Document:

Unassociated Document

Exhibit
10.1

 

___________________________________

ASSET
PURCHASE AGREEMENT

BY
AND AMONG

ACCERIS
COMMUNICATIONS INC.,

ACCERIS
COMMUNICATIONS CORP.,

COUNSEL
CORPORATION,

ACCERIS
MANAGEMENT AND ACQUISITION LLC,

AND

NORTH
CENTRAL EQUITY LLC

_________________________________

Dated
as of May
19, 2005

________________________________________

 

ASSET
PURCHASE AGREEMENT

 

This
ASSET PURCHASE AGREEMENT (this “Agreement”), dated
as of May 19, 2005
(the “Execution
Date”), is by
and among Acceris
Management and Acquisition LLC, a Minnesota limited liability company (the
“Buyer”), North
Central Equity LLC, a Minnesota limited liability company (“Guarantor”),
Acceris Communications Inc., a Florida corporation (“ACI”),
Acceris Communications Corp, a Delaware corporation (the
“Company,”
and
together with ACI, the “Sellers”) and
Counsel Corporation, an Ontario corporation (the “Parent,” and
together with the Sellers, the “Seller
Parties”).

W I T N E
S S E T H:

 

WHEREAS,
the Company desires to sell, transfer and otherwise convey, and the Buyer
desires to purchase and assume, the Acquired Assets and the Assumed Liabilities
of the Business, on the terms and subject to the conditions of this Agreement;
and 

 

WHEREAS,
ACI’s board of directors has adopted resolutions approving the transactions
contemplated by this Agreement and recommended that ACI’s stockholders approve
and adopt this Agreement and the transactions contemplated hereby and the
Parent’s board of directors has adopted resolutions approving the transactions
contemplated by this Agreement.

 

NOW,
THEREFORE, in consideration of the foregoing premises and the respective
covenants and agreements hereinafter contained, the parties hereby agree as
follows: 

 

SECTION
1. DEFINITIONS.

 

As used
in this Agreement, the following terms shall have the following meanings:

 

“ACC
Website”
- See the
Section
5.1(e).

 

“ACI”
- See the
Preamble hereto.

 

“ACI
Website”
- See
Section
5.1(e).

 

“Acquired
Assets” means
all of the Company’s right title and interest in, to and under all of the assets
(other than the Excluded Assets) that are owned by, used or in any way related
to the Business, including without limitation the following: (a) the Financial
Assets; (b) real property, leaseholds, subleaseholds, improvements, fixtures,
fittings, easements, rights-of-way and other appurtenants; (c) tangible personal
property, including machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture, computers, automobiles, trucks, tractors, trailers, tools, jigs and
dies, wherever located; (d) Intellectual Property, associated goodwill, licenses
and sublicenses, remedies against infringements, and rights to protection of
interests under any Law; (e) leases and subleases; (f) agreements, contracts,
indentures, mortgages, instruments, security interests, guaranties and other
similar arrangements; (g) accounts, notes and other receivables; (h) securities,
except for the capital stock in its subsidiaries; (i) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery,
rights of set off and rights of recoupment (including any such item relating to
the payment of Taxes); (j) Licenses and Permits to the extent legally
transferable; (k) customer agreements, customer lists, books, records, ledgers,
files, documents, correspondence, lists, plats, architectural plans, drawings
and specifications, creative materials, advertising and promotional materials,
studies, reports and other printed or written materials; and (l) all of the
assets specified as Acquired Assets on Schedule
1.1.

 

2

“Action”
- See
Section
3.14.

 

“Affiliates” means,
with respect to a Person, any Person directly or indirectly controlling,
controlled by or under common control with the Person specified.

 

“Affiliated
Group” means
an affiliated group as defined in Section 1504 of the Code (or any analogous
combined, consolidated, or unitary group defined under state, local, or foreign
income Tax Law).

 

“Assumed
Liabilities” means
only the following liabilities of the Company, none of which include any of
Seller Parties’ income tax Liabilities: (a) the Company Liabilities; (b) all
liabilities incurred by the Company in the ordinary course of business between
the Effective Date and the Closing Date; (c) the costs incurred between the
Effective Date and the Closing Date related to the management and operations of
the Company (including litigation related costs and expenses but excluding the
Excluded Litigation); and (d) all of the liabilities specified as Assumed
Liabilities on Schedule
1.2, but not
in excess of the amount of such liabilities set forth on Schedule
1.2.

 

“Agreement”
- See the
preamble hereto.

 

“Benefit
Plans”
- See
Section
3.16(a).

 

“Break
Up Fee” - See
Section
5.11(a).

 

“Break
Up Fee Loan Documents” means
the following documents executed and delivered in connection with this
Agreement: (a) a promissory note made jointly and severally by the Sellers in
the amount of the Break Up Fee substantially in the form attached hereto as
Exhibit
A; (b) a
security agreement between the Company and the Buyer substantially in the form
attached hereto as Exhibit
B; and (c)
a guaranty of the Parent in favor of the Buyer in substantially the form
attached hereto as Exhibit
C.

 

“Business” means
all of the business activities of the Company, including without limitation the
Company’s broad-based communications business that serves residential, small and
medium-sized businesses and large enterprise customers in the United States by
providing them a range of products and services from domestic and international
long distance voice services to managed and integrated data and enhanced
services.

 

3

“Business
Day” means a
day other than a Saturday, Sunday or other day on which banks in the State of
Minnesota are not required or authorized to close.

 

“Business
Employee”
- See
Section
3.16(a).

 

“Business
Intellectual Property” means
all of the Intellectual Property owned by the
Company including without
limitation any and
all of the Company’s rights in and to the name “Acceris” and any derivative and
variation thereof.

 

“Buyer”
- See the
preamble hereto.

 

“Buyer
Indemnitees”
- See
Section
7.2.

 

“Closing”
- See
Section
2.5.

 

“Closing
Date”
- See
Section
2.5.

 

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

 

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

 

“Communications
Act” means
the Communications Act of 1934, as amended.

 

“Company”
- See the
preamble hereto.

 

“Company
Balance Sheet” - See
Section
3.5.

 

“Company
Liabilities” means
the Liabilities of the Company (but excluding the Excluded Liabilities) which
are related to the Business that appear on the Company Balance
Sheet.

