; (ii) keep the other Parties informed as to the status of any such
request or Action; (iii) promptly inform the other Parties of any communication
to or from any Governmental Entity regarding the Merger or any of the other
Transactions; (iv) respond as promptly as practicable to any additional requests
for information received by any Party from any Governmental Entity with respect
to the Transactions or filings contemplated by Section 6.1(a); and (v) use
commercially reasonable efforts to prevent the entry in any Action brought by a
Governmental Entity or any other Person of any Injunction which would prohibit,
make unlawful or delay the consummation of the Transactions. Each Party hereto
will consult and cooperate with the other Parties and will consider in good
faith the views of the other Parties in connection with any filing, analysis,
appearance, presentation, memorandum, brief, argument, opinion or proposal made
or submitted in connection with the Merger or any of the other Transactions. In
addition, except as may be prohibited by any Governmental Entity or by
applicable Law, in connection with any such request or Action, each Party will
permit Representatives of the other Parties to be present at each meeting or
conference relating to such request or Action and to have access to and be
consulted in connection with any document, opinion or proposal made or submitted
to any Governmental Entity in connection with such request or Action.
 
(d) Without limiting the generality of the foregoing, each of Parent, Merger Sub
and the Company agrees to (and the Company will cause each Company Subsidiary
to) use commercially reasonable efforts to: (A) promptly provide all information
requested by any Governmental Entity in connection with the Transactions; (B)
obtain such approvals, consents and clearances as may be necessary, proper or
advisable under any applicable Laws; (C) promptly provide all notifications
required by, and file all applications with, the FCC seeking the consent of the
FCC that are necessary or appropriate to consummate the Transactions, including
the FCC Approvals listed on Section 6.1(d) of the Company Disclosure Letter; and
(D) promptly provide all notifications and registrations required by, and file
all applications with, each applicable State PSC that are necessary or
appropriate to consummate the Transactions, including the State Approvals listed
on Section 6.1(d) of the Company Disclosure Letter.
 
 
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Section 6.2 Written Consent. Immediately following the execution and delivery of
this Agreement by the Parties, the Company will, in accordance with the DGCL,
the Company Charter, the Company Bylaws and any applicable Contract to which the
Company is a party, use commercially reasonable efforts to seek and obtain a
written consent (the “Written Consent”) approving all of the Transactions
contemplated by this Agreement and executed by the holders of at least 95% of
the Company Capital Stock, determined on an as-converted basis. If the duly
executed Written Consent executed by such holders of Company Capital Stock is
not delivered to Parent within two (2) Business Days following the date of this
Agreement, Parent will have the right to terminate this Agreement pursuant to
Section 8.1. In the event the Written Consent is executed by the holders of a
majority of the outstanding shares of each class of Company Capital Stock but
not the requisite holders of Company Capital Stock described above and Parent
does not elect to terminate this Agreement, the Company will comply with the
DGCL, the Company Charter and the Company Bylaws in connection with the Written
Consent, including giving written notice no later than ten days after the
execution of the Written Consent, in accordance with Section 228 of the DGCL, of
the taking of the actions described in the Written Consent to all other holders
of Company Capital Stock and providing a description of any appraisal rights of
holders of Company Capital Stock available under Section 262 of the DGCL and
providing all other information and disclosures with respect to appraisal rights
required by the DGCL. The Company will provide a copy of such notice to Parent
prior to mailing such notice to holders of Company Capital Stock for Parent’s
reasonable review and comment.
 
Section 6.3 No Solicitation of Other Bids.
 
(a) The Company shall not, and shall not authorize or permit any of its
Affiliates or any of its or their Representatives to, directly or indirectly,
(i) encourage, solicit, initiate, facilitate or continue inquiries regarding an
Acquisition Proposal; (ii) enter into discussions or negotiations with, or
provide any information to, any Person concerning a possible Acquisition
Proposal; or (iii) enter into any agreements or other instruments (whether or
not binding) regarding an Acquisition Proposal. The Company shall immediately
cease and cause to be terminated, and shall cause its Affiliates and all of its
and their Representatives to immediately cease and cause to be terminated, all
existing discussions or negotiations with any Persons conducted heretofore with
respect to, or that could lead to, an Acquisition Proposal. For purposes hereof,
“Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person
(other than Parent or any of its Affiliates) concerning (i) a merger,
consolidation, liquidation, recapitalization, share exchange or other business
combination transaction involving the Company; (ii) the issuance or acquisition
of shares of capital stock or other equity securities of the Company; or (iii)
the sale, lease, exchange or other disposition of any significant portion of the
Company’s properties or assets.
 
(b) In addition to the other obligations under this Section 6.3, the Company
shall promptly (and in any event within three (3) Business Days after receipt
thereof by the Company or its Representatives) advise Parent orally and in
writing of any Acquisition Proposal, any request for information with respect to
any Acquisition Proposal, or any inquiry with respect to or which could
reasonably be expected to result in an Acquisition Proposal, the material terms
and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the Person making the same.
 
 
-37-

 
 
(c) The Company agrees that the rights and remedies for noncompliance with this
Section 6.3 shall include having such provision specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to Parent and that
money damages would not provide an adequate remedy to Parent.
 
Section 6.4 Access to Information.
 
(a) Upon reasonable notice the Company will, and will cause each Company
Subsidiary to, afford to Parent and to the officers, employees, accountants,
counsel, lenders, financial advisors and other Representatives of Parent
reasonable access during normal business hours during the period prior to the
Effective Time to all the Company’s and the Company Subsidiaries’ owned or
leased properties, books, Contracts, commitments, personnel (including
contractors and distributors), records, Tax Returns, work papers and all other
information concerning its business, operations, status of compliance with Laws,
properties, personnel, accountants, Tax Return preparers and Tax advisors as
Parent may reasonably request; except that Parent and its Representatives will
conduct any such activities in such a manner as not to interfere unreasonably
with the business or operations of the Company and the Company Subsidiaries;
except further that the Company and the Company Subsidiaries will not be
required to provide any access or disclose any information if such access or
disclosure would contravene any applicable Law or where such access or
disclosure would jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any fiduciary duty or
binding agreement entered into prior to the date of this Agreement. The
foregoing notwithstanding, neither Parent nor any of its Representatives shall
contact any of the employees (other than the senior officers identified by the
Company to Parent), landlords, customers or suppliers of the Company or its
Subsidiaries without the prior written consent of the Company, which consent
shall not be unreasonably withheld, conditioned or delayed; it being
acknowledged that any and all such contacts will be arranged by and coordinated
with the Company.
 
(b) All information and materials provided pursuant to this Agreement will be
subject to the provisions of the Confidentiality Agreement entered into between
the Company and Parent as of April 11, 2017 (the “Confidentiality Agreement”).
Notwithstanding anything to the contrary set forth in this Agreement or in the
Confidentiality Agreement, Parent, the Parent Subsidiaries and their respective
Representatives may disclose information of the Company and the Company
Subsidiaries and their respective Affiliates to the Debt Financing Sources and
the Debt Financing Source Related Parties (in each case, without any obligation
on the part of the Debt Financing Sources or the Debt Financing Source Related
Parties to comply with the terms of the Confidentiality Agreement) provided,
that the Debt Financing Sources are subject to confidentiality undertakings that
are at least as restrictive as those applicable to the Debt Financing Sources
under the Debt Engagement Letter or the Definitive Debt Financing Agreements.
 
(c) No investigation by either of the Parties or their respective
Representatives will affect the representations and warranties of the other set
forth in this Agreement.
 
 
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Section 6.5 Employee Matters.
 
(a) After the Closing Date, Parent will provide, or will cause its Affiliates to
provide, each employee of the Company or any Company Subsidiary as of the
Closing Date (the “Company Employees”) with such employee compensation and
benefits as Parent or the Company or the Company Subsidiary (as applicable), in
its sole discretion, considers to be appropriate, provided that for six months
following the Closing Date Parent will not, and will cause the Surviving
Corporation and each Company Subsidiary to not, decrease the base salary of any
Company Employee in effect immediately prior to the Closing.
 
(b) Parent (i) will give, and cause its Affiliates to give, each Company
Employee service credit granted by the Company prior to Closing under any
comparable Company Benefit Plan for all purposes (including eligibility to
participate, vesting in eligible benefits, levels of benefits) other than for
benefit accrual purposes under a defined benefit pension plan, (ii) will give,
and cause its Affiliates to give, each Company Employee service credit granted
by the Company prior to Closing under any comparable personnel policies
(including any severance policies) that cover such Company Employee after the
Closing Date, for purposes of entitlement to benefits thereunder, (iii) will
allow, and cause its Affiliates to allow, such Company Employees to participate
in each Company Benefit Plan providing welfare benefits (including medical, life
insurance, long-term disability insurance and long-term care insurance) in the
plan year in which the Closing occurs without regard to preexisting-condition
limitations, waiting periods, evidence of insurability or other exclusions or
limitations, and (iv) will credit, and cause its Affiliates to credit, the
Company Employee with any expenses that were covered by the Company Benefit
Plans for purposes of determining deductibles, co-pays and other applicable
limits under the Company Benefit Plan in which they participate and any similar
replacement plans.
 
(c) Parent will continue, and cause its Affiliates to continue, to credit to
each Company Employee all vacation and personal holiday pay that the Company
Employee is entitled to use but has not used as of the Closing Date (including
any earned vacation or personal holiday pay to be used in future years), subject
to Parent’s vacation day carryover policy.
 
(d) Nothing in this Agreement will create any right or obligation which is
enforceable by any employee, former employee, Company Employee or any other
Person with respect to any terms or conditions of employment, including, but not
limited to, the benefits and compensation described in this Section 6.5. For the
avoidance of doubt, any amendments to the Company’s, the Company Subsidiaries’,
Parent’s and the Surviving Corporation’s benefit and compensation plans,
programs or arrangements will occur only in accordance with their respective
terms and will be pursuant to action taken by the Company, the Company
Subsidiaries, Parent or the Surviving Corporation which are independent of the
consummation of this Agreement or any continuing obligations hereunder.
 
 
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Section 6.6 Advice of Changes. Each of the Company and Parent will promptly
advise the other of any change or event, of which it has knowledge, (a) having
or reasonably likely to have a Company Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be, or (b) that would or would be
reasonably likely to cause or constitute a material breach of any of its
representations, warranties or covenants contained in this Agreement if it would
result in the failure of closing conditions in Section 7.3(a) or Section 7.3(b)
or Section 7.2(a) or Section 7.2(b), respectively, by the Outside Date, except
that (i) no such notification will affect the representations, warranties or
covenants of the Parties (or remedies with respect thereto) or the conditions to
the obligations of the Parties under this Agreement and (ii) a failure to comply
with this Section 6.6 will not constitute the failure of any condition set forth
in Article VII to be satisfied unless the underlying Company Material Adverse
Effect, Parent Material Adverse Effect or material breach would independently
result in the failure of a condition set forth in Article VII to be satisfied.
 
Section 6.7 Transaction Litigation. Each Party will give the other Party prompt
notice of any Action commenced or, to the knowledge of the Company or to the
knowledge of Parent, as the case may be, threatened, against the such Party or
its directors, officers, managers, partners or Affiliates relating to this
Agreement or the Transactions (collectively, “Transaction Litigation”). The
Parties will consult with each other regarding the defense or settlement of any
Transaction Litigation and neither Party will compromise, settle, come to an
arrangement regarding or agree to compromise, settle or come to an arrangement
regarding any Transaction Litigation or consent to the same, without the prior
written consent of the other Party (which consent will not be unreasonably
withheld, conditioned or delayed). In connection with any Transaction Litigation
and the Parties’ performance of their obligations under this Section 6.7, the
Company and Parent will enter into a customary common interest or joint defense
agreement or implement such other techniques as reasonably required to preserve
any attorney-client privilege or other applicable legal privilege; except that
no Party will be required to provide information if doing so, in the opinion of
its legal counsel, would cause the loss of any attorney-client privilege or
other applicable legal privilege; except that, if any information is withheld
pursuant to the foregoing exception, such Party will inform the other Party as
to the general nature of what is being withheld and the Parties will use
reasonable best efforts to enable the informing Party to provide such
information without causing the loss of any attorney-client or other applicable
legal privilege.
 
