Plan of Merger




 

                                                                                    
Exhibit 10.1

 

AGREEMENT
AND PLAN OF MERGER

 

dated as
of

 

October
18, 2005

 

Among

 

NT
CORPORATION

 

TALK
AMERICA HOLDINGS, INC.

 

AND

 

THNETCO,
INC.

 


    


























Table
of Contents

 

 

 

 


	
       ARTICLE
      I
	
      DEFINITIONS
	
      




 

1.1. Definitions.                                                                                   1

 


	
       ARTICLE
      II
	
      THE
      TRANSACTION
	
      




 

 2.1. The
Merger.                                                                                   8

2.2. The
Closing.                                                                                   8

2.3. Actions
at the Closing.                                                                             8

2.4. Effect
of Merger.                                                                                 9

2.5. Procedure
for Exchange.                                                                                                                                                                                                                               
13

2.6. Escrow.                                                                                                                                                                                                                                                              
13

2.7. Closing
of Transfer Record.                                                                                                                                                                                                                           
14

 


	
       ARTICLE
      III
	
      REPRESENTATIONS
      AND WARRANTIES OF COMPANY
	
      




 

3.1. Organization,
Qualification and Corporate Power; Transaction
Authorization.                                                                                                                                 
14

3.2. Capitalization.                                                                                              16

3.3. Noncontravention;
Consents.                                                                                                                                                                                                                           
17

3.4. Compliance
with Laws, Licenses.                                                                      18

3.5. Customers.                                                                                      19

3.6. Securities.                                                                                       19

3.7. Brokers’
Fees.                                                                           19

3.8. Title
to Assets.                                                                                                                               
19

3.9. Subsidiaries.                                                                                      19

3.10. Financial
Statements.                                                                                                                               
20

3.11. Events
Subsequent to Most Recent Fiscal Year End.                                                                  
20

3.12. Undisclosed
Liabilities.                                                                                                        23

3.13. Antitakeover
Statutes.                                                                                                                                                                                                                                       24

3.14. Tax
Matters.                                                                                         24

3.15. Real
Property.                                                                                                                     26

3.16. Intellectual
Property.                                                                                                                                28

3.17. Tangible
Assets.                                                                                  29

3.18. Contracts.                                                                                                     29

3.19. Notes
and Accounts Receivable.                                                                        31

3.20. Powers
of Attorney.                                                                               31

3.21. Insurance.                                                                                       31

3.22. Litigation.                                                                                       32

3.23. Employees.                                                                                      32

3.24. Employee
Benefits.                                                                                 32

3.25. Guaranties.                                                                                      34

3.26. Environmental,
Health and Safety Matters.                                                                  34

3.27. Certain
Business Relationships with Company and its Subsidiaries.                                                         35

 






















3.28. Accounts;
Lockboxes; Safe Deposit Boxes.                                                                    35

3.29. Accounting
Matters.                                                                               35

3.30. PUHCA.                                                                                            
35

3.31. Investment
Company
Act.                                                                                              35

3.32. Disclosure.                                                                                                       
35

 


	
      ARTICLE
      IV
	
      REPRESENTATIONS
      AND WARRANTIES OF PARENT AND MERGER SUB
	
      




 

4.1. Organization.                                                                                        36

4.2. Authorization
of Transaction.                                                                            36

4.3. Noncontravention.                                                                                  36

4.4. Brokers’
Fees.                                                                                                              
37

4.5. Capital
Resources.                                                                                                                                                                                              
37

 


	
       ARTICLE
      V
	
      COVENANTS
	
      




 

5.1. Interim
Operations.                                                                                                                             
37

5.2. Filings;
Other Actions; Notification.                                                                                                                               
42

5.3. Company
Financial Statements.                                                                                                               
44

5.4. Access.                                                                                                                                                                                            
44

5.5. Director
and Officer Liability.                                                                                                                            
45

5.6. Employee
Benefits After the Merger.                                                                                                                                                         
46

5.7. Notices
and Filing by Company.                                                                                                                                       
47

 


	
      ARTICLE
      VI
	
      CONDITIONS
      TO OBLIGATIONS TO CLOSE
	
      




 

6.1. Conditions
to Each Party’s Obligation.                                                                                                                          
48

6.2. Conditions
to Obligation of Parent and Merger Sub.                                                                48

6.3. Conditions
to Obligation of Company.                                                                       50

 


	
      ARTICLE
      VII
	
      SURVIVAL
      OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
	
      




 

 7.1. Survival
of Representations and Warranties.                                                                                                                       
 51

7.2. Indemnification.                                                                                                                                                   
 51

 


	
       ARTICLE
      VIII
	
      TERMINATION
	
      




 

 8.1. Termination
of Agreement.                                                                              58

8.2. Effect
of Termination                                                                                  58

 


	
      ARTICLE
      IX
	
      MISCELLANEOUS
	
      




 

 9.1. Press
Releases and Public Announcements.                                                                    59

9.2. No
Third-Party Beneficiaries.                                                                           59

9.3. Entire
Agreement.                                                                                  59

9.4. Binding
Effect; Assignment.                                                                              60

9.5. Counterparts.                                                                                      60

9.6. Headings.                                                                                       60

9.7. Notices.                                                                                                                                                
60

9.8. Governing
Law.                                                                                                                                                                                                                                                          
63

9.9. Amendments
and Waivers.                                                                              64

 






















9.10. Severability.                                                                                      64

9.11. Expenses.                                                                                           
64

9.12. Survival.                                                                                         64

9.13. Construction.                                                                                     64

9.14. Incorporation
of Exhibits and Schedules.                                                                     65

9.15. Specific
Performance.                                                                                 65

9.16. Submission
to Jurisdiction.                                                                              66

9.17. Waiver
of Jury Trial.                                                                                  66




Exhibits:

 

A. Form of
Escrow Agreement




 




















 

AGREEMENT
AND PLAN OF MERGER

 

THIS
AGREEMENT AND PLAN OF MERGER (the
“Agreement”) is
dated effective October 18, 2005, by and among TALK
AMERICA HOLDINGS, INC., a
Delaware corporation (“Parent”),
THNETCO,
INC., a
Delaware corporation and indirectly wholly owned subsidiary of Parent
(“Merger
Sub”), and
NT
CORPORATION, a
Delaware corporation (“Company”).
Parent, Merger Sub and Company are referred to collectively herein as the
“Parties,” and
Company and Merger Sub are sometimes collectively referred to as the
“Constituent
Corporations.”

 

WITNESSETH:

 

WHEREAS, this
Agreement contemplates a transaction whereby Parent will acquire all of the
outstanding capital stock of Company through a merger of Merger Sub with and
into Company;

 

WHEREAS, the
Board of Directors of each of Parent, Merger Sub and Company has approved the
acquisition of Company by Parent, including the merger of Merger Sub with and
into Company (the “Merger”), upon
the terms and subject to the conditions set forth herein, and the Board of
Directors of each of Company and Merger Sub has adopted this
Agreement;

 

WHEREAS, the
Board of Directors of Company has determined that the Merger is advisable and is
fair to and in the best interests of the holders of the Company Shares and
recommended the approval of the Merger and this Agreement by the stockholders of
Company and this Agreement and the Merger have been approved by the requisite
vote of the stockholders of Company; and

 

NOW,
THEREFORE, in
consideration of the premises and the mutual promises set forth herein, and in
consideration of the representations, warranties and covenants set forth herein,
the Parties agree as follows:

 

ARTICLE
I  

 

DEFINITIONS

        1.1.  Definitions.

 

        (a)  The
following terms, as used herein, have the following meanings:

 

“Affiliate” has the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.

 

“Affiliated
Group” means
any affiliated group within the meaning of Code Section 1504(a) or any similar
group defined under a similar provision of federal, state, local or foreign
law.

 

“Claim
Date” means
the earlier of (a) the 60th day after Parent files its Annual Report on Form
10-K with the SEC for its fiscal year ending December 31, 2006 and (b) May 31,
2007.

 







1












 

“COBRA” means
the requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section
4980B and of any similar state law.

 

“Code” means
the Internal Revenue Code of 1986, as amended.

 

“Combined
Material Adverse Effect” means a
Material Adverse Effect on Company or a Material Adverse Effect on Parent and
its Subsidiaries (including the Surviving Corporation), taken as a whole, after
the Effective Time.

 

“Company
Board” means
the board of directors of Company.

 

“Company’s
Restated Charter” means
the Fourth Amended and Restated Certificate of Incorporation of NT CORPORATION
filed with the Delaware Secretary of State on July 29, 2004, as in effect as of
the Effective Time.

 

“Confidentiality
Agreement” means
the letter agreement dated August 23, 2005 between Parent and Company, as it may
be amended, providing that, among other things, each Party would maintain
confidential certain information of the other Party.

 

“Consenting
Stockholders” means
the Preferred Stockholders that approve the adoption of this Agreement and the
Merger by written consent pursuant to Stockholder Consents.

 

“Deferred
Intercompany Transaction” has the
meaning set forth in Treas. Reg. Section 1.1502-13.

 

“Delaware
Law” means
the General Corporation Law of the State of Delaware, Chapter 1, Title 8 of the
Delaware Code 1953, as amended.

 

“Dissenting
Stockholder” at any
time means a holder of Company Shares that are Dissenting Shares at such time
the holder of which continues to be entitled to appraisal rights under Section
262 of the Delaware Law (including not having withdrawn any demand or otherwise
waived or lost such rights) in respect of such shares.

 

“Employee
Benefit Plan” means
any “employee benefit plan” (as such term is defined in ERISA Section 3(3)) and
any other employee benefit plan, program or arrangement of any
kind.

 

“Employee
Options” means
any stock options to purchase shares of Common Stock granted under any employee
stock option or compensation plan or arrangement of Company.

 

“Employee
Pension Benefit Plan” has the
meaning set forth in ERISA Section 3(2).

 

“Employee
Welfare Benefit Plan” has the
meaning set forth in ERISA Section 3(1).

 

“Environmental,
Health and Safety Requirements” means
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyl, noise or radiation, each as amended and as now or
hereafter in effect.

 

 







2












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

 

“ERISA
Affiliate” means
each entity that is treated as a single employer with Company for purposes of
Code Section 414.

 

“Excess
Loss Account” has the
meaning set forth in Treas. Reg. Section 1.1502-19.

 

“FCC” means
the Federal Communications Commission.

 

“FCC
Consent” means
the grant by the FCC of its consent to the transfer of the FCC Licenses in
connection with the consummation of the transactions contemplated
hereby.

 

“Fiduciary” has the
meaning set forth in ERISA Section 3(21).

 

“GAAP” means
United States generally accepted accounting principles as in effect from time to
time.

 

“Governmental
Entity” means
any United States federal, state or local or any foreign government,
governmental regulatory or administrative authority, agency, commission
(including any department or political subdivision of any of the foregoing),
court, tribunal or judicial or arbitral body.

 

“Governmental
Order” means
any order, ruling, writ, judgment, injunction, decree, charge, stipulation,
determination or award entered by or with any Governmental Entity.

 

“Intellectual
Property” means
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all copyrights and all applications, registrations and
renewals in connection therewith, (d) all mask works and all applications,
registrations and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulae, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all Computer Software (including data and related
documentation), (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof (in whatever form or medium).

 

 







3












 

“Interim
Agreement” means
the Interim Operating and Integration Agreement, dated as of the date hereof,
between Parent and Company.

 

“Interim
Escrow Amount” means,
as of any date, the aggregate amount remaining in the Escrow Fund as of such
date, as such amount is reduced by the aggregate amount of any claims for
indemnification that have been resolved but not yet paid as of such date or that
have not been resolved but have been asserted in writing prior to such date
pursuant to Section 7.2.

 

“Knowledge” of any
Person that is not an individual means the actual knowledge of (i) such Person’s
executive officers, in the case of Parent and Merger Subsidiary, and (ii) each
of Leo J. Cyr and Danyelle L. Kennedy-Lantz, in the case of the Company, in each
case after reasonable investigation by such individual.

 

“Laws” mean
any laws, statutes, rules, ordinances, regulations, codes, plans, injunctions,
judgments, orders, writs, decrees, rulings and charges thereunder of any
Governmental Entity.

 

“Liability” means
any liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
Taxes.

 

“Lien” means,
with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such property or
asset.

 

“Main
Leases” means
collectively all leases by Company or any of its Subsidiaries of 3300 Pace
Street, Pensacola, Florida and 2700 N.E. Expressway, Building B, Suites 700 and
900, Atlanta, Georgia.

 

“Material
Adverse Effect” means,
with respect to or of or on any Person, (a) a material adverse change in, or
materially adverse effect on, the business, assets, revenues, financial
condition or results of operations of such Person and its Subsidiaries taken as
a whole, excluding any such effect resulting from (i) changes in political or
regulatory conditions generally, (ii) changes or conditions generally affecting
the U.S. economy or financial markets or generally affecting the segments of the
telecommunications industry in which such Person or any of its Subsidiaries
operates, (iii) changes in GAAP, (iv) actions or forbearances taken in
accordance with the terms of the Interim Agreement or (v) the announcement or
consummation of this Agreement, or (b) an effect that would prevent, materially
delay or materially impair the ability of such Person to consummate the Merger
and the other transactions contemplated by this Agreement.

 

“Most
Recent Balance Sheet” means
the balance sheet contained within the Most Recent Financial
Statements.

 

“Multiemployer
Plan” has the
meaning set forth in ERISA Section 3(37).

 

“Nasdaq” means
the Nasdaq National Market.

 

“Ordinary
Course of Business” means
the ordinary course of business consistent with past practice.

 

 







4












“Parent
Board” means
the board of directors of Parent.

 

“PBGC” means
the Pension Benefit Guaranty Corporation.

 

“Person” means
an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a Governmental Entity.

 

“Preferred
Stockholder” means a
holder of record of shares of Preferred Stock.

 

“Prohibited
Transaction” has the
meaning set forth in ERISA Section 406 and Code Section 4975.

 

“Reportable
Event” has the
meaning set forth in ERISA Section 4043.

 

“Representatives” has the
meaning set forth in the Escrow Agreement.

 

“Requisite
Stockholder Approval” means
adoption of this Agreement by the affirmative vote, at a meeting or by written
consent, of (i) the holders of a majority of the outstanding Common Stock and
Preferred Stock voting together as a single class, with the Preferred Stock
voting on an as-converted-to-Common Stock basis, (ii) the holders of 60% of the
outstanding shares of Series A Preferred, Series B Preferred and Series C
Preferred, voting together as a single class, and (iii) the holders of 75% of
the shares of Series D Preferred, voting separately as a class.

 

“SEC” means
the Securities and Exchange Commission.

 

“Securities
Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder. 

 

“Securities
Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.

 

“Security
Interest” means
any Lien other security interest, other than (a) mechanic’s, materialman’s and
similar liens; (b) Liens for taxes not yet due and payable; (c) purchase money
Liens and Liens securing rental payments under capital lease arrangements; and
(d) other Liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.

 

“Severance
Amounts” means
all out-of-pocket compensation, bonuses, fees and expenses payable by Company or
any of its Subsidiaries to any of its employees or directors in connection with
or by reason of the transactions contemplated hereby and the consummation of any
thereof, including payments and amounts of the categories, natures and types
reflected in the statement in Section 5.6(e) of the Company Disclosure Letter
and including all costs and payments to be paid as contemplated by Section
5.6(e), but in any case not including payments described in Note 2 of Section
5.6(e) of the Company Disclosure Letter, and any other amount that is stated in
Section 5.1(a)(18)(z) to be, or be deemed to be, a Severance Amount. By way of
example but not limitation of the generality of the foregoing definition, set
forth in Section 5.6(e) of the Company Disclosure Letter is an estimate, as of
the date of this Agreement, of the “Severance Amounts.”

 

 







5












 

“State
PUC Consent” means
the grant by any state Governmental Entity that granted or issued any of the
State Licenses or otherwise has authority in the matter of its consent to the
transfer of the State Licenses in connection with the consummation of the
transactions contemplated hereby.

 

“Stockholder
Consent” means a
Consent, executed by a Preferred Stockholder, approving the adoption of this
Agreement and the Merger.

 

“Subsidiary” of a
specified Person means any corporation, limited liability company, partnership,
joint venture or other legal entity of which the specified Person (either alone
or together with any other Subsidiary of the specified Person) owns, directly or
indirectly, more than 50% of the stock or other equity, partnership, limited
liability company or equivalent interests, the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity, or otherwise has the power to
vote or direct the voting of sufficient securities to elect a majority of such
board of directors or other governing body.

 

“Tax” means
any federal, state, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.

 

“Tax
Return” means
any report, return, declaration or other information required to be supplied to
a taxing authority in connection with Taxes.

 

“Total
Merger Consideration” means
$23,000,000, minus the sum of the Transaction Costs and Severance Amounts, as
set forth in the Closing Costs Certificate.

 

“Transaction
Costs” means
all fees and expenses of legal counsel, investment bankers, brokers or other
representatives and consultants, including Breckenridge Securities Corp. and The
Breckenridge Group, Inc., Latham & Watkins LLP, Cooley Godward LLP, Nowalsky
Bronston & Gothard PLLC, Kilpatrick Stockton LLP and Ernst & Young LLP,
incurred or accrued by Company, or for which Company or any of its Subsidiaries
is liable, in connection with the negotiation, execution and delivery of this
Agreement, the performance of the obligations of Company and its Subsidiaries
hereunder and the consummation of the transactions contemplated hereby,
including payments and amounts of the categories, natures and types reflected in
the statement in Section 5.6(b) of the Company Disclosure Letter, the premium
payable for the purchase of the “tail” policy required to be procured pursuant
to Section 5.5(b) and any other amount that is stated in Section 5.1(a)(18)(z)
to be, or be deemed to be, a Transaction Cost. By way of example but not
limitation of the generality of the foregoing definition, set forth in Section
5.6(b) of the Company Disclosure Letter is an estimate, as of the date of this
Agreement, of the maximum amounts of the various categories of “Transaction
Costs.”

        







6












        (b)  Each of
the following terms is defined in the Section set forth opposite such
term:

 


	
      TERM
	
      SECTION

	 	 
	
      Agreement
	
      Preamble

	
      Allocable
      Series Consideration
	
      2.4(f)

	
      Allocated
      Portion
	
      7.2(e)(2)

	
      Applicable
      Series Liquidation Amount
	
      2.4(f)

	
      Basket
      Amount
	
      7.2(f)

	
      Certificate
      of Merger
	
      2.3

	
      Closing
	
      2.2

	
      Closing
      Costs Certificate
	
      6.2(i)

	
      Closing
      Date
	
      2.2

	
      Common
      Stock
	
      3.2

	
      Common
      Stock Exchange Ratio
	
      2.4(f)

	
      Communications
      Licenses
	
      3.4

	
      Company
	
      Preamble

	
      Company
      Disclosure Letter
	
      ARTICLE
      III

	
      Company
      Indemnified Party
	
      7.2(a)(2)

	
      Company
      Outstanding Shares
	
      2.4(f)

	
      Company
      Shares
	
      3.2(a)(2)

	
      Computer
      Software
	
      3.16

	
      Compensation
      Plan
	
      5.1(a)(18)

	
      Constituent
      Corporations
	
      Preamble

	
      Dissenting
      Shares
	
      2.4(g)

	
      Effective
      Time
	
      2.4(a)

	
      Escrow
      Agent
	
      2.6(a)

	
      Escrow
      Agreement
	
      2.6(a)

	
      Escrow
      Amount
	
      2.6(a)

	
      Escrow
      Fund
	
      2.6(a)

	
      Escrowed
      Consideration
	
      2.5(a)

	
      Exchange
      Agent
	
      2.5(a)

	
      Exchange
      Fund
	
      2.5(a)

	
      FCC
      Licenses
	
      3.4(b)

	
      Financial
      Statements
	
      3.10

	
      Indemnified
      Party
	
      7.2(b)(1)

	
      Indemnifying
      Party
	
      7.2(b)(1)

	
      IT
      Assets
	
      3.16

	
      Licenses
	
      3.4(b)

	
      Local
      Licenses
	
      3.4(b)

	
      Material
      Contract
	
      3.18

	
      Merger
	
      Recitals

	
      Merger
      Consideration
	
      2.4(e)

	
      Merger
      Sub
	
      Preamble

	
      Most
      Recent Financial Statements
	
      3.10

	
      Most
      Recent Fiscal Year End
	
      3.10

	
      Parent
	
      Preamble

	
      Parent
      Indemnified Party
	
      7.2(a)(1)

	
      Parties
	
      Preamble

	
      Per
      Share Merger Consideration
	
      2.4(e)

	
      Preferred
      Merger Consideration
	
      2.4(f)

	
      Preferred
      Share Liquidation Consideration
	
      2.4(f)

	
      Preferred
      Stock
	
      3.2(a)(2)

	
      Reserved
      Insurance Proceeds
	
      7.2(g)(1)

	
      Series
      A Preferred
	
      3.2

	
      Series
      B Preferred
	
      3.2

	
      Series
      C Preferred
	
      3.2

	
      Series
      D Preferred
	
      3.2

	
      Series
      E Preferred
	
      3.2

	
      Series
      F Preferred
	
      3.2

	
      Series
      Shares Outstanding
	
      2.4(f)

	
      State
      Licenses
	
      3.4

	
      Stockholder
	
      3.2(b)

	
      Surviving
      Corporation
	
      2.1

	
      Surviving
      Corporation New Plans
	
      5.6(b)

	
      Termination
      Date
	
      8.1(d)

	
      Third
      Party Claim
	
      7.2(b)(1)

	
      Total
      Liquidation Amount
	
      2.4(f)




 







7












        (c)  Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The words “include,”
“includes” and
“including” shall
mean include, includes or including without limitation. The phrase “business
day” shall
mean any day other than a day on which banks in the State of New York are
required or authorized to be closed. The phrases “herein,”
“hereof,”
“hereunder” and
words of similar import shall be deemed to refer to this Agreement as a whole,
including the Exhibits and Schedules hereto, and not to any particular provision
of this Agreement. The word “or” shall
be inclusive and not exclusive. Any pronoun shall include the corresponding
masculine, feminine and neuter forms.