 

“Confidential
Information” means
the following: (a) in the possession of the Buyer, all information relating to
the Seller Parties that is not an Acquired Asset, including without limitation
information concerning the Excluded Assets and Excluded Liabilities and ACI’s
financial results, strategic plans, research and development, products,
services, technology, marketing and sales; and (b) in the possession of the
Seller Parties, all information relating to the Buyer and its Affiliates and all
information that is an Acquired Asset, including without limitation information
concerning the Acquired Assets and Assumed Liabilities and the Buyer’s and its
Affiliates’ financial results, strategic plans, research and development,
products, services, technology, marketing and sales. Notwithstanding the
foregoing, Confidential Information shall not include information which (i) is
already published or available to the public other than by a breach of this
Agreement, (ii) is rightfully received from a third party not in breach of any
obligation of confidentiality, (iii) is independently developed by personnel or
agents of one party without use of the other party’s Confidential Information
(“use” shall not be deemed to include use of Confidential Information that may
be retained in the unaided memories of the receiving party’s employees or agents
who have otherwise rightfully accessed Confidential Information), or (iv) is
produced in compliance with applicable law or a court order, provided that the
receiving party first gives the disclosing party reasonable notice of such law
or order and gives the disclosing party an opportunity to defend and/or attempt
to limit such production; provided that it shall not be necessary for ACI to
give Buyer notice with respect to disclosures that it makes in its required
filings with the SEC.

 

4

“Consent”
means
each consent, notice, waiver, authorization or approval of any Governmental
Entity or of any other Person that is required in connection with the execution
and delivery or performance by the Seller Parties of this Agreement and the
Transaction Documents.

 

“Contract” means
all contracts, subcontracts, agreements, leases, licenses, commitments, loan
agreement, mortgage, security agreement, trust indenture, sales and purchase
orders, statements of work, and other instruments, arrangements or
understandings of any kind, including any amendments or alterations thereto, to
which the Company is a party to or by which any of its assets, properties or the
Business are bound.

 

“Debt” means
all liabilities or obligations, whether primary or secondary or absolute or
contingent (a) for
borrowed money, including outstanding checks and overdrafts, (b) evidenced by
notes, bonds, debentures, guaranties or similar obligations, (c) secured by a
Lien on any assets, other than Permitted Liens, or (d) under or pursuant to any
capital lease arrangements.

 

“Effective
Date”
means
April 30, 2005.

 

“Environmental
Laws” means
all federal, state, and local Laws, rules and regulations, orders, decrees,
directives, permits and licenses relating to Releases of Hazardous Materials or
otherwise relating to the generation, treatment, storage, transport or handling
of Hazardous Materials.

 

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

 

“ERISA
Affiliate”
- See
Section
3.16(a).

 

“Excluded
Assets” means
only the following: (a) the Company’s corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates and other
documents relating to the organization, maintenance and existence of any of the
Seller Parties as an entity; (b) any of the rights of the Seller Parties under
this Agreement (or under any side agreement between the parties entered into on
or after the date of this Agreement); (c) any of the capital stock, membership
interests or other equity securities of Transpoint Holdings Corporation and
Solomon Datatransport, Inc.; and (d) all of the assets specified as Excluded
Assets on Schedule
1.1.

 

5

“Excluded
Liabilities” means
all of the Liabilities of the Seller Parties or their Affiliates except for the
Assumed Liabilities, including without limitation the following: (a) any
Liability for Taxes, including without limitation any Liability with respect to
income Taxes and Taxes attributable to the Acquired Assets for taxable periods,
or any portion thereof, ending on or before the Effective Date (except to the
extent that such liabilities are specifically included in the Assumed
Liabilities); (b) any Liability for the unpaid Taxes of any Person under Treas.
Reg. Section § 1.1502-6 (or any similar provision of Law), as a transferee or
successor, by contract, or otherwise (except to the extent that such Liabilities
are specifically included in the Assumed Liabilities); (c) any obligation to
indemnify any Person (including the Seller Parties or their Affiliates) by
reason of the fact that such Person was a director, officer, employee or agent
of any of one of the Seller Parties or their Affiliates, or was serving at the
request of the entity as a partner, trustee, director, officer, employee or
agent of another entity (whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses or
otherwise and whether such indemnification is pursuant to any Law, charter
document, bylaw, agreement or otherwise); (d) any Liability of for costs and
expenses incurred in connection with this Agreement and the contemplated
transactions; (e) any Liability or obligation under this Agreement (or under any
side agreement between the Seller Parties or their Affiliates on the one hand
and the Buyer entered into on or after the date of this Agreement); (f) any
other unknown, asserted or unasserted obligation or Liability of any of the
Seller Parties or their Affiliates or any other Person not specifically included
within the definition of Assumed Liabilities; (g) the Excluded Litigation; (h)
any Liability arising after the Effective Date related to the actions of the
Seller Parties or their Affiliates before the Effective Date not specifically
included in the definition of Assumed Liabilities; and (i) all of the
Liabilities specified as excluded liabilities on Schedule
1.2
including any Liabilities considered Excluded Liabilities by the parties in
accordance with Section
2.4(c).

 

“Excluded
Litigation” means
any Liability related to litigation involving the Company which: (a) arises from
a transaction or occurrence which occurred prior to the Execution Date,
including without limitation the litigation identified on Schedule
3.14; (b) is
initiated by a shareholder, employee or the Affiliates of a shareholder or
employee of ACI challenging the transactions contemplated by this Agreement, and
(c) is initiated by an employee of the Company that asserts a Liability under a
Benefit Plan other than a claim for unpaid benefits and which arose or allegedly
arose from the conduct of the Sellers. 

 

“Execution
Date” - See
the preamble hereto.

 

“FCC” means
the Federal Communications Commission.

 

“Final
Company Balance Sheet” See
Section
2.4(b).

 

“Financial
Assets” means
the cash, accounts receivable, prepaid items and prepaid deposits of the Company
that appear on the Company Balance Sheet or that are otherwise held by the
Company as of the Closing Date. The Company Balance Sheet indicates the amount
of the Financial Assets is equal to $14,435,246. 

 

“Financial
Statements”
- See
Section
3.5.

 

“Foothills” means
Wells Fargo Foothill, Inc. a California corporation or any of its successors or
Affiliates. 

 

6

“Foothills
Loan” means
all outstanding amounts due and owing by the Company to Foothills under the
secured credit facility memorialized by that certain Loan and Security Agreement
originally dated December 10, 2001 between ACI, the Company and Foothills, as
amended. 

 

“GAAP” means
U.S. generally accepted accounting principles applied on a consistent
basis.

 

“Governmental
Entity” means
any federal, state, municipal or foreign governmental, court,
governmental, administrative or regulatory
or other public body, agency or authority (including self-regulatory
organizations), domestic or foreign.

 

“Guaranteed
Obligations” - See
Section
5.17.

 

“Guarantor” - See
preamble hereto. 