Section 6.8 Control of the Other Party’s Business. Nothing contained in this
Agreement will give Parent, directly or indirectly, the right to control or
direct the operations of the Company or the Company Subsidiaries or will give
the Company, directly or indirectly, the right to control or direct the
operations of Parent or its Subsidiaries prior to the Effective Time. Prior to
the Effective Time, each of Parent and the Company will exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its and its Subsidiaries’ respective operations.
 
 
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Section 6.9 Subsidiary Compliance. Parent will cause Merger Sub to comply with
and perform all of Merger Sub’s obligations under or relating to this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement. Merger Sub will not engage in any business which is not in connection
with the Merger
 
Section 6.10 Publicity. The initial press release with respect to the execution
of this Agreement will be a joint press release to be reasonably agreed upon by
the Parent and the Company. Following such initial press release, none of the
Company, Parent or Merger Sub will, and neither the Company nor Parent will
permit any of its Subsidiaries to, issue or cause the publication of any press
release or similar public announcement with respect to, or otherwise make any
public statement concerning, the Transactions without the prior consent (which
consent will not be unreasonably withheld, conditioned or delayed) of Parent, in
the case of a proposed announcement or statement by the Company, or the Company,
in the case of a proposed announcement or statement by Parent or Merger Sub;
except that either Party may, without the prior consent of the other Party (but
after prior consultation with the other Party to the extent practicable under
the circumstances) issue or cause the publication of any press release or other
public announcement to the extent such Party may reasonably conclude may be
required by applicable Law. The restrictions set forth in this Section 6.10 will
not apply to any release or public statement in connection with any dispute
between the Parties regarding this Agreement or the Transactions, or limit the
ability of any Party hereto to make internal announcements to their respective
employees and other stockholders that are not inconsistent in any material
respects with the prior public disclosures regarding the Transactions.
 
Section 6.11 Takeover Laws. If any Takeover Law is or may become applicable to
the Transactions, the Company and Parent, including the Company Board and the
board of directors of Parent, will grant such approvals and take such actions as
are necessary so that the Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and the Parties will
otherwise act to eliminate or minimize the effects of such Takeover Law on the
Merger.
 
Section 6.12 Indemnification of Officers and Directors.
 
(a) All rights to indemnification by the Company existing in favor of all
current and former directors and officers of the Company (the “Covered Persons”)
for their acts and omissions occurring prior to the Effective Time, as provided
in the Company Charter and Company Bylaws (as in effect as of the date of this
Agreement) and as provided in any indemnification agreements between the Company
and the Covered Persons (as in effect as of the date of this Agreement) in the
forms made available by the Company to Parent prior to the date of this
Agreement, shall survive the Merger and shall be observed by the Surviving
Corporation for a period of six years from the Effective Time, and any claim
made requesting indemnification pursuant to such indemnification rights within
such six-year period shall continue to be subject to this Section 6.12(a) until
disposition of such claim.
 
 
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(b) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, Parent shall
ensure that the successors and assigns of the Company or the Surviving
Corporation, as the case may be, or at Parent’s option, Parent, shall assume the
obligations set forth in this Section 6.12.
 
(c) Prior to the Effective Time, the Company shall purchase, at its expense
(which shall constitute a Transaction Expense), in effect for six years after
the Effective Time, insurance “tail” or other insurance policies with respect to
directors’ and officers’ liability insurance with respect to acts or omissions
existing or occurring at or prior to the Effective Time in an amount and scope
at least as favorable as the coverage applicable to directors and officers as of
immediately prior to the Effective Time under the Company’s directors’ and
officers’ liability insurance policy (the “D&O Tail Policy”). The Surviving
Corporation shall maintain such policy for its duration.
 
(d) The provisions of this Section 6.12 shall survive the consummation of the
Merger and are (i) intended to be for the benefit of, and will be enforceable
by, each of the Covered Persons and their successors, assigns and heirs, and
(ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or
otherwise. This Section 6.12 may not be amended, altered or repealed after the
Effective Time without the prior written consent of the affected Covered Persons
 
Section 6.13 Related Party Agreements. Prior to Closing, the Company will
terminate all Contracts between the Company or any Company Subsidiary, on the
one hand, and any stockholder of the Company or any of such stockholder’s
respective Affiliates, on the other hand
 
Section 6.14 Organizational Integration. From the date of this Agreement and
until the Closing, the Parties shall work together in good faith to develop
effective plans for the integration of the Company with the operations of Parent
and its subsidiaries (the “Integration Plan”), which Integration Plan shall not
be implemented until Closing. Furthermore, the Integration Plan shall be
considered confidential information. Parent shall advise the Company at least
fifteen (15) days prior to Closing of any employee(s) of Company and any Company
Subsidiary who are not included in the Integration Plan and who, therefore, will
not be retained following Closing. Nothing in the foregoing shall guarantee any
employee of the Company continued employment following the Closing, and Parent
reserves the right to make all decisions affecting personnel of the Company form
and after the Closing.
 
 
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Section 6.15 Resignations. The Company shall deliver to Parent written
resignations, effective as of the Closing Date, of the managers, officers and
directors, as applicable, of the Company and each Company Subsidiary set forth
on Section 6.15 of the Company Disclosure Letter at least three (3) Business
Days prior to the Closing. The total severance costs associated with the
resignation or termination of the Chief Executive Officer and the Chief
Financial Officer and fifty percent (50%) of the severance costs associated with
any other employees of the Company who have a change of control agreement and
that are terminated within sixty (60) days following the Closing (subject to a
cap of $250,000) shall constitute Transaction Expenses.
 
Section 6.16 Rule 144 Reporting. Parent will use its commercially reasonable
efforts to (i) file in a timely manner all reports and other documents required
to be filed by it under the Securities Exchange Act and the rules and
regulations adopted by the SEC thereunder, and will, upon request of any holder
of Parent Common Stock following the expiration of the applicable Rule 144
holding period, use commercially reasonable efforts to cause its transfer agent
to remove restrictive legends from the certificates evidencing such shares of
Parent Common Stock, including by providing such opinions of counsel as may be
required by the transfer agent.
 
ARTICLE VII
CLOSING CONDITIONS
 
Section 7.1 Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of the Parties to effect the Merger will be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
 
(a) Written Consent. The Written Consent will have been executed and delivered
to Parent within the time frame specified in Section 6.2.
 
(b) Regulatory Consents. Each of the State Approvals and the FCC Approval have
been obtained and are in effect, and any waiting period prescribed by Law with
respect to such approvals before the Merger may be consummated have expired (the
“Regulatory Approvals”).
 
(c) No Injunctions or Restraints; Illegality. No Injunction preventing the
consummation of the Transactions will be in effect. No statute, rule,
regulation, Order, Injunction or decree will have been enacted, entered,
promulgated or enforced by any Governmental Entity that prohibits or makes
illegal consummation of the Merger.
 
Section 7.2 Conditions to Obligations of Parent and Merger Sub. The obligation
of Parent and Merger Sub to effect the Merger is also subject to the
satisfaction, or waiver by Parent, on behalf of itself and Merger Sub, at or
prior to the Effective Time, of the following conditions:
 
 
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(a) Representations and Warranties. The representations and warranties of the
Company set forth in Article III of this Agreement (except for representations
and warranties that are Fundamental Representations will be true and correct as
of the date of this Agreement and as of the Effective Time as though made on and
as of the Effective Time (except that representations and warranties that by
their terms speak specifically as of the date of this Agreement or another date
will be true and correct as of such date), provided that this condition will be
deemed satisfied unless all inaccuracies in such representations and warranties
in the aggregate constitute a Company Material Adverse Effect at the Closing
Date (ignoring solely for purposes of this proviso any reference to Company
Material Adverse Effect or other materiality qualifiers contained in such
representations and warranties or contained in any defined terms used in such
representations and warranties). The representations and warranties of the
Company set forth in Section 3.1(a), Section 3.1(c), Section 3.2, Section 3.3(a)
and (b)(i) and Section 3.20 (the “Fundamental Representations”) will be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time.
 
(b) Performance of Obligations of the Company. The Company will have performed
in all material respects all covenants and agreements required to be performed
by it under this Agreement at or prior to the Closing Date.
 
(c) Company Material Adverse Effect. There will not have occurred at any time
after the date of this Agreement any Company Material Adverse Effect.
 
(d) FIRPTA Certificate. The Company will have delivered to Parent an executed
notice to the IRS prepared in accordance with the requirements of Treasury
Regulations Sections 1.897-2(h)(2) and 1.1445-2(c)(3) that is reasonably
acceptable to Parent and dated as of the Closing Date (the “FIRPTA
Certificate”), along with written authorization for Parent to deliver such
FIRPTA Certificate to the IRS on behalf of the Company following the Closing.
 
(e) Dissenting Shares. No more than one percent (1.0%) of the Shares shall be
Dissenting Shares.
 
(f) Indebtedness.
 
(i) Parent will have received payoff letters (the “Payoff Letters”) reasonably
acceptable to it from each creditor of the Company and Company Subsidiaries to
whom Indebtedness is owed with respect to the payment of the Indebtedness Payoff
Amount and the release of all Liens related thereto; and
 
(ii) Except for the Indebtedness described in the Payoff Letters that is being
paid off at the Closing, the Company and the Company Subsidiaries will have no
Indebtedness;
 
(g) Closing Certificate. Parent will have received a certificate signed on
behalf of the Company by the Chief Executive Officer of the Company certifying
that the conditions set forth in Section 7.2(a), Section 7.2(b), Section 7.2(c),
Section 7.2(e) and Section 7.2(f)(ii) are satisfied as of the Effective Time;
 
 
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Section 7.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
 
(a) Representations and Warranties. The representations and warranties of Parent
and Merger Sub set forth in Article IV of this Agreement will be true and
correct as of the date of this Agreement and as of the Effective Time as though
made on and as of the Effective Time (except that representations and warranties
that by their terms speak specifically as of the date of this Agreement or
another date will be true and correct as of such date), except that this
condition will be deemed satisfied unless all inaccuracies in such
representations and warranties in the aggregate constitute a Parent Material
Adverse Effect at the Closing Date (ignoring solely for purposes of this
exception any reference to Parent Material Adverse Effect or other materiality
qualifiers contained in such representations and warranties), and the Company
will have received a certificate signed on behalf of Parent and Merger Sub by
the President and Chief Operating Officer of Parent to the foregoing effect.
 
(b) Performance of Obligations of Parent. Parent and Merger Sub will have
performed in all material respects all covenants and agreements required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company will have received a certificate signed on behalf of Parent and Merger
Sub by the President and Chief Operating Officer of Parent to such effect.
 
Section 7.4 Frustration of Closing Conditions. No Party may rely on the failure
of any condition set forth in Section 7.1, Section 7.2, or Section 7.3, as the
case may be, to be satisfied, if such Party’s failure to perform any material
obligation required to be performed by it has been the primary cause of, or
primarily results in, such failure.
 
ARTICLE VIII
TERMINATION AND AMENDMENT
 
Section 8.1 Termination. This Agreement may be terminated and the Transactions
abandoned at any time prior to the Effective Time:
 
(a) by the mutual written consent of the Company and Parent duly authorized by
each of the Company Board and the board of directors of Parent, respectively;
 
(b) by either of the Company or Parent by written notice to the other Party at
any time after the Outside Date, if the Closing has not been consummated on or
before the Outside Date; except that, if on the Outside Date (A) the condition
set forth in Section 7.1(b) is not satisfied but all of the other conditions to
Closing have been satisfied or waived (other than those conditions that by their
nature are to be satisfied at the Closing) and the condition set forth in
Section 7.1(b) remains capable of being satisfied and (B) no final and
non-appealable order imposed by any Governmental Entity preventing the
consummation of the Transactions is in effect as of such date of determination,
then the Outside Date may be extended by the mutual written agreement of Parent
and the Company at or before 11:59 p.m. New York, New York time on the Outside
Date; and except that the right to terminate this Agreement under this Section
8.1(b) will not be available (x) to a Party if the inability to satisfy such
conditions was due to the failure of such Party to perform any of its
obligations under this Agreement or (y) to a Party if the other Party has filed
(and is then pursuing) an action seeking specific performance as permitted by
Section 11.11;
 
 
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(c) by either of the Company or Parent by written notice to the other Party if
any Injunction having the effect set forth in Section 7.1(c) is in effect and
has become final and nonappealable; or
 
(d) by Parent as described in Section 6.2.
 