 

ARTICLE
II  

 

THE
TRANSACTION

2.1.  The
Merger.

 

On and
subject to the terms and conditions of this Agreement, Merger Sub will merge
with and into Company at the Effective Time and the separate corporate existence
of Merger Sub will thereupon cease. Company shall be the surviving corporation
in the Merger (the “Surviving
Corporation”), and
the separate corporate existence of Company, with all of its rights, privileges,
summary powers and franchises, shall continue unaffected by the Merger, except
as provided for in Section 2.4.

 

2.2.  The
Closing.

 

The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place (i) at the offices of Latham & Watkins LLP, 555 Eleventh Street,
NW, Suite 1000 Washington, D.C. 20004, commencing at 9:00 A.M. local time on
January 2, 2006 or, in the event the conditions set forth in Article VI are not
satisfied or waived (other than those conditions that by their terms are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) as of such date, the first day that is the last business day of a
month and at least three business days after the satisfaction or waiver of all
conditions set forth in ARTICLE VI (other than those conditions that by their
terms are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions) or (ii) at such other place and time or on such
other date as Parent and Company may agree in writing (the “Closing
Date”).

 

2.3.  Actions
at the Closing.

 

At the
Closing, (i) Company will deliver to Parent and Merger Sub the various
certificates, instruments and documents referred to in Section 6.2; (ii) Parent
and Merger Sub will deliver to Company the various certificates, instruments and
documents referred to in Section 6.3; (iii) Company and Merger Sub shall duly
execute and deliver a
certificate of merger (the “Certificate
of Merger”)to the
Secretary of State of the State of Delaware for filing under Section 251 of
the Delaware Law and make all other filings or recordings required by the
Delaware Law in connection with the Merger and (iv)
Parent will deliver or cause to be delivered the Exchange Fund to the Exchange
Agent in the manner provided below in this ARTICLE II.

 







8












2.4.  Effect
of Merger.

 

    (a)  General.
The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware or at such later date
or time as is specified in the Certificate of Merger (the “Effective
Time”). From
and after the Effective Time, the Surviving Corporation shall possess all of the
property, rights, privileges, immunities, powers and franchises and be subject
to all of the debts, liabilities, obligations, restrictions, disabilities and
duties of the Company and Merger Sub, all as provided under this Agreement and
the Delaware
Law. The Surviving Corporation may, at any time after the Effective Time, take
any action (including executing and delivering any document) in the name and on
behalf of either Company or Merger Sub in order to carry out and effectuate the
transactions contemplated by this Agreement.

 

    (b)  Certificate
of Incorporation. At the
Effective Time, the certificate of incorporation of the Surviving Corporation
shall be amended and restated to read in its entirety as did the certificate of
incorporation of Merger Sub in effect immediately prior to the Effective Time,
except that the name of the Surviving Corporation shall be NT CORPORATION, and,
as so amended, shall be the certificate of incorporation of the Surviving
Corporation until thereafter amended in accordance with their terms and as
provided by law.

 

    (c)  By-laws. The
By-laws of the Surviving Corporation shall be amended and restated at and as of
the Effective Time to read in their entirety as did the By-laws of Merger Sub in
effect immediately prior to the Effective Time and shall be the By-laws of the
Surviving Corporation until amended in accordance with their terms and as
provided by law.

 

    (d)  Directors
and Officers. The
directors and officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers of the Surviving Corporation at and as of
the Effective Time (retaining their respective positions and terms of office),
until the earlier of their respective resignation, removal or otherwise ceasing
to be a director or officer, respectively, or until their respective successors
are duly elected and qualified, as the case may be.

 

    (e)  Conversion
of Company Shares. At and
as of the Effective Time, (A) each issued and outstanding Company Share will be
converted into the right to receive the Merger Consideration set forth below in
Section 2.4(f) (as to each Company Share, its “Per
Share Merger Consideration”), and
all such Company Shares will no longer be outstanding, will be canceled and
retired and will cease to exist, and each holder of a certificate representing
any such Company Shares will thereafter cease to have any rights with respect to
such Company Shares, except the right to receive the respective Per Share Merger
Consideration for each such Company Share to which the holder of such Company
Shares is entitled pursuant to Section 2.4(f) upon the surrender of such
certificate in accordance with Section 2.4(f) (collectively, the “Merger
Consideration”) and
(B) each Company Share owned by Company or any Subsidiary of Company shall be
canceled and retired without payment of any consideration therefor and shall
cease to exist. No Company Share shall be deemed to be outstanding or to have
any rights other than those set forth above in this Section 2.4(e) after the
Effective Time.

 







9












    (f)  Per
Share Merger Consideration. The
Company Shares will be converted into the respective rights to receive the
following Per Share Merger Consideration, which shall be payable in cash, as
provided, and subject to the limitations set forth, below:

 

        (1)  each
share of Common Stock held by the Company as treasury stock or owned by Parent
or any Subsidiary of Parent immediately prior to the Effective Time shall be
cancelled and retired, and no payment shall be made with respect
thereto;

 

        (2)  each
share of any series of Preferred Stock outstanding immediately prior to the
Effective Time shall be converted into the right to receive from Parent a
portion of the Merger Consideration determined in accordance with the following
formula: 

 

(Allocable
Series Consideration multiplied by Total Merger Consideration)

Number of
Applicable Series Shares Outstanding

 

   (3)  thereafter,
a holder of a share of Common Stock and a holder of Preferred Stock other than
the Series E Preferred (treating the Preferred Stock on an as-converted to
Common Stock basis) outstanding immediately prior to the Effective Time shall be
converted into the right to receive from Parent, a portion of the Merger
Consideration determined in accordance with the following formula:

 




(Total
Merger Consideration minus Preferred Share Liquidation
Consideration)

Company
Outstanding Shares




Notwithstanding
clause (2) or (3) immediately above, the maximum Merger Consideration that shall
be paid by Parent in the Merger shall not exceed the Total Merger
Consideration.










10












For
purposes of this Section 2.4(f), each of the following terms is defined as
follows:




“Allocable
Series Consideration” means
the Applicable Series Liquidation Amount divided by the Total Liquidation
Amount.




“Applicable
Series Liquidation Amount” means
the total amount that would be payable to the holders of outstanding Preferred
Stock in the Merger if, in the Merger, the holders of Preferred Stock were
entitled to receive the following: (a) with respect to the Series A Preferred,
the Series B Preferred and the Series C Preferred, the Liquidation Price (as
defined in the Company’s Restated Charter); (b) with respect to the Series D
Preferred, the Series D Liquidation Preference (as defined in the Company’s
Restated Charter); and (c) with respect to the Series E Preferred, the Sale
Preference (as defined in the Company’s Restated Charter).




“Common
Stock Exchange Ratio” means,
for the Common Stock, the ratio obtained pursuant to clause (3) immediately
above.




“Company
Outstanding Shares” means
the number of shares of Common Stock outstanding as of the Effective Time
(assuming the exercise, conversion or exchange of all outstanding rights,
warrants, options, convertible securities or indebtedness or other rights
exercisable, convertible or exchangeable for or into, directly or indirectly,
Common Stock whether at the time of issue or upon the passage of time or the
occurrence of some future event, including the conversion into Common Stock of
all shares of Preferred Stock outstanding as of the Effective
Time).




“Preferred
Merger Consideration” means
the merger consideration paid to all holders of Preferred Stock pursuant to
clauses (2) and (3) immediately above.




“Preferred
Share Liquidation Consideration” means
the total amount of Merger Consideration allocated at the Effective Time to the
holders of Preferred Stock pursuant to clause (2) immediately above.





“Series
Shares Outstanding” means
(a) in the case of the Series A Preferred, the total number of shares of Series
A Preferred outstanding at the Effective Time; (b) in the case of the
Series B Preferred, the total number of shares of Series B Preferred outstanding
at the Effective Time; (c) in the case of the Series C Preferred, the total
number of shares of Series C Preferred outstanding at the Effective Time;
(d) in the case of the Series D Preferred, the total number of shares of
Series D Preferred outstanding at the Effective Time; and (e) in the case
of the Series E Preferred, the total number of shares of Series E Preferred
outstanding at the Effective Time.




“Total
Liquidation Amount” means
the sum of all Applicable Series Liquidation Amounts.

 







11












 

    (g)  Notwithstanding
anything in this Agreement to the contrary, each Share that is held by a holder
(i) who has not voted in favor of the Merger or consented thereto in writing,
(ii) who shall have properly demanded in writing appraisal of such Shares
pursuant to, and who complies in all respects with, Section 262 of the
Delaware Law and (iii) who has neither effectively withdrawn nor lost the
right to such payment (each such share, a “Dissenting
Share” and
collectively, the “Dissenting
Shares”) shall
not be converted into the right to receive Merger Consideration as provided in
Sections 2.4(e) and (f), but rather the holders of Dissenting Shares shall
be entitled to payment of the fair value of such Dissenting Shares in accordance
with Section 262 of the Delaware Law; provided, however, that if any such
holder shall fail to perfect or otherwise shall waive, withdraw or lose the
right to appraisal under Section 262 of the Delaware Law, then the right of
such holder to be paid the fair value of such holder’s Dissenting Shares shall
cease and such Dissenting Shares shall be deemed to have been converted as of
the Effective Time into, and to have become exchangeable solely for the right to
receive, Merger Consideration as provided in Section 2.4(f). Company shall
serve prompt notice to Parent of any written demands received by Company for
appraisal of any Company Shares, and Parent shall have the right to participate
in and direct all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands, or agree to do any of the foregoing.

 

    (h)  Cancellation
of Employee Stock Options.
At or
immediately prior to the Effective Time, each stock option or warrant to
purchase Company Shares or any other capital stock of Company or any Company
Subsidiary outstanding, whether or not vested or exercisable, and each
commitment or agreement to issue Company Shares or any other capital stock of
Company or any Company Subsidiary, including without limitation, all such stock
options, warrants and commitments or agreements to issue Shares or any other
capital stock of the Company or any Subsidiary set forth in Section 3.2(b)
of the Company Disclosure Letter, shall be cancelled without the payment of any
consideration, and Company and its Subsidiaries shall take all such actions, and
shall obtain all consents and approvals as are necessary, to effect such
cancellation.

 

    (i)  Conversion
of Capital Stock of Merger Sub. At and
as of the Effective Time, each share of common stock, $.01 par value per share,
of Merger Sub shall be converted into one share of common stock, $.0l par value
per share, of the Surviving Corporation.

 







12












2.5.  Procedure
for Exchange.

 

    (a)  Immediately
after the Effective Time, (A) Parent shall furnish to StockTrans, Inc., its
transfer agent, or such other bank or trust company reasonably acceptable to
Company to act as exchange agent (the “Exchange
Agent”), a
corpus (the “Exchange
Fund”)
consisting of cash sufficient to permit the Exchange Agent to make full payment
of the Merger Consideration to the holders of all of the issued and outstanding
Company Shares (other than any Company Shares owned by Company), less the amount
in cash equal to 10% of the Total Merger Consideration, which amount (the
“Escrowed
Consideration”) will
be withheld from the amounts otherwise to be delivered to the holders of
Preferred Stock as Merger Consideration to which each such holder of Preferred
Stock would, but for this Section 2.5(a), be entitled to be delivered pursuant
to this Agreement, pro
rata in
proportion to the respective amount otherwise so deliverable and (B) Parent will
cause the Exchange Agent to mail a letter of transmittal (with instructions for
its use) in a form to be mutually agreed upon by Company and Parent prior to
Closing to each holder of issued and outstanding Company Shares (other than any
Company Shares owned by Company) that is entitled to receive any Merger
Consideration for the holder to use in surrendering the certificates that,
immediately prior to the Effective Time, represented his or its Company Shares
against payment of the Merger Consideration to which the holder is entitled
pursuant to Section 2.4(f), subject to the escrow of the Escrowed Consideration
pursuant to the Escrow Agreement. Notwithstanding the withholding of the
Escrowed Consideration and deposit thereof with the Escrow Agent pursuant to
Section 2.6(a), each Preferred Stockholder shall, for all purposes of Section
2.4, be deemed to have received its pro rata share of such Escrowed
Consideration so withheld and deposited. Upon surrender to the Exchange Agent of
these certificates, together with the letter of transmittal, duly executed and
completed in accordance with the letter of transmittal instructions, subject to
the escrow of the Escrow Amount pursuant to the Escrow Agreement, Parent shall
promptly cause to be issued a check representing the Merger Consideration
(after
giving effect to any required tax withholdings and the withholding of the
Escrowed Consideration). No
interest will be paid or accrued on any amounts payable to former holders of
Company Shares. If payment is to be made to a Person other than the registered
holder of the certificate surrendered, it shall be a condition of payment that
the surrendered certificate must be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a Person other than
the registered holder of the certificate surrendered or establish to the
reasonable satisfaction of the Surviving Corporation or the Exchange Agent that
this tax has been paid or is not applicable. If any certificate representing
Company Shares is lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming a certificate to be lost, stolen or destroyed,
the Exchange Agent will issue in exchange for this lost, stolen or destroyed
certificate the Merger Consideration deliverable in respect thereof except that
the Person to whom this Merger Consideration is paid shall, as a condition
precedent to the payment thereof, indemnify the Surviving Corporation in a
manner reasonably satisfactory to it against any claim that may be made against
the Surviving Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.

 

    (b)  Parent
shall pay, or shall cause the Surviving Corporation to pay, all charges and
expenses of the Exchange Agent.

 

2.6.  Escrow.

 

    (a)  At the
Effective Time, Parent, Merger Sub, Company, the Representatives and the Escrow
Agent shall execute and deliver an escrow agreement substantially in the form of
the attached Exhibit A (the “Escrow
Agreement”) under
which U.S. Bank Corporate Trust Services or other Person mutually satisfactory
to Parent and Company shall act as escrow agent (the “Escrow
Agent”) with
respect to the Escrowed Consideration (the aggregate value of which, the
“Escrow
Amount”), which
shall be deposited in an escrow fund (the “Escrow
Fund”) to be
governed by the terms set forth in the Escrow Agreement. Parent shall deposit
the Escrowed Consideration with the Escrow Agent, which shall be withheld from
the Merger Consideration as provided in Section 2.5 in connection with the
indemnification obligations set forth in Section 7.2.

 







13












    (b)  Subject
to the provisions of this Section 2.6 and the Escrow Agreement, (i) on the first
business day that is at least 270 days after the Closing Date, an amount equal
to 50% of the Interim Escrow Amount as of such date shall be paid to the
Preferred Stockholders, and (ii) on the Claim Date, the then remaining amount in
the Escrow Fund, as such amount is reduced by the aggregate amount of any claims
for indemnification that have been resolved but not yet paid or that have not
been resolved but have been asserted in writing prior to the Claim Date pursuant
to Section 7.2, shall be paid to the Preferred Stockholders.

 

2.7.  Closing
of Transfer Record.
After the
Effective Time, no transfer of Company Shares outstanding prior to the Effective
Time may be made on the stock transfer books of the Surviving Corporation. If,
after the Effective Time, certificates representing such shares are presented
for transfer to the Exchange Agent, they shall be canceled and exchanged for
Merger Consideration as provided in Section 2.5.

 

ARTICLE
III  

 

REPRESENTATIONS
AND WARRANTIES OF COMPANY

 

Except as
set forth in the disclosure letter (subject to Section 9.13(c)) delivered to
Parent by Company at or prior to entering into this Agreement (the “Company
Disclosure Letter”),
Company hereby represents and warrants to Parent and Merger Sub
that:

 

3.1.  Organization,
Qualification and Corporate Power; Transaction Authorization.

 

    (a)  Each of
Company and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the Laws of the jurisdiction of its incorporation and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership or operation of its assets or
properties or conduct of its business requires such qualification, except where
the failure to be so organized, validly existing, qualified or in good standing,
or to have such power or authority, would not be reasonably expected to have a
Material Adverse Effect on Company. Section 3.1 of the Company Disclosure Letter
lists for each of Company and its Subsidiaries (i) the directors and officers,
(ii) the state of incorporation and (iii) the jurisdictions in which the
corporation is qualified to do business. Company has delivered to Parent correct
and complete copies of the charter and bylaws of each of Company and its
Subsidiaries (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors and any committees of the
board of directors), the stock certificate books, and the stock record books of
each of Company and its Subsidiaries are correct and complete, and Company has
delivered to Parent copies of all such items. None of Company and its
Subsidiaries is in default under or in violation of any provision of its charter
or bylaws.

 







14












    (b)  The
Company Board has received the opinion of Breckenridge Securities Corp., dated
October 18, 2005, to the effect that, as of such date, based upon and subject to
the terms, qualifications, assumptions, limitations and exceptions set forth
therein, the aggregate consideration to be received by the holders of the
Company Shares pursuant to the Merger is fair to such holders, taken as a whole,
from a financial point of view. A copy of such opinion was furnished to Parent
on or before the date hereof. The Company Board, at a meeting duly called and
held, has (i) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to and in the best interest of Company’s
stockholders, (ii) adopted this Agreement and the transactions contemplated
hereby, including the Merger, in accordance with the requirements of
Section 251 of the Delaware Law with respect to the transactions
contemplated hereby, (iii) adopted resolutions recommending to the Company’s
stockholders approval of the transactions contemplated hereby, including the
Merger, (iv) directed that this Agreement and the transactions contemplated
hereby, including the Merger, be submitted to the Preferred Stockholders for
their approval and adoption on or before the date of this Agreement, and (v)
taken all necessary action to provide that Employee Options outstanding as of
the Effective Time will be in all respects cancelled and of no further force and
effect from and after the Effective Time. The only
vote of holders of any class or series of Common Stock or Preferred Stock
necessary to approve and adopt this Agreement and the Merger and the
transactions contemplated hereby is the Requisite Stockholder Approval and no
vote of the holders of the shares of Common Stock and the Preferred Stock, or
any of them, is necessary to consummate any transaction expressly contemplated
hereby other than the Merger. Company has received the consents of the
Consenting Stockholders in the Stockholder Consents, a true and correct copy of
each of which has been provided to Parent, and such consents so received
constitute the Requisite Stockholder Approval. This Agreement and the
transactions contemplated hereby, including the Merger, have been duly
authorized by all necessary corporate action. 

 

    (c)  Company
has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Merger in accordance with its terms. This
Agreement is a valid and binding agreement of Company enforceable against
Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles and except as indemnification obligations hereunder may be limited by
applicable securities laws. No Stockholder is entitled to any dissenter’s rights
with respect to, or other rights of appraisal of, its Company Shares in respect
or by reason of the Merger or any of the transactions contemplated hereby,
except only such rights of appraisal as a holder of Company Shares that is not a
Consenting Stockholder shall have under Section 262 of the Delaware
Law.

 

    (d)  Company
has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
the Interim Agreement and the Interim Agreement is a valid and binding agreement
of Company enforceable against Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’ rights
and to general equity principles.

 







15












3.2.  Capitalization.

 

    (a)  As of the
date of this Agreement, Company’s authorized capitalization consisted
of:

 

        (1)  90,028,495
shares of Common Stock, par value $0.01 per share (the “Common
Stock”), of
which 9,408,544 shares were issued and outstanding, an aggregate of 5,033,998
shares were issuable upon exercise of outstanding Employee Options and an
aggregate of 67,731,279 shares were issuable upon conversion of shares of the
Preferred Stock, as set forth below; and

 

        (2)  58,020,595
shares of Preferred Stock, par value $0.01 per share (the “Preferred
Stock” and,
collectively with the Common Stock, the “Company
Shares”),
designated as:

 


	(i)  	
      7,500,000
      shares of Series A Convertible Preferred Stock (“Series
      A Preferred”),
      of which 7,500,000 shares were issued and outstanding and were convertible
      into 7,704,628 shares of Common Stock;




 


	(ii)  	
      4,459,320
      shares of Series B Convertible Preferred Stock (“Series
      B Preferred”),
      of which 4,459,320 shares were issued and outstanding and were convertible
      into 4,581,326 shares of Common Stock;




 


	(iii)  	
      6,584,372
      shares of Series C Convertible Preferred Stock (“Series
      C Preferred”),
      of which 6,584,372 shares were issued and outstanding and were convertible
      into 6,764,747 shares of Common Stock;




 


	(iv)  	
      29,668,487
      shares of Series D Convertible Preferred Stock (“Series
      D Preferred”),
      of which 25,584,455 shares were issued and outstanding and were
      convertible into 38,615,437 shares of Common Stock;
and




 


	(v)  	
      9,796,238
      shares of Series E Convertible Preferred (“Series
      E Preferred”),
      of which 9,796,238 shares were issued and outstanding and were convertible
      into 10,065,142 shares of Common Stock.