 

“Hazardous
Materials” means
any dangerous, toxic or hazardous pollutant, contaminant, chemical, waste,
material or substance as defined in or governed by any Law or other requirement
relating to such substance or otherwise relating to the environment or human
health or safety, including without limitation any petroleum and petroleum
products, asbestos and asbestos containing products or PCBs or other matter
which might subject the Company or the Business to any imposition of costs or
liability under any Environmental Law.

 

“HIPAA” means
the Health Insurance Portability and Accountability Act of 1996, as amended, and
the regulations promulgated thereunder, including the Standards for Privacy of
Individually Identifiable Health Information at 45 Code of Federal Regulations
Parts 160 and 164.

 

“Indemnitee”
- See
Section
7.5(a).

 

“Indemnitor”
- See
Section
7.5(a).

 

“Intellectual
Property”
means all
of the following in any jurisdiction throughout the world: (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements, and all patents, patent applications and patent disclosures,
together with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations; (b) all trademarks, service marks, trade dress,
logos, trade names, slogans, Internet domain names, Internet addresses,
corporate names and rights in telephone numbers, together with all translations,
adaptations, derivations and combinations and including all associated goodwill,
and all applications, registrations and renewals; (c) all copyrightable works,
all copyrights, and all applications, registrations and renewals; (d) all mask
works and all applications, registrations and renewals; (e) all trade secrets
and confidential business information, including ideas, research and
development, know-how, formulas, 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 all source
code, object code, executable code, firmware, development tools, files, records,
data, data bases and related documentation, regardless of the media on which it
is recorded, and all Internet sites (and all contents of the sites); (g) all
advertising and promotional materials; (h) all other proprietary rights; (i) all
copies and tangible embodiments of any of the foregoing (in whatever form or
medium); and (j) claims
or causes of action arising out of or related to past, present or future
infringement or misappropriation of the foregoing.

 

7

“IRS” means
the Internal Revenue Service.

 

“Knowledge
of the Sellers” or
“Sellers’
Knowledge” means
the actual knowledge (or knowledge that such person reasonably should have had
given the facts and circumstances) of Allan C. Silber, Kelly D. Murumets,
Gary M.
Clifford, James Ducay, Kenneth L. Hilton,
David Silverman and Stephen Weintraub.

 

“Laurus” means
Laurus Master Fund, Ltd. a Cayman Islands company or any of its successors or
Affiliates. 

 

“Laurus
Interest” means
the Lien on the Acquired Assets held by Laurus. 

 

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

 

“Leases”
- See
Section
3.9.

 

“Liability
Cap”
- See
Section
7.4(a).

 

“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 or reasonable attorneys’, accountants’ and experts’ fees and interest and
penalties.

 

“Licenses
and Permits”
- See
Section
3.12.

 

“Lien” means
any charge, claim, lien, option, pledge, security interest, right of first
refusal, or encumbrance.

 

“Material
Contract”
- See
Section
3.15.

 

“Organizational
Documents” means
articles of incorporation, certificate of incorporation or charter, bylaws,
articles of organization, certificate of formation, operating agreement, limited
liability company agreement and all similar documents adopted, or filed in
connection with the creation, formation, or organization of a Person, including
any amendments thereto.

 

“Parent” - See
preamble hereto.

 

8

“Parent
Stock”
- See
Section
5.2(c).

 

“Pension
Plans”
- See
Section
3.16 (a).

 

“Permitted
Liens” means
(a) mechanics’, carriers’ non-contractual, workmen’s, repairmen’s or similar
Liens arising or incurred in the ordinary course of business which involve
obligations that are not due and payable, (b) statutory liens for Taxes (other
than local, state and federal income Taxes) and other charges and assessments by
any Governmental Entity that are not yet due and payable or are being contested
in good faith and adequate reserves for which are contained in the Financial
Statements and
which are listed on Schedule
1.3 (c)
Liens related to any Assumed
Liability, (d) Liens related to the Contracts entered into by the Company in the
ordinary course of business, and (e) any bonds, letters of credit and similar
items posted or provided in accordance with regulatory
requirements.

 

“Person” means
any individual, corporation, company, limited liability company, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Entity or other entity.

 

“Personal
Property Lease”
- See
Section
3.10.

 

“Proxy
Statement” means
the proxy statement to be sent to ACI’s stockholders in connection with the ACI
Stockholders Meeting.

 

“PUCs” means
all state telecommunications regulatory agencies.

 

“Release” means
the spilling, leaking, disposing, discharging, emitting, depositing, ejecting,
leaching, escaping or any other release of any Hazardous Materials that is a
violation of Environmental Law.

 

“Required
ACI Stockholder Vote” means
the affirmative vote by the holders of the outstanding shares of ACI’s capital
stock representing the voting power of ACI’s capital stock required to vote on
and approve this Agreement and the transactions contemplated by this
Agreement.

 

“Revised
Company Balance Sheet” See
Section
2.4(a).

 

“Schedule
13D/A” - See
Section
3.24.

 

“Schedules” means
the schedules delivered by the Seller Parties to the Buyer and by the Buyer to
the Seller Parties on the Execution Date and as corrected to the extent
necessary to comply with the requirements of Section
5.4, as
applicable, which, among other things, set forth certain exceptions to the
representations and warranties contained in this Agreement. Each reference in
this Agreement to any numbered Schedule is a reference to that numbered Schedule
in the Schedules; provided,
however, that a
matter disclosed in one Schedule shall be deemed disclosed with respect to other
Schedules to which such disclosure would be reasonably deemed related if it is
reasonably apparent on the face of the disclosure of such matter that such
matter also pertains another Schedule or Schedules. 

 

9

“SEC” means
the Securities and Exchange Commission.

 

“Seller
Indemnitees” - See
Section
7.3.

 

“Sellers”
- See
preamble hereto.

 

“Seller
Parties” - See
preamble hereto.

 

“Tax” or
“Taxes” means
all federal, state, local or foreign taxes, charges,
levies, or other like assessments, including,
without limitation, income, gross income, gross receipts, production, excise,
employment, sales, use, transfer, ad valorem, profits, license, capital stock,
franchise, severance, stamp, withholding, Social Security, employment,
unemployment, disability, worker’s compensation, payroll, utility, windfall
profit, custom duties, personal property, real property, registration,
value-added, alternative or add-on minimum, estimated and other taxes, or like
charges of any kind whatsoever, including any interest, penalties or additions
thereto, imposed by any Governmental Entity. This
definition includes any obligations to indemnify or otherwise assume or succeed
to the Tax liability of any other Person.

 

“Tax
Return” means
any return, report, information return or other similar document or statement
(including any related or supporting information) filed or required to be filed
with any Governmental Entity in connection with the determination, assessment or
collection of any Tax or the administration of any Laws, regulations or
administrative requirements relating to any Tax, including, without limitation,
any information, return, claim for refund, amended return or declaration of
estimated Tax and all federal, state, local and foreign returns, reports and
similar statements.