Section 8.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 8.1, written notice thereof will be given to
the other Party or Parties, specifying the provision of this Agreement pursuant
to which such termination is made, and this Agreement will become null and void
(other than the provisions of this Section 8.2 and the provisions in Article X
(General Provisions), all of which will survive termination of this Agreement).
Upon termination pursuant to this Article VIII, there will be no liability on
the part of Parent, Merger Sub, the Company or their respective directors,
managers, officers and Affiliates; except that, upon the termination of this
Agreement nothing will be deemed to (i) release any Party from any liability to
any other Party for any intentional breach by such Party of this Agreement prior
to such termination or (ii) impair the right of any Party to compel specific
performance by the Party terminating this Agreement of such terminating Party’s
obligations under this Agreement as provided in Section 10.11 of this Agreement
 
ARTICLE IX
INDEMNIFICATION
 
Section 9.1 Survival. All representations and warranties in this Agreement shall
expire on the first anniversary of the Closing; provided, however, that (a)
Fundamental Representations shall survive for a period of two (2) years after
the Closing, and (b) the representations in Section 3.8 shall survive for the
full period of all applicable statutes of limitations (giving effect to any
waiver, mitigation or extension thereof) plus 60 days. All covenants and
agreements of the Parties contained herein shall survive the Closing for the
applicable statute of limitations or for the period explicitly specified
therein. Notwithstanding the foregoing, any claims asserted in good faith with
reasonable specificity (to the extent known at such time) and in writing by
notice from the Indemnified Party to the Indemnifying Party prior to the
expiration date of the applicable survival period shall not thereafter be barred
by the expiration of the relevant representation or warranty and such claims
shall survive until finally resolved.
 
Section 9.2 Indemnification By Stockholders and Optionholders. Subject to the
other terms and conditions of this Article IX, (i) each of the Stockholders,
severally and not jointly (in accordance with their respective Individual Share
Percentages), and (ii) each of the Optionholders, severally and not jointly (in
accordance with their respective Individual Option Percentages), shall indemnify
and defend each of Parent and its Affiliates (including the Company) and their
respective Representatives (collectively, the “Parent Indemnitees”) against, and
shall hold each of them harmless from and against, and shall pay and reimburse
each of them for, any and all Losses incurred or sustained by, or imposed upon,
the Parent Indemnitees based upon, arising out of, with respect to or by reason
of:
 
 
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(a) any inaccuracy in or breach of any of the representations or warranties of
the Company contained in this Agreement or in any certificate or instrument
delivered by or on behalf of the Company pursuant to this Agreement as of the
date such representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for representations and
warranties that expressly relate to a specified date, the inaccuracy in or
breach of which will be determined with reference to such specified date); and
 
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by the Company pursuant to this Agreement.
 
Subject to the foregoing, the Stockholders shall be liable for the Share
Percentage of, and the Optionholders shall be liable for the Option Percentage
of, the foregoing indemnification obligations.
 
Section 9.3 Indemnification By Parent. Subject to the other terms and conditions
of this Article IX, Parent shall indemnify and defend each of the Stockholders
and the Optionholders and their Affiliates and their respective Representatives
(collectively, the “Stockholder Indemnitees”) against, and shall hold each of
them harmless from and against, and shall pay and reimburse each of them for,
any and all Losses incurred or sustained by, or imposed upon, the Stockholder
Indemnitees based upon, arising out of, with respect to or by reason of:
 
(a) any inaccuracy in or breach of any of the representations or warranties of
Parent and Merger Sub contained in this Agreement or in any certificate or
instrument delivered by or on behalf of Parent or Merger Sub pursuant to this
Agreement, as of the date such representation or warranty was made or as if such
representation or warranty was made on and as of the Closing Date (except for
representations and warranties that expressly relate to a specified date, the
inaccuracy in or breach of which will be determined with reference to such
specified date); or
 
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Parent or Merger Sub pursuant to this Agreement.
 
Section 9.4 Certain Limitations. The indemnification provided for in Section 9.2
and Section 9.3 shall be subject to the following limitations:
 
(a) The Stockholders and the Optionholders shall not be liable to the Parent
Indemnitees for indemnification under Section 9.2(a) until the aggregate amount
of all Losses in respect of indemnification under Section 9.2(a) exceeds
$500,000 (the “Basket”), in which event the Stockholders and Optionholders shall
be required to pay or be liable for all such Losses from the first dollar in
accordance with the provisions, and subject to the limitations, of this
Agreement. Except for Losses arising from a breach of a Fundamental
Representations or a breach of the representations and warranties set forth in
Section 3.8, a claim by Parent hereunder shall be limited to the amount of the
remaining Escrow Fund. Losses arising from a breach of the Fundamental
Representations and a breach of Sections 3.8, shall not be so limited but the
aggregate amount of all Losses for which any Stockholder or Optionholder shall
be liable pursuant to Section 9.2 shall not exceed the overall consideration
received by such Stockholder or Optionholder under this Agreement.
 
 
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(b) Parent shall not be liable to the Stockholder Indemnitees for
indemnification under Section 9.3(a) until the aggregate amount of all Losses in
respect of indemnification under Section 9.3(a) exceeds the Basket, in which
event Parent shall be required to pay or be liable for all such Losses from the
first dollar. The aggregate amount of all Losses for which Parent shall be
liable pursuant to Section 9.3(a) shall not exceed $2,500,000.
 
(c) The amount of any Loss subject to indemnification shall be calculated net of
(a) any Tax Benefit inuring to the Indemnified Party on account of such Loss and
(b) any insurance proceeds or any indemnity, contribution or other similar
payment recoverable by the Indemnified Party from any third party with respect
thereto. If the Indemnified Party receives such insurance proceeds, contribution
or similar payments after being indemnified with respect to some or all of such
Loss, such Indemnified Party shall pay to the Indemnifying Party the lesser of
(i) the amount of such insurance proceeds or indemnity, contribution or similar
payment, less reasonable out-of-pocket expenses incurred in connection with such
recovery and (ii) the aggregate amount paid to such Indemnified Party with
respect to such Loss. If the Indemnified Party receives a Tax Benefit after an
indemnification payment is made to it, the Indemnified Party shall promptly pay
to the Indemnifying Party the amount of such Tax Benefit at such time or times
as and to the extent that such Tax Benefit is realized by the Indemnified Party.
For purposes hereof, “Tax Benefit” shall mean any refund of Taxes paid or
reduction in the amount of Taxes which otherwise would have been paid, in each
case computed at the highest marginal tax rates applicable to the recipient of
such benefit. The Indemnified Party shall seek full recovery under all insurance
policies covering any Loss to the same extent as it would if such Loss were not
subject to indemnification hereunder.
 
(d) Each Person entitled to indemnification hereunder shall take all reasonable
steps to mitigate all losses, costs, expenses and damages after becoming aware
of any event which could reasonably be expected to give rise to any losses,
costs, expenses and damages that are indemnifiable or recoverable hereunder or
in connection herewith.
 
(e) Notwithstanding the fact that any Indemnified Party may have the right to
assert claims for indemnification under or in respect of more than one provision
of this Agreement in respect of any fact, event, condition or circumstance, no
Indemnified Party shall be entitled to recover the amount of any Losses suffered
by such Indemnified Party more than once, regardless of whether such Losses may
be as a result of a breach of more than one representation, warranty or
covenant. Without limiting the generality of the foregoing, the Parent
Indemnitees shall have no right to indemnification hereunder with respect to any
Loss to the extent such Loss is included in the calculation of the Indebtedness,
Working Capital or Transaction Expenses as finally determined hereunder.
 
 
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(f) Parent and Merger Sub acknowledge that the representations and warranties of
the Company contained herein constitute the sole and exclusive representations
and warranties of the Company, the Stockholders and the Optionholders in
connection with the transactions contemplated hereby, and Parent and Merger Sub
understand, acknowledge and agree that all other representations and warranties
of any kind or nature expressed or implied (including any relating to the future
or historical financial condition, results of operations, assets or liabilities
of the Company, or the quality, quantity or condition of the Company’s or its
Subsidiaries’ assets) are specifically disclaimed by the Company, the
Stockholders and the Optionholders. Except as expressly provided in this
Agreement, the Company, the Subsidiaries, the Stockholders and the Optionholders
do not make or provide, and Parent and Merger Sub hereby waive, any warranty or
representation, express or implied, as to the quality, merchantability, as for a
particular purpose, conformity to samples, or condition of the Company’s and its
Subsidiaries’ assets or any part thereto.
 
(g) For purposes of this Article IX, any inaccuracy in or breach of any
representation or warranty shall be determined without regard to any
materiality, Material Adverse Effect or other similar qualification contained in
or otherwise applicable to such representation or warranty.
 
Section 9.5 Indemnification Procedures. The Party making a claim under this
Article IX is referred to as the “Indemnified Party”, and the party against whom
such claims are asserted under this Article IX is referred to as the
“Indemnifying Party”. For purposes of this Article IX, (i) if Parent (or any
other Parent Indemnitee) comprises the Indemnified Party, any references to
Indemnifying Party (except provisions relating to an obligation to make
payments) shall be deemed to refer to the Stockholder Representative acting on
behalf of the Stockholders and Optionholders, and (ii) if Parent comprises the
Indemnifying Party, any references to the Indemnified Party (except provisions
relating to a right to receive payments) shall be deemed to refer to Stockholder
Representative acting on behalf of the Stockholders and Optionholders. Any
payment due to the Stockholders and Optionholders as the Indemnified Party shall
be distributed to the Stockholder Representative, or upon written instruction of
the Stockholder Representative, the Payments Administrator for further
distribution to Stockholders and Optionholders in accordance with this
Agreement.
 
 
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(a) Third Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement or a
Representative of the foregoing (a “Third Party Claim”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall give the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than thirty (30) calendar days after receipt of such notice of such
Third Party Claim. The failure to give such prompt written notice shall not,
however, relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party forfeits rights or
defenses or is otherwise materially prejudiced by reason of such failure. Such
notice by the Indemnified Party shall describe the Third Party Claim in
reasonable detail, shall include copies of all material written evidence thereof
and shall indicate the estimated amount, if reasonably practicable, of the Loss
that has been or may be sustained by the Indemnified Party. The Indemnifying
Party shall have the right to participate in, or by giving written notice to the
Indemnified Party, to assume the defense of any Third Party Claim at the
Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and
the Indemnified Party shall cooperate in good faith in such defense; provided,
however, that if the Indemnifying Party is a Stockholder, such Indemnifying
Party shall not have the right to defend or direct the defense of any such Third
Party Claim that (x) is asserted directly by or on behalf of a Person that is a
supplier or customer of the Company, or (y) seeks an Injunction or other
equitable relief against the Indemnified Parties. In the event that the
Indemnifying Party assumes the defense of any Third Party Claim, subject to
Section 9.5(b), it shall have the right to take such action as it deems
necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to
any such Third Party Claim in the name and on behalf of the Indemnified Party.
The Indemnified Party shall have the right to participate in the defense of any
Third Party Claim with counsel selected by it subject to the Indemnifying
Party’s right to control the defense thereof. The fees and disbursements of such
counsel shall be at the expense of the Indemnified Party; provided, however,
that if in the reasonable opinion of counsel to the Indemnified Party, (A) there
are legal defenses available to an Indemnified Party that are different from or
additional to those available to the Indemnifying Party; or (B) there exists a
conflict of interest between the Indemnifying Party and the Indemnified Party
that cannot be waived, the Indemnifying Party shall be liable for the reasonable
fees and expenses of counsel to the Indemnified Party in each jurisdiction for
which the Indemnified Party determines counsel is required. If the Indemnifying
Party elects not to compromise or defend such Third Party Claim, fails to notify
the Indemnified Party in writing of its election to defend as provided in this
Agreement within 30 days of its receipt of notice of such Third Party Claim, or
fails to diligently prosecute the defense of such Third Party Claim, the
Indemnified Party may defend such Third Party Claim, provided that the
Indemnified Party shall not settle such Third Party Claim without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, delayed or conditioned. The Stockholder Representative
and Parent shall cooperate with each other in all reasonable respects in
connection with the defense of any Third Party Claim, including making available
records relating to such Third Party Claim and furnishing, without expense
(other than reimbursement of actual out-of-pocket expenses) to the defending
party, management employees of the non-defending party as may be reasonably
necessary for the preparation of the defense of such Third Party Claim.
 