 


	(vi)  	
      2,178
      shares of Series F Convertible Preferred (“Series
      F Preferred”),
      of which 0 shares were issued and
outstanding.




 







16












    (b)  All of
the issued and outstanding Company Shares have been duly authorized, are validly
issued, fully paid and nonassessable, and, as of the date of this Agreement, are
held of record by the respective stockholders as set forth in Section 3.2(b) of
the Company Disclosure Letter (each a “Stockholder” and
collectively, the “Stockholders”). The
Company has no treasury stock. Other than the Employee Options that are
exercisable for 5,033,998 shares of Common Stock as of the date of this
Agreement, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Company to issue, sell or otherwise
cause to become outstanding any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation or similar
rights with respect to Company. There are no voting trusts, proxies or other
agreements or understandings with respect to the voting of the capital stock of
Company, provided that the foregoing representation and warranty is to the
Knowledge of Company as respects voting trusts, proxies or other agreements or
understandings to which none of Company and its Subsidiaries is a party or has
acknowledged in writing. Each Stockholder holds of record and, to Company’s
Knowledge, owns beneficially, as of the date of this Agreement, the number of
Company Shares set forth next to his or its name and record address in Section
3.2(b) of the Company Disclosure Letter, free and clear, to Company’s Knowledge,
of any restrictions on transfer (other than any generally applicable
restrictions on transfer under the Securities Act and state securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands. To Company’s Knowledge, no
Stockholder is a party to any option, warrant, purchase right or other contract
or commitment that could require the Stockholder to sell, transfer or otherwise
dispose of any capital stock of Company (other than this Agreement). From and
after the Effective Time, all Employee Options will be cancelled and shall
represent no rights of any holder thereof. As of the Effective Time, each of the
Employee Options shall in all respects be cancelled and of no further force or
effect.

 

3.3.  Noncontravention;
Consents.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i), assuming the filing of the
Certificate of Amendment as contemplated by Section 2.3, violate any provision
of the charter or bylaws of any of Company and its Subsidiaries or (ii),
assuming compliance with the matters referred to in the next sentence of this
Section 3.3, (A) violate any Laws or Governmental Order to which any of Company
and its Subsidiaries is subject or (B) with or without notice, lapse of time or
both, conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any agreement, contract, lease,
license, instrument or other arrangement to which any of Company and its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except, in the case of clause (ii), such violation, breach, default,
acceleration or other change that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company. Except for
(a) any FCC Consent, State PUC Consent or consent or approval of any other
Governmental Entity identified in Section 3.3 of the Company Disclosure Letter,
in each case as required by applicable Laws, (b) the filing of the Certificate
of Merger with the Secretary of State of Delaware pursuant to the Delaware Law
and of appropriate documents with relevant authorities of other states in which
Company is qualified to do business to reflect such Certificate of Merger
filing, and (c) any other third party approvals as are reflected in Section 3.3
of the Company Disclosure Letter, including with respect to any Computer
Software program and databases (other than commercial, non-exclusive end-user
licenses having a total consideration, with respect to each license, of less
than $50,000), the execution, delivery and performance by Company of this
Agreement and the transactions contemplated hereby do not require any consents,
waivers, authorizations or approvals of, or filings with, any Governmental
Entity or any other third Person except for those that the failure to make or
obtain would not reasonably be expected to have a Material Adverse Effect on
Company.

 







17












3.4.  Compliance
with Laws, Licenses.

 

    (a)  Company
and its Subsidiaries are not in violation of any Laws, License or Governmental
Order applicable to any of the businesses in which any of Company and its
Subsidiaries is engaged except to the extent that noncompliance would not
reasonably be expected to have a Material Adverse Effect on Company and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand or notice has been filed or, to Company’s Knowledge, commenced, and
currently pending, against any of them alleging any failure so to comply, except
to the extent such failure would not reasonably be expected to have a Material
Adverse Effect on Company.

 

    (b)  Company
and its Subsidiaries hold all permits, licenses, certificates, variances,
exemptions, orders, approvals, tariffs, rate schedules and similar documents
from Governmental Entities (collectively, “Licenses”) that
are necessary to own, lease and operate the assets and properties they currently
own, lease and operate and to conduct their respective businesses and operations
in the manner currently conducted, except where the failure to hold such
Licenses would not reasonably be expected to have a Material Adverse Effect on
Company. Section 3.4 of the Company Disclosure Letter sets forth all Licenses
issued or granted to Company or any of its Subsidiaries by the FCC
(“FCC
Licenses”), all
Licenses issued or granted to Company or any of its Subsidiaries by any state
public utility commission or other state commission or authority regulating
telecommunications businesses or services (“State
Licenses”) and
all Licenses issued or granted to Company or any of its Subsidiaries by any
local government regulating telecommunications businesses or services or
authorizing Company or any of its Subsidiaries to place facilities within the
boundary of such local government (“Local
Licenses”) and,
collectively with the FCC Licenses and the State Licenses, the “Communications
Licenses”) and
all other material Licenses held by Company or its Subsidiaries, together with
any pending applications filed by Company or its Subsidiaries for Communications
Licenses or other material Licenses that would be Licenses if issued or granted
or for modification, extension or renewal of any License. Company has delivered
to Parent correct and complete copies of all Licenses (including the
applications related thereto) and all pending applications listed on Section 3.4
of the Company Disclosure Letter.

 

    (c)  Each of
Company and its Subsidiaries is in compliance in all material respects with each
Communications License. Each of Company and its Subsidiaries is in compliance
with (A) its obligations under each of the Licenses and (B) the rules and
regulations of the Governmental Entity issuing such Licenses, except for any
failures to be in compliance that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Company. There
is not pending or, to the Knowledge of Company, threatened in writing before the
FCC or any other Governmental Entity any material proceeding, notice of
violation, order of forfeiture or complaint or investigation against Company or
any of its Subsidiaries relating to any of the Licenses, except, in the case of
Licenses other than Communications Licenses, for any of the foregoing that would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Company. As of the date of this Agreement, Company
has received no written notice, and, as to any Communications License, has no
Knowledge, that any event has occurred with respect to any such License or
application that would permit the revocation, termination, suspension or denial
thereof or would result in any impairment of the rights of the holder thereof.
No written notice has been received and to Company’s Knowledge no investigation
or review is pending or threatened in writing by any Governmental Entity with
regard to any alleged violation by Company or any of its Subsidiaries of any
License or any alleged failure by Company or any of its Subsidiaries to have any
Licenses. The actions of the applicable Governmental Entities granting all
Licenses have not been reversed, stayed, enjoined, annulled or suspended, and
there is not pending or, to the Knowledge of Company, threatened in writing, any
material application, petition, objection or other pleading with the FCC or any
other Governmental Entity that challenges or questions the validity of or any
rights of the holder under any License, except, in the case of Licenses other
than Communications Licenses, for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on Company.

 







18












3.5.  Customers.
Listed in
Section 3.5 of the Company Disclosure Letter are the names and addresses of the
50 most significant separate customer billing accounts (by revenue) of Company
and its Subsidiaries for the twelve-month period ended June 30, 2005 and the
amount for which each such customer was invoiced during such period. As of the
date of this Agreement, Company has not received any written notice nor does it
have any Knowledge that any of the above-listed significant customers of Company
or any of its Subsidiaries has ceased, or will cease, to use the products,
equipment, goods or services of Company or any of its Subsidiaries, or has
substantially reduced or will substantially reduce, the use of such products,
equipment, goods or services at any time.

 

3.6.  Securities.
To the
Knowledge of Company, the outstanding shares of Company were issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.

 

3.7.  Brokers’
Fees.
Except
for fees payable to Breckenridge Securities Corp. and The Breckenridge Group,
Inc. as set forth in the Company Disclosure Letter, neither Company nor its
Subsidiaries has any Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.

 

3.8.  Title
to Assets.
Company
and its Subsidiaries have good and marketable title to, or a valid leasehold
interest in, the properties and tangible assets used by them, located on their
premises or shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for (i) properties and
assets disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet, (ii) Security Interests disclosed in Section 3.8 of the
Company Disclosure Letter, (iii) Security Interests or imperfections of title
that are not, individually, material in character, amount or extent and that do
not, individually or in the aggregate, materially detract from the value or
materially interfere with the present or presently contemplated use by Company
of the assets subject thereto or affected thereby, (iv) Security Interests
arising under conditional sale or title retention agreements, real property
leases, equipment leases or lease purchase agreements that are disclosed in
Section 3.8 of the Company Disclosure Letter, (v) Security Interests arising in
the Ordinary Course of Business (including, but not limited to, Liens for Taxes
or governmental charges or levies, Security Interests of mechanics, carriers,
workmen and repairmen, Security Interests incurred in connection with workmen’s
compensation, unemployment insurance, social security and other like laws) for
amounts that are not delinquent, except such Security Interests as are being
contested in good faith, and (vi) Security Interests or imperfections of title
that would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Company.

 

3.9.  Subsidiaries.
Section
3.9 of the Company Disclosure Letter sets forth for each Subsidiary of Company
(i) its name and jurisdiction of incorporation, (ii) the number of shares of
authorized capital stock of each class of its capital stock, (iii) the number of
issued and outstanding shares of each class of its capital stock, the names of
the holders thereof, and the number of shares held by each such holder, and (iv)
the number of shares of its capital stock held in treasury. All of the issued
and outstanding shares of capital stock of each Subsidiary of Company have been
duly authorized and are validly issued, fully paid and nonassessable. All of the
outstanding shares of each Subsidiary of Company is free and clear of any
restrictions on transfer (other than generally applicable restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims and demands.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts or
commitments that could require any of Company and its Subsidiaries to sell,
transfer or otherwise dispose of any capital stock, of any of its Subsidiaries
or that could require any Subsidiary of Company to issue, sell or otherwise
cause to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation or similar
rights with respect to any Subsidiary of Company. There are no voting trusts,
proxies or other agreements or understandings with respect to the voting of any
capital stock of any Subsidiary of Company. None of Company and its Subsidiaries
controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust or other business
association, which is not a Subsidiary of Company.

 







19












3.10.  Financial
Statements.

 

Company
has furnished to Parent prior to the date of this Agreement audited consolidated
balance sheets and statements of income, changes in stockholders’ equity, and
cash flow as of, and for the fiscal years ended, December 31, 2002, December 31,
2003 and December 31, 2004 (the “Most
Recent Fiscal Year End”) for
Company and its Subsidiaries, together with the reports of Company’s independent
auditors thereon, and the unaudited consolidated balance sheet and statements of
income, changes in stockholders’ equity, and cash flow as of, and for the fiscal
quarter ended, June 30, 2005 (the “Most
Recent Financial Statements”). Such
financial statements so furnished and the subsequent unaudited quarterly
financial statements that may be delivered to Parent as provided in this
Agreement are collectively the “Financial
Statements.” The
Financial Statements (including the notes thereto) present fairly (or will
present fairly, in the case of those furnished after the date hereof) the
financial condition of Company and its Subsidiaries as of their respective dates
and the results of operations of Company and its Subsidiaries for their
respective periods (subject, in the case of the unaudited statements, to notes
and normal year-end audit adjustments that will not be material in amount or
effect), in each case in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby.

 

3.11.  Events
Subsequent to Most Recent Fiscal Year End.
Since the
Most Recent Fiscal Year End, Company and its Subsidiaries have conducted their
businesses only in, and have not engaged in any material transaction other than
in accordance with, the Ordinary Course of Business of Company and its
Subsidiaries. Since the Most Recent Fiscal Year End and prior to the date
hereof, there has not been any Material Adverse Effect on Company, provided,
however, that, any damage to properties, service interruptions, loss of
customers, additional operating and other costs and other adverse consequences
resulting from Hurricanes Katrina and Rita, as and to the extent described in
the Section 3.11(m) of the Company Disclosure Letter under the heading
“Katrina/Rita Impact,” shall not be deemed to be a Material Adverse Effect.
Since the Most Recent Fiscal Year End and prior to the date hereof:

 

     (a)  none of
Company and its Subsidiaries has sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than in the Ordinary Course of
Business;

 

     (b)  none of
Company and its Subsidiaries has entered into any agreement, contract, lease or
license (or series of related agreements, contracts, leases and licenses with
the same other party or Affiliates of such other party) either involving more
than $250,000 or other than in the Ordinary Course of Business;

 

     (c)  no party
(including any of Company and its Subsidiaries) has accelerated, terminated,
modified or cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses with the same other party or
Affiliates of such other party) involving more than $250,000 to which any of
Company and its Subsidiaries is a party or by which any of them is
bound;

 







20












     (d)  none of
Company and its Subsidiaries has made any capital expenditure (or series of
related capital expenditures) either involving more than $250,000 or other than
in the Ordinary Course of Business;

 

     (e)  none of
Company and its Subsidiaries has made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans or acquisitions with the same other party or
Affiliates of such other party) either involving more than $50,000 or other than
in the Ordinary Course of Business;

 

     (f)  none of
Company and its Subsidiaries has issued any note, bond or other debt security or
created, incurred, assumed or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $50,000 singly or
$250,000 in the aggregate;

 

     (g)  none of
Company and its Subsidiaries has delayed or postponed the payment of accounts
payable or other Liabilities other than in the Ordinary Course of
Business;

 

     (h)  none of
Company and its Subsidiaries has cancelled, compromised, waived or released any
right or claim (or series of related rights and claims) either involving more
than $50,000 or other than in the Ordinary Course of Business;

 

     (i)  none of
Company and its Subsidiaries has granted any license or sublicense of any rights
under or with respect to any Intellectual Property;

 

     (j)  other
than as contemplated by this Agreement, there has been no change made or
authorized in the charter or bylaws of any of Company and its
Subsidiaries;

 

     (k)  none of
Company and its Subsidiaries has issued, sold or otherwise disposed of any of
its capital stock, or granted any options, warrants or other rights to purchase
or obtain (including upon conversion, exchange or exercise) any of its capital
stock except for the issuance of shares of Common Stock upon exercise of
Employee Stock Options outstanding as of the Most Recent Fiscal Year End in
accordance with their terms;

 







21












     (l)  none of
Company and its Subsidiaries has declared, set aside or paid any dividend or
made any distribution with respect to its capital stock (whether in cash,
property, stock or any combination thereof) or redeemed, purchased or otherwise
acquired any of its capital stock;

 

     (m)  none of
Company and its Subsidiaries has experienced any damage, destruction or loss
(whether or not covered by insurance) to its property that could reasonably be
expected to have a Material Adverse Effect on Company;

 

     (n)  none of
Company and its Subsidiaries (x) has made any loan or advance to, or entered
into any other transaction with, any of its directors, officers or stockholders,
or (y) made any loans or advances to, or entered into any other transactions
with, any of its employees that were in the aggregate as to an employee in
excess of $10,000 at any one time outstanding, other than, in the case of
transactions with officers or employees (including stockholders in their
capacity as officers or employees) referenced in either of clause (x) or (y),
employment arrangements in the Ordinary Course of Business;

 

     (o)  none of
Company and its Subsidiaries has entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
such existing contract or agreement;

 

     (p)  none of
Company and its Subsidiaries has granted any increase in the base compensation
of any of its directors or officers or, other than in the Ordinary Course of
Business, any of its employees;

 

     (q)  none of
Company and its Subsidiaries has adopted, amended, modified or terminated any
bonus, profit-sharing, incentive, severance or other plan, contract or
commitment for the benefit of any of its directors, officers or employees (or
taken any such action with respect to any other Employee Benefit
Plan);

 







22












     (r)  none of
Company and its Subsidiaries has made any other change in employment terms for
any of its directors or officers;

 

     (s)  none of
Company and its Subsidiaries has made or pledged to make any charitable or other
capital contribution other than in the Ordinary Course of Business;
and

 

     (t)  none of
Company and its Subsidiaries has committed to any of the foregoing.

 

3.12.  Undisclosed
Liabilities.
There are
no liabilities or obligations of Company or any Subsidiary of Company, whether
or not accrued, contingent or otherwise and whether or not required to be
disclosed, nor any other facts or circumstances that would reasonably be
expected to result in any liabilities or obligations of Company or any of its
Subsidiaries, other than:

 

     (a)  liabilities
or obligations to the extent (i) reflected on the Most Recent Balance Sheet or
(ii) readily apparent in the notes thereto;

 

     (b)  liabilities
or obligations incurred in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet (none of which results from, arises out of, relates
to, is in the nature of or was caused by any breach of contract, breach of
warranty, tort, infringement or violation of law);

 

     (c)  liabilities
or obligations under this Agreement or in the Interim Agreement;

 

     (d)  performance
obligations under contracts required in accordance with their terms, or
performance obligations to the extent required under applicable Laws, in each
case to the extent arising after the date hereof; and

 

     (e)  liabilities
or obligations that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on Company.

 







23












3.13.  Antitakeover
Statutes.
No
anti-takeover or similar statute or regulation under Delaware Law applies to any
of the transactions contemplated by this Agreement. No other “control
share acquisition,”
“fair
price,”
“moratorium” or
other similar anti-takeover laws or regulations enacted under Delaware Law or
under any other laws of the State of Delaware or under any laws of the State of
Florida apply to this Agreement or any of the transactions contemplated hereby.
Without limitation of the foregoing, the business combination restrictions of
Section 203 of the Delaware Law are inapplicable to the Merger, this
Agreement or the other transactions contemplated by this Agreement and no other
state takeover statute or similar statute or regulation is or purports to be
applicable to the Merger, this Agreement or the transactions contemplated
hereby.

 

3.14.  Tax
Matters.

 

     (a)  Each of
Company and its Subsidiaries has filed all Tax Returns that it was required to
file, except, in the case of Tax Returns other than federal or state income,
sales and use Tax Returns, where failure to file such Return would not
reasonably be expected to have a Material Adverse Effect on Company. All such
Tax Returns were correct and complete in all material respects. All Taxes owed
by any of Company and its Subsidiaries (whether or not shown on any Tax Return)
have been paid, except where failure to pay such Taxes would not reasonably be
expected to have a Material Adverse Effect on Company. None of Company and its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. No claim has been made in the last 5 years, by a
Governmental Entity in a jurisdiction where any of Company and its Subsidiaries
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of any of
Company and its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax, except for (i) Liens for current Taxes not yet
due and (ii) Liens arising in connection with any failure or alleged failure
that is being contested in good faith by appropriate proceedings and are set
forth in Section 3.14 of the Company Disclosure Letter.

 

     (b)  Each of
Company and its Subsidiaries has, in all material respects, withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid, or owing to any employee, independent contractor, creditor, stockholder or
other third party.

 







24












     (c)  There is
no dispute or claim concerning any Liability for any Tax of any of Company and
its Subsidiaries either (A) claimed or raised by any Governmental Entity in
writing received by Company or any of its Subsidiaries or (B) as to which any of
the directors and officers (and employees responsible for Tax matters) of
Company and its Subsidiaries has Knowledge based on personal contact with any
agent of such Governmental Entity. Section 3.14 of the Company Disclosure Letter
lists all federal, state and foreign income Tax Returns filed with respect to
any of Company and its Subsidiaries for taxable periods ended on or after
December 31, 2002, indicates those Tax Returns that have been audited and
indicates those Tax Returns that currently are being audited. Company has
delivered to Parent correct and complete copies of all federal income Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by any of Company and its Subsidiaries since December 31,
2002.

 

     (d)  None of
Company and its Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency, which waiver or extension is currently in effect, in each case with
respect to any taxable period that remains open.

 

     (e)  None of
Company and its Subsidiaries has made any payments, is obligated to make any
payments or is a party to any agreement that could obligate it to make any
payments that will not be deductible under Code Section 280G, in part, as a
result of the transactions contemplated by this Agreement. None of Company and
its Subsidiaries has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii). Each of Company and its Subsidiaries
has disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662. None of Company and its Subsidiaries is a party to
any Tax allocation or sharing agreement. None of Company and its Subsidiaries
(A) has been a member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which was Company) or
(B) has any Liability for the Taxes of any Person (other than any of Company and
its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract or
otherwise.

 







25












3.15.  Real
Property.

 

    (a)  Neither
Company nor any of its Subsidiaries owns any real property.