 

“Termination
Restriction Date” means
the day on which both of the following have occurred: (a) a third party, on
terms and conditions that are reasonably acceptable to the Buyer and the Seller
Parties, either directly or through a party to this Agreement, (i) closes on a
loan of $3,000,000 or more to the Company, or (ii) accepts an assignment of all
amounts due and owing under the Foothills Loan; and (b) to the extent that the
Company’s borrowing capacity is in excess of $3,000,000 under the terms and
conditions of a loan made in accordance with (a)(i) or an assignment made in
accordance with (a)(ii), as the case may be, such excess amount is delivered by
the Company to the Buyer in an amount necessary to repay any unreimbursed
advances made by the Buyer to the Company to the full extent permitted by the
terms and conditions
of such
loan or assignment.

 

“Third
Party Claim”
- See
Section
7.5(b).

 

“Transaction
Documents”
means all
documents and agreements to be entered into by one or more of the parties to
this Agreement in connection with the transactions contemplated by this
Agreement.

 

10

“USAC” -
See Section 9.10.

 

“WARN
Act” means
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101
et.
seq. and any
corresponding state laws that could be applied to any Business Employee.

 

SECTION
2. BASIC
TRANSACTION.

2.1    Sale
of Acquired Assets. On the
terms and subject to the conditions of this Agreement, at the Closing the
Company shall sell, transfer, convey and deliver the Acquired Assets to the
Buyer, free and clear of all security interests, liens, claims, charges,
restrictions or encumbrances of any kind (except for the Permitted Liens), in
exchange for the Buyer’s acceptance of the assignment of the Assumed Liabilities
from the Company set forth in Section
2.2.

 

2.2    Assumption
of Assumed Liabilities. On the
terms and subject to the conditions of this Agreement, at the Closing the Buyer
agrees to assume and become responsible for the Assumed Liabilities in exchange
for the Company’s transfer, conveyance and delivery of the Acquired Assets set
forth in Section
2.1. The
Buyer will not, however, assume or otherwise be obligated for the Excluded
Liabilities or any other Liability. 

 

2.3    Post-Effective
Date Adjustment and Payment. In
order to adjust the consideration under this Agreement for changes to the
Company’s financial condition in the period between the Effective Date and the
Execution Date, on or before the Execution Date ACI shall have paid the Company
$496,155 which shall be deemed to be Acquired Assets. 

 

2.4   Adjustment
to Company Balance Sheet.

 

(a) As soon
as practicable following the Execution Date, the Buyer will review the Company
Balance Sheet. If the Buyer determines that the Company Balance Sheet contained
material errors or omissions which affect the amount and type of Assumed
Liabilities, as soon as reasonably practicable following the Execution Date the
Buyer will deliver to the Seller Parties a revised Company Balance Sheet which
accurately reflects the Company’s balance sheet at and as of April 30, 2005 (the
“Revised
Company Balance Sheet”). The
Buyer, in conjunction with its regular outside accountants, will prepare the
Revised Company Balance Sheet in accordance with GAAP. 

 

(b) If the
Seller Parties have any objections to the Revised Company Balance Sheet, they
will deliver a detailed statement describing their specific objections to the
Buyer within 20 days after receiving it. The Buyer and the Seller Parties will
then use reasonable efforts to resolve any such objections themselves through
good faith negotiation. If the parties do not obtain a final resolution of such
a dispute within 30 days after the Buyer has received the statement of
objection(s), however, the Buyer and the Seller Parties will select a mutually
acceptable, nationally-recognized accounting firm to resolve any remaining
objections. The Buyer shall pay 50% and the Seller Parties shall pay 50% of the
costs and expenses of any accounting firm so used. The determination made by
such accounting firm will be set forth in writing and will be conclusive and
binding upon the parties. For purposes of this Agreement, “Final
Company Balance Sheet” means
the Revised Company Balance Sheet, together with any revisions made pursuant to
this Section 2.4(b). 

 

11

(c) Within
ten days after the Final Company Balance Sheet has been determined in accordance
with Section 2.4(b), if the Final Company Balance Sheet indicates Financial
Assets less than $14,435,246, or Assumed Liabilities in excess of $24,264,569 ,
the Parent or ACI will either (i) pay to the Company, by wire transfer or
delivery of other immediately available funds, an amount equal to such
deficiency or excess, as applicable, or (ii) accept a reduction to the Assumed
Liabilities equal to such deficiency or excess, as applicable. 

 

2.5    The
Closing. The
closing of the transactions contemplated by this Agreement (the “Closing”) will
take place as soon as reasonably practicable after satisfaction or waiver of all
of the conditions set forth in Sections
8 and 9 at the
offices of Gray, Plant, Mooty, Mooty & Bennett, P.A., 500 IDS Center,
Minneapolis, Minnesota 55402, at 10:00 a.m. local time or at such other place
and at such time as may be mutually agreed to by the parties (the “Closing
Date”).

 

2.6    Deliveries
at the Closing. At the
Closing the parties will do the following: (a) the Seller Parties will execute,
acknowledge (if appropriate) and deliver to the Buyer any certificates,
instruments and documents, including those referred to in Section
9 of this
Agreement, as the Buyer and its counsel may reasonably request; and (b) the
Buyer will execute, acknowledge (if appropriate) and deliver to the Seller
Parties any certificates, instruments and documents, including those referred to
in Section
8 of this
Agreement, as the Seller Parties and their counsel may reasonably
request.

SECTION
3. REPRESENTATIONS
AND WARRANTIES OF SELLER.

The
Seller Parties hereby jointly
and severally represent
and warrant to the Buyer
that the statements contained in this Section
3 are
correct and complete as of
the Effective Date, or such other date that is stated; and, if
specifically stated in a representation or warranty, such representation or
warranty will be correct and complete at and as of the Closing Date:

3.1    Organization,
Qualification and Power.
Each of
the Seller Parties is, and will be on the Closing Date, a corporation duly
organized, validly existing and in good standing under the Laws of the State or
Province set forth in the preface above. Except as set forth on Schedule
3.1, the
Company is as of the Execution Date and will be on the Closing Date, duly
authorized to conduct business and is in good standing under the Laws of each
jurisdiction where such qualification is required. The Company has, as of the
Execution Date and will have on the Closing Date, full corporate power and
authority and all Licenses and Permits necessary to carry on the businesses in
which it is engaged and in which it presently proposes to engage and to own and
use the properties owned and used by it.