 
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(b) Settlement of Third Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third Party Claim without the prior written consent of the Indemnified Party,
except as provided in this Section 9.5(b). If a firm offer is made to settle a
Third Party Claim and provides, in customary form, for the unconditional release
of each Indemnified Party from all liabilities and obligations in connection
with such Third Party Claim and the Indemnifying Party desires to accept and
agree to such offer, the Indemnifying Party shall give written notice to that
effect to the Indemnified Party. If the Indemnified Party fails to consent to
such firm offer within ten (10) days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim and
in such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim shall not exceed the amount of such settlement offer. If the
Indemnified Party fails to consent to such firm offer and also fails to assume
defense of such Third Party Claim, the Indemnifying Party may settle the Third
Party Claim upon the terms set forth in such firm offer to settle such Third
Party Claim. If the Indemnified Party has assumed the defense pursuant to
Section 9.5(a), it shall not agree to any settlement without the written consent
of the Indemnifying Party (which consent shall not be unreasonably withheld or
delayed).
 
(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss which
does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than thirty (30) days after the
Indemnified Party becomes aware of such Direct Claim. The failure to give such
prompt written notice shall not, however, relieve the Indemnifying Party of its
indemnification obligations, except and only to the extent that the Indemnifying
Party forfeits rights or defenses by reason of such failure. Such notice by the
Indemnified Party shall describe the Direct Claim in reasonable detail, shall
include copies of all material written evidence thereof and shall indicate the
estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. The Indemnifying Party shall have thirty
(30) days after its receipt of such notice to respond in writing to such Direct
Claim. The Indemnified Party shall allow the Indemnifying Party and its
professional advisors to investigate the matter or circumstance alleged to give
rise to the Direct Claim, and whether and to what extent any amount is payable
in respect of the Direct Claim and the Indemnified Party shall assist the
Indemnifying Party’s investigation by giving such information and assistance
(including access to the Company’s premises and personnel and the right to
examine and copy any accounts, documents or records) as the Indemnifying Party
or any of its professional advisors may reasonably request. If the Indemnifying
Party does not so respond within such thirty (30) day period, the Indemnifying
Party shall be deemed to have rejected such claim, in which case the Indemnified
Party shall be free to pursue such remedies as may be available to the
Indemnified Party on the terms and subject to the provisions of this Agreement.
 
 
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Section 9.6 Payments; Escrow Fund.
 
(a) Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to
be payable pursuant to this Article IX, the Indemnifying Party shall satisfy its
obligations within ten (10) Business Days of such final, non-appealable
adjudication by wire transfer of immediately available funds. The Parties hereto
agree that should an Indemnifying Party not make full payment of any such
obligations within such ten (10) Business Day period, any amount payable shall
accrue interest from and including the date of agreement of the Indemnifying
Party or final, non-appealable adjudication to and including the date such
payment has been made at a rate per annum equal to one and one half percent
(1.5%) per month. Such interest shall be calculated daily on the basis of a
365-day year and the actual number of days elapsed
 
(b) Any Losses payable to a Parent Indemnitee pursuant to this Article IX shall
be satisfied: (i) first from the Escrow Fund; and (ii) solely in the case of
Losses exceeding the amount in the Escrow Fund that arise from a breach of a
Fundamental Representation or a breach of Section 3.8, from (i) each of the
Stockholders, severally and not jointly (in accordance with their respective
Individual Share Percentages), and (ii) each of the Optionholders, severally and
not jointly (in accordance with their respective Individual Option Percentages);
provided, however, that such direct indemnification obligations of any
Stockholder or Optionholder shall be satisfied first from any funds remaining in
the Escrow Fund that would otherwise be payable to such Stockholder or
Optionholder pursuant to Section 2.8, and any indemnification obligations of a
Stockholder or Optionholder in excess of such funds shall be paid directly by
such Stockholder or Optionholder.
 
(c) If Parent or any of its Affiliates or the Stockholder Representative
receives notice from any Governmental Entity of any proposed or actual audit,
examination, adjustment, claim, assessment or demand concerning the Taxes of the
Company or any or its Subsidiaries that are subject to indemnification under
Section 9.2(a), such Party shall inform the other Party thereof within ten (10)
Business Days after receipt of such notice. No failure or delay in providing
such notice shall reduce or otherwise affect the obligations or liabilities of
any Party, except to the extent such failure or delay adversely affects the
recipient Party’s ability to defend against any liability or claim with respect
to such Taxes. Any notice shall be accompanied by a copy of any written notice
or other document received from the applicable Governmental Entity with respect
to such matter. The Stockholder Representative shall have the sole right to
control, at the expense of the Stockholders and the Optionholders, the contest
of any audit, dispute or administrative, judicial or other proceeding relating
to such Taxes of the Company or any of its Subsidiaries, provided that Parent
may, at its expense, participate in such contest. No such audit, dispute or
administrative, judicial or other proceeding may be settled by the Stockholder
Representative without Parent’s prior written consent if such settlement would
have an adverse impact on Parent or any of its Affiliates, provided that such
consent shall not be unreasonably withheld, delayed or conditioned.
 
 
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Section 9.7 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the Parties as an
adjustment to the Merger Consideration for Tax purposes, unless otherwise
required by Law.
 
Section 9.8 Effect of Investigation. The representations, warranties and
covenants of the Indemnifying Party, and the Indemnified Party’s right to
indemnification with respect thereto, shall not be affected or deemed waived by
reason of any investigation made by or on behalf of the Indemnified Party
(including by any of its Representatives) or by reason of the fact that the
Indemnified Party or any of its Representatives knew or should have known that
any such representation or warranty is, was or might be inaccurate or by reason
of the Indemnified Party’s waiver of any condition set forth in Section 7.1 or
Section 7.2, as the case may be.
 
Section 9.9 Exclusive Remedies. Subject to Section 10.11 the Parties acknowledge
and agree that their sole and exclusive remedy with respect to any and all
claims (other than claims arising from fraud, criminal activity or willful
misconduct on the part of a Party hereto in connection with the Transactions)
for any breach of any representation, warranty, covenant, agreement or
obligation set forth herein or otherwise relating to the subject matter of this
Agreement, shall be pursuant to the indemnification provisions set forth in this
Article IX. In furtherance of the foregoing, each Party hereby waives, to the
fullest extent permitted under Law, any and all rights, claims and causes of
action for any breach of any representation, warranty, covenant, agreement or
obligation set forth herein or otherwise relating to the subject matter of this
Agreement it may have against the other Parties and their Affiliates and each of
their respective Representatives arising under or based upon any Law, except
pursuant to the indemnification provisions set forth in this Article IX. Nothing
in this Section 9.9 shall limit any Person’s right to seek and obtain any
equitable relief to which any Person shall be entitled or to seek any remedy on
account of any Party’s fraudulent, criminal or intentional misconduct.
 
ARTICLE X
GENERAL PROVISIONS
 
Section 10.1 Notices. All notices and other communications in connection with
this Agreement will be in writing and will be deemed given to a Party when
delivered personally, mailed by registered or certified mail (return receipt
requested) or delivered by an express courier at the following addresses (or at
such other address for a Party as will be specified by like notice):
 
(a) if to the Company, to:
 
MegaPath Holding Corporation
6800 Koll Center Parkway, Suite 200
Pleasanton, California 94566
Attention: Birch Blair
with a copy to (which will not constitute notice):
 
Morgan, Lewis & Bockius LLP
600 Anton Drive, Suite 1800
Costa Mesa, CA 92626
Attention: Tim Rupp, Esq.
Email: timothy.rupp@morganlewis.com
 
 
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(b) if to Parent, Merger Sub or the Surviving Corporation, to:
 
Fusion Connect, Inc.
420 Lexington Avenue, Suite 1718
New York, New York 10170
Attention: James P. Prenetta, Jr., Executive Vice President and General Counsel
Email: jprenetta@fusionconnect.com
 
with a copy to (which will not constitute notice):
 
Kelley Drye & Warren, LLP
101 Park Avenue
New York, New York 10171
Attention: Jack Miles, Esq.
Email: jmiles@kelleydrye.com
 
(c) if to the Stockholders Representative, to:
 
Shareholder Representative Services LLC
950 17th Street, Suite 1400
Denver, CO 80202
Attention: Deals@srsacquiom.com
Facsimile: (303) 623-0294
Telephone: (303) 648-4085
 
with a copy to (which will not constitute notice):
 
Morgan, Lewis & Bockius LLP
600 Anton Drive, Suite 1800
Costa Mesa, CA 92626
Attention: Tim Rupp
 
Section 10.2 Interpretation.
 
(a) When a reference is made in this Agreement to Articles, Sections, Exhibits,
Schedules or Disclosure Letters, such reference will be to an Article or Section
of or Exhibit, Schedule or Disclosure Letter to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they will be deemed to be followed by
the words “without limitation.” Unless the context otherwise requires, (i) “or”
is disjunctive but not necessarily exclusive, (ii) words in the singular include
the plural and vice versa, and (iii) the use in this Agreement of a pronoun in
reference to a Party hereto includes the masculine, feminine or neuter, as the
context may require. The Company Disclosure Letter as well as all other
schedules and all exhibits hereto, will be deemed part of this Agreement and
included in any reference to this Agreement. The representations and warranties
of the Company are made and given, and the covenants are agreed to, subject to
the disclosures and exceptions set forth in the Company Disclosure Letter. In no
event will the listing of any matter in the Company Disclosure Letter be deemed
or interpreted to expand the scope the Company’s representations, warranties
and/or covenants set forth in this Agreement. All attachments to the Company
Disclosure Letter are incorporated by reference into the Company Disclosure
Letter. Notwithstanding anything in this Agreement to the contrary, the mere
inclusion of an item therein as an exception to a representation or warranty
will not be deemed an admission that such item represents a material exception
or material fact, event or circumstance or that such item has had or would,
individually or in the aggregate, have a Company Material Adverse Effect.
 
 
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(b) The Parties have participated jointly in negotiating and drafting this
Agreement. In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by
the Parties, and no presumption or burden of proof will arise favoring or
disfavoring any Party by virtue of the authorship of any provision of this
Agreement.
 
Section 10.3 Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
will become effective when counterparts have been signed by each of the Parties
and delivered to the other Party, it being understood that each Party need not
sign the same counterpart.
 
Section 10.4 Entire Agreement; Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to in this Agreement),
together with the Confidentiality Agreement, (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the Parties with respect to the subject matter of this
Agreement, (b) is not intended to confer on any Person, other than the Parties
hereto and their respective successors and permitted assigns, any rights or
remedies hereunder; provided that the Debt Financing Sources and the Debt
Financing Source Related Parties shall be third-party beneficiaries of, and
shall be entitled to rely on, the third sentence of Section 10.5, Sections 10.7,
10.8(b), 10.8(c) and 10.17 and this Section 10.4.
 
Section 10.5 Amendment. Subject to compliance with applicable Law, this
Agreement may be amended prior to the Effective Time by the Company and Parent
(on behalf of itself and Merger Sub) and after the Effective Time by the
Stockholder Representative and Parent, by action taken or authorized by the
Stockholder Representative and by Parent, provided that, after any approval of
the Transactions by the stockholders of the Company, there may not be, without
further approval of such stockholders, any amendment of this Agreement that
changes the amount or the form of the consideration to be delivered under this
Agreement to the holders of Shares, other than (i) to correct manifest errors,
(ii) in connection with settlements entered into between Parent and the
Stockholder Representative or (iii) as otherwise contemplated by this Agreement.
This Agreement may not be amended except by an instrument in writing.
Notwithstanding anything to the contrary contained in this Agreement, the
proviso to Section 10.4, Sections 10.7, 10.8(b), 10.8(c) and 10.17 and this
sentence (and any provision of this Agreement to the extent that any amendment,
waiver or other modification of such provision would modify the substance of any
such Sections) may not be amended, waived or otherwise modified in any manner
that is adverse in any material respect to any Debt Financing Source or any of
its Debt Financing Source Related Parties without the prior written consent of
such Debt Financing Source.
 