 

    (b)  Section
3.15 of the Company Disclosure Letter lists and describes briefly all real
property leased or subleased to any of Company and its Subsidiaries. Company has
delivered to Parent correct and complete copies of the leases and subleases with
respect to the real property listed in Section 3.15 of the Company Disclosure
Letter. With respect to each lease and sublease listed in Section 3.15 of the
Company Disclosure Letter and, other than with respect to the Main Leases,
except as would not reasonably be expected to have a Material Adverse Effect on
Company:

 

        (1)  the lease
or sublease is legal, valid, binding, enforceable and in full force and
effect;

 

        (2)  the lease
or sublease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;

 

        (3)  no party
to the lease or sublease is in breach or default, and no event has occurred
that, with notice or lapse of time, would constitute a breach or default or
permit termination, modification or acceleration thereunder, except for any such
breach or default as would not reasonably be expected to have a Material Adverse
Effect on Company;

 

        (4)  no party
to the lease or sublease has repudiated any provision thereof;

 







26












        (5)  there are
no disputes, oral agreements or forbearance programs in effect as to the lease
or sublease;

 

        (6)  with
respect to each sublease, to the Knowledge of Company, the representations and
warranties set forth in subsections (1) through (5) above are true and correct
with respect to the underlying lease;

 

        (7)  none of
Company and its Subsidiaries has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or
subleasehold;

 

        (8)  all
facilities leased or subleased thereunder have received all approvals of
Governmental Entities (including Licenses) required in connection with the
operation thereof required to be obtained by Company or any of its Subsidiaries
and have been operated and maintained by Company and its Subsidiaries in
accordance with all Laws, except in each case (including the Main Leases) where
failure to receive such approval or so operate and maintain would not reasonably
be expected to have a Material Adverse Effect on Company;

 

        (9)  all
facilities leased or subleased thereunder are supplied with utilities and other
services necessary for the operation of said facilities; and

 

        (10)  to the
Knowledge of Company, there are no restrictions that impair the current use or
occupancy of the property that is subject to the lease. 

 







27












3.16.  Intellectual
Property.

 

    (a)  Set forth
in Section 3.16 of the Company Disclosure Letter is a complete and correct list
of all material patents, patent applications, and all registrations or
applications for registration of trademarks, servicemarks, copyrights and mask
works owned or used by Company or its Subsidiaries. With respect to all
Intellectual Property owned or used by Company or its Subsidiaries, except as
would not reasonably be expected to have a Material Adverse Effect on Company,
(A) Company and/or its Subsidiaries own or have the right to use all of such
Intellectual Property free and clear of any Security Interest, license or other
restriction, other than commercial, non-exclusive end-user licenses having a
total consideration, with respect to each license, of less than $50,000; (B) no
proceedings have been instituted, are pending or, to the Knowledge of Company,
are threatened in writing that challenge the rights of Company and/or its
Subsidiaries, in respect of such Intellectual Property or the validity thereof
and, to the Knowledge of Company, there is no basis for any such proceedings;
(C) none of such Intellectual Property violates any Laws, or has at any time
infringed on or, to the Company’s Knowledge, violated any rights of others, or,
to the Company’s Knowledge, is being infringed by others; and (D) to the
Company’s Knowledge, none of such Intellectual Property is subject to any
outstanding Governmental Order except for rulings generated in the ordinary
course of ex parte prosecution of applications for patents or for registration
of trademarks, servicemarks, copyrights or mask works.

 

    (b)  Company
and its Subsidiaries own or have the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary for the
operation of the businesses of Company and its Subsidiaries as presently
conducted. Each item of Intellectual Property owned or used by any of Company
and its Subsidiaries immediately prior to the Closing hereunder will be owned or
available for use by the Surviving Corporation or its Subsidiary, on
substantially identical terms and conditions immediately subsequent to the
Closing hereunder, except as such non-ownership or unavailability or change in
terms would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Company. Each of Company and its Subsidiaries
has taken all necessary action to maintain and protect each item of Intellectual
Property that it owns or uses, except where failure to take such action would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Company. None of Company and its Subsidiaries has any
obligation to indemnify any Person for or against any interference,
infringement, misappropriation or other conflict with respect to any item
included in such Intellectual Property owned by Company or any of its
Subsidiaries.

 

    (c)  Except
where failure so to operate and perform would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Company,
the IT Assets of Company and its Subsidiaries operate and perform in accordance
with their documentation and functional specifications and otherwise as required
by Company and its Subsidiaries for the operation of their respective
businesses, and, except as the result of such malfunction or failure did not
have a Material Adverse Effect on Company at the time, have not malfunctioned or
failed within the three (3) year period immediately preceding the date of this
Agreement. To the Knowledge of Company, no Person has gained unauthorized access
to such IT Assets. Company and its Subsidiaries have implemented and maintained
for the three (3) year period immediately preceding the date of this Agreement
reasonable and sufficient backup and disaster recovery technology consistent
with industry practices. 

 







28












As used
in this Agreement,

 

            (1)  “Computer
Software” means
all computer software and databases (including source code, object code, and all
related documentation).

 

            (2)  “IT
Assets” means
computers, Computer Software, firmware, middleware, servers, workstations,
routers, hubs, switches, data communications lines, and all other information
technology equipment and elements, and all associated
documentation.

 

3.17.  Tangible
Assets.
Company
and its Subsidiaries own or lease all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their businesses as presently
conducted. Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company, each such tangible asset
is free from material defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.

 

3.18.  Contracts.
Section
3.18 of the Company Disclosure Letter lists the following contracts and other
agreements to which any of Company and its Subsidiaries is a party or by which
its assets are bound, in each case as of the date of this Agreement (each
contract or other agreement required to be so listed, a “Material
Contract”):

 

    (a)  any
agreement (or group of related agreements with the same other party or
Affiliates of such other party) for the lease of personal property to or from
any Person providing for annual lease payments in excess of $50,000 per
annum;

 

    (b)  any
agreement (or group of related agreements with the same other party or
Affiliates of such other party) for the purchase of raw materials, commodities,
supplies, products or other personal property, or for the receipt of services,
the performance of which will extend over a period of more than one year or
involve annual consideration in excess of $250,000;

 







29












    (c)  any
agreement (or group of related agreements with the same other party or
Affiliates of such other party) for the sale of raw materials, commodities,
supplies, products or other personal property, or for the furnishing of
services, that involves annual consideration in excess of $250,000;

 

    (d)  any
agreement concerning a partnership or joint venture;

 

    (e)  any
agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $50,000 or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;

 

    (f)  any
agreement limiting the solicitation or hiring by Company or its Subsidiaries of
employees or agents of, or the pursuit or consummation by Company or its
Subsidiaries of investments in, or transactions with, any other Person or
otherwise concerning competition or noncompetition by Company or its
Subsidiaries;

 

    (g)  any
agreement with any of the Stockholders and their Affiliates (other than Company
and its Subsidiaries);

 

    (h)  any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance or other plan or arrangement for the benefit of its
current or former directors, officers or employees;

 

    (i)  any
collective bargaining agreement;

 

    (j)  any
agreement for the employment of any individual on a full-time, part-time,
consulting or other basis providing annual compensation in excess of $250,000 or
providing severance benefits;

 

    (k)  any
agreement under which Company or its Subsidiaries (x) has made any loan or
advance to any of its directors, officers or stockholders, or (y) has made any
loans or advances to any of its employees that were in the aggregate as to an
employee in excess of $10,000 at any one time outstanding;

 

    (l)  any
agreement under which Company or its Subsidiaries would be required, by its
terms, to pay in excess of $250,000 to terminate the agreement; and

 

    (m)  any other
agreement (or group of related agreements with the same other party or
Affiliates of such other party) the performance of which involves annual
consideration in excess of $250,000.

 







30












Company
has made available to Parent a correct and complete copy of each written
agreement listed in Section 3.18 of the Company Disclosure Letter (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3.18 of the Company Disclosure Letter. Except
as the failure of this representation and warranty to be true and correct,
individually or in the aggregate as to all such agreements, would not reasonably
be expected to have a Material Adverse Effect, with respect to each such
agreement, to Company’s Knowledge: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable and in full force and effect on substantially
identical terms following the consummation of the transactions contemplated
hereby; (C) no party is in material breach or material default, and no event has
occurred that with notice or lapse of time would constitute a material breach or
material default, or permit termination, modification or acceleration under the
agreement; and (D) no party has repudiated any material provision of the
agreement.

 

3.19.  Notes
and Accounts Receivable.
Listed in
Section 3.19 of the Company Disclosure Letter are notes or accounts receivable
of Company or any of its Subsidiaries in excess of $50,000 as of the date of
this Agreement.

 

3.20.  Powers
of Attorney.
There are
no outstanding powers of attorney executed on behalf of any of Company and its
Subsidiaries.

 

3.21.  Insurance.
Section
3.21 of the Company Disclosure Letter sets forth the following information with
respect to each current insurance policy (including policies providing property,
casualty, liability and workers’ compensation coverage and bond and surety
arrangements) to which any of Company and its Subsidiaries is a party, a named
insured or otherwise the beneficiary of coverage:

 

    (a)  the name,
address and telephone number of the agent;

 

    (b)  the name
of the insurer, the name of the policyholder, and the name of each covered
insured;

 

    (c)  the
policy number and the period of coverage;

 

    (d)  the scope
(including an indication of whether the coverage was on a claims made,
occurrence or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage;
and

 

    (e)  a
description of any retroactive premium adjustments or other loss-sharing
arrangements.

 







31












With
respect to each such insurance policy, to Company’s Knowledge: (A) the policy is
legal, valid, binding, enforceable and in full force and effect; (B) the Policy
will continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of Company and its Subsidiaries nor any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred that,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification or acceleration under the policy; and (D) no
party to the policy has repudiated any provision thereof or otherwise indicated
that any coverage under the policy would be reduced or not available, for any
reason whatsoever. Each of Company and its Subsidiaries has been covered during
the past 5 years by insurance in scope and amount customary and reasonable for
the businesses in which it has engaged during the aforementioned period. Neither
Company nor any of its Subsidiaries has maintained any self-insurance
arrangements during the past 5 years.

 

3.22.  Litigation.
Section
3.22 of the Company Disclosure Letter sets forth each instance in which any of
Company and its Subsidiaries is, as of the date of this Agreement, (i) subject
to any outstanding Governmental Order or (ii) a party or, to the Knowledge of
Company, threatened to be made a party to any action, suit, proceeding, hearing
or investigation of, in or before, any Governmental Entity or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator or mediator. There are no (i) civil, criminal or
administrative actions, suits, claims, hearings, arbitrations, investigations or
proceedings pending or, to Company’s Knowledge, threatened against Company or
any of its Subsidiaries or (ii) litigations, arbitrations, investigations or
other proceedings, or Governmental Orders relating thereto, pending or, to
Company’s Knowledge, threatened against Company or any of its Subsidiaries
before any Governmental Entity, including the FCC, except in the case of either
clause (i) or (ii), for those that would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on
Company.

 

3.23.  Employees.
To the
Knowledge of Company, there is no organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of Company and its Subsidiaries. None of Company and its Subsidiaries is a party
to or bound by any collective bargaining agreement, nor has any of them
experienced any strikes, material grievances, claims of unfair labor practices
or other collective bargaining disputes since January 1, 2003. None of Company
and its Subsidiaries has committed any unfair labor practice, except any such as
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect on Company.

 

3.24.  Employee
Benefits.

 

    (a)  Section
3.24 of the Company Disclosure Letter lists each Employee Benefit Plan that any
of Company and its Subsidiaries maintains or to which any of Company and its
Subsidiaries contributes or has any obligation to contribute.

 

        (1)  To the
Knowledge of Company, each such Employee Benefit Plan (and each related trust,
insurance contract or fund) has been maintained, funded and administered in all
material respects in accordance with the terms of such Employee Benefit Plan and
complies in form and in operation in all material respects with the applicable
requirements of ERISA, the Code and other applicable laws.

 

        (2)  To the
Knowledge of Company, all material required reports and descriptions (including
annual reports (IRS Form 5500), summary annual reports, and summary plan
descriptions) have been timely filed and/or distributed in accordance with the
applicable requirements of ERISA and the Code with respect to each such Employee
Benefit Plan. To the Knowledge of Company, the requirements of COBRA have been
met in all material respects with respect to each such Employee Benefit Plan
that is an Employee Welfare Benefit Plan subject to COBRA.

 







32












        (3)  All
material contributions (including all employer contributions and employee salary
reduction contributions) that are due have been made within the time period
prescribed by ERISA to each such Employee Benefit Plan that is an Employee
Pension Benefit Plan and all material contributions for any period ending on or
before the Closing Date that are not yet due have been made to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom and
practice of Company and its Subsidiaries. All premiums or other payments for all
periods ending on or before the Closing Date that are due on or before the
Closing Date have been paid with respect to each such Employee Benefit Plan that
is an Employee Welfare Benefit Plan.

 

        (4)  Each such
Employee Benefit Plan that is intended to meet the requirements of a
“qualified
plan” under
Code Section 401(a) has received a determination from the Internal Revenue
Service that such Employee Benefit Plan is so qualified, and to the Knowledge of
Company nothing has occurred since the date of such determination that could
adversely affect the qualified status of any such Employee Benefit
Plan.

 

        (5)  There is
no Employee Benefit Plan that is an Employee Pension Benefit Plan.

 

        (6)  Company
has delivered to Parent correct and complete copies of the plan documents and
summary plan descriptions, the most recent determination letter received from
the Internal Revenue Service, the most recent annual report (IRS Form 5500, with
all applicable attachments), and all related trust agreements, insurance
contracts, and other funding arrangements that implement each such Employee
Benefit Plan.

 

    (b)  With
respect to each Employee Benefit Plan that any of Company, its Subsidiaries, and
any ERISA Affiliate maintains or to which any of them contributes or has any
obligation to contribute or has any liability:

 

        (1)  To the
Knowledge of Company, there have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any material Liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or to the Knowledge of
Company is threatened. 

 

        (2)  None of
Company and its Subsidiaries has incurred any material Liability under COBRA
with respect to any such Employee Benefit Plan that is an Employee Welfare
Benefit Plan.

 

     (c)  None of
Company, its Subsidiaries and any ERISA Affiliate contributes to, has any
obligation to contribute to, or has any Liability (including withdrawal
liability as defined in ERISA Section 4201) under or with respect to any
Multiemployer Plan.

 







33












    (d)  Section
3.24(d) of the Company Disclosure Letter lists each Employee Welfare Benefit
Plan that any of Company and its Subsidiaries maintains, to which any of Company
and its Subsidiaries contributes or has any obligation to contribute, and
describes any Liability or potential Liability that may be incurred by or
imposed on Company or any of its Subsidiaries with respect to medical, health or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses or their dependents (other than with respect
to claims incurred prior to an employee’s retirement or other termination or in
accordance with COBRA or similar statutes).

 

3.25.  Guaranties.
None of
Company and its Subsidiaries is a guarantor or otherwise is liable for any
Liability or obligation (including indebtedness) of any other
Person.

 

3.26.  Environmental,
Health and Safety Matters.

 

    (a)  Except as
would not reasonably be expected to have a Material Adverse Effect on Company,
the properties and facilities currently occupied by Company and its Subsidiaries
are not being used by Company or its Subsidiaries to make, store, handle, treat,
dispose, generate, or transport hazardous substances in violation of any
Environmental, Health and Safety Requirement.

 

    (b)  To the
Knowledge of Company, hazardous substances have never been made, stored,
handled, treated, disposed of, generated, or transported on or from the
properties and facilities occupied by Company and its Subsidiaries during the
term of such occupancy, except in accordance with Environmental, Health and
Safety Requirements and except as would not reasonably be expected to have a
Material Adverse Effect on Company.

 

    (c)  The
properties, facilities and operations of Company and its Subsidiaries and their
respective predecessors and Affiliates have complied and are in compliance in
all material respects with all applicable Environmental, Health and Safety
Requirements. Without limiting the generality of the foregoing, each of Company,
its Subsidiaries and their respective Affiliates has obtained and complied with,
and is in compliance with, all permits, licenses and other authorizations that
are required pursuant to Environmental, Health and Safety Requirements for the
occupation of its facilities and the operation of its business, except for those
the failure of which to obtain or comply or be in compliance with would not
reasonably be expected to result in a Material Adverse Effect on Company. A list
of all such permits, licenses and other authorizations is set forth in Section
3.26 of the Company Disclosure Letter.

 

    (d)  To the
Knowledge of Company, none of the properties, facilities or operations of
Company and its Subsidiaries is subject to any judicial or administrative
proceedings alleging the violation of any applicable Environmental, Health and
Safety Requirements.

 

    (e)  To the
Knowledge of Company, none of the properties, facilities or operations of
Company and its Subsidiaries is the subject of federal, state or local
investigation evaluating whether any remedial action is needed to respond to a
release of any hazardous or toxic waste, substance or constituent, any petroleum
or petroleum product or any other hazardous, illegal or unlawful substance into
the environment.

 

    (f)  Neither
Company nor its Subsidiaries has filed any notice under any Environmental,
Health and Safety Requirements indicating past or present treatment or disposal
of a hazardous waste, hazardous substance or any petroleum or petroleum product,
or reporting a spill or release of a hazardous or toxic waste, substance or
constituent, any petroleum or petroleum product or any other substance into the
environment.

 







34












    (g)  None of
Company and its Subsidiaries have within the past year received written notice
nor are they aware of any Liability of any of Company and its Subsidiaries in
connection with any release of any hazardous or toxic waste, substance or
constituent, any petroleum or petroleum product or any other substance into the
environment.

 

3.27.  Certain
Business Relationships with Company and its Subsidiaries.
None of
the Stockholders and their Affiliates has been involved in any business
arrangement or relationship with any of Company and its Subsidiaries within the
past 12 months, and none of the Company’s employees, the Stockholders and their
respective Affiliates owns any asset, tangible or intangible, that is used in
the business of any of Company and its Subsidiaries.

 

3.28.  Accounts;
Lockboxes; Safe Deposit Boxes.
Section
3.28 of the Company Disclosure Letter contains a true and complete list of (i)
the names of each bank, savings and loan association, securities or commodities
broker or other financial institution in which any of Company and its
Subsidiaries has an account, including cash contribution accounts, and the names
of all persons authorized to draw thereon or have access thereto and (ii) the
location of all lockboxes and safe deposit boxes of Company or its Subsidiaries
and the names of all persons authorized to draw thereon or have access thereto.
The Stockholders and their Affiliates have not commingled monies or accounts of
Company or its Subsidiaries with other monies or accounts of the Stockholders
and their Affiliates or relating to their other businesses nor have the
Stockholders or their Affiliates transferred monies or accounts of Company or
its Subsidiaries other than to an account of Company or its Subsidiaries. At the
Effective Time, all monies and accounts of Company and its Subsidiaries shall be
held by, and be accessible only to, Company or its Subsidiaries.

 

3.29.  Accounting
Matters.
Listed in
Section 3.29 of the Company Disclosure Letter are all predecessor companies of
Company, the names of any Persons from which, since January 1, 1999, Company
previously acquired material properties or assets in a single transaction or
series of related transactions with a single party in excess of $2,000,000, and
the changes in Company’s capital structure and capital stock ownership since
October 1, 2003.

 

3.30.  PUHCA. 
Company,
together with its affiliates (as defined in Section 2(a)(11)(B) of the
Public Utility Holding Company Act of 1935, as amended (“PUHCA”) (15 U.S.C. §
79b(a)(11)(B))), is engaged exclusively in the business of providing
telecommunications services, information services, other services or products
subject to the jurisdiction of the FCC or products or services that are related
or incidental to the provision of any of the foregoing products or services,
within the meaning of Section 34(a)(1) of PUHCA (15 U.S.C. § 79z-5c(a)(1))
and the rules and regulations thereunder.

 

3.31.  Investment
Company Act.
Neither
the Company nor any Subsidiary is an “investment company” as defined in the
Investment Company Act of 1940, as amended.

 

3.32.  Disclosure.
The
representations and warranties contained in this ARTICLE III do not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements contained in this ARTICLE III, in the light of the
circumstances under which they are made, not misleading.

 







35












 

ARTICLE
IV  

 

REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB

 

Except as
set forth in the disclosure letter (subject to Section 9.13(c)) delivered to
Company by Parent at or prior to entering into this Agreement (the “Parent
Disclosure Letter”),
Parent hereby represents and warrants to Company that:

 

4.1.  Organization.
Each of
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently
conducted.

 

4.2.  Authorization
of Transaction.
Each of
Parent and Merger Sub has all requisite corporate power and authority to, and
has taken all corporate action necessary in order to, execute, deliver and
perform its obligations under this Agreement. This Agreement is a valid and
binding agreement of each of Parent and Merger Sub, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity
principles.

 

4.3.  Noncontravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any provision of the charter
or bylaws of any of Parent and its Subsidiaries or (ii), assuming compliance
with the matters referred to in the next sentence of this Section 4.3, (A)
violate any Laws or Governmental Order to which any of Parent and its
Subsidiaries is subject or (B) with or without notice, lapse of time or both,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which any of Parent and its Subsidiaries is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets),
except, in the case of clause (ii), such violation, breach, default,
acceleration or other change that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent. Except (a)
for any FCC Consent, State PUC Consent or consent or approval of any other
Governmental Entity identified in Section 3.3 of the Company Disclosure Letter
or in Section 4.3 of the Parent Disclosure Letter, in each case as required by
applicable Laws, (b) as may be necessary as a result of any facts or
circumstances relating solely to Company, any of its Subsidiaries or any holder
of Company Shares, (c) for the filing of the Certificate of Merger with the
Delaware Secretary of State pursuant to the Delaware Law and of appropriate
documents with relevant authorities of other states in which Company is
qualified to do business to reflect such Certificate of Merger filing, (d) for
filings by Parent under, and compliance by Parent with the requirements under,
the Securities Exchange Act and the applicable requirements of Nasdaq and (e)
for any other third party approvals as are reflected in Section 4.3 of the
Parent Disclosure Letter, the execution, delivery and performance by Parent and
Merger Sub of this Agreement and the transactions contemplated hereby do not
require any consents, waivers, authorizations or approvals of, or filings with,
any Governmental Entity or any other third Person, except in any case for those
that the failure to make or obtain would not be reasonably expected to have a
Material Adverse Effect on Parent.