12

3.2    Authority.
Subject
to the Required ACI Stockholder Vote and receipt of all necessary
Consents, the Seller Parties have (and on the Closing Date will have) all
requisite corporate power and authority to execute and deliver this Agreement
and the Transaction Documents to which they are a party, to perform their
obligations hereunder and thereunder, and to consummate the transactions
contemplated herein and therein. This Agreement and the Transaction Documents to
which any of the Seller Parties are a party, have been (or, to the extent
executed as of the Closing, will be at the Closing) duly and validly executed
and delivered by such Seller Party and, assuming this Agreement and such
Transaction Documents have been duly authorized, executed and delivered by the
other parties thereto, this Agreement and the Transaction Documents to which
they are a party, constitute the valid and binding agreements of the Seller
Parties, enforceable against the Seller Parties in accordance with their terms
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to or
affecting creditors’ rights generally and general principles of equity
(regardless of whether enforceability is considered in a proceeding at Law or in
equity). The Seller Parties’ execution, delivery and performance of this
Agreement and the Transaction Documents to which any of them are a party have
been duly authorized by all necessary corporate action on the part of the Seller
Parties other than the Required ACI Stockholder Vote.

3.3    No
Conflict or Violation; Consents.

(a)    Subject
to the receipt of all necessary Consents, the execution and delivery by
the
Seller Parties of this
Agreement and the Transaction Documents to which the
Seller Parties are
parties, and the
performance of their obligations hereunder and thereunder do not (i) violate any
provision of any Organizational Document of the Seller
Parties, (ii) materially violate any provision of Law, (iii) violate, result in
a breach of or constitute (with or without notice or lapse of time or both) a
default under any Contract in any material respect, (iv)
result in the creation or imposition of any Lien upon any of the assets,
properties or rights of the Company, including without limitation the Acquired
Assets, or (v)
result in the cancellation, modification, revocation or suspension of any
License.

(b)    Schedule
3.3
identifies each Contract that satisfies each of the following criteria: (i) it
required the payment or indicated the receipt by the Company of more than
$250,000 during calendar year 2004, (ii) it requires the Consent of a third
party for assignment to Buyer, and (iii) failure to obtain such Consent would
have a material adverse effect on the Company.

13

3.4    Acquired
Assets and Assumed Liabilities.

(a)    Except
for the Permitted Liens, at Closing the Sellers
shall have good and marketable title to or a valid leasehold interest in or
license to the Acquired Assets, free and clear of any Lien or restriction on
transfer. The Acquired Assets constitute all of the assets used in the Business
that are not specifically identified as Excluded Assets. Except for the Acquired
Assets, no other assets will be transferred to the Buyer in connection with this
Agreement, the Transaction Documents and the transactions contemplated by this
Agreement and the Transaction Documents. 

(b)    The
Assumed Liabilities represent all of the Liabilities assumed by the Buyer in
accordance with this Agreement, the Transaction Documents and the transactions
contemplated by this Agreement and the Transaction Documents. Except for the
Assumed Liabilities, no other Liabilities will be transferred to the Buyer in
connection with this Agreement, the Transaction Documents and the transactions
contemplated by this Agreement and the Transaction Documents. 

 

3.5    Financial
Statements.  The
(a) audited balance sheets of ACI at and as of December
31, 2002,
December 31, 2003 and December
31, 2004, and
the related statements of income and cash flow for ACI for the fiscal years then
ended, and (b) the unaudited balance sheet for the Company at and as of April
30, 2005 (the “Company
Balance Sheet”), the
related statements of income for the Company for the four month period ended
April 30, 2005 and the related statement of income for the Company for the one
month period ended April 30, 2005 are set forth on Schedule
3.5 (all of
the foregoing statements, collectively, the “Financial
Statements”). The
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis during the respective periods and fairly present in all
material respects the financial position
of ACI and the Company, respectively. The Financial Statements accurately
reflect, respectively, the results of ACI’s or the Company’s operations and
changes in cash flow at the
respective dates thereof and the results of operations of ACI or the Company for
the respective periods covered by the statements of income contained therein,
subject to normal year-end adjustments and lack of footnotes and other
presentation items.  The
Company
Balance Sheet and the related statements of income for the Company for the four
month period ended
April 30, 2005 accurately reflect in all material respects the assets,
liabilities, costs and expenses of the Company as they relate to the business of
the Company and are in all material respects accurate, complete, correct and in
accordance with the books of account and records of the Company.

3.6    Absence
of Certain Changes or Events. Since
the
Effective Date and up to the Execution Date there has
been no material adverse change in the properties, assets, condition (financial
or otherwise), liabilities or operations of the Company that has
not been adjusted for pursuant to Section
2.3 or 2.4.

14

3.7    Absence
of Undisclosed Liabilities.
There are
no Liabilities with respect to the Business or the Acquired Assets for which the
Buyer may become obligated or otherwise responsible other than the Assumed
Liabilities.

3.8    Tax
Matters.
 Except as
set forth on Schedule
3.8 or
except to the extent it is an Excluded Liability:

(a)    The
Company has filed all Tax Returns required to be filed prior to the Effective
Date, and all such Tax Returns were correct, complete and accurately reflect all
Liability for Taxes for the periods covered thereby, in all material respects.
The Company has paid all Taxes due and payable by Company (whether or not shown
on a Tax Return). Without limiting the foregoing, none of the Tax Returns
contains any position that is, or would be, subject to penalties under section
6662 of the Code (or any corresponding provisions of state, local or non-U.S.
Tax law). The Company has not waived any statutes of limitation in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency which waiver or extension remains in effect. No action, suit,
proceeding, or audit is pending against or with respect to the Company regarding
Taxes.

(b)    No
federal, state or local examination or administrative or judicial proceeding
currently exists or is outstanding and unresolved with regard to Taxes or Tax
Returns of the Company. To the Knowledge of Sellers, there is no reason to
believe that a Tax authority may assess any additional Taxes against the Company
with respect to a pre-Effective Date Tax period for which Tax Returns have been
filed. There is no material dispute or claim concerning any Tax liability of the
Company asserted by any Taxing authority in writing. The Company (i) is not a
party to any Tax sharing, Tax indemnity, Tax allocation or other agreement or
arrangement with any entity and (ii) is not a party to or bound by any closing
agreement or offer in compromise with any Taxing authority.

 

(c)    There is
no Tax Lien (other than Permitted Liens) against the Acquired
Assets.

 

(d)    True,
correct and complete copies of all income Tax Returns, income Tax examination
reports and statements of deficiencies assessed against, or agreed to with
respect to the Company with the IRS in the one year period preceding the
Effective Date and any similar items requested by Buyer have been delivered to
the Buyer.

(e)    The
Company (or predecessor thereof) (i) is not and never has been a member of an
Affiliated Group other than the ACI Affiliated Group, and (ii) does not have any
liability for the Taxes of any Person under Treasury Regulation Section 1.1502-6
(or similar provision of state, local or non-U.S. law) as a transferee or
successor, by contract or otherwise.