 
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Section 10.6 Extension; Waiver. At any time prior to the Effective Time, the
Company and Parent (on behalf of itself and Merger Sub), by action taken or
authorized by the Company Board and the board of directors of Parent, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other Party, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement, and (c) waive
compliance with any of the agreements or conditions contained in this Agreement,
except that, after any approval of the Transactions by the stockholders of the
Company, there may not be, without further approval of such stockholders, any
extension or waiver of this Agreement or any portion hereof that reduces the
amount or changes the form of the consideration to be delivered to the holders
of Shares under this Agreement, other than as contemplated by this Agreement.
Any agreement on the part of a Party to any such extension or waiver will be
valid only if set forth in a written instrument signed on behalf of such Party,
but such extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition will not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
 
Section 10.7 Governing Law. This Agreement will be governed by, and construed
and enforced in accordance with, the internal Laws of the State of Delaware,
without regard to any applicable conflict of laws principles (whether of the
State of Delaware or any other jurisdiction); provided that any action, suit,
claim, investigation, or proceeding of any kind whatsoever against the Debt
Financing Sources or any of the Debt Financing Source Related Parties, including
a counterclaim, cross-claim, or defense, regardless of the legal theory under
which such liability or obligation may be sought to be imposed, whether sounding
in contract or tort, or whether at law or in equity, or otherwise under any
legal or equitable theory, that may be based upon, arising out of or related to
this Agreement or the negotiation, execution or performance of this Agreement or
the Transactions, including any dispute relating to the Debt Financing, will be
governed by and construed in accordance with the internal Laws of the State of
New York applicable to agreements executed and performed entirely within such
State without regard to conflicts of law principles of the State of New York or
any other jurisdiction that would cause the Laws of any jurisdiction other than
the State of New York to apply.
 
Section 10.8 Jurisdiction.
 
(a) Each of the Parties hereby irrevocably and unconditionally submits, for
itself and its property, to the exclusive jurisdiction and venue of the Chancery
Court of the State of Delaware and, in the absence of such jurisdiction, the
United States District Court for the District of Delaware, and, in the absence
of such federal jurisdiction, the parties consent to be subject to the exclusive
jurisdiction of any Delaware state court sitting in New Castle County (together,
the “Chosen Courts”), in any action or proceeding arising out of or relating to
this Agreement or the Transactions or for recognition or enforcement of any
judgment relating thereto, and each of the Parties hereby irrevocably and
unconditionally (i) agrees not to commence any such action or proceeding except
in the Chosen Courts, (ii) agrees that any claim in respect of any such action
or proceeding may be heard and determined in the Chosen Courts, and any
appellate court hearing actions or proceedings therefrom, (iii) waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any such action or proceeding in
the Chosen Courts, and (iv) waives, to the fullest extent it may legally and
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding in the Chosen Courts. Each of the Parties agrees that
a final judgment in any such action or proceeding will be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law.
 
 
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(b) Notwithstanding anything to the contrary contained in this Agreement, each
of the Parties and the Stockholder Representative, on behalf of itself and each
of the Stockholders and Optionholders, irrevocably and unconditionally submits,
for itself and its property, to the exclusive jurisdiction and venue of the
United States federal court located in, or if that court does not have subject
matter jurisdiction, in any New York state court located in, the Borough of
Manhattan in the City of New York, New York (together, the “Debt Financing
Chosen Courts”), in any action or proceeding against the Debt Financing Sources
or any of the Debt Financing Source Related Parties arising out of or relating
to this Agreement or the Transactions or for recognition or enforcement of any
judgment relating thereto, including any dispute relating to the Debt Financing,
and each of the Parties and the Stockholder Representative, on behalf of itself
and each of the Stockholders and Optionholders, hereby irrevocably and
unconditionally (i) agrees not to commence any such action or proceeding against
the Debt Financing Sources or any of the Debt Financing Source Related Parties,
including any dispute relating to the Debt Financing, except in the Debt
Financing Chosen Courts, (ii) agrees that any claim in respect of any such
action or proceeding against the Debt Financing Sources or any of the Debt
Financing Source Related Parties, including any dispute relating to the Debt
Financing, may be heard and determined in the Debt Financing Chosen Courts, and
any appellate court hearing actions or proceedings therefrom, (iii) waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any such action or
proceeding against the Debt Financing Sources or any of the Debt Financing
Source Related Parties, including any dispute relating to the Debt Financing, in
the Debt Financing Chosen Courts and (iv) waives, to the fullest extent it may
legally and effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding against the Debt Financing Sources or
any of the Debt Financing Source Related Parties, including any dispute relating
to the Debt Financing, in the Debt Financing Chosen Courts.
 
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(INCLUDING ANY LITIGATION AGAINST ANY DEBT FINANCING SOURCE OR ANY DEBT
FINANCING SOURCE RELATED PARTIES IN RESPECT OF THE DEBT FINANCING). EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES
SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.8(c).
 
 
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Section 10.9 Fees and Expenses. Except as expressly provided in this Agreement,
whether or not the Merger is consummated, all fees and expenses incurred in
connection with this Agreement and the Transactions will be paid by the Party
incurring or required to incur such fees or expenses
 
Section 10.10 Assignment. Neither this Agreement nor any rights, interest or
obligations hereunder will be assigned by any of the Parties (whether by
operation of law or otherwise) without the prior written consent of the other
Parties and any attempt to do so will be null and void; except that each of
Parent and Merger Sub may assign (a) its rights, but not its obligations,
hereunder to any person providing financing pursuant to the terms thereof to the
extent necessary for purposes of creating a security interest herein or
otherwise assigning as collateral in respect of such financing and (b) its
rights and obligations to any Affiliate of Parent, but no such assignment will
release any assigning Party from its obligations hereunder. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the Parties hereto and their respective permitted
successors and assigns.
 
Section 10.11 Specific Performance. The Parties agree that immediate, extensive
and irreparable damage, for which monetary damages would not be an adequate
remedy, would occur in the event that the Parties do not perform their
obligations under the provisions of this Agreement in accordance with its
specified terms or otherwise breach such provisions. Accordingly, the Parties
acknowledge and agree that the Parties will be entitled, in addition to any
other remedy to which they are entitled at law or in equity to seek an
Injunction or Injunctions, specific performance or other equitable relief to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof (including the obligation of the Parties hereto to consummate
the Merger) in the Chosen Courts without proof of damages or otherwise, and that
such explicit rights of specific enforcement are an integral part of the
Transactions and, without such rights, neither the Company nor Parent would have
entered into this Agreement. Each of the Parties agrees that it will not oppose
the granting of an Injunction, specific performance and other equitable relief
on the basis that the other Parties have an adequate remedy at law or an award
of specific performance is not an appropriate remedy for any reason at law or in
equity. The Parties hereto acknowledge and agree that any Party seeking an
Injunction or Injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement will not be required to
provide any bond or other security in connection with any such Order or
Injunction.
 
Section 10.12 Waivers. Any failure of any of the Parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the Party
or Parties entitled to the benefits thereof, only by a written instrument signed
by the Party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
 
Section 10.13 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable, such term, provision, covenant or
restriction will be deemed to be modified to the extent necessary to render it
valid, effective and enforceable, and the remainder of the terms, provisions,
covenants and restrictions of this Agreement will remain in full force and
effect and will in no way be affected, impaired or invalidated.
 
 
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Section 10.14 Stockholder Representative.
 
(a) By approving this Agreement and the transactions contemplated hereby, by
executing and delivering a Letter of Transmittal, or by the acceptance of
consideration paid pursuant to this Agreement, each Stockholder and Optionholder
has irrevocably authorized and appointed the Stockholder Representative as such
Person’s representative and attorney-in-fact to act on behalf of such Person
with respect to this Agreement, the Escrow Agreement and any other agreements
ancillary hereto and to take any and all actions and make any decisions required
or permitted to be taken by the Stockholder Representative pursuant to this
Agreement, the Escrow Agreement or any other agreements ancillary hereto,
including the exercise of the power to:
 
(i) give and receive notices and communications;
 
(ii) authorize delivery to Parent of cash from the Escrow Fund in satisfaction
of claims for indemnification made by Parent pursuant to Article IX;
 
(iii) agree to, negotiate, enter into settlements and compromises of, and comply
with orders or otherwise handle any other matters described in Section 2.7;
 
(iv) agree to, negotiate, enter into settlements and compromises of, and comply
with orders of courts with respect to claims for indemnification made by Parent
pursuant to pursuant to Article IX;
 
(v) litigate, arbitrate, resolve, settle or compromise any claim for
indemnification pursuant to pursuant to Article IX;
 
(vi) execute and deliver all documents necessary or desirable to carry out the
intent of this Agreement and any ancillary document (including the Escrow
Agreement and the Payments Agreement);
 
(vii) make all elections or decisions contemplated by this Agreement and any
ancillary document (including the Escrow Agreement and the Payments Agreement);
 
(viii) engage, employ or appoint any agents or representatives (including
attorneys, accountants and consultants) to assist the Stockholder Representative
in complying with its duties and obligations; and
 
(ix) take all actions necessary or appropriate in the good faith judgment of the
Stockholder Representative for the accomplishment of the foregoing.
 
 
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Parent shall be entitled to deal exclusively with the Stockholder Representative
on all matters relating to this Agreement (including Article IX) (except with
respect to Parent’s collection of funds from the Stockholders and Optionholders
directly) and shall be entitled to rely conclusively (without further evidence
of any kind whatsoever) on any document executed or purported to be executed on
behalf of any Stockholder or Optionholder by the Stockholder Representative, and
on any other action taken or purported to be taken on behalf of any Stockholder
or Optionholder by the Stockholder Representative, as being fully binding upon
such Person. After the Closing, notices or communications to or from the
Stockholder Representative shall constitute notice to or from each of the
Stockholders and Optionholders. Any decision or action by the Stockholder
Representative hereunder, including any agreement between the Stockholder
Representative and Parent relating to the defense, payment or settlement of any
claims for indemnification hereunder, shall constitute a decision or action of
all Stockholders and Optionholders and shall be final, binding and conclusive
upon each such Person. No Stockholder or Optionholder shall have the right to
object to, dissent from, protest or otherwise contest the same. The provisions
of this Section, including the power of attorney granted hereby, are independent
and severable, are irrevocable and coupled with an interest and shall not be
terminated by any act of any one or more Stockholders or Optionholders, or by
operation of Law, whether by death or other event.
 
(b) The Stockholder Representative may resign at any time upon twenty (20) days
prior written notice to Parent. The Stockholder Representative may be removed
for any reason or no reason by the vote or written consent of the Stockholders
who held a majority of the shares of the Company Capital Stock immediately prior
to the Effective Time (the “Majority Holders”); provided, however, in no event
shall the Stockholder Representative be removed without the Majority Holders
having first appointed a new Stockholder Representative who shall assume such
duties immediately upon the removal of the Stockholder Representative. If the
Stockholder Representative resigns, the Majority Holders shall appoint a
successor within twenty (20) days of such notice of resignation. In the event of
the death, incapacity, resignation or removal of the Stockholder Representative,
a new Stockholder Representative shall be appointed by the vote or written
consent of the Majority Holders. Notice of such vote or a copy of the written
consent appointing such new Stockholder Representative shall be sent to Parent,
such appointment to be effective upon the later of the date indicated in such
consent or the date such notice is received by Parent; provided, that until such
notice is received, Parent, Merger Sub and the Surviving Corporation shall be
entitled to rely on the decisions and actions of the prior Stockholder
Representative as described in Section 10.14(a) above
 
 
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(c) The Stockholder Representative will incur no liability of any kind with
respect to any action or omission by the Stockholder Representative in
connection with its services pursuant to this Agreement and any agreements
ancillary hereto, except in the event of liability directly resulting from the
Stockholder Representative’s gross negligence or willful misconduct. The
Stockholder Representative shall not be liable for any action or omission
pursuant to the advice of counsel. The Stockholders and Optionholders will
indemnify, defend and hold harmless the Stockholder Representative from and
against any and all losses, liabilities, damages, claims, penalties, fines,
forfeitures, actions, fees, costs and expenses (including the fees and expenses
of counsel and experts and their staffs and all expense of document location,
duplication and shipment) (collectively, “Representative Losses”) arising out of
or in connection with the Stockholder Representative’s execution and performance
of this Agreement and any agreements ancillary hereto, in each case as such
Representative Loss is suffered or incurred; provided, that in the event that
any such Representative Loss is finally adjudicated to have been directly caused
by the gross negligence or willful misconduct of the Stockholder Representative,
the Stockholder Representative will reimburse the Stockholders and Optionholders
the amount of such indemnified Representative Loss to the extent attributable to
such gross negligence or willful misconduct. If not paid directly to the
Stockholder Representative by the Stockholders and Optionholders, any such
Representative Losses may be recovered by the Stockholder Representative from
(i) the funds in the Holdback Account and (ii) the amounts in the Escrow Fund at
such time as any such remaining amounts would otherwise be distributable to the
Stockholders and Optionholders; provided, that while this section allows the
Stockholder Representative to be paid from the aforementioned sources of funds,
this does not relieve the Stockholders and Optionholders from their obligation
to promptly pay such Representative Losses as they are suffered or incurred, nor
does it prevent the Stockholder Representative from seeking any remedies
available to it at law or otherwise. In no event will the Stockholder
Representative be required to advance its own funds on behalf of the
Stockholders and Optionholders or otherwise. Notwithstanding anything in this
Agreement to the contrary, any restrictions or limitations on liability or
indemnity obligations of the Stockholders or Optionholders set forth elsewhere
in this Agreement are not intended to be applicable to the indemnities provided
to the Stockholder Representative in this section. The foregoing indemnities
will survive the Closing, the resignation or removal of the Stockholder
Representative or the termination of this Agreement.
 