 







36












4.4.  Brokers’
Fees.
Neither
Parent nor Merger Sub has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any of Company and its Subsidiaries
could become liable or obligated.

 

4.5.  Capital
Resources.
Parent
has sufficient capital resources to pay the Merger Consideration and shall
maintain such capital resources through the effective date of the
Merger.

 




 

ARTICLE 
V  

                                                 

                                                                                                                                                                      
COVENANTS

 

5.1.  Interim
Operations.
The
Parties agree as follows with respect to the period from and after the execution
of this Agreement.

 

    (a)  Company
shall not knowingly take or permit any of its Subsidiaries to take any action or
refrain from taking any action the result of which would be reasonably and
foreseeably likely to prevent the consummation of the Merger by the Termination
Date. Company covenants and agrees as to itself and its Subsidiaries that, after
the date hereof and prior to the Effective Time, unless Parent shall otherwise
approve in writing, and except as otherwise expressly contemplated by this
Agreement or the Interim Agreement or as required by applicable Laws, the
business of it and its Subsidiaries shall be conducted in the ordinary and usual
course and, to the extent consistent therewith, it and its Subsidiaries shall
use their respective reasonable best efforts to preserve their business
organizations intact, maintain existing relations and goodwill with Governmental
Entities, customers, suppliers, distributors, creditors, lessors, employees and
business associates and keep available the services of the present employees and
agents of Company and its Subsidiaries, maintain the validity of the
Communications Licenses and, except as disclosed in Section 5.1 of the Company
Disclosure Letter, comply in all material respects with all requirements of the
Communications Licenses and the rules and regulations of the FCC and State PUCs.
Without limiting the generality of the foregoing and in furtherance thereof,
from the date of this Agreement until the Effective Time, except (A) as
otherwise expressly required by this Agreement or as otherwise contemplated by
the Interim Agreement or as permitted in Section 5.6(d), (B) as Parent may
approve in writing, (C) as set forth in Section 5.1(a) of the Company Disclosure
Letter or (D), in the case of any of the following clauses in this Section
5.1(a), as may be expressly permitted by another of the following clauses in
this Section 5.1(a), the Company will not and will not permit its Subsidiaries
to: 

 







37












        (1)  adopt or
propose any material change in its articles of incorporation or by-laws or other
applicable governing instruments or amend any term of the Company
Shares;

 

        (2)  merge or
consolidate Company or any of its Subsidiaries with any other Person, except for
any such transactions among wholly owned Subsidiaries of Company that are not
obligors or guarantors of third-party indebtedness, or adopt a plan of
liquidation;

 

        (3)  acquire
assets outside of the Ordinary Course of Business from any other Person with a
value or purchase price in excess of $50,000 in the aggregate, other than
acquisitions pursuant to Contracts to the extent in effect immediately prior to
the execution of this Agreement and as otherwise set forth in Section 5.1(a)(3)
of the Company Disclosure Letter, and other than capital expenditures as
permitted by Section 5.1(a)(12);

 

        (4)  (x) enter
into any material line of business in any geographic area other than the current
lines of business of Company or any of its Subsidiaries, and in the geographic
areas where they are currently conducted, as of the date hereof or (y) engage in
the conduct of any business in any state that would require the receipt or
transfer of a Communications License;

 

        (5)  file for
any License outside of the Ordinary Course of Business;

 

        (6)  other
than as set forth in Section 5.1(a)(6) of the Company Disclosure Letter and
other than the issuance of shares of Common Stock upon exercise of Employee
Stock Options or conversion of shares of Preferred Stock outstanding as of the
date of this Agreement, issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of, any
shares of capital stock of Company or any of its Subsidiaries (other than the
issuance of shares by a wholly owned Subsidiary of Company to Company or another
wholly owned Subsidiary), or securities convertible or exchangeable into or
exercisable for any shares of such capital stock, or any options, warrants,
conversion rights, stock appreciation rights, redemption rights, repurchase
rights, agreements, arrangements, calls, commitments or other rights of any kind
to acquire any shares of such capital stock or such convertible or exchangeable
securities;

 







38












        (7)  other
than (i) in connection with receivables, facilities and securitizations as in
effect on the date hereof and disclosed in the Company Disclosure Letter and
renewals thereof in the Ordinary Course of Business, (ii) in connection with the
refinancing of Company’s indebtedness under its credit facility as in effect on
the date hereof and disclosed in the Company Disclosure Letter, (iii) Liens
created or incurred to secure the purchase price of assets acquired as permitted
by Section 5.1(a)(12) and (iv) Liens described in clause (ii), (iii), (iv), (v)
or (vi) of Section 3.8, create or incur any Security Interest on any assets of
the Company or any of its Subsidiaries;

 

        (8)  other
than loans and advances to employees of Company or its Subsidiaries in the
Ordinary Course of Business and not in excess of $10,000 at any time outstanding
to any employee, make any loans, advances or capital contributions to or
investments in any Person (other than Company or any direct or indirect wholly
owned Subsidiary of Company);

 

        (9)  declare,
set aside or pay any dividend or distribution with respect to Company’s capital
stock (whether in cash, stock or property or any combination thereof) or redeem,
purchase or acquire any of its capital stock;

 

        (10)  reclassify,
split, combine, subdivide or repurchase, redeem or otherwise acquire, directly
or indirectly, any of its capital stock or securities convertible or
exchangeable into or exercisable for any shares of its capital
stock;

 

        (11)  other
than (i) in connection with receivables, facilities and securitizations as in
effect on the date hereof and disclosed in the Company Disclosure Letter and
renewals thereof in the Ordinary Course of Business, (ii) in connection with the
refinancing of Company’s indebtedness under its credit facility as in effect on
the date hereof and disclosed in the Company Disclosure Letter, and (iii)
indebtedness incurred to finance the capital expenditures permitted by Section
5.1(a)(12) and guarantees thereof, incur any indebtedness for borrowed money or
guarantee such indebtedness of another Person, or issue or sell any debt
securities or warrants or other rights to acquire any debt security of the
Company or any of its Subsidiaries;

 







39












        (12)  except
for the capital expenditures set forth in Section 5.1(a)(12) of the Company
Disclosure Letter and asset acquisitions otherwise permitted by Section
5.1(a)(3) (without giving effect to the exception therein for capital
expenditures as permitted by this clause (12)), make or authorize any capital
expenditure;

 

        (13)  enter
into any contract or other agreement (x) that would have been a Material
Contract as described in Section 3.18 (d), (f) or (g) had it been entered into
prior to the date of this Agreement, (y) other than in the Ordinary Course of
Business, that involves annual consideration in excess of $50,000 or (z) that
involves annual consideration in excess of $250,000 and is not terminable by
Company and its Subsidiaries without additional payment or penalty (including by
any acceleration of remaining amounts), upon not more than 90 days’
notice;

 

        (14)  make any
changes with respect to accounting policies or procedures, except as required by
changes in GAAP or by applicable Laws or except as Company, based upon the
advice of its independent auditors after consultation with Parent, determines in
good faith is advisable to conform to best accounting practices;

 

        (15)  settle
any litigation or other proceedings before or threatened to be brought before a
Governmental Entity for an amount to be paid by Company or any of its
Subsidiaries in excess of $25,000 or that would be reasonably likely to have any
adverse impact on the operations of Company or any of its
Subsidiaries;

 

        (16)  other
than in the Ordinary Course of Business or as disclosed in Section 5.1(a)(16) of
the Company Disclosure Letter, (i) amend or modify in any material respect
adverse to Company or its Subsidiaries, or terminate or waive any material right
or benefit of Company or its Subsidiaries under, any Material Contract, or (ii)
cancel, modify or waive any debts or claims held by it or waive any
rights;

 

        (17)  sell,
lease, license or otherwise dispose of any assets of Company or its Subsidiaries
except (i) in the Ordinary Course of Business or obsolete assets or (ii) as set
forth in Section 5.1(a)(17) of the Company Disclosure Letter;

 







40












        (18)  except as
(x) required pursuant to existing written, binding agreements in effect prior to
the date of this Agreement or as otherwise required by applicable Laws, (y) set
forth in Section 5.1(a)(18) of the Company Disclosure Letter or (z) the costs
and expenses of which will be a Transaction Cost or Severance Amount, (i) enter
into any commitment to provide any severance or termination benefits to (or
amend any such existing arrangement with) any director, officer or employee of
Company or any of its Subsidiaries, other than for severance or termination
benefits to employees (other than officers) in the Ordinary Course of Business
and pursuant to the terms of plans, programs or arrangements in effect prior to
the date of this Agreement and disclosed on Section 3.18 or 3.25 of the Company
Disclosure Letter, (ii) increase the benefits payable under any existing
severance or termination benefit policy or employment agreement (other than as
required to be increased pursuant to the existing terms of any such policy or
agreement or as a result of ordinary pay raises or promotions), (iii) enter into
any employment, severance, change in control, termination, deferred compensation
or other similar agreement (or amend any such existing agreement) with any
director, officer or employee of the Company or any of its Subsidiaries other
than pursuant to the terms of any plan or agreement in effect on the date hereof
and disclosed on Section 3.18 or 3.25 of the Company Disclosure Letter, (iv)
establish, adopt, amend or terminate any employee or director compensation or
other benefit, employment or severance plan, program or agreement (including
Employee Benefit Plans, each, a “Compensation
Plan”),
except for technical amendments in the Ordinary Course of Business, provided
that such amendments do not materially increase the cost of such arrangements to
Company, (v) increase the compensation, bonus or other benefits of, make any new
awards under any Compensation Plan to, or pay any bonus to any director,
officer, employee, consultant or independent contractor of the Company or any of
its Subsidiaries, except for (1) the payment of the first half 2005 bonus
amounts set forth in Section 5.1(a)(18) of the Company Disclosure Letter and
accrued for in the Most Recent Financial Statements by the Company and (2)
increases, new awards or payments in the Ordinary Course of Business for
employees who are not officers of Company, (vi) take any action to fund or in
any other way secure the payment of compensation or benefits under any
Compensation Plan, except as required pursuant to the terms thereof as in effect
as of the date of this Agreement, (vii) take any action to accelerate the
vesting or payment of any compensation or benefits under any Compensation Plan,
to the extent not already required in any such Compensation Plan, or (viii)
enter into any collective bargaining agreements; provided,
however, that
the prohibitions contained in the foregoing clauses (i) and (v) shall not apply
in connection with newly hired or newly promoted employees, in each case to the
extent consistent with past practice;

 

        (19)  (a) take
any action that may reasonably be expected to jeopardize the validity of any of
the Communications Licenses or result in the revocation, surrender or any
adverse modification of, forfeiture of, or fail to renew under regular terms,
any of the Communications Licenses, (b) fail to use commercially reasonable
efforts to prosecute with due diligence any pending applications with respect to
the Communications Licenses, including any renewals thereof, and (c) with
respect to Communications Licenses, fail to make all material filings and
reports and pay all material fees necessary or reasonably appropriate for the
continued operation of the Business, as and when such approvals, consents,
permits, licenses, filings, or reports or other authorizations are necessary or
appropriate or (d) fail to initiate appropriate steps to renew any material
Licenses held by Company or any of its Subsidiaries that are scheduled to
terminate prior to or within 60 days after the Effective Time or to prosecute
any pending applications for any material License; or

 







41












        (20)  agree or
commit to do any of the foregoing. 

 

    (b)  Parent
shall not knowingly take or permit any of its Subsidiaries to take any action or
refrain from taking any action the result of which would be reasonably and
foreseeably likely to prevent the consummation of the Merger by the Termination
Date.

 

5.2.  Filings;
Other Actions; Notification.

 

    (a)  Company
and Parent shall cooperate with each other and use (and shall cause their
respective Subsidiaries to use) their respective reasonable best efforts to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on its part under this Agreement and applicable
Laws to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including preparing and
filing as promptly as practicable all documentation to effect all necessary
notices, reports and other filings (including by filing no later than 5 business
days after the date of this Agreement all applications required to be filed with
the FCC; provided,
however, that
the failure to file within 5 business days will not constitute a breach of this
Agreement) and to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in order to consummate the Merger
or any of the other transactions contemplated by this Agreement; provided,
however, that
nothing in this Section 5.2 (i) shall require, or be construed to require,
Parent to take or to refrain from taking any action, to agree to any restriction
with respect to any assets or operations of Parent or its Subsidiaries, or to
cause its Subsidiaries to do or agree to do any of the foregoing, in each case
that would take effect prior to the Effective Time, or (ii) shall require, or be
construed to require, Parent to take or to refrain from taking any action, to
agree to any restriction with respect to any assets or operations of Parent or
Company or its respective Subsidiaries, or to cause its Subsidiaries to do or
agree to do any of the foregoing, if any such action, failure to act,
restriction or agreement, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on it or a Combined Material Adverse
Effect. Subject to applicable Laws relating to the exchange of information,
Parent and Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all of the information relating to
Parent or Company, as the case may be, and any of their respective Subsidiaries,
that appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement. To the extent permitted by
law, each Party shall provide the other with copies of all correspondence
between it (or its advisors) and any Governmental Entity relating to the
transactions contemplated by this Agreement and, to the extent reasonably
practicable, all telephone calls and meetings with a Governmental Entity
regarding the transactions contemplated by this Agreement shall include
representatives of Parent and Company. In exercising the foregoing rights, each
of Company and Parent shall act reasonably and as promptly as
practicable.

 







42












    (b)  To the
extent permitted by law, Company and Parent each shall, upon request by the
other, furnish the other with all information concerning itself, its Affiliates,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any statement, filing, notice or
application made by or on behalf of Parent, Company or any of their respective
Affiliates to any third party and/or any Governmental Entity in connection with
the Merger and the transactions contemplated by this Agreement.

 

    (c)  Subject
to applicable Laws and the instructions of any Governmental Entity, Company and
Parent each shall keep the other apprised of the status of matters relating to
completion of the transactions contemplated hereby, including promptly
furnishing the other with copies of notices or other communications received by
Parent or Company, as the case may be, or any of its Subsidiaries, from any
third party and/or any Governmental Entity with respect to the Merger and the
other transactions contemplated by this Agreement. Company shall give prompt
notice to Parent of any change, fact or condition of which it has Knowledge that
is reasonably expected to result in a Material Adverse Effect on Company or of
any failure of any condition to Parent’s obligations to effect the Merger.
Parent shall give prompt notice to Company of any change, fact or condition of
which it has Knowledge that is reasonably expected to result in a Material
Adverse Effect on Parent or of any failure of any condition to Company’s
obligations to effect the Merger.

 

    (d)  Subject
to the proviso set forth in Section 5.2(a), Parent’s and Company’s obligations
under this Section 5.2 shall include, without limitation, the obligation to use
their respective reasonable best efforts to defend any lawsuits or other legal
proceedings, whether judicial or administrative, challenging the consummation of
the Merger or the other transactions contemplated hereby, including using
reasonable best efforts to seek to have any stay or other injunctive relief
which would prevent or materially delay or impair the consummation of the
transactions contemplated by this Agreement entered by any court or other
Governmental Entity reversed on appeal or vacated.

 







43












5.3.  Company
Financial Statements.

 

    (a)  As soon
as reasonably practicable, but in any event within 20 days after the end of each
calendar month commencing with October 2005, Company will deliver to Parent
unaudited consolidated balance sheets of Company and its Subsidiaries as of the
end of such calendar month and as at the end of the comparative month in the
preceding year, together with unaudited summaries of consolidated earnings of
Company and its Subsidiaries for such calendar month and for the comparative
month in the preceding year. As soon as reasonably practicable, but in any event
within 45 days after the end of each fiscal quarter of Company, commencing with
the quarter ended September 30, 2005, Company will deliver to Parent unaudited
consolidated balance sheets of Company and its Subsidiaries as at the end of
such fiscal quarter and as at the end of the comparative fiscal quarter of the
preceding year, together with the unaudited statements of consolidated income
and cash flows for the fiscal quarters then ended.

 

    (b)  Company
will use its reasonable best efforts to work with Ernst & Young LLP to
deliver to Parent as promptly as practicable after the date of this Agreement
(and in any event prior to the Closing Date) the following information with
respect to each of Company and its Subsidiaries (or, in the case of clause (B)
below, with respect to each of the Subsidiaries) as of the then most recent
practicable date: (A) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax or excess charitable
contribution allocable to Company or Subsidiary; (B) the amount of any deferred
gain or loss allocable to Company or Subsidiary arising out of any Deferred
Intercompany Transaction; (C) the basis of Company or Subsidiary in its assets
and (D) the basis of the stockholder(s) of the Subsidiary in its stock (or the
amount of any Excess Loss Account).

 

5.4.  Access.
Subject
to confidentiality obligations and similar restrictions that may be applicable
to information furnished to Company or its Subsidiaries by third-parties that
may be in Company’s or its Subsidiaries’ possession from time to time, from the
date hereof until the Closing, Company shall (i) give Parent and its counsel,
financial advisors, auditors and other authorized representatives (collectively,
the “Parent
Representatives”)
reasonable access during normal business hours to the offices, properties, books
and records of Company and its Subsidiaries, (ii) furnish to Parent and the
Parent Representatives such financial and operating data and other information
as such Persons may reasonably request and (iii) instruct its employees, counsel
and financial advisors to cooperate with Parent in Parent’s investigation of the
business of Company and its Subsidiaries; provided that any information provided
to Parent or the Parent Representatives pursuant to this Section 5.4 shall
be subject to the Confidentiality Agreement; and provided further that no
investigation pursuant to this Section 5.4 or otherwise in connection with
this Agreement and the other Transaction Agreements shall affect any
representation or warranty given by Company hereunder or by any Preferred
Stockholder in any instrument or certificate delivered pursuant to this
Agreement. Any investigation pursuant to this Section 5.4 shall be
conducted in such manner as not unreasonably to interfere with the conduct of
the business of Company and its Subsidiaries. Notwithstanding the foregoing,
Parent shall not have access to personnel records of Company and its
Subsidiaries relating to individual performance or evaluation records, medical
histories or other information that, in the Company’s good faith opinion, is
sensitive or the disclosure of which could subject Company or any of its
Subsidiaries to risk of liability. From the date hereof until the Closing,
Company shall furnish and shall cause each Company Subsidiary to furnish to
Parent copies of any notices, documents, requests, court papers or other
materials received from any governmental agency or third party with respect to
the Transactions.

 







44












5.5.  Director
and Officer Liability.
Parent
shall cause the Surviving Corporation, and the Surviving Corporation hereby
agrees, to do the following:

 

    (a)  From and
for six years after the Effective Time, Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, indemnify and hold harmless
each present and former officer and director of Company and of any Subsidiary of
the Company (each an “Indemnified
Person”) in
respect of acts or omissions occurring at or prior to the Effective Time to the
fullest extent permitted by Delaware Law and as provided under the Company’s
certificate of incorporation and bylaws in effect on the date hereof; provided
that such indemnification shall be subject to any limitation imposed from time
to time under applicable law. The Indemnified Person shall be entitled to
control the defense of any action, suit, investigation or proceeding with
counsel of his or her own choosing reasonably acceptable to the Surviving
Corporation and the Surviving Corporation shall cooperate in the defense
thereof, provided that the Surviving Corporation shall not be liable for the
fees of more than one counsel for all Indemnified Persons, other than local
counsel, in any one jurisdiction, unless a conflict of interest shall be caused
thereby, and provided further that the Surviving Corporation shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld).

 

    (b)  Any
Indemnified Person wishing to claim indemnification under Section 5.5(a), upon
learning of any such claim, action, suit, proceeding or investigation that may
give rise to such claim, shall promptly notify Parent thereof, but the failure
to so notify shall not relieve Parent or the Surviving Corporation of any
liability it may have to such Indemnified Person except to the extent such
failure materially and actually prejudices the indemnifying party. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Persons for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Persons in
connection with the defense thereof, except that if Parent or the Surviving
Corporation does not elect to assume such defense or counsel for the Indemnified
Persons advises that there are issues that raise conflicts of interest between
Parent or the Surviving Corporation and the Indemnified Persons, the Indemnified
Persons may retain counsel satisfactory to them, and Parent and the Surviving
Corporation shall jointly and severally be obligated to pay all reasonable fees
and expenses of such counsel for the Indemnified Persons promptly as statements
therefor are received; provided, however, that Parent and the Surviving
Corporation shall be obligated pursuant to this Section 5.5(b) to pay for only
one firm of counsel for all Indemnified Persons in any jurisdiction unless the
use of one counsel for such Indemnified Persons would present such counsel with
a conflict of interest; provided, that the fewest number of counsel necessary to
avoid conflicts of interest shall be used; (ii) the Indemnified Persons will use
their reasonable efforts to cooperate in the defense of any such matter, and
(iii) Parent and the Surviving Corporation shall not be liable for any
settlement effected without their prior written consent (such consent not to be
unreasonably withheld or delayed); and provided, further, that Parent and the
Surviving Corporation shall not have any obligation under this Agreement to any
Indemnified Person if and when a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final, that the
indemnification of such Indemnified Person in the manner contemplated hereby is
prohibited by applicable law.