(f)    Neither
of the Sellers is a “foreign person” as that term is referred to in Code §
1445(f)(3).

15

(g)    The ACI
Affiliated Group has filed all income Tax Returns required to be filed prior to
the Effective Date and all such income Tax Returns were correct, complete, and
accurately reflect all Liability for income Taxes for the periods covered
thereby, in each case in all material respects. The ACI Affiliated Group has
paid all income Taxes due and payable by the ACI Affiliated Group (whether or
not shown due on a Tax Return). ACI’s only consolidated Tax Returns are for
income Taxes.

(h)    No
federal, state or local examination or administrative or judicial proceeding
exists or to the Sellers’ Knowledge has been initiated with regard to income
Taxes or income Tax Returns of the ACI Affiliated Group. There is no material
dispute or claim concerning any income Tax liability of the ACI Affiliated Group
asserted by any Taxing authority in writing.

 

3.9    Real
Property. The
Company does not own any real property. Schedule
3.9 lists
all real property leases to which Company is a party (each a “Lease” and,
collectively, the “Leases”). All of
the Leases are valid and in full force and effect, and the Company is not in
default
thereunder nor to the Knowledge of Sellers has any such breach been
asserted in
writing or otherwise.

3.10    Personal
Property. True
and correct copies of all leases for personal property, except for leases having
future minimum lease payments of less than $50,000 in any
twelve-month period, (each a “Personal
Property Leases”) used
or employed by the Company are listed on
the attached Schedule
3.10, which
includes the name
of the lessor, the address of the lessor, the term of the lease, and the start
date of the lease. All of
the Personal Property Leases are valid and in full force and effect, and the
Company is not in default thereunder nor to the
Knowledge of
Sellers has any such breach been asserted in
writing or otherwise. The
Acquired Assets related
to the Company’s “switching” facilities are each free from defects (patent and
latent), have been maintained in accordance with normal industry practice, are
in good operating condition and repair (subject to normal wear and tear), and
are suitable for the purposes for which they are presently used.

3.11    Intellectual
Property.

(a)    Schedule
3.11(a) sets
forth a complete and correct list of (i)
all patents,
registered trademarks, service marks, trade names, copyrights and applications
for any of the foregoing included in the Business Intellectual
Property, and
(ii) all material
Intellectual Property which is licensed by the Company from any third party.
The
Business Intellectual Property, together with all other Intellectual Property
licensed by the Company, constitutes all of the proprietary rights used in the
operation of the Business as currently conducted. 

16

(b)    Except as
set forth on Schedule
3.11(b), the
Company has not received any written claim from or to the Knowledge
of Sellers been advised by any Person that (i) the Company does not own or have
the right to use any Business Intellectual Property, (ii) any
governmental action to prohibit use of the Business Intellectual Property, or
(iii) the use
of any Business Intellectual Property infringes upon the Intellectual Property
rights of a third party. The Company is not a party to any Action alleging
infringement or misuse of any Intellectual Property. To the
Knowledge of Sellers, no third
party is infringing any Business Intellectual Property.

(c)    Notwithstanding
any provision of this Agreement to the contrary, none of the Seller Parties
makes any representation or warranty that any Intellectual Property, including
the Business Intellectual Property, does not infringe the rights or any third
party.

3.12    Licenses
and Permits.
Schedule
3.12 of this
Agreement sets forth all
material licenses, permits, franchises, authorizations and approvals issued or
granted for use by the Company or in the Business by any Governmental Entity,
including, but not
limited to, the FCC
and the PUCs (collectively,
the
“Licenses
and Permits”), and
all pending applications therefore. Each
License
and Permit has been
fully paid for and is held
by the Company and is valid and in full force and effect, and is not subject to
any pending or, to the Knowledge
of Sellers,
threatened administrative or judicial proceeding to revoke, cancel, suspend or
declare such License and Permit invalid in any respect
or subject to any fine or penalty or civil penalty. The Company has all of the
Licenses or Permits required of it to permit the continued lawful conduct of the
Business in the manner now conducted and the ownership, occupancy and operations
of its assets for their present use. The Company is not in violation in any
material respect of any of the License or Permit requirements. 

3.13    Compliance
with Laws. The
Company is in compliance in all material respects with all applicable
Laws. None of
the Sellers has received written notice, or to the Knowledge of Sellers has been
advised of any violation
of any such Law that could give rise to a material obligation or Liability of
the Company or the
Business. The Company
is not in default in any respect
with respect to any order, writ, judgment, award, injunction or decree of any
Governmental Entity or arbitrator, material to the operations of the
Business. 

3.14    Litigation. Except
for
consumer
complaints lodged in the
ordinary course of business and as
otherwise disclosed in Schedule
3.14, there is
no action, claim, suit, proceedings,
demand,
litigation, arbitration, mediation or other proceeding by or before any
Governmental Entity (each, an “Action”)
pending or, to the Knowledge of the Sellers, threatened by or against the
Company.

17

3.15    Contracts.

 

(a)    Schedule
3.15 sets
forth the party names and effective date of any Contract
that requires the receipt or payment by the
Company
of more than $100,000 in the
twelve months following the Effective Date (each, a “Material
Contract”),
including without limitation any of the following types of Contracts that is a
Material Contract: (i) any
mortgage, indenture, security agreement, pledge or other Contract relating to
the borrowing of money or extension of credit; (ii) any employment, severance,
bonus, retention,
employee plans, employment and labor agreements or
material consulting Contract; (iii) any distributor, agency, reseller, sales,
license, carrier, vendor or similar Contract; (iv) any Contract which (A)
provides for the performance of services for customers of the Company, or (B)
the sale of products by the Company; (v) intercompany Contracts to which the
Company is a party or to which the Company is otherwise bound and that will
continue following the Effective Date; (vi) any
Contract where the counterparty is a Governmental Entity; (vii)
any service and other similar contracts; (viii) any Lease; and (ix) any personal
property leases; (x) any
Benefits Plans; (xi) agreements and other arrangements for the sale of any
assets, property or rights other than in the ordinary course of business or for
the grant of any options or preferential rights to purchase an assets, property
or rights; (xii) documents granting any powers of attorney with respect to the
affairs of the Company; (xiii) suretyship, contracts, performance bonds, working
capital maintenance or other forms of guaranty agreements; (xiv) contracts or
commitments limited or restraining the Sellers or their Affiliates from engaging
or competing in any lines of business or with any person, firm or corporation,
(xv) any partnership or joint venture agreement; and (xvi) material licenses,
including but not limited to material software licenses.. 