Section 10.15 Tax Matters.
 
(a) For the avoidance of doubt, all legally permitted Tax deductions related to
the payment of Transaction Expenses or Indebtedness on the Closing Date shall be
attributable to the Pre-Closing Tax Period.
 
(b) The Stockholders and the Optionholders shall be entitled to receive any
refund of Taxes (including refunds paid by credit against Taxes of Parent, the
Company or any Company Subsidiary) attributable to any Pre-Closing Tax Period
and any overpayment of estimated Pre-Closing Taxes by the Company or any Company
Subsidiary, plus any interest on any such refund or credits received from the
applicable Tax authority. Parent shall, and shall cause the Company and the
Company Subsidiaries to, cooperate with the Stockholder Representative in
obtaining any such refunds or credits. Such cooperation shall include (i)
informing the Stockholder Representative if and the extent that Parent becomes
aware of the availability of any such refund or credit, (ii) filing claims or
amended Tax returns at the request of the Stockholder Representative to obtain
any such refund or credit and (iii) paying the amount of such credit or refund
over to the Stockholder Representative, or upon a written instruction of the
Stockholder Representative, to the Payments Administrator (for further
distribution to the Stockholders) or to the Surviving Corporation (for further
distribution to the Optionholders), as applicable, by wire transfer within five
(5) Business Days after the receipt thereof.
 
 
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(c) If Parent, any of its Affiliates or any Stockholder receives notice from any
Governmental Entity of any proposed or actual audit, examination, adjustment,
claim, assessment or demand concerning the amount of Taxes of the Company or any
Company Subsidiary with respect to any Pre-Closing Tax Period, such Party shall
inform the other Party thereof within ten (10) Business Days after receipt of
such notice. No failure or delay in providing such notice shall reduce or
otherwise affect the obligations or liabilities of any Party, except to the
extent such failure or delay adversely affects the recipient Party’s ability to
defend against any liability or claim with respect to such Taxes. Any notice
shall be accompanied by a copy of any written notice or other document received
from the applicable Governmental Entity with respect to such matter.
 
(d) The Stockholder Representative shall have the sole right to control, at the
expense of the Stockholders and Optionholders, the contest of any audit, dispute
or administrative, judicial or other proceeding relating to the Taxes of the
Company or any Company Subsidiary for any Pre-Closing Tax Period. If the
Stockholder Representative elects to control any such contest, Parent may, at
its expense, participate in such contest. No such audit, dispute or
administrative, judicial or other proceeding may be settled by the Stockholder
Representative without Parent’s prior written consent if such settlement would
have an adverse impact on Parent or any of its Affiliates; provided, however,
that no such consent shall be unreasonably withheld, conditioned or delayed.
 
(e) Parent shall furnish or cause to be furnished to the Stockholder
Representative, upon request, as promptly as practicable, such information
(including access to books and records) and assistance relating to the Company
and the Company Subsidiaries as is reasonably requested in connection with the
filing of any Tax returns or for the prosecution or defense of any Tax audit or
claim. Parent shall, and shall cause the Company and the Company Subsidiaries
to, preserve and keep all books and records with respect to Taxes and Tax
returns of the Company and the Company Subsidiaries until the expiration of the
applicable statute of limitations. Any information obtained under this Section
10.15(e) shall be kept confidential except (i) as required by applicable Law,
(ii) as may be otherwise necessary in connection with the filing of Tax Returns
or for the prosecution or defense of any Tax audit or claim or (iii) with the
consent of Parent; provided that the Stockholder Representative may communicate
such information to its advisors and representatives and to the Stockholders and
Optionholders, in each case on a need-to-know basis.
 
Section 10.16 Definitions. For the purposes of this Agreement:
 
“Accounting Fees” has the meaning set forth in Section 2.7(b).
 
“Accounting Firm” has the meaning set forth in Section 2.7(b).
 
“Accredited Investor” has the meaning set forth for such term in Rule 501 of
Regulation D promulgated under the Securities Act.
 
“Acquisition Proposal” has the meaning set forth in Section 6.3.
 
“Action” has the meaning set forth in Section 3.7(a).
 
 
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“Additional Indebtedness” has the meaning set forth in Section 2.7(a).
 
“Additional Per Share Merger Consideration” means the quotient of (a) the
Additional Merger Consideration, divided by (b) the Fully Diluted Share Number.
 
“Additional Merger Consideration” means the aggregate of all payments to the
Stockholders and Optionholders pursuant to Section 2.7.
 
“Additional Transaction Expenses” has the meaning set forth in Section 2.7(a).
 
“Affidavit of Loss” has the meaning set forth in Section 2.1(f).
 
“Affiliate” means a Person that directly or indirectly, through one or more
intermediaries, control, is controlled by, or is under common control with, the
first-mentioned Person. For this purpose, “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of stock, by Contract or otherwise.
 
“Agreement” has the meaning set forth in the Preamble.
 
“Basket” has the meaning set forth in Section 9.4(a).
 
“Book-Entry Shares” has the meaning set forth in Section 1.5(a).
 
“Business Day” means a day other than a Saturday, a Sunday or another day on
which commercial banking institutions in New York, New York are authorized or
required by Law to be closed.
 
“CALEA” has the meaning set forth in Section 3.16(c).
 
“Certificate of Merger” has the meaning set forth in Section 1.3.
 
“Certificates” has the meaning set forth in Section 1.5(a).
 
“Chosen Courts” has the meaning set forth in Section 10.8(a).
 
“Closing” has the meaning set forth in Section 1.2.
 
“Closing Cash” means the cash and cash equivalents of the Company and the
Company Subsidiaries, determined in accordance with GAAP, as of 11:59 p.m. on
the Closing Date (without giving effect to the Transactions).
 
“Closing Cash Estimate” has the meaning set forth in Section 2.5.
 
“Closing Cash Overage” shall exist when (and shall be equal to the amount by
which) the Closing Cash exceeds the Closing Cash Estimate.
 
 
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“Closing Cash Underage” shall exist when (and shall be equal to the amount by
which) the Closing Cash Estimate exceeds the Closing Cash.
 
“Closing Date” has the meaning set forth in Section 1.2.
 
“Closing Indebtedness” means the Indebtedness of the Company and the Company
subsidiaries as of 11:59 p.m. on the Closing Date (without giving effect to the
Transactions).
 
“Closing Working Capital” means the Working Capital as of 11:59 p.m. on the
Closing Date (without giving effect to the Transactions).
 
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and as codified in Section 4980B of the Code and Section 601 et. seq.
of ERISA.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Communications Act” has the meaning set forth in Section 3.16(c).
 
“Company” has the meaning set forth in the Preamble.
 
“Company Benefit Plans” has the meaning set forth in Section 3.9(a).
 
“Company Board” means the Board of Directors of the Company.
 
“Company Bylaws” has the meaning set forth in Section 3.1(b).
 
“Company Capital Stock” has the meaning set forth in Section 3.2(a).
 
“Company Charter” has the meaning set forth in Section 3.1(b).
 
“Company Common Stock” has the meaning set forth in Section 3.2(a).
 
“Company Commonly Controlled Entity” has the meaning set forth in Section
3.9(d).
 
“Company Disclosure Letter” has the meaning set forth in the preamble to Article
III.
 
“Company Employees” has the meaning set forth in Section 6.4(a).
 
“Company Financial Statements” has the meaning set forth in Section 3.5(a).
 
“Company Intellectual Property” has the meaning set forth in Section 3.13(a).
 
“Company Interconnection Agreements” has the meaning set forth in Section 3.17.
 
“Company Leased Network Facilities” means Network Facilities that are leased by
the Company or any Company Subsidiary.
 
“Company Leased Real Property” has the meaning set forth in Section 3.15.
 
 
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“Company Licenses” has the meaning set forth in Section 3.16(a).
 
“Company Material Adverse Effect” means any change, event, effect, occurrence,
state of facts or development that, individually or in the aggregate, has had or
would reasonably be expected to have a material adverse effect on the business,
results of operations, assets, liabilities or condition (financial or otherwise)
of the Company and the Company Subsidiaries, taken as a whole, provided,
however, that in no event would any of the following, alone or in combination,
be deemed to constitute, nor shall any of the following (including the effect of
any of the following) be taken into account in determining whether there has
been or will be, a “Company Material Adverse Effect”: (a) changes, events,
effects, occurrences, states of facts or developments generally affecting the
United States economy; (b) changes in GAAP or Law or the interpretation thereof;
(c) changes, events, effects, occurrences, states of facts or developments
generally affecting the industries in which the Company and the Subsidiaries
operate in the geographies in which they operate; (d) changes, events, effects,
occurrences, states of facts or developments arising from the announcement of
this Agreement; (e) changes, events, effects, occurrences, states of facts or
developments resulting from any action or omission of the Company or any of the
Company Subsidiaries prior to the Closing Date contemplated by this Agreement or
taken with the prior written consent of Parent; and (f) any failure to meet
internal or published projections, forecasts or revenue or earnings predictions
for any period, except that the underlying causes of such change or failure will
not be excluded by this clause (f), except, in the case of clauses (a), (b), and
(c) to the extent disproportionately affecting the Company and the Company
Subsidiaries when compared to other Persons operating in the same industries.
 
“Company Network Facility Agreement” has the meaning set forth in Section
3.18(c).
 
“Company Material Contract” has the meaning set forth in Section 3.12(a).
 
“Company Owned Intellectual Property” has the meaning set forth in Section
3.13(b).
 
“Company Owned Network Facilities” means Network Facilities that are owned by
the Company or any Company Subsidiary.
 
“Company Owned Real Property” has the meaning set forth in Section 3.15.
 
“Company Preferred Stock” has the meaning set forth in Section 3.2(a).
 
“Company Proprietary Software” means all Software owned or purported to be owned
by the Company or a Company Subsidiary.
 
“Company Registered Intellectual Property” means Company Intellectual Property
owned or purported to be owned by the Company or any Company Subsidiary that is
registered or for which an application for registration has been submitted by
the Company or any Company Subsidiary.
 
“Company Stock Option Plan” means the MegaPath Holding Corporation 2015 Equity
Incentive Plan, as amended.
 
 
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“Company Subsidiary” has the meaning set forth in Section 3.1(c).
 
“Confidentiality Agreement” has the meaning set forth in Section 6.3(b).
 
“Contracts” means any contracts, agreements, licenses (or sublicenses), notes,
bonds, mortgages, indentures, commitments, leases (or subleases) or other
instruments or obligations, whether written or oral.
 
“Covered Persons” has the meaning set forth in Section 6.11(a).
 
“CPNI” has the meaning set forth in Section 3.16(c).
 
“Cramming” has the meaning set forth in Section 3.16(d).
 
“Current Assets” means, as of any date of determination hereunder, the current
assets of the Company and the Company Subsidiaries, determined in accordance
with GAAP, excluding cash, cash equivalents and Tax receivables (other than
sales tax receivables).
 
“Current Liabilities” means, as of any date of determination hereunder, the
current liabilities of the Company and the Company Subsidiaries determined in
accordance with GAAP excluding (i) Tax liabilities arising from periods prior to
January 1, 2018 and reserves associated therewith, (ii) customer credit
balances, (iii) Indebtedness and Transaction Expenses, and (iv) a percentage of
deferred revenue equal to the lower of (x) 70% of the deferred revenue, and (y)
100% of the deferred revenue minus the average recurring margin percentage
derived from the Company’s Financial Statements for the six most recent calendar
months ended prior to the date of this Agreement.
 