 

    (c)  Prior to
the Closing Date, Company shall procure a six-year “tail” prepaid
policy prior to the Effective Time on terms with respect to coverage and amount
substantially comparable to, but no less favorable to Company and the
Indemnified Persons than, those under the directors’ and officers’ liability
policy maintained by Company and in effect on the date hereof.

 







45












5.6.  Employee
Benefits After the Merger.

 

    (a)  Until at
least June 30, 2006, Parent shall cause the Surviving Corporation to provide
those of its and its Subsidiaries’ employees who were employed by Company or its
Subsidiaries immediately prior to the Effective Time with compensation and
employee benefits at least as favorable, in the aggregate, as the compensation
and benefits provided by Company and its Subsidiaries to such employees
immediately prior to the date hereof. The preceding sentence shall not preclude
Parent or the Surviving Corporation at any time following the Effective Time
from terminating the employment of any Company employee.

 

    (b)  Parent
shall, or shall cause the Surviving Corporation to, give each Company employee
full credit in respect of his or her employment with Company or its Subsidiaries
prior to the Effective Time for purposes of eligibility, vesting, level of
benefits and service under any new employee benefit plans offered by the
Surviving Corporation after the Merger (“Surviving
Corporation New Plans”) or any
Parent Employee Benefit Plan in which the Company employee is permitted to
participate (to the extent that the corresponding Company Employee Benefit Plan
currently provided to Company employees gave such credit).

 

    (c)  From and
after the Effective Time, Parent will, or will cause the Surviving Corporation
to, (i) cause any pre-existing conditions or limitations and eligibility waiting
periods (only to the extent such limitations or waiting periods did not apply to
the Company employees under the Company Employee Benefit Plans) under any group
health plans of Parent, or any group health plans constituting Surviving
Corporation New Plans, in which Company employees are permitted to participate
to be waived with respect to the Company employees and their eligible dependents
and (ii) give each Company employee credit toward applicable deductibles and
annual out-of-pocket limits under group health plans of Parent or group health
plans constituting Surviving Corporation New Plans for expenses incurred under
the Benefit Plans during the plan year in which such employees and their
eligible dependents are transferred to the group health plans of Parent, or any
group health plans constituting Surviving Corporation New Plans.

 

    (d)  From and
after the Effective Time, Parent will, and will cause the Surviving Corporation
to, honor, without modification, perform all acts and pay all amounts required
or due under or with respect to each Company Employee Benefit Plan and each
agreement that relates to any current or former employee of the Company and its
Subsidiaries or the terms of any such employee’s employment or termination of
employment, including, without limitation, all employment, retention, change of
control, employment protection, severance, termination, consulting, deferred
compensation, executive pension and retirement, welfare and fringe benefit
agreements, plans and programs. Without limiting the generality of the
foregoing, Parent will, and will cause the Surviving Corporation, to administer
the Company’s 2005 Bonus Plan in the manner set forth in Section 5.6(d) of the
Company Disclosure Letter.

 







46












    (e)  Parent
acknowledges and agrees that the consummation of the transactions contemplated
by this Agreement will constitute a “change
of control” of the
Company for purposes of each Company Employee Benefit Plan and each program,
policy and agreement covering any current or former employee of the Company and
its Subsidiaries as has been specifically indicated in Section 5.6(e) of the
Company Disclosure Letter to have any such “change
of control”
provisions, and, accordingly agrees to, and agrees to cause the Surviving
Corporation to, honor all provisions relating to a change of control under such
Company Employee Benefit Plans, programs, policies and agreements as have been
specifically indicated in Section 5.6(e) of the Company Disclosure Letter to
have any such “change
of control”
provisions and pay all costs associated therewith and specifically indicated in
Section 5.6(e) of the Company Disclosure Letter.

 

    (f)  Notwithstanding
the foregoing, nothing in this Section 5.6 shall preclude Parent from seeking to
(i) modify any employment agreement with the consent of the affected employee or
employees or (ii) modify any Company Employee Benefit Plan to the extent such
modification is permitted by the terms of such Company Employee Benefit Plan and
is consistent with Section 5.6(a).

 

5.7.  Notices
and Filing by Company.

 

    (a)  As
promptly as practicable, but in no event more than three business days after the
date hereof, Company shall give to all holders of Company Shares other than the
Consenting Stockholders the notice (which shall be in form and content
reasonably acceptable to Parent) of the approval and adoption of this Agreement
and the Merger and appraisal rights required to be given pursuant to the first
sentence of Section 262(d) of the Delaware Law and the Secretary of Company
shall execute a written affidavit certifying to Company and Parent that such
notice has been given as so required.

 

    (b)  As
promptly as practicable, but in no event more than three business days after the
Effective Time, the Surviving Corporation shall give to all former holders of
Company Shares that were still Dissenting Stockholders as of the Effective Time
the notice of the Effective Time required to be given pursuant to the fifth
sentence of Section 262(d) of the Delaware Law and the Secretary of the
Surviving Corporation shall execute a written affidavit certifying to Company
and Parent that such notice has been given as so required.

 







47












ARTICLE
VI  

 

CONDITIONS
TO OBLIGATIONS TO CLOSE

 

6.1.  Conditions
to Each Party’s Obligation.
The
respective obligation of each Party to consummate the Merger is subject to the
satisfaction or waiver of each of the following conditions at or prior to the
Effective Time:

 

    (a)  (i) All
approvals and authorizations required to be obtained in respect of the FCC
Licenses for the consummation of the Merger shall have been obtained; and (ii)
all other Governmental Consents the failure of which to make or obtain would,
individually or in the aggregate, provide a reasonable basis to conclude that
Company or its directors or officers would be subject to risk of criminal
liability or to risk of civil liability for which they are not entitled to
indemnification by Company (or the Surviving Corporation), shall have been made
or obtained. For purposes of this Agreement, “Governmental
Consents” means
all notices, reports, filings, consents, registrations, approvals, permits or
authorizations required to be made prior to the Effective Time by Company or
Parent or any of their respective Subsidiaries with, or obtained prior to the
Effective Time by Company or Parent or any of their respective Subsidiaries
from, any Governmental Entity in connection with the execution and delivery of
this Agreement and the consummation of the Merger and other transactions
contemplated hereby.

 

    (b)  Neither
any Laws or Governmental Order shall be enacted, promulgated, entered, enforced
or deemed applicable to the Merger nor any other action shall have been taken by
any Governmental Entity that is in effect and that (i) restrains, enjoins or
otherwise prohibits the consummation of the transactions contemplated by this
Agreement or (ii) makes the purchase of, or payment for, some or all of Company
Shares illegal.

 

6.2.  Conditions
to Obligation of Parent and Merger Sub.
The
obligations of each of Parent and Merger Sub to consummate the Merger are also
subject to satisfaction or waiver by Parent or Merger Sub of the following
conditions at or prior to the Effective Time:

 

    (a)  (i) Each
of the representations and warranties of Company set forth in the first three
and the last sentences of Section 3.1(a) and in Sections 3.1(b), 3.1(c), 3.1(d),
3.2, 3.3(i) and 3.13 of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent any such representation
and warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date);
(ii) any failure of any of the other representations and warranties of Company
set forth in this Agreement (without giving effect to any materiality or
Material Adverse Effect qualifications contained therein), individually or in
the aggregate, to be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation and warranty expressly speaks as of an earlier
date, in which case such representation and warranty shall be true and correct
as of such earlier date) shall not have had a Material Adverse Effect on
Company; (iii) from and after the date of this Agreement and to the Closing Date
there has not been any Material Adverse Effect on Company, provided, however,
that, any damage to properties, service interruptions, loss of customers,
additional operating and other costs and other adverse consequences resulting
from Hurricanes Katrina and Rita, as and to the extent described in Section
3.11(m) of the Company Disclosure Letter under the heading “Katrina/Rita
Impact,” shall not be deemed to be a Material Adverse Effect; and (iv) Parent
shall have received a certificate signed on behalf of Company by the chief
executive officer and the chief financial officer of Company to such
effect.

 







48












    (b)  Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of Company by the chief
executive officer and the chief financial officer of Company to such
effect.

 

    (c)  No
Governmental Entity of applicable jurisdiction shall have instituted (or, if
instituted, shall not have withdrawn) any proceeding seeking any Governmental
Order and no Governmental Entity shall have instituted any civil, criminal or
administrative action, suit, claim, hearing, investigation or other proceeding
the existence of which would, in the reasonable judgment of Parent, individually
or in the aggregate, be reasonably likely to result in a failure of the
condition set forth in Section 6.1(b).

 

    (d)  All
approvals and authorizations required to be obtained in respect of the
Communications Licenses for the consummation of the Merger shall have been
obtained and all other Governmental Consents (other than those described in
Section 6.1(a)(i)) the failure of which to make or obtain would, individually or
in the aggregate, (i) reasonably be expected to result in a Combined Material
Adverse Effect or (ii) provide a reasonable basis to conclude that Parent or any
of its directors or officers would be subject to the risk of criminal liability,
shall have been made or obtained (such consents, together with those consents
that are conditions under Section 6.1(a)(i) being the “Required
Governmental Consents”). All
Governmental Consents that have been obtained shall have been obtained without
the imposition of any term, condition or consequence the acceptance of which
would, individually or in the aggregate, reasonably be expected to have or
result in a Combined Material Adverse Effect.

 

    (e)  Company
shall have obtained the consent or approval of each Person whose consent or
approval shall be required under any Contract set forth in Section 6.2(e) of the
Company Disclosure Letter to which Company or any of its Subsidiaries is a party
in connection with the transactions contemplated by this Agreement except where
the failure to obtain such consent or approval, individually or in the
aggregate, would not reasonably be expected to result in a Combined Material
Adverse Effect.

 

    (f)  Except as
set forth in Section 6.2(f) of the Company Disclosure Letter, Parent and Merger
Sub shall have received the resignations as directors and officers, effective as
of the Closing, of each director and officer of Company and its Subsidiaries
other than those whom Parent shall have specified in writing at least five
business days prior to the Closing.

 

    (g)  Company
and the Representatives shall have delivered to Parent and Merger Sub an
executed counterpart of the Escrow Agreement.

 

    (h)  There
shall not have been any material default by Company or its Subsidiaries under
the Interim Agreement and the Interim Agreement shall be in full force and
effect.

 







49












    (i)  Parent
shall have received a certificate dated the Closing Date and signed on behalf of
Company by the chief executive officer and the chief financial officer of
Company certifying as to the respective amounts of the Transaction Costs and the
Severance Amount (the “Closing
Costs Certificate”).

 

    (j)  Holders
of no more than 400,000 shares of Common Stock shall be Dissenting Stockholders
or holders of no more than 400,000 shares of Preferred Stock shall be Dissenting
Stockholders.

 

Subject
to the provisions of applicable law, Parent and Merger Sub may waive, in whole
or in part, any condition specified in this Section 6.2 if they execute a
writing so stating at or prior to the Closing.

 

6.3.  Conditions
to Obligation of Company.
The
obligation of Company to consummate the Merger are also subject to satisfaction
or waiver by Company of the following conditions at or prior to the Effective
Time:

 

    (a)  (i) Each
of the representations and warranties of Parent and Merger Sub set forth in
Sections 4.1, 4.2, 4.3(i) and 4.5 of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except to the extent any such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be true and correct as of such
earlier date); (ii) any failure of any of the other representations and
warranties of Parent and Merger Sub set forth in this Agreement (without giving
effect to any materiality or Material Adverse Effect qualifications contained
therein), individually or in the aggregate, to be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent any such representation and warranty
expressly speaks as of an earlier date, in which case such representation and
warranty shall be true and correct as of such earlier date) shall not have had a
Material Adverse Effect on Parent; and (iii) Company shall have received a
certificate signed on behalf of Parent and Merger Sub by the chief executive
officer and the chief financial officer of Parent to such effect.

 

    (b)  Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and Company shall have received a certificate signed on behalf
of Parent and Merger Sub by the chief executive officer and the chief financial
officer of Parent to such effect.

 

    (c)  Parent
shall have delivered to Company an executed counterpart of the Escrow
Agreement.

 

Subject
to the provisions of applicable law, Company may waive, in whole or in part, any
condition specified in this Section 6.3 if it executes a writing so stating at
or prior to the Closing.

 

 







50












 

ARTICLE
VII  

 

SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

 

7.1.  Survival
of Representations and Warranties.
The
representations and warranties of the Parties contained in this Agreement shall
survive the Closing hereunder (even if the damaged Party knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect until the Claim Date (subject, in
each case, to any applicable statutes of limitations).

 

7.2.  Indemnification.

 

    (a)  Indemnification. From
and after the Effective Time:

 

        (1)  From the
Escrow Fund and as provided in, and subject to the terms and conditions of, this
Section 7.2, Parent and its officers, directors, affiliates (including the
Surviving Corporation), employees, agents and representatives (each a
“Parent
Indemnified Party” and,
collectively, the “Parent
Indemnified Parties”), shall
be indemnified and held harmless against (i) all claims (including without
limitation Third Party Claims, as defined below, and any claims for
indemnification against Company, Surviving Corporation or Parent by officers,
directors or employees of Company), losses, liabilities, damages, diminutions in
value, deficiencies, costs, interest, awards, amounts paid in settlement,
judgments, penalties and expenses, including reasonable attorneys’ and
consultants’ fees and expenses and including any such expenses incurred in
connection with investigating, defending against or settling any of the
foregoing, but excluding liability for any lost profits or incidental,
consequential, indirect or special damages, (hereinafter individually a
“Loss” and
collectively “Losses”),
incurred or sustained by the Parent Indemnified Parties, or any of them,
directly or indirectly, arising out of or by reason of or as a result of (x) any
breach or inaccuracy of a representation or warranty of Company contained in
this Agreement or in any certificate or other instrument delivered by or on
behalf of Company pursuant to this Agreement or (y) any claim by any holder of
Common Stock in respect of or arising out of or as a result or by reason of (or
alleged to be in respect of or to arise out of or as a result or by reason of)
this Agreement or the transactions contemplated thereby, including the Merger,
the approval or adoption thereof or any solicitation of such approval or
adoption (other than appraisal proceedings under Section 262 of the Delaware
Law) and (ii) the amount, if any, by which the payment required to be paid to
any Dissenting Stockholder in respect of its Company Shares exceeds the amount
of the Merger Consideration that would have been received by such holder in
respect of such Company Shares pursuant to Sections 2.4(e) and (f) had such
holder not been a Dissenting Stockholder and that was not paid out as Merger
Consideration, and (iii) any costs and expenses, including attorneys’ and
consultants’ fees and expenses (including any that may be assessed by the court)
and including any such expenses incurred in connection with investigating,
defending against or settling, but not including the amounts paid to the former
holders in respect of their Company Shares as determined pursuant to Section 262
of the Delaware Law, incurred or sustained by the Parent Indemnified Parties, or
any of them, directly or indirectly, arising out of or by reason of or as a
result of any appraisal proceeding in respect of the Company Shares under
Section 262 of the Delaware Law and (iv) the amount by which the aggregate
amount of all Transaction Costs and Severance Amounts shall exceed the aggregate
amount thereof set forth in the Closing Costs Certificate.

 







51












        (2)  As
provided in, and subject to the terms and conditions of, this Section 7.2,
Parent shall indemnify and hold harmless each of the Preferred Stockholders and
its shareholders, officers, directors, affiliates, employees, agents and
representatives (each a “Company
Indemnified Party” and,
collectively, the “Company
Indemnified Parties”),
against all Losses incurred or sustained by the Company Indemnified Parties, or
any of them, directly or indirectly, arising out of any breach or inaccuracy of
a representation or warranty of Parent or Merger Sub contained in this Agreement
or in any certificate or other instrument delivered by or on behalf of Parent or
Merger Sub pursuant to this Agreement.

 

    (b)  Third
Party Claims.

 

        (1)  Promptly
after receipt by any Person entitled to indemnification under this Section 7.2
(the “Indemnified
Party”) of
notice of the commencement of any action by a third party in respect of which,
if successful, the Indemnified Party would be entitled to indemnification under
this Section 7.2 (a “Third
Party Claim”), the
Indemnified Party shall notify the Representative in writing, who shall in turn
notify each person that is obligated to provide such indemnification (an
“Indemnifying
Party”)
thereof in writing, but any failure to so notify the Representative or the
Indemnifying Party, as the case may be, shall not relieve the Indemnifying Party
from any liability that it may have to the Indemnified Party other than to the
extent the Indemnifying Party is actually prejudiced thereby.

 

        (2)  The
Representative shall have the right to assume control of the defense of the
Indemnified Party against the Third Party Claim with counsel reasonably
satisfactory to such Indemnified Party or, if the Representative does not assume
such defense, to participate in the defense of such Third Party Claim at its own
expense.

 







52












        (3)  So long
as the Representative is diligently conducting the defense of the Third Party
Claim:

 


	(i)  	
      the
      Indemnified Party shall be entitled to participate in the defense of such
      claim and to employ counsel at its own cost and expense (which expense
      shall not constitute a Loss unless the Indemnified Party reasonably
      determines that the Representative, because of a conflict of interest, may
      not adequately represent any interests of the Indemnified Parties and to
      the extent such costs and expenses are reasonable) to assist in the
      handling of such claim;




 


	(ii)  	
      the
      Representative shall not consent to the entry of any judgment or enter
      into any settlement that does not include as an unconditional term thereof
      the giving by each claimant or plaintiff to each Indemnified Party of a
      release from all liability in respect of such claim;
and




 


	(iii)  	
      the
      Representative shall not be liable to such Indemnified Party hereunder for
      any legal expenses subsequently incurred by such Indemnified Party in
      connection with the defense.




 

        (4)  Notwithstanding
the foregoing, if (x) a Third Party Claim seeks equitable relief or (y) the
subject matter of a Third Party Claim relates, in whole or in part, to the
ongoing business of any of the Indemnified Parties, which Claim, if decided
against any of the Indemnified Parties, would materially adversely affect the
ongoing business of any of the Indemnified Parties, or (z) a Third Party Claim,
if decided against any of the Indemnified Parties, would, together with any
other claims for indemnification under this Section 7.2 by such Indemnified
Parties, result in Losses that would reasonably be expected to exceed, by 25% or
more, the maximum amount of the Indemnifying Party’s remaining indemnification
obligations under this Section 7.2 (after giving effect to the limitations
herein on the maximum payments under this Section 7.2 by the Indemnifying Party)
then, in any such case, the Indemnified Parties alone shall be entitled to
contest, defend and settle such Third Party Claim in the first instance and, if
the Indemnified Parties do not contest, defend or settle such Third Party Claim,
the Indemnifying Party shall have the right to contest and defend (but not
settle) such Third Party Claim. If the Indemnified Parties shall have exercised
the right to contest, defend and settle any such Third Party Claim instead of
the Indemnifying Party by reason of the foregoing provisions of this Section
7.2(b)(4), such Indemnifying Party shall be entitled, at its own cost and
expense, to participate in the defense of such claim and to employ
counsel.

 







53












        (5)  The
Indemnified Party shall obtain the prior written approval of the Indemnifying
Party before admitting liability or entering into any settlement of such claim
or ceasing to defend against such claim that the Indemnified Party is defending
(with such approval not to be unreasonably withheld or delayed), provided that the
Indemnified Party shall not be required to obtain approval from the
Representative of the Indemnifying Party in respect of any claims to the extent
that the Losses resulting from such admission of liability or settlement or
cessation of defense exceed, by 25% or more, the maximum amount of the
Indemnifying Party’s remaining indemnification obligations under this Section
7.2 (after giving effect to the limitations herein on the maximum payments under
this Section 7.2 by the Indemnifying Party).

 

        (6)  If the
Representative does not assume defense of the Third Party Claim, the Indemnified
Party shall have the right to defend such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor in
accordance with this Section 7.2(b).

 

        (7)  If the
Indemnified Party is a Parent Indemnified Party, the reimbursement of fees,
costs and expenses incurred by the defending party as required by this Section
7.2(b) shall be made from the Escrow Fund by periodic payments during the course
of the investigations or defense, as and when bills are received or expenses
incurred.

 

    (c)  Other
Claims. In the
event any Indemnified Party should have a claim under Section 7.2(a) that does
not involve a Third Party Claim being asserted against or sought to be collected
from such Indemnified Party, the Indemnified Party shall deliver written notice
of such claim with reasonable promptness and stating the nature, basis and
amount of the claim in reasonable detail to the Representative, who shall in
turn notify the Indemnifying Party. The failure by any Indemnified Party to so
notify the Representative, or the Representative to so notify the Indemnifying
Party, as the case may be, shall not relieve any liability under Section 7.2(a),
except to the extent that the ability to defend such claim or demand shall have
been prejudiced as a result of such failure. If the Indemnifying Party disputes
the liability with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution of such
dispute and, if not resolved through negotiations, such dispute shall be
resolved by litigation in an appropriate court of competent
jurisdiction.