 

(b)    With
respect to each such Material Contract: (i) it is legal, valid, binding,
enforceable and in full force and effect; (ii) assuming all necessary Consents
are obtained, it 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; (iii) Company is not and to the Knowledge of
Sellers no other party is in breach or default; (iv) no event has occurred that,
with notice or lapse of time, would constitute a material breach or default, or
permit termination, modification, or acceleration, under the Material Contract;
and (v) Company has not and to the Knowledge of Sellers no other party has
repudiated any provision of the Material Contract. 

3.16    Employee
Plans

 

(a)    The
attached Schedule
3.16 sets
forth the following: (i) all
“employee welfare
benefit
plans,” as
defined in Section 3(1) of
ERISA, sponsored or
maintained by the Company or to which
contributions are made by the Company on behalf of current employees of the
Company (such employees are collectively referred to as the “Business
Employees”) or
with respect to which the Company or any ERISA Affiliate has any Liability or
potential Liability (the
“Welfare
Plans”); (ii) all
“employee
pension benefit
plans,” as
defined in Section 3(2) of ERISA, sponsored
or maintained
by the Company or any trade or business (whether or not incorporated) which is
or has ever been under control or treated as a single employer with the Company
under Section 414(b), (c), (m) or (o) of the Code (“ERISA
Affiliate”) or to
which the Company or any ERISA Affiliate has contributed on behalf
of the Business Employees or any former employee of the Company or with
respect to which the Company or any ERISA Affiliate has any Liability or
potential Liability (the
“Pension
Plans”); and
(iii) all other employee
benefit arrangements, programs, policies or payroll practices,
including without
limitation all severance pay, sick leave, vacation pay, salary continuation for
disability, retirement, deferred compensation, bonus, hospitalization, medical
insurance, cafeteria, life insurance, tuition reimbursement and scholarship
programs
sponsored or maintained by the Company or to which contributions are made by the
Company on behalf of Business Employees or with
respect to which the Company or any ERISA Affiliate has any Liability or
potential Liability (collectively,
such programs, policies and practices, together with the Welfare Plans and
Pension Plans, are referred to as the “Benefit
Plans”).

18

(b)    The
Company does not
sponsor, maintain
or contribute to or in any way directly or indirectly (including,
without limitation, indirect liability as a member of a controlled group that
includes an ERISA Affiliate that has any such responsibility)(whether
contingent or otherwise) with respect to any plan to
which the funding requirements of Section 412 of the Code apply or to
any
“multiemployer plan” as
defined in Section 3(37) or 4001(a)(3) of ERISA and has
not had any direct or indirect responsibility within the three years preceding
the date of the signing of this Agreement.

(c)    With
respect to each Pension Plan
that is intended to qualify under Code Section 401(a), such Pension Plan and
its related trust has received
or has an
application pending for
obtaining a
determination letter from the IRS that it is so qualified and that its trust is
exempt from Tax under Section 501(a) of the Code and no facts
or set of circumstances exist that could reasonably be expected to cause such
plan and related trust to be disqualified or to be so non-exempt from
Tax. Each
Pension Plan has been administered in accordance with its terms and all
applicable legal requirements. There have been no prohibited transactions within
the meaning of Code Section 4975 or breach of fiduciary duty under ERISA and no
investigations by any governmental agency or other actions or written claims
against or directly involving any Benefit Plan (except claims for benefits
payable in the normal operation of the Benefit Plans). With
respect to each Benefit Plan, all required reports and descriptions (including
without limitation Forms 5500 and summary plan descriptions) have been timely
filed or distributed in accordance with applicable Law.

(d)    All
contributions (including all employer contributions and employee salary
reduction contributions) required to be made to or with respect to each Benefit
Plan with respect to the service of Business
Employees or
former employees of the Company as of the Effective Date and all contributions
for any period ending on or before the Effective Date that are not yet due have
been made or have been accrued for in the books and records of the Company.

19

(e)    The
Company has complied with the health care continuation requirements of Part 6 of
Title I of ERISA and all
similar state laws.

(f)    The
Company does not maintain, contribute to or have an obligation to contribute to,
nor has any liability with respect to, any employee welfare benefit plan
providing health or life insurance or other welfare type benefits beyond
termination of employment or retirement other than in accordance with
COBRA.

(g)    None of
the Benefit Plans is a deferred compensation plan within the meaning of Code
Section 409A. 

3.17    Insurance.
Schedule
3.17 lists
all policies of insurance insuring the Company, its assets, properties,
employees, operations, and the Business. None of
the Seller
Parties has
received written notice of cancellation or adverse modification of any such
insurance.

3.18    Transactions
with Sellers and Affiliates.
Except as
set forth on Schedule
3.18,
no officer
or director of the Seller Parties (each a “Related
Party”), or,
to the Knowledge of the Sellers, any individual related by blood, marriage or
adoption to any Related Party or any entity controlled by a Related Party, is a
party to any Contract with the Company.

3.19    Labor
and
Employment Matters.

(a)    The
Company has complied in all material respects with all Laws relating to
employment, including without limitation all Laws concerning equal employment
opportunity, nondiscrimination, accommodations, leaves and absences,
immigration, classification of employees as exempt or non-exempt, payment of
wages, hours, unemployment taxes and benefits, other employment-related
benefits, including ERISA, HIPAA and COBRA, any and all Laws relating to
collective bargaining, the payment of social security and similar Taxes,
occupational safety and health and plant closing or layoffs.

(b)    Except as
set forth on Schedule
3.19(b), the
Company is not a party to or bound by any collective bargaining agreement, nor
has the Company experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has not committed
any unfair labor practice.

20

(c)    Except as
listed on Schedule
3.14, the
Company has no unresolved employment-related charges, claims, lawsuits or other
liabilities. Except as listed on Schedule
3.14, there
are no unresolved complaints from any current or former employees concerning any
matters relating to employment with the Company. Except for the Assumed
Liabilities, the Company has no liability for any employment-related matters,
including without limitation any claims for unpaid wages, salary, bonuses,
benefits, severance or other compensation due to current or former employees,
whether or not asserted.

(d)    The
Company has not treated any Person who should have been treated as an employee,
under any Law or otherwise, as an independent contractor.

(e)    Except
for the Assumed Liabilities, no current or former employee has, and the Company
has no liability for, any accrued and unpaid vacation, flexible time off, paid
time off or other similar benefits.

(f)    Except as
listed on Schedule
3.19(f), the
Company is not a party to any agreement for the employment of any individual
(other than pursuant to the Company standard form of employment offer letter and
related standard documentation for at-will employment, which are attached to
Schedule
3.19(f) along
with a list of all Persons who are subject to such letter and documentation),
and all of the current employees of the Company are employees at-will and may be
terminated by the Company at any time and for any or no reason without any
liability.