“D&O Tail Policy” has the meaning set forth in Section 6.11(c).
 
“Debt Engagement Letter” means the Engagement Letter, dated February 13, 2018,
among Parent, Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc. and
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
 
“Debt Financing” means any debt financing by Parent or any of its Subsidiaries
entered into or incurred, or to be entered into or incurred, in connection with
the Transactions contemplated by this Agreement, including the debt financing
contemplated by the Definitive Debt Financing Agreements.
 
“Debt Financing Chosen Courts” has the meaning set forth in Section 10.8(b).
 
“Debt Financing Sources” means the parties to the Debt Engagement Letter, the
parties to the Definitive Debt Financing Agreements and each other Person that
has committed to provide or otherwise entered into any commitment letter,
engagement letter, credit agreement, underwriting agreement, purchase agreement,
indenture or other agreement with Parent or any of its Subsidiaries in
connection with, or that is otherwise acting as an arranger, bookrunner,
underwriter, initial purchaser, placement agent, administrative agent, trustee
or a similar representative in respect of, all or any part of the Debt
Financing.
 
 
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“Debt Financing Source Related Parties” means the Debt Financing Sources'
respective Affiliates and any of the Debt Financing Sources’ or their respective
Affiliates’ respective former, current or future general or limited partners,
shareholders, managers, members, agents, officers, directors, employees,
accountants, advisors, or representatives or any of their respective successors
or assigns.
 
“Deficiency Amount” has the meaning set forth in Section 2.7(d).
 
“Definitive Debt Financing Agreements” means the First Lien Credit and Guaranty
Agreement, dated as of May 4, 2018, among Parent, certain of Parent’s
subsidiaries, Wilmington Trust, National Association, as administrative agent
and collateral agent, and the lenders from time to time party thereto, and any
other definitive agreements with respect to any Debt Financing.
 
“DGCL” has the meaning set forth in Section 1.1.
 
“Direct Claim” has the meaning set forth in Section 9.5(c).
 
“Dissenting Shares” has the meaning set forth in Section 2.4.
 
“Dissenting Stockholder” has the meaning set forth in Section 2.4.
 
“Effective Time” has the meaning set forth in Section 1.3.
 
“Environment” means soil, soil vapor, surface water, groundwater, land,
sediment, surface or subsurface structures or strata or ambient air.
 
“Environmental Law” means any Law regulating or relating to the protection of
human health, safety (as it relates to Releases of Hazardous Substances),
natural resources or the Environment, including, without limitation, laws
relating to wetlands, pollution, contamination or the use, generation,
management, handling, transport, treatment, disposal, storage, Release or
threatened Release of Hazardous Substances.
 
“Equity Interest” means any share, capital stock, partnership, limited liability
company, membership or similar interest in any Person.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“Escrow Agent” means Citibank, N.A.
 
“Escrow Agreement” means the escrow agreement to be entered into by Parent, the
Stockholder Representative and the Escrow Agent at the Closing, substantially in
the form of Exhibit E.
 
“Escrow Amount” means $2.5 million in cash.
 
 
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“Escrow Fund” has the meaning set forth in Section 2.1(b).
 
“Estimated Working Capital Overage” shall exist when (and shall be equal to the
amount by which) the Working Capital Estimate exceeds the Target Working Capital
Amount.
 
“Estimated Working Capital Underage” shall exist when (and, subject to the
limitations set forth in Section 2.7(e), shall be equal to the amount by which)
the Target Working Capital Amount exceeds the Working Capital Estimate.
 
“Excess Amount” has the meaning set forth in Section 2.7(c).
 
“Exercise Price” means, with respect to any Option, the applicable exercise
price payable to the Company by the Optionholder upon the exercise of such
Option.
 
“FCC” means the Federal Communications Commission.
 
“FCC Approval” has the meaning set forth in Section 3.4.
 
“FCC Rules” has the meaning set forth in Section 3.16(c).
 
“Final Closing Cash Overage” means the Closing Cash Overage as finally agreed or
determined in accordance with Section 2.7(b).
 
“Final Closing Cash Underage” means the Closing Cash Underage as finally agreed
or determined in accordance with Section 2.7(b).
 
“Final Working Capital Overage” means the Working Capital Overage as finally
agreed or determined in accordance with Section 2.7(b).
 
“Final Working Capital Underage” means the Working Capital Underage as finally
agreed or determined in accordance with Section 2.7(b).
 
“FIRPTA Certificate” has the meaning set forth in Section 7.2(d).
 
“Fully Diluted Share Number” means (i) the aggregate number of Shares of Company
Common Stock issuable upon exercise of all Options that are outstanding as of
immediately prior to the Effective Time, plus (ii) the aggregate number of
shares of Company Capital Stock outstanding as of immediately prior to the
Effective Time.
 
“Fundamental Representations” has the meaning set forth in Section 7.2(a).
 
“GAAP” means U.S. generally accepted accounting principles.
 
“Governmental Entity” means any federal, state, provincial, municipal, local or
foreign government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, agency or instrumentality,
court or tribunal, arbitration or mediation body or appointing authority, or
self-regulatory organization.
 
 
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“Hazardous Substances” means any substance that: (i) is or contains asbestos,
urea formaldehyde insulation, polychlorinated biphenyls, petroleum, petroleum
products or petroleum-derived substances or wastes, radon gas, microbial or
microbiological contamination or related materials, (ii) requires investigation
or remedial action pursuant to any Environmental Law or (iii) is defined, listed
or identified as a “hazardous waste,” “hazardous substance,” “toxic substance”
or words of similar import thereunder or (iv) is regulated under any
Environmental Law.
 
“Holdback Account” has the meaning set forth in Section 2.6(c).
 
“Holdback Amount” means $850,000.
 
“Indebtedness” means, with respect to any Person at any date, without
duplication: (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures or notes (other than
any surety bonds or similar instruments issued in the ordinary course of
business), (c) all obligations in respect of letters of credit, to the extent
drawn, and bankers’ acceptances issued for the account of such Person, (d) any
indebtedness guaranteed in any manner by such Person (including guaranties in
the form of an agreement to repurchase or reimburse), (e) obligations of such
Person under or pursuant to any capital leases, (f) any liability with respect
to interest rate swaps, collars, caps and similar hedging arrangements, (g)
obligations for the deferred purchase price of property or services (other than
trade accounts payable and accrued liabilities), and (h) any accrued and unpaid
interest related to any of the foregoing and prepayment premiums or penalties
related to any of the foregoing that are due or become due as a result of the
consummation of the Merger or the prepayment of such Indebtedness; provided that
in no event will Indebtedness of any Party include Indebtedness of such Party
owing to any of its Subsidiaries or Indebtedness of any of its Subsidiaries
owing to it or any of its other Subsidiaries.
 
“Indebtedness Payoff Amount” means the aggregate amount of Indebtedness of the
Company and Company Subsidiaries as of the Effective Time as evidenced by the
Payoff Letters.
 
“Individual Option Percentage” means, for any Optionholder, the quotient
(expressed as a percentage) obtained by dividing (a) the aggregate number of
shares of Company Common Stock issuable upon exercise of all Options held by
such holder that are outstanding as of immediately prior to the Effective Time,
by (b) the aggregate number of shares of Company Common Stock issuable upon
exercise of all Options that are outstanding as of immediately prior to the
Effective Time.
 
“Indemnified Party” has the meaning set forth in Section 9.5.
 
“Indemnifying Party” has the meaning set forth in Section 9.5.
 
“Individual Share Percentage” means for any Stockholder, the quotient (expressed
as a percentage) obtained by dividing (a) the aggregate number of shares of
Company Capital Stock held by such holder that are outstanding immediately prior
to the Effective Time, by (b) the aggregate number of shares of Company Capital
Stock that are outstanding immediately prior to the Effective Time.
 
 
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“Initial Merger Consideration” means (a) $71.5 million (of which up to $10.0
million may be paid by Parent in shares of Parent Common Stock in accordance
with Section 1.5(a)), plus (b) any Estimated Working Capital Overage, plus (c)
the amount of the Closing Cash Estimate, plus (d) the aggregate amount of the
Exercise Prices all Options that are outstanding as of immediately prior to the
Effective Time, minus (e) the amount of Closing Indebtedness, as determined
prior to the Closing, minus (f) the Transaction Expenses Payoff Amount, as
determined prior to the Closing, minus (g) the Escrow Amount, minus (h) the
Holdback Amount, and minus (i) any Estimated Working Capital Underage.
 
“Initial Per Share Merger Consideration” means the quotient of (a) the Initial
Merger Consideration, divided by (b) the Fully Diluted Share Number.
 
“Injunction” has the meaning set forth in Section 3.3(b).
 
“Integration Plan” has the meaning set forth in Section 6.13.
 
“Intellectual Property” means all of the following anywhere in the world and all
legal rights, title or interest in, under or in respect of the following arising
under Law, whether or not filed, perfected, registered or recorded and whether
now or later existing, filed, issued or acquired, including all renewals: (a)
all patents and applications for patents (including all invention disclosures)
and all related reissues, reexaminations, divisions, renewals, extensions,
provisionals, continuations and continuations in part, (b) all copyrights,
copyright registrations and copyright applications, copyrightable works and all
other corresponding rights, (c) all trade dress and trade names, logos, Internet
addresses and domain names, trademarks and service marks and related
registrations and applications, including any intent to use applications,
supplemental registrations and any renewals or extensions, all other indicia of
commercial source or origin and all goodwill associated with any of the
foregoing, (d) all computer software (including source and object code),
firmware, development tools, proprietary languages, algorithms, files, records,
technical drawings and related documentation, data and manuals, (e) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know how, technology, technical data, (f) trade secrets, confidential
business information, financial, marketing and business data, pricing and cost
information, business and marketing plans, advertising and promotional
materials, customer, distributor, reseller and supplier lists and information,
correspondence, records, and other documentation, and other proprietary
information of every kind (collectively, if and to the extent proprietary, held
as confidential and protectable as a “trade secret” under applicable Law, “Trade
Secrets”), (g) all databases and data collections, (h) all other proprietary
rights (including moral rights) and (i) all copies and tangible embodiments of
any of the foregoing (in whatever form or medium).
 
“IRS” means the Internal Revenue Service or any successor agency.
 
“knowledge of the Company” means the actual knowledge of D. Craig Young, Dan
Foster, Paul Milley, Mike Perusse and Birch Blair after reasonable inquiry of
employees that ordinarily report directly to them.
 
 
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“knowledge of Parent” means the actual knowledge of Gordon Hutchins, Jr.,
Michael R. Bauer and James P. Prenetta, Jr., after reasonable inquiry of
employees that ordinarily report directly to them.
 
“Law” means any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, order, writ,
edict, decree, rule, regulation, judgment, ruling, policy, guideline or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity.
 
“Letter of Transmittal” has the meaning set forth in Section 2.1(a)(i).
 
“Liens” means any lien, mortgage, pledge, conditional or installment sale
agreement, encumbrance, covenant, restriction, option, right of first refusal,
easement, security interest, deed of trust, right-of-way, encroachment,
community property interest or other claim or restriction of any nature, whether
voluntarily incurred or arising by operation of Law.
 
“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments,
interest, awards, penalties, fines, costs or expenses of whatever kind,
including reasonable attorneys’ fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance providers;
provided, however, that “Losses” shall not include damages calculated on
multiples of earnings or cash flow, lost profits, indirect damages,
consequential damages, incidental damages, exemplary damages or punitive
damages, except to the extent actually recovered from and Indemnified Party
pursuant to a Third Party Claim.
 
“Majority Holders” has the meaning set forth in Section 10.14(b).
 
“Material Customer” has the meaning set forth in Section 3.22(a).
 
“Material Supplier” has the meaning set forth in Section 3.22(b).
 
“Merger” has the meaning set forth in the Recitals.
 
“Merger Consideration” means the aggregate consideration that the holders of
Shares are entitled to receive pursuant to the Merger and the terms of this
Agreement.
 
“Merger Sub” has the meaning set forth in the Preamble.
 
“Merger Sub Bylaws” means the bylaws of Merger Sub.
 
“Merger Sub Charter” means the articles of incorporation of Merger Sub.
 
“Network Facilities” means all material network facilities (including cables,
wires, conduits, switches, and other equipment and facilities) and related
material operating support systems, network operations centers, and land and
buildings associated therewith.
 
 
-71-

 
 
“NOR” has the meaning set forth in Section 3.16(g).
 
“Notice of Disagreement” has the meaning set forth in Section 2.7(b).
 
“Option” means any option to purchase shares of Company Common Stock issued
pursuant to the Company Stock Option Plan and still outstanding immediately
prior to the Effective Time.
 
“Option Percentage” means the quotient (expressed as a percentage) obtained by
dividing (a) the aggregate number of shares of Company Common Stock issuable
upon exercise of all Options that are outstanding as of immediately prior to the
Effective Time by (b) the Fully Diluted Share Number.
 
“Optionholder” means a holder of an Option.
 
“Order” means any judgment, order, decision, writ, Injunction, decree,
stipulation, award, ruling, or other finding or agency requirement of a
Governmental Entity, or arbitration award.
 
“Outside Date” means June 30, 2018, or if extended to a later date pursuant to
and in accordance with Section 8.1(b)(ii), any such later date.
 
“Parent” has the meaning set forth in the Preamble.
 
“Parent Adjustment Amount” means the sum of (i) the Final Working Capital
Underage, if any, plus (ii) the Final Closing Cash Underage, if any, plus (iii)
the Additional Transaction Expenses, if any, plus (iv) the Additional
Indebtedness, if any.
 
“Parent Bylaws” means the bylaws of Parent, as amended and restated.
 
“Parent Charter” means the certificate of incorporation of Parent, as amended
and restated.
 
“Parent Common Stock” means shares of common stock, $0.01 par value per share,
of Parent.
 
“Parent Material Adverse Effect” means any change, event, development,
conditions, occurrence or effect that (a) has a material adverse effect on the
ability of either Parent or Merger Sub to consummate the Transactions or perform
their respective obligations under this Agreement or (b) would prevent or
materially delay the consummation of the Transactions by Parent.
 
“Parent Subsidiary” has the meaning set forth in Section 3.1(c).
 
“Party” has the meaning set forth in the Preamble.
 
“Payments Administrator” means Acquiom Financial LLC, a Colorado limited
liability company.
 
 
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“Payments Agreement” means that certain Acquiom Payments Administration
Agreement to be entered into at or prior to Closing by and between the
Stockholder Representative and the Payments Administrator.
 
“Payoff Letter” has the meaning set forth in Section 7.2(f).
 
“Pension Plans” has the meaning set forth in Section 3.9(a).
 
“Permits” means all licenses, franchises, permits, variances, Orders, approvals,
certificates, authorizations, registrations and rights of or with all
Governmental Entities.
 
“Permitted Lien” means (a) Liens in respect of any liabilities and obligations
reflected in the Company Financial Statements, (b) with respect to the owned
real property and leased real property of the Company and the Company
Subsidiaries, (i) defects, exceptions, restrictions, rights of way, easements,
covenants, encroachments and other imperfections of title, none of which
materially impair or interfere with the present users of such property, and (ii)
zoning, entitlement, land use, environmental regulations, and building
restrictions, none of which materially impair or interfere with the present uses
of such property, (c) Liens for current Taxes not yet delinquent or being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP on the Company Financial
Statements, (d) mechanics’, carriers’, workmen’s, repairmen’s or other like
Liens that arise or are incurred in the ordinary course of business for amounts
not yet due and payable, and (e) Liens to be released on or prior to the Closing
Date.
 
“Person” means any individual (in any capacity) or legal entity, including a
Governmental Entity.
 
“Personal Data” means any data or information from, about, or related to an
identified or identifiable individual that (i) alone or in combination with
other data information could be used, directly or indirectly, to identify an
individual or otherwise facilitate decisions regarding individuals, (ii)
constitutes personal data or personal information under any applicable Law or
any applicable privacy policy, including, individual’s combined first and last
name, home address, telephone number, fax number, email address, Social Security
number or other Government Entity-issued identifier (including state
identification number, driver’s license number, or passport number), geolocation
information of an individual or device, biometric data, medical or health
information, credit card or other financial information (including bank account
information), cookie identifiers associated with registration information, or
any other browser- or device-specific number or identifier not controllable by
the end user, and web or mobile browsing or usage information that is linked to
the foregoing.
 
“Pre-Closing Tax Period” means any taxable period (or portion thereof) ending
prior to or on (and including) the Closing Date.
 
“Pre-Closing Taxes” means all Taxes imposed on the Company and the Company
Subsidiaries for the Pre-Closing Tax Period other than the Uncollected Sales
Taxes.
 
 
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“PSC Rules” has the meaning set forth in Section 3.16(c).
 
“Regulatory Approvals” has the meaning set forth in Section 7.1(a).
 
“Release” means any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, emptying, seeping, dispersal,
migration, transporting, placing and the like, including, without limitation,
the moving of any materials through, into or upon, any land, soil, surface
water, groundwater or air, or otherwise entering into the indoor or outdoor
environment.
 
“Representative Losses” has the meaning set forth in Section 10.14(c).
 
“Representatives” means any officer, director, employee, investment banks,
accountant, attorney or other advisor or representative of a Person.
 
“Right-of-Way Agreement” means a right-of-way agreement, license agreement or
other agreement permitting or requiring a Person to lay, build, operate,
maintain or place cable, wires, conduits or other equipment and facilities over
land, underwater or underground.
 
“SEC” means the U.S. Securities and Exchange Commission.
 
“Securities Act” means the U.S. Securities Act of 1933, as amended.
 
“Share” has the meaning set forth in Section 1.5(a).
 
“Share Percentage” means the quotient (expressed as a percentage) obtained by
dividing (a) the aggregate number of shares of Company Capital Stock that are
outstanding as of immediately prior to the Effective Time, by (b) the Fully
Diluted Share Number.
 
“Slamming” has the meaning set forth in Section 3.16(d).
 
“Software” means any computer software program, together with any error
corrections, updates, modifications, or enhancements thereto, in both
machine-readable form and human readable form, including all comments and any
procedural code.
 
“State Approvals” has the meaning set forth in Section 3.4.
 
“Statement” has the meaning set forth in Section 2.7(a).
 
“State PSCs” has the meaning set forth in Section 3.16(a).
 
“State Telecommunications Laws” has the meaning set forth in Section 3.16(c).
 
“Stockholder” means a holder of a Share.
 
“Stockholder Adjustment Amount” means (i) the Final Working Capital Overage, if
any, plus (ii) the Final Closing Cash Overage, if any.
 
 
-74-

 
 
“Stockholder Payment Account” has the meaning set forth in Section 2.1(a)(iii).
 
“Stockholder Representative” has the meaning set forth in the Preamble.
 
“Subsidiary” has the meaning set forth in Section 3.1(c).
 
“Surviving Corporation” has the meaning set forth in Section 1.1.
 
“Target Working Capital Amount” means $0.00.
 
“Takeover Laws” means any state takeover Law or other state Law that purports to
limit or restrict business combinations or the ability to acquire or vote
Company Common Stock, including any “business combination,” “control share
acquisition,” “fair price,” “moratorium” or other similar anti-takeover Law.
 
“Tax Benefit” has the meaning set forth in Section 9.4(c).
 
“Tax” or “Taxes” means any (a) federal, state, local and foreign income, excise,
gross receipts, gross income, ad valorem, profits, gains, property, estimated,
capital, sales, transfer, use, value added, payroll, employment, unemployment,
workers’ compensation, severance, withholding, duties, intangibles, franchise,
backup withholding and other taxes of any kind, charges, levies or like
assessments, including escheat, together with all penalties, and additions and
interest thereto, whether disputed or not, and whether liability is imposed
directly or by virtue of an obligation to indemnify or otherwise assume or
succeed to the Taxes of another Person and (b) liability for the payment of any
amounts of the type described in clause (a) of this sentence as a result of
being a member of an affiliated, consolidated, combined, unitary or aggregate
group for any taxable period.
 
“Tax Return” includes all returns, reports, claims for refund and forms
(including elections, attachments, declarations, disclosures, schedules,
estimates, information returns and TD Form 90 22.1, and its successor form
FinCEN Form 114) relating to Taxes, including any amendment thereof and any
document with respect to or accompanying payments of estimated Taxes, or with
respect to or accompanying requests for the extension of time in which to file
any such return, report, document or declaration.
 
“Telecommunications Act” has the meaning set forth in Section 3.17.
 
“Third Party Claim” has the meaning set forth in Section 9.5(a).
 
“Trade Secrets” has the meaning set forth in the definition of Intellectual
Property.
 
“Transaction Bonuses” means any bonuses, success fees, change of control or
other similar payments paid or payable to any Person by the Company or any of
its Subsidiaries solely as a result of the Transactions.
 
 
-75-

 
 
“Transaction Expenses” means, (a) any legal, accounting, financial advisory or
other third party advisory or consulting fees or expenses incurred by the
Company or any Company Subsidiaries (i) in connection with the Transactions at
or prior to the Closing or (ii) in connection with the audit of the Company
Financial Statements for the fiscal year ended December 31, 2017, whether prior
to or after the Closing, and in each case which remain unpaid as of the Closing,
including any broker’s fees described in the engagement letters with the
entities set forth in Section 3.25 of the Company Disclosure Letter, (b) the
costs and expenses of the D&O Tail Policy, (c) any Transaction Bonuses, (d) the
severance costs specified in Section 6.15.
 
“Transaction Expenses Payoff Amount” means the aggregate amount of Transaction
Expenses that are unpaid as of the Effective Time as evidenced by final invoices
or other applicable documentation.
 
“Transaction Litigation” has the meaning set forth in Section 6.6.
 
“Transactions” has the meaning set forth in Section 3.3(a).
 
“Treasury Regulations” means the regulations promulgated under the Code by the
U.S. Department of the Treasury.
 
“Uncollected Sales Taxes” means sales Taxes for which the corresponding
receivables in respect of such Taxes have not been collected from the customers
of the Company and the Company Subsidiaries prior to the Closing Date.
 
“UNEs” has the meaning set forth in Section 3.17.
 
“USF Programs” has the meaning set forth in Section 3.16(c).
 
“Welfare Plans” has the meaning set forth in Section 3.9(a).
 
“Working Capital” means, at any date, all Current Assets minus all Current
Liabilities as of such date. An illustrative example of the calculation of
Working Capital as of December 31, 2017 is attached as Exhibit F.
 
“Working Capital Estimate” has the meaning set forth in Section 2.5.
 
“Working Capital Overage” shall exist when (and shall be equal to the amount by
which) the Closing Working Capital exceeds the Working Capital Estimate.
 
“Working Capital Underage” shall exist when the Working Capital Estimate exceeds
the Closing Working Capital.
 
“Written Consent” has the meaning set forth in Section 6.2.
 
 
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Section 10.17 Liability of Financing Source Parties. Without limiting the rights
of Parent under the Debt Financing Agreements, notwithstanding anything to the
contrary contained in this Agreement, each Party hereto (in the case of the
Stockholder Representative, on behalf of itself and each of the Stockholders and
Optionholders) irrevocably agrees that none of the Debt Financing Sources or the
Debt Financing Source Related Parties shall have any liability or obligation to
the Parties, any Stockholder, any Optionholder or any Affiliate of any of the
foregoing relating to this Agreement or the negotiation, execution or
performance of this Agreement or the Transactions, including any dispute
relating to the Debt Financing, whether sounding in contract or tort, or whether
at law or in equity, or otherwise under any legal or equitable theory.
 
 
 
 [Remainder of Page Intentionally Left Blank]
 
 
 
 
-77-

 
 
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
 
MEGAPATH HOLDING CORPORATION
 
By: /s/ D. Craig Young
Name: D. Craig Young
Title: CEO

 
 
FUSION MPHC ACQUISITION CORP..
 
By: /s/ James P. Prenetta, Jr.
Name: James P. Prenetta, Jr.
Title: Executive Vice President and General Counsel
 
 
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
 
By: /s/ James P. Prenetta, Jr.
Name: James P. Prenetta, Jr.
Title: Executive Vice President and General Counsel
 
 
For the purposes of Section 2.1, Section 2.7, Section 2.8, Article IX and
Section 10.14 only:
 
 
SHAREHOLDER REPRESENTATIVE SERVICES LLC, solely in its capacity as the
Stockholder Representative
 
By: /s/ Sam Riffe

Name: Sam Riffe
Title: Executive Director

 
 
[Signature page to Agreement and Plan of Merger]