 







54












    (d)  Termination
of Indemnification.

 

        (1)  The
rights of the Parent Indemnified Parties to be indemnified, defended and held
harmless under Section 7.2(a)(1) shall terminate at 11:59 p.m. EST on the Claim
Date; provided,
however, that
such obligations to indemnify, defend and hold harmless shall not terminate with
respect to any item as to which the Person to be indemnified or the related
party thereto shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis and amount of such claim) to the Company and
Preferred Stockholders.

 

        (2)  The
rights of the Company Indemnified Parties to be indemnified, defended and held
harmless under Section 7.2(a)(2) shall terminate at 11:59 p.m. EST on the Claim
Date; provided,
however, that
such obligations to indemnify, defend and hold harmless shall not terminate with
respect to any item as to which the Person to be indemnified or the related
party thereto shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice of such claim (stating in
reasonable detail the basis and amount of such claim) to Parent.

 

    (e)  Escrow
Fund; Maximum Payments; Remedy.

 

        (1)  By virtue
of this Section 7.2 and as security for the indemnity obligations provided for
in Section 7.2(a) hereof, at the Effective Time, Parent will deposit with the
Escrow Agent the Escrowed Consideration as provided in Section 2.6(a). Solely
for purposes of this Section 7.2 and the allocation of interests in the Escrow
Fund among the Preferred Stockholders, and without limitation of the amount of
the Escrow Fund available for satisfaction of claims by the Parent Indemnified
Parties under this Section 7.2, each Preferred Stockholder shall be deemed to
have received and deposited such Preferred Stockholder’s pro
rata share of
the Escrow Fund with the Escrow Agent as provided in Section 2.5(a) of this
Agreement. The Escrow Fund shall be deposited with, and shall be held by, the
Escrow Agent and shall be available to compensate the Parent Indemnified Parties
for any claims by such parties for any Losses suffered or incurred by them and
for which they are entitled to recovery under this Agreement. Claims by the
Parent Indemnified Parties under this Section 7.2 for Losses shall be limited
to, and shall be satisfied solely from, the Escrow Fund.

 

        (2)  Any
payment to any Parent Indemnified Party under this Section 7.2 from the Escrow
Fund shall be deemed made by each of the Preferred Stockholders in their
respective Allocated Portions. The “Allocated
Portion” of any
Preferred Stockholder shall be such amount that bears the same relationship to
the total payment to any Parent Indemnified Party as the value of the Merger
Consideration to be received by such Preferred Stockholder bears to the Total
Merger Consideration.

 







55












        (3)  Claims by
the Company Indemnified Parties under this Section 7.2 for Losses shall be
limited to, and shall not exceed, an amount equal to the Escrow Amount, reduced
dollar-for-dollar by the amount, if any, of any direct or indirect payment by or
on behalf of Parent to any Stockholder or former Stockholder, in each case in
its capacity as a Stockholder or former Stockholder, by reason of any claim,
statutory or otherwise, in respect of the Merger or this Agreement or the
Interim Agreement that is made other than under this Section 7.2 (other than (i)
the payment of the Merger Consideration as provided in this Agreement, (ii)
payments by Parent to the extent that any such payment is by reason of a loss,
claim, damage or liability arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission in written materials
furnished by Company to the Stockholders, in connection with the solicitation of
the Stockholders of their approval of this Agreement, in reliance upon and in
conformity with written information furnished to Company by or on behalf of
Parent specifically for inclusion in such furnished written materials, and (iii)
payments made to any Stockholders for breach by Parent of any obligation of
Parent under this Agreement that is expressly stated herein to be for the
benefit of such Stockholder). No payment by Parent of Losses to any Company
Indemnified Party shall be made until the expiration of Parent’s indemnification
period, as set forth in Section 7.2(d)(2), and any such payment may be withheld
or reduced (x) pending the final resolution of any claim that would have reduced
the Escrow Amount indemnity obligation of Parent as provided above in this
Section 7.2(e)(3) had payment thereof been made prior to such expiration date
and as to which Parent shall have, before such expiration date, given notice of
such claim (stating in reasonable detail the basis and amount of such claim) to
the Company and Preferred Stockholders and (y) by the amount at issue in such
claim.

 

    (f)  Basket
Amount.
Notwithstanding any other provision of this Section 7.2 to the contrary, but
subject to the proviso below in this sentence, an Indemnified Party may not
recover any Losses under Section 7.2(a) hereof unless and until such Losses
exceed $50,000 (the “Basket
Amount”), in
which case the Indemnified Party shall be entitled to recover all Losses,
including the Basket Amount, provided that Parent may recover any amount
described under Section 7.2(a)(1)(ii), (iii) or (iv) upon occurrence and without
regard to the Basket Amount.

 

    (g)  Insurance;
Tax Benefit; Mitigation.

 

        (1)  All
indemnification or reimbursement payments required pursuant to this Section 7.2
shall be (i) made net of all insurance proceeds actually received by the party
to be indemnified, and (ii) reduced to take account of any net tax benefit when
and as realized by the indemnified party arising from the incurrence or payment
of any Loss. In the event a payment has been made without reduction (in whole or
in part) because any net tax benefit has not yet been realized (in whole or in
part), the indemnified party shall reimburse the paying party promptly at the
time of the realization of the net tax benefit. Proceeds received from an
insurance carrier which are subject to a reservation of rights by the carrier
that has not been released in writing by the carrier (“Reserved
Insurance Proceeds”) shall
be taken into account in the calculation of Losses once received by the party to
be indemnified; provided,
however, that
Reserved Insurance Proceeds with respect to which the insurance carrier
subsequently obtains reimbursement shall be deemed to be Losses on a dollar for
dollar basis with the amount by which Losses were previously reduced as a result
of the receipt of such proceeds. Parent Indemnified Parties and Company
Indemnified Parties shall each use commercially reasonable efforts to obtain a
release of a reservation of rights from the insurance carrier promptly following
the settlement or final adjudication of the claim or proceeding to which the
Reserved Insurance Proceeds related.

 

        (2)  Each
Indemnified Party shall use commercially reasonable efforts to mitigate Losses,
including seeking recovery under insurance policies. If a Parent Indemnified
Party is the Indemnified Party, it shall reimburse the Escrow Fund (if the
Escrow Agreement is still in effect) or the Preferred Stockholders (if the
Escrow Agreement has been terminated), or if a Company Indemnified Party is the
Indemnified Party, it shall reimburse Parent, for any Loss indemnified by them
to the extent all or a portion of such Loss (net of reasonable collection costs)
is subsequently recovered by the Indemnified Party under any such insurance, but
in each case only to the extent that the amount of such recovery exceeds the
amount of the Losses claimed by such Indemnified Party that have not been paid
to such Indemnified Party because of the limitations of Section 7.2(e)
hereof.

 







56












    (h)  Exclusive
Remedy.

 

        (1)  From and
after the Closing and to the fullest extent allowed by law, the indemnification
pursuant to this Section 7.2 shall be the exclusive remedy of the Parent
Indemnified Parties for any Loss or Losses arising out of or by reason of or as
a result of any matter described in clause (i), (ii) or (iii) of Section
7.2(a)(1).

 

        (2)  From and
after the Closing and to the fullest extent allowed by law, the indemnification
pursuant to this Agreement shall be the exclusive remedy of the Company
Indemnified Parties for any Loss or Losses arising out of or by reason of or as
a result of any matter described in Section 7.2(a)(2).

 

        (3)  Notwithstanding
the foregoing in this Section 7.2(h), nothing herein shall prevent any of the
Indemnified Parties from bringing an action based upon allegations of fraud or
other intentional breach of an obligation of or with respect to any party in
connection with this Agreement or the Interim Agreement.

 







57












ARTICLE
VIII  

 

TERMINATION

 

8.1.  Termination
of Agreement.
The
Parties may terminate this Agreement and the Merger may be abandoned as provided
below at any time prior to the Effective Time before or after the approval by
the Stockholders or Merger Sub stockholder:

 

    (a)  the
Parties may terminate this Agreement by mutual written consent of Parent and
Company with the prior authorization of their respective board of
directors;

 

    (b)  Parent
may terminate this Agreement with the prior authorization of the Parent Board by
giving written notice to Company at any time prior to the Closing in the event
Company has breached any of its representations, warranties, covenants or
agreements contained in this Agreement in any material respect, or any such
representation or warranty shall have become untrue or incorrect after the
execution of this Agreement, such that Section 6.2(a) or Section 6.2(b), as the
case may be, would not be satisfied, and (x) such breach is not reasonably
capable of being cured prior to the Termination Date or (y) in the case of a
breach of a covenant or agreement, if such breach is reasonably capable of being
cured prior to the Termination Date, such breach shall not have been cured prior
to the Termination Date;

 

    (c)  Company
may terminate this Agreement with the prior authorization of the Company Board
by giving written notice to Parent at any time prior to the Closing in the event
Parent or Merger Sub has breached any of its representations, warranties,
covenants or agreements contained in this Agreement in any material respect, or
any such representation or warranty shall have become untrue or incorrect after
the execution of this Agreement, such that Section 6.3(a) or Section 6.3(b), as
the case may be, would not be satisfied, and (x) such breach is not reasonably
capable of being cured prior to the Termination Date or (y) in the case of a
breach of a covenant or agreement, if such breach is reasonably capable of being
cured prior to the Termination Date, such breach shall not have been cured prior
to the Termination Date; and

 

    (d)  either
Company or Parent may terminate this Agreement with the prior authorization of
its respective board of directors by giving written notice to the other Party if
(i) the Closing shall not have occurred on or before March 31, 2006 (the
“Termination
Date”), by
reason of the failure of any condition precedent under ARTICLE VI hereof; or
(ii) there shall be any law or regulation that makes consummation of the Merger
illegal or otherwise prohibited or any judgment, injunction, order or decree of
any court or governmental body having competent jurisdiction enjoining Company
or Parent from consummating the Merger and such judgment, injunction, order or
decree shall have become final and nonappealable; provided that the
right to terminate this Agreement pursuant to this Section 8.1(d) shall not be
available to any Party that has breached its obligations under this Agreement or
under any other agreement contemplated hereunder in any manner that shall have
proximately contributed to the occurrence of the failure of a condition to the
consummation of the Merger.

 

8.2.  Effect
of Termination.  If this
Agreement is terminated pursuant to Section 8.1, all rights and obligations of
the Parties hereunder shall terminate without any liability of any Party to any
other Party, except that the provisions of the Confidentiality Agreement and the
provisions of Sections 8.2 and 9.11 shall survive any such termination, and
provided,
however, except
as otherwise provided herein, no such termination shall relieve any Party of any
liability or damages resulting from any willful or intentional breach of any
covenant in this Agreement.

 







58












ARTICLE
IX  

 

MISCELLANEOUS

 

9.1.  Press
Releases and Public Announcements.
The
initial press release disclosing this Agreement shall be a press release issued
jointly by Parent and Company. Company shall issue no press releases or
otherwise make any public announcements with respect to the Merger or the other
transactions contemplated by this Agreement without the express written consent
of Parent. Parent shall consult with Company prior to issuing any press releases
or otherwise making public announcements with respect to the Merger and the
other transactions contemplated by this Agreement and, except as may be required
by applicable Laws or by obligations pursuant to any listing agreement with or
rules of Nasdaq or by the request of any Governmental Entity, will not issue any
such press releases or make any such public statement prior to such
consultation. Company and Parent each shall consult with the other prior to
making any filings with any third party or any Governmental Entity (including
any national securities exchange) with respect thereto.

 

9.2.  No
Third-Party Beneficiaries.
This
Agreement is not intended to, and does not, confer any rights or remedies
hereunder upon any Person other than the Parties and their respective successors
and permitted assigns; provided,
however, that
(a) the Stockholders shall be deemed third party beneficiaries solely with
respect to the right to receive the Per Share Merger Consideration pursuant to
ARTICLE II hereof, (b) the Indemnified Parties shall be deemed third party
beneficiaries solely with respect to Section 7.2 and (c) the Indemnified Persons
shall be deemed third party beneficiaries solely with respect to Section
5.5.

 

9.3.  Entire
Agreement.
This
Agreement and the other documents referred to herein, including the
Confidentiality Agreement, the Escrow Agreement and the Interim Agreement
constitute the entire agreement among the Parties and supersede all other prior
understandings, agreements or representations by or among the Parties, written
or oral, to the extent they relate in any way to the subject matter
hereof.

 







59












9.4.  Binding
Effect; Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns. This Agreement shall not be
assignable by operation of law or otherwise; provided,
however, that
Parent may designate, by written notice to Company, another wholly owned direct
or indirect subsidiary to be a Constituent Corporation in lieu of Merger Sub, in
which event all references herein to Merger Sub shall be deemed references to
such other subsidiary, except that all representations and warranties made
herein with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other subsidiary
as of the date of such designation; provided that any
such designation shall not relieve Parent or Merger Sub of any of its
obligations hereunder or materially impede or delay the consummation of the
transactions contemplated by this Agreement or otherwise materially impede the
rights of the Stockholders under this Agreement. Any purported assignment in
violation of this Agreement will be void ab initio.

 

9.5.  Counterparts.
This
Agreement may be executed (including by facsimile) in one or more counterparts,
each of which shall be deemed an original instrument but all of which together
will constitute the same instrument.

 

9.6.  Headings.
The table
of contents and headings contained in this Agreement are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect in any way the meaning or interpretation of this
Agreement.

 

9.7.  Notices.
Any
notice, request, demand, claim or other communication or document to be given
hereunder shall be in writing and delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid, by facsimile or by
overnight courier, addressed to the intended recipient as set forth
below:

 







60












If to
Company: 

 

NT
CORPORATION.

 

3300
North Pace Boulevard

 

Pensacola,
FL 30505

 

Attention:
Danyelle Kennedy, Chief Financial Officer

 

Facsimile: (850)
470-9641

 

 

with
a copy(which shall
not constitute notice) to: 

 

Latham
& Watkins LLP

 

555
Eleventh Street, NW, Suite 1000

 

Washington,
D.C. 20004

 

Attention: David M.
McPherson

 

Facsimile: (202)
637-1080

 

 

If to
Parent: 

 

TALK
AMERICA HOLDINGS, INC.

 

6805
Route 202

 

New Hope,
PA 18938

 

Attention: Aloysius
T. Lawn, IV, Executive Vice President - General Counsel

 

Facsimile: 215.862.1960

 

 







61












with
a copy (which  shall
not constitute notice) to: 

 

Arnold
& Porter LLP

 

399 Park
Avenue

 

New York,
New York 10022

 

Attention: Jonathan
C. Stapleton, Esq.

 

Facsimile: (212)
715-1111

 

 

If to
Merger Sub: 

 

THNETCO,
INC.

 

c/o TALK
AMERICA HOLDINGS, INC.

 

6805
Route 202

 

New Hope,
PA 18938

 

Attention: Aloysius
T. Lawn, IV, Executive Vice President - General Counsel

 

Facsimile: 215.862.1960

 

 







62












with
a copy (which  shall
not constitute notice) to: 

 

Arnold
& Porter LLP

 

399 Park
Avenue

 

New York,
New York 10022

 

Attention: Jonathan
C. Stapleton, Esq.

 

Facsimile: (212)
715-1111,

 

or to
such other persons or addresses as may be designated in writing by the party to
receive such notice as provided above. Any notice, request, instruction or other
communication or document given as provided above shall be deemed given to the
receiving party upon actual receipt, if delivered personally; three business
days after deposit in the mail, if sent by registered or certified mail; upon
confirmation of successful transmission if sent by facsimile (provided that if
given by facsimile such notice, request, instruction or other document shall be
followed up within one business day by dispatch pursuant to one of the other
methods described herein); or on the next business day after deposit with an
overnight courier, if sent by an overnight courier.

 

9.8.  Governing
Law.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF DELAWARE.

 







63












9.9.  Amendments
and Waivers.
The
Parties may mutually amend any provision of this Agreement at any time prior to
the Effective Time with the prior authorization of their respective boards of
directors; except that any amendment will be subject to the restrictions
contained in the Delaware Law, to the extent applicable. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. The conditions to each of the Parties’
obligations to consummate the Merger are for the sole benefit of such Party and
may be waived by such Party in whole or in part to the extent permitted by
applicable Laws. No waiver by any Party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any such prior or subsequent occurrence.

 

9.10.  Severability.
The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.

 

9.11.  Expenses.
Except as
expressly set forth elsewhere in this Agreement, each of Company and Parent
shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.

 

9.12.  Survival.
This
ARTICLE IX and the agreements of Company, Parent and Merger Sub contained in
Sections 5.5, 5.6 and 7.2 shall survive the consummation of the Merger. This
ARTICLE IX and the agreements of Company, Parent and Merger Sub contained in
Section 9.11 (Expenses) and Section 8.2 (Effect of Termination) and the
Confidentiality Agreement shall survive the termination of this Agreement. If
the Merger shall be consummated, the representations and warranties of Company
set forth in ARTICLE III and the representations and warranties of Parent set
forth in ARTICLE IV shall survive the consummation of the Merger for the period
set forth in Section 7.1; except as otherwise set forth in this Section 9.12,
all other representations, warranties, covenants and agreements in this
Agreement shall not survive the consummation of the Merger or the termination of
this Agreement.

 

9.13.  Construction.

        

        (a)  The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this
Agreement.

 







64












        (b)  The
Parties intend that each representation, warranty and covenant contained herein
shall have independent significance. If any Party has breached any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) that the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty or
covenant.

 

        (c)  Each of
Company and Parent has or may have set forth information in its respective
disclosure letter in a section thereof that corresponds to the section of this
Agreement to which it relates. A matter set forth in one section of a disclosure
letter need not be set forth in any other section of the disclosure letter so
long as its relevance to the latter section of the disclosure letter or section
of this Agreement is readily apparent on the face of the information disclosed
in the disclosure letter to the Person to which such disclosure is being made.
The fact that any item of information is disclosed in such a disclosure letter
shall not be construed to mean that such information is required to be disclosed
pursuant to this Agreement. Such information and the dollar thresholds set forth
herein shall not be used as a basis for interpreting the terms “material,”
“Material
Adverse Effect” or
other similar terms in this Agreement.

 

9.14.  Incorporation
of Exhibits and Schedules.
The
Exhibits and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.

 

9.15.  Specific
Performance.
Each of
the Parties acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or other equitable relief to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 9.16 below), in addition to any other
remedy to which they may be entitled, at law or in equity.

 







65












9.16.  Submission
to Jurisdiction.
Each
Party irrevocably submits to the jurisdiction of the courts of the State of
Delaware and the federal courts of the United States of America located in the
State of Delaware for the purposes of any suit, action or other proceeding
arising out of this Agreement and of the documents referred to in this Agreement
and any transaction contemplated hereby. Each Party irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or any transaction contemplated
hereby in said courts and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
Each Party further irrevocably consents to the service of process out of any of
the aforementioned courts in any such suit, action or other proceeding by the
mailing of copies thereof by mail to such party at its address set forth in this
Agreement, such service of process to be effective upon acknowledgment of
receipt of such registered mail; provided that nothing in this Section 9.16
shall affect the right of any party to serve legal process in any other manner
permitted by law. The consent to jurisdiction set forth in this Section 9.16
shall not constitute a general consent to service of process in the State of
Delaware and shall have no effect for any purpose except as provided in this
Section 9.16. The parties agree that a final judgment in any such suit, action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

9.17.  Waiver
of Jury Trial.
EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY 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 BY THIS AGREEMENT. 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 THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.17.

 


 







66














IN
WITNESS WHEREOF, the
Parties hereto have executed this Agreement effective the date first above
written.

 

 

NT
CORPORATION

 

By:
/s/
Leo J. Cyr 

 

Name: Leo
J. Cyr

 

Title:
President and CEO

 

 

THNETCO,
INC.

 

By:
/s/
Aloysius T. Lawn IV 

 

Name:
Aloysius T. Lawn IV

 

Title:
EVP & Secretary

 

 

TALK
AMERICA HOLDINGS, INC.

 

By:
/s/
Aloysius T. Lawn IV 

 

Name:
Aloysius T. Lawn IV

 

Title:
EVP - General Counsel

 










 





















 

EXHIBIT A

Form of Escrow Agreement

 

ESCROW
AGREEMENT

 

This
ESCROW
AGREEMENT (the
“Agreement”) is
dated as of [Closing Date], 2005, by and among TALK
AMERICA HOLDINGS, INC.., a
Delaware corporation (“Parent”),
VIC
PARKER, as
representative of the Stockholders (as defined below) (“Representative”), and
[___________] (the
“Escrow
Agent”).