(g)    Schedule
3.19(g) sets
forth a list of all Business Employees and their positions, rates of pay and
original hire dates. To the Knowledge of the Sellers, none of the employees of
the Company intend to voluntarily cease their employment with the Company prior
to the Effective Date or following the Closing.

3.20    Environmental,
Health and Safety Matters.

 

(a)    Each of
the Company and its predecessors and Affiliates has complied and is in
compliance with all Laws concerning public health and safety, worker health and
safety, and pollution or protection of the environment, 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
biphenyls, noise or radiation, each as amended and in effect, now or in the
future, including without limitation all Environmental Laws. To the Knowledge of
the Sellers, there are no facts or circumstances that would give rise to any
Liability to Buyer under any such Laws.

21

(b)    To the
Knowledge of the Sellers, no portion of the real property now or previously
leased by the Company, including without limitation all real property covered by
any lease of real property, contains or contained any Hazardous Materials or
substances, tanks, lead paint, asbestos, any type of wells or petroleum, nor is
or was there any other release or disposal that has occurred at such property
during the Company’s occupancy that may violate any Laws.

3.21    Accounts
Receivable; Accounts Payable.

 

(a)    Accounts
Receivable.
All notes
and accounts
receivable of the Company set forth on the Company Balance Sheet which are
included within the Acquired Assets arose from the provision of services or the
sale of goods in the ordinary course of business and are valid
and enforceable claims, are
reflected properly on its books and records, are valid receivables subject to no
setoffs or counterclaims, and are collectible at their recorded
amounts net of
reserves.

 

(b)    Accounts
Payable. The
accounts payable of the Company set forth on the Company Balance Sheet which are
included within the Assumed Liabilities represent or will represent valid
obligations arising from transactions actually made or services actually
performed in the ordinary course of the Business in accordance with
GAAP.

3.22    No
Brokers.
Except
for any amounts owed by the Seller Parties to Rebensdorf & Associates, Inc.,
the Seller Parties have not taken any action that would give rise to a claim by
any broker, finder or similar intermediary against the
Buyer for any
broker’s, finder’s or similar fee or other commission in connection with this
Agreement, the Transaction Documents or the transactions contemplated by this
Agreement and the Transaction Documents. 

3.23    Customer
Relations.
To the
Knowledge of the Sellers, there exists no condition or state of facts or
circumstances involving the customers, wholesale carriers, vendors, suppliers,
distributors or commissioned sales agents of the Company that will result in the
termination or material change in the business relationship between the Company
and such party or parties except for changes in the ordinary course of business.
To the Knowledge of Sellers, except as set forth on Schedule
3.23, no
material customer, wholesale carrier, vendor, suppliers, distributors or
commissioned sales agents has indicated that it will stop or materially decrease
the rate of business done with the Sellers except for changes in the ordinary
course of Company’s business.

3.24    Parent
Stock. The
Seller Parties are the registered and/or beneficial owners of that number of
shares of ACI’s common stock set forth in the Schedule 13D/A filed by the Parent
and ACI with the SEC on February 16, 2005 (the “Schedule
13D/A”).
Except for the common stock set forth in Schedule 13D/A, none of the Parent, ACI
or their Affiliates own or hold any rights to acquire any additional securities
of ACI.

22

3.25    Qualifications. EXCEPT
AS SET FORTH IN SECTION 3, SELLERS MAKE NO AND DISCLAIM ALL REPRESENTATIONS AND
WARRANTIES INCLUDING ANY IMPLIED WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.

SECTION
4.  REPRESENTATIONS
AND WARRANTIES OF THE BUYER.

 

The Buyer
hereby represents and warrants to the Sellers that the statements contained in
this Section
4 are
correct and complete as of
the Effective Date, or such
other date that is stated; and, if specifically stated in a representation or
warranty, such representation or warranty will be correct and complete at and as
of the Closing Date:

4.1    Corporate
Organization.
Each of
the Buyer
and Guarantor is and will be on the Closing Date a limited liability company
duly organized, validly existing and in good standing under the Laws of the
State of Minnesota and have now and will have on the Closing Date all requisite
limited liability company power to own their properties and assets and to
conduct their business as now conducted. 

4.2    Authorization. The
Buyer
and
Guarantor have and on the Closing Date will have all
requisite limited
liability company power and authority to enter into this Agreement and the
Transaction Documents, to carry out their obligations hereunder and thereunder
and to consummate the transactions contemplated herein and therein. The
execution and delivery of this Agreement and the Transaction Documents and the
performance of the Buyer’s and Guarantor’s obligations hereunder and thereunder
have been (or, to the extent executed as of the Closing, will be at the Closing)
duly authorized by all necessary action by the governing body of the
Buyer and
Guarantor and no other proceedings on the part of the Buyer or
Guarantor are necessary to authorize such execution, delivery and performance.
This Agreement and the Transaction Documents have been duly and validly executed
and delivered by the Buyer and
Guarantor and assuming they have been duly authorized, executed and delivered by
the other Persons who are parties thereto, constitute the Buyer’s
and Guarantor’s valid and
binding obligations, enforceable against the Buyer and
Guarantor in accordance with their terms except that such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other Laws, now or hereafter in effect, relating to or limiting
creditors’ rights generally, and general principles of equity (regardless of
whether enforceability is considered in a proceeding at Law or in
equity).

23

4.3    No
Conflict or Violation. The
execution, delivery and performance by the Buyer and
Guarantor of this Agreement and the Transaction Documents do not (a) violate any
provision of Organizational Documents of the Buyer or
Guarantor, (b)
violate any provision of Law, or (c) violate or result in a breach of or
constitute (with or without due notice or lapse of time or both) a default under
any material contract, lease, loan agreement, mortgage, security agreement,
trust indenture or other agreement or instrument to which the Buyer
or
Guarantor is a
party.

4.4    Consents
and Approvals. The
execution, delivery and performance of this Agreement and the Transaction
Documents on behalf of the Buyer does not
require the consent or approval of, or filing with, any Governmental Entity or
other Person, except for those required under or in relation to the
Communications Act and any rules and regulations promulgated by the FCC or the
PUCs.

4.5    No
Brokers. The
Buyer
has not
taken any action that would give rise to a claim by any broker, finder or
similar intermediary against the Seller Parties for any broker’s, finder’s or
similar fee or other commission in connection with this Agreement or the
transactions contemplated hereby.

4.6    Proxy
Statement. None of
the information supplied in writing by the Buyer for
inclusion or incorporation by reference in the Proxy Statement will, at the date
it is first mailed to ACI’s stockholders and at the time of the Required ACI
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. 

SECTION
5. COVENANTS
OF THE PARTIES.

5.1    Restructuring
Matters