 

 

W
I T N E S S E T H

 

WHEREAS, Parent,
THNETCO, INC., a Delaware corporation and a subsidiary of Parent (“Merger
Sub”), and
NT Corporation, a Delaware corporation (“Company”),
entered into an Agreement and Plan of Merger dated as of October 18, 2005 (the
“Merger
Agreement”),
pursuant to which Parent agreed to acquire all of the outstanding shares of
common stock, $0.01 par value per share (the “Common
Stock”), and
preferred stock, $0.01 par value per share (the “Preferred
Stock”), of
Company pursuant to a merger of Merger Sub with and into Company (the
“Merger”);

 

WHEREAS, at and
as of the effective time of the Merger, each issued and outstanding share of
Preferred Stock and Common Stock will be converted into the right to receive
cash;

 

WHEREAS, certain
indemnification obligations exist under the Merger Agreement, which obligations
are to be satisfied from cash (together with all earnings on and income from the
amounts held hereunder, the “Escrow
Assets”)
deposited with, and to be held and disposed of by, the Escrow Agent under this
Agreement, which Escrow Assets are, in accordance with the terms of the Merger
Agreement, to be withheld from the Merger Consideration (as defined in the
Merger Agreement) otherwise payable to the holders of Preferred Stock identified
on Exhibit A attached hereto (the “Stockholders”) and in
the respective amounts set forth in such Exhibit A;

 

WHEREAS,
Representative has agreed to act as Stockholders’ agent hereunder, subject to
the terms and conditions set forth herein; and

 

WHEREAS, to
provide for the appropriate administration of the Escrow Assets, Parent, Company
and Representative desire to establish an escrow account with the Escrow Agent
subject to the terms and conditions set forth herein.

 

NOW,
THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Parent,
Company, Representative and the Escrow Agent (collectively, the “Parties” and
sometimes, individually, a “Party”),
intending to be legally bound, hereby agree as follows:

 







1













	I.  	
      Appointment.
      Parent,
      Company and Representative hereby appoint the Escrow Agent as escrow
      agent, and the Escrow Agent hereby accepts such appointment, on the terms
      and conditions set forth herein. Representative shall act hereunder as the
      attorney-in-fact and agent of Stockholders, which Representative shall
      have full authority to act for and on behalf of Stockholders with respect
      to the Escrow Assets for all purposes of this Agreement. Representative’s
      authority to act hereunder shall not be affected by the death, incapacity,
      illness, dissolution or other inability to act of any of the
      Stockholders.




 


	II.  	
      Establishment
      of Escrow.




 


	A.  	
      Concurrently
      herewith, Parent is depositing with the Escrow Agent cash representing the
      total amount of the Escrow Assets. The Escrow Agent hereby acknowledges
      receipt of cash in an amount of $[_____________] constituting the Escrow
      Assets.




 


	 	
              
       B.
	
      The
      Escrow Agent shall invest and reinvest the Escrow Assets as directed in
      Section IV. Any earnings on the amount of the Escrow Assets shall be
      credited to and become part of the Escrow Assets and may be reinvested as
      provided in Section IV and any loss on the investment of the Escrow Assets
      shall be charged against the Escrow Assets.




 


	 	
               
      C.
	
      The
      Escrow Agent shall hold the Escrow Assets deposited with the Escrow Agent
      under this Agreement pursuant to and in accordance with this Agreement,
      and shall disburse the Escrow Assets only when and to the extent required
      by Section III hereof.




 







2













	III.  	
      Distributions
      from Escrow; Escrow Period. 




 


	A.  	
      If
      at any time and from time to time Parent advises the Escrow Agent in
      writing (with a copy to Representative in the manner set forth in Section
      X hereof) (such notice, a “Claim”)
      (a) that Parent is entitled to indemnification pursuant to Section 7.2 of
      the Merger Agreement, identifying the basis for such claim and the
      provision of the Merger Agreement upon which the claim is based, and (b)
      of the amount of indemnification due (the “Indemnity
      Amount”),
      then the Escrow Agent shall, within 15 Banking Days (as defined below)
      after the date of the written notice from Parent, deliver Escrow Assets in
      an amount equal to the Indemnity Amount to Parent, unless the Escrow Agent
      shall have received, within 10 Banking Days after the date of the written
      notice from Parent, a written objection from Representative to such
      delivery setting forth the amount in dispute, in which case the Escrow
      Agent shall deliver any undisputed amount to Parent, and shall continue to
      hold the disputed amount until either (A) receipt of a certificate signed
      by Parent and Representative directing the Escrow Agent to deliver Escrow
      Assets in an amount equal to the Indemnity Amount set forth in such
      certificate to Parent or (B) receipt of a formal order of a court of
      competent jurisdiction directing the Escrow Agent to deliver Escrow Assets
      in an amount equal to the Indemnity Amount specified in such order to
      Parent. Escrow Agent has the right to institute upon a Bill of
      Interpleader, should a controversy arise. The term “Banking
      Days”
      shall mean days other than Saturdays, Sundays or days on which banks in
      the State of New York may be closed.




 


	B.  	
      The
      release of Escrow Assets by the Escrow Agent to Parent of the Indemnity
      Amount in respect of any Claim in accordance with this Section III shall
      be made from the Escrow Assets in proportion to the respective interests
      of the Stockholders, as set forth in Exhibit
A.




 


	C.  	
      The
      Escrow Agent shall disburse to the Stockholders (a) on the first business
      day that is at least 270 days after the [date hereof] [Closing Date], an
      amount equal to 50% of the Interim Escrow Amount (as defined below), to be
      distributed to each Stockholder in proportion to its respective interest
      as set forth in Exhibit A, and (b) within 10 days after the Claim Date,
      the remaining Escrow Assets, (x) less the aggregate Indemnity Amounts
      related to all Claims made pursuant to Section III.A and not yet resolved
      as of the Claim Date and (y) less (i) any unpaid Escrow Agent fees or
      Escrow Agent expenses payable by the Representative on behalf of
      Stockholders and then (ii) any unpaid Representative claims pursuant to
      Section IX or expenses pursuant to Section X hereto, which amount shall be
      distributed to each Stockholder in accordance with the remaining cash
      constituting part of the Escrow Assets attributable to such Stockholder as
      set forth in Exhibit A. “Interim
      Escrow Amount”
      means, as of any date, the aggregate amount of Escrow Assets held by the
      Escrow Agent pursuant to this Agreement as of such date, as such amount is
      reduced by the aggregate Indemnity Amounts related to all Claims made
      pursuant to Section III.A and not yet
resolved.




 


	D.  	
      Upon
      receipt by the Escrow Agent from time to time and at any time during the
      term of this Agreement of joint written instructions executed by
      Representative and Parent or a court order from a court of competent
      jurisdiction directing disbursement of Escrow Assets, the Escrow Agent
      shall promptly disburse Escrow Assets then held by it to the persons and
      in the amounts specified therein.




 


	E.  	
      Notwithstanding
      anything contained herein to the contrary, the Escrow Agent shall not be
      required at any time to disburse more than the aggregate amount of Escrow
      Assets then held by it.




 


	F.  	
      Nothing
      contained herein shall obligate or be construed to obligate Representative
      or Parent to submit any dispute or claim to
arbitration.




 







3













	IV.  	
      Investment
      of Escrow Assets.




 


	A.  	
      During
      the term of this Agreement, at the joint written direction of Parent and
      Representative, Escrow Assets deposited shall be invested in an
      interest-bearing money market account or other pooling arrangement that
      exclusively purchases and holds investments itemized in Exhibit B. All
      interest and other income earned on the Escrow Assets shall be added to
      and be a part of the Escrow Assets. Periodic statements will be provided
      to Parent and Representative reflecting transactions executed in the
      Escrow Assets. Parent and Representative, upon written request, shall
      receive a statement of transaction details upon completion of any
      securities transaction in the Escrow Assets without any additional cost.
      The Escrow Agent shall have the right to liquidate any investments held in
      order to provide funds necessary to make required payments under this
      Agreement. The Escrow Agent shall have no liability for any loss sustained
      as a result of any investment in an investment indicated on Exhibit B or
      any investment made pursuant to the joint written investment instructions
      of Parent and Representative or as a result of any liquidation of any
      investment prior to its maturity in order to provide funds necessary to
      make required payments under this Agreement or for the failure of
      Representative or Parent to give the Escrow Agent instructions to invest
      or reinvest the Escrow Assets.




 


	B.  	
      Any
      earnings or loss on investment of the Escrow Assets shall be allocated as
      to each Stockholder in the respective proportion of Escrow Assets for such
      Stockholder set forth in Exhibit A. The parties hereto acknowledge and
      agree that any interest or other income earned on the Escrow Assets shall
      constitute gross income of the Stockholders for all income tax purposes,
      and the Stockholders shall file all income tax returns (including without
      limitation, information returns) in a manner consistent with such
      treatment. Representative shall provide Escrow Agent with such written
      information as is necessary for the Escrow Agent to determine each
      Stockholder’s share of any income earned on the Escrow Assets for income
      tax reporting purposes (including, without limitation, the preparation and
      filing of all IRS Form 1099s). The Escrow Agent shall distribute to the
      Stockholders throughout the term of this Agreement, on or about each April
      1, June 1, September 1 and January 1, 48% of the interest or other income
      earned on the Escrow Assets since the later of the date hereof or the
      determination date for the most recent such
payment.




 


	C.  	
      The
      Escrow Agent may make investments permitted by this Section through or
      from its own bond department or trust investments department, or its
      parent’s or affiliate’s bond department or trust investments department.
      Except as otherwise provided hereunder or agreed in writing among the
      parties hereto, Representative, for and on behalf of the Stockholders,
      shall retain the authority to institute, participate and join in any plan
      of reorganization, readjustment, merger or consolidation with respect to
      the issuer of any securities held hereunder, and, in general, to exercise
      each and every other power or right with respect to each such asset or
      investment as individuals generally have and enjoy with respect to their
      own assets and investment, including power to vote upon any securities.
      Parent
      and Representative acknowledge that regulations of the Comptroller of the
      Currency grant the Stockholders the right to receive brokerage
      confirmations of the security transactions as they occur. Representative,
      for and on behalf of the Stockholders, specifically waives such
      notification to the extent permitted by law and will receive periodic cash
      transaction statements which will detail all investment
      transactions.




 







4













	V.  	
      Responsibilities
      and Duties of Escrow Agent.




 


	A.  	
      The
      Escrow Agent shall not incur any liability for following the instructions
      herein contained or provided for in any written instructions given jointly
      by Representative and Parent. In the event that the Escrow Agent shall be
      uncertain as to its duties or rights hereunder, shall fail to receive
      written instructions or shall receive instructions, claims or demands from
      any other Party that, in its opinion, conflict with any of the provisions
      of this Agreement, it shall be entitled to refrain from taking any action
      and its sole obligation shall be to keep safely all property held in
      escrow until it shall be directed otherwise in writing by all of the other
      Parties or by a final order or judgment of a court of competent
      jurisdiction.




 


	B.  	
      The
      Escrow Agent may rely and shall be protected in acting or refraining from
      acting on any written notice, instruction or request furnished to it
      hereunder. The Escrow Agent shall not have any responsibility for the
      genuineness or validity of any document or other material presented to or
      deposited with it nor any liability for any action taken, suffered or
      omitted in accordance with any written instructions or certificates given
      to it hereunder and believed by it to be signed by the proper party or
      parties.




 


	C.  	
      The
      Escrow Agent shall not be liable for any action taken by it in good faith
      and believed by it to be authorized or within the rights or powers
      conferred on it by this Agreement. The Escrow Agent may consult with
      counsel of its choice, and shall not be liable for any action taken,
      suffered or omitted by it in good faith in accordance with the opinion of
      such counsel.




 


	D.  	
      The
      Escrow Agent shall not be required to institute legal proceedings of any
      kind and shall not be required to initiate or defend any legal proceedings
      that may be instituted against it by third parties with respect to the
      subject matter of this Agreement. If the Escrow Agent does elect to act it
      will do so only to the extent that it is indemnified to its satisfaction
      against the cost and expense of such defense or
  initiation.




 


	E.  	
      The
      duties and responsibilities of the Escrow Agent are those herein
      specifically provided and no other. The Escrow Agent shall not have any
      liability under, or duty to inquire into, the terms and provisions of the
      Indemnification Agreement or of any other agreement or instrument, other
      than this Agreement. Its duties are ministerial in nature and, the Escrow
      Agent shall not incur any liability whatsoever other than for its own
      willful misconduct or gross negligence.




 







5













	VI.  	
      Escrow
      Agent Indemnification.
      Parent and Representative, for and on behalf of the Stockholders, hereby,
      jointly and severally, agree to indemnify, defend and hold the Escrow
      Agent harmless from and against any and all loss, damage, tax, liability
      and expense that may be incurred by the Escrow Agent arising out of or in
      connection with its duties, obligations or performance as escrow agent
      under this Agreement, except as caused by its gross negligence or willful
      misconduct, including the legal costs and expenses of defending itself
      against or initiating any claim or liability in connection with its
      performance hereunder. The terms of this paragraph shall survive the
      termination of (i) this Agreement and (ii), with respect to claims arising
      in connection with the Escrow Agent’s duties while acting as such, the
      resignation or removal of the Escrow Agent.




 


	VII.  	
      Escrow
      Agent Fee; Expenses of Escrow Agent.
      Each of Parent and Representative, for and on behalf of the Stockholders,
      agrees to pay one-half of the fees of the Escrow Agent for its services
      hereunder as and when billed by the Escrow Agent or to reimburse the
      Escrow Agent on request for one-half of all expenses, disbursements and
      advances, including reasonable attorneys fees, incurred or made by the
      Escrow Agent in connection with carrying out its duties hereunder. The
      payment obligations of Representative, on behalf of the Stockholders,
      shall be paid out of, and charged against, the Escrow Assets, to the
      extent thereof.




 


	VIII.  	
      Discharge
      and Resignation of Escrow Agent.
      The Escrow Agent may resign and be discharged from its duties or
      obligations hereunder by giving Representative and Parent at least thirty
      (30) days prior notice in writing of such resignation, but such
      resignation shall not be effective until a successor escrow agent shall
      have been appointed and shall have accepted such appointment in writing.
      As soon as practicable after its resignation, the Escrow Agent shall turn
      over to a successor escrow agent appointed by Representative and Parent
      the Escrow Assets on presentation of the document appointing the successor
      escrow agent and its acceptance thereof, whereupon all of the Escrow
      Agent’s duties and obligations hereunder shall cease and terminate. If no
      successor escrow agent is so appointed within the 30-day period following
      such notice of resignation, the resigning Escrow Agent may petition any
      court of competent jurisdiction for the appointment of a successor escrow
      agent.




 







6













	IX.  	
      Representative
      Indemnification.
      Stockholders shall, jointly and severally, agree to indemnify, defend and
      hold Representative harmless from and against any and all loss, damage,
      tax, liability and expense that may be incurred by Representative arising
      out of or in connection with his/her duties, obligations or performance as
      Representative under this Agreement, except as caused by his/her gross
      negligence or willful misconduct, including the legal costs and expenses
      of defending himself/herself against or initiating any claim or liability
      in connection with his/her performance hereunder. Representative shall not
      have any liability under the terms or provisions of this agreement or
      instrument for any action taken or not taken in performance of his/her
      duties under this Agreement, except for such liability as arises from
      Representative’s gross negligence or willful misconduct. The terms of this
      paragraph shall survive the termination of (i) this Agreement and (ii),
      with respect to claims arising in connection with Representative’s duties
      while acting as such, the resignation or removal of
      Representative.




 


	X.  	
      Discharge
      and Resignation of Representative; Expenses of
      Representative.
      Representative may resign from his/her duties or obligations hereunder by
      giving Parent and Escrow Agent at least thirty (30) days prior notice in
      writing of such resignation. In addition, the Stockholders to whom at
      least 50% of the Escrow Assets are deemed attributable as set forth in
      Exhibit A (the “Required
      Stockholder Interest”)
      may discharge Representative of his/her duties or obligations hereunder by
      giving Parent and Escrow Agent at least thirty (30) days prior notice in
      writing of such discharge. Prior to the effective time of any resignation
      or discharge of Representative, the Required Stockholder Interest shall
      provide written notice to Parent and Escrow Agent of a successor
      Representative. Upon the death or incapacity of Representative, the
      Required Stockholder Interest shall provide prompt written notice to
      Parent and Escrow Agent of a successor Representative. Any and all costs
      and expenses incurred by Representative in connection with any action
      taken as Representative, including any action taken by Representative in
      enforcing or defending Stockholders rights under this Agreement, shall be
      reimbursed to such Representative out of the Escrow Assets in accordance
      with Section III.C. of this Agreement.




 


	XI.  	
      Termination.
      This Agreement, except Sections V, VI, VII, IX, and X shall terminate on
      disbursement of all Escrow Assets.




 


	XII.  	
      Notice.
      All notices required or permitted to be given pursuant to this Agreement
      shall be given in writing, shall be transmitted by registered or certified
      mail, postage prepaid; and shall be addressed, as
  follows:




 







7












When
Escrow Agent is the intended recipient:







 

                Attention:


Facsimile:





 

If to
Parent:

 

TALK
AMERICA HOLDINGS, INC.

 

6805
Route 202

 

New Hope,
PA 18938

 

Attention:
Aloysius T. Lawn, IV, Executive Vice President - General Counsel

 

Facsimile:
215.862.1960 

 










8












 

With a
copy to

 

Arnold
& Porter LLP

 

399 Park
Avenue

 

New York,
NY 10022

 

Attention:
Jonathan C. Stapleton, Esq. 

 

Facsimile:
(212) 715-1111

 

When the
Representative is the intended recipient:

 

Vic
Parker

 

c/o
Spectrum Equity

 

333
Middlefield Road

 

Suite
200

 

Menlo
Park, CA 94025

 

Facsimile:
(415) 464-4601










9












A Party
may designate a new address to which notices required or permitted to be given
pursuant to this Agreement shall thereafter be transmitted by giving written
notice to that effect to the other Parties. Each notice transmitted in the
manner described in this Section XII shall be deemed to have been given,
received and become effective for all purposes at the time it shall have been
delivered to the addressee as indicated by the return receipt.

 


	XIII.  	
      Entire
      Agreement; Binding Effect; Assignment.
      The terms and provisions of this Agreement constitute the entire agreement
      among the Parties with respect to the subject matter hereof. This
      Agreement shall be binding on and inure to the benefit of the Parties and
      their respective successors and assigns. No Party shall assign any of its
      rights or delegate any of its duties under this Agreement (by operation of
      law or otherwise) without the prior written consent of the other Parties.
      In the case of any inconsistency or conflict between the provisions of
      this Agreement, the provisions of this Agreement shall
    govern.




 


	XIV.  	
      Amendments.
      The Escrow Agent shall not be bound by any modification, amendment,
      termination, cancellation, rescission or supersession of this Agreement
      unless the same shall be in writing and signed by all of the other Parties
      and, if its rights, duties, immunities or indemnities as Escrow Agent are
      affected thereby, unless Escrow Agent shall have given its prior written
      consent thereto.




 







10













	XV.  	
      Governing
      Law; Jurisdiction.
      EXCEPT
      AS EXPRESSLY SET FORTH BELOW, THIS AGREEMENT SHALL BE GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE
      WITHOUT GIVING EFFECT TO ANY CHOICE, OR CONFLICT OF LAW PROVISION OR RULE
      (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD
      CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
      OF DELAWARE.
      Each of the Parties submits to the jurisdiction of any state or federal
      court sitting in the State of Delaware in any action or proceeding arising
      out of or relating to this Agreement and agrees that all claims in respect
      of the action or proceeding may be heard and determined in any such court.
      Each Party also agrees not to bring any action or proceeding arising out
      of or relating to this Agreement in any other court. Each of the parties
      hereto waives any defense of inconvenient forum to the maintenance of any
      action or proceeding so brought and waives any bond, surety or other
      security that might be required of any other Party with respect thereto.
      Each Party agrees that a final judgment in any action or proceeding so
      brought shall be conclusive and may be enforced by suit on the judgment or
      in any other manner provided by law or at equity. EACH
      OF PARENT, COMPANY, REPRESENTATIVE (FOR AND ON BEHALF OF ITSELF AND
      STOCKHOLDERS) AND THE ESCROW AGENT HEREBY IRREVOCABLY WAIVES, TO THE
      FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY
      ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
      OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
      TRANSACTIONS CONTEMPLATED HEREBY.




 


	XVI.  	
      Headings;
      Counterparts.
      The headings in this Agreement have been inserted for convenience of
      reference only, shall not be considered a part of this Agreement and shall
      not limit, modify or affect in any way the meaning or interpretation of
      this Agreement. This Agreement may be signed in any number of
      counterparts.




 


	XVII.  	
      No
      Modification of Indemnification Agreement.
      Except as expressly provided herein, the rights and obligations of Parent
      and Company in this Agreement shall in no way affect their respective
      rights and obligations under the Merger
Agreement.




 




 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 










11












 




IN
WITNESS WHEREOF, the
Parties have duly executed this Agreement effective the date first above
written.

 

 

TALK
AMERICA HOLDINGS, INC..

 

By:___________________________

 

Name:


 

Title:


 




 

/s/____________________________

 

(AS
REPRESENTATIVE)

 

 

[ESCROW
AGENT]

 

By:
/s/__________________________

 

Name:


 

Title:


 




 







12















EXHIBIT
A

 




 


	
      STOCKHOLDER

       
	
      SHARE
      OF ESCROW ASSETS

       

	 	
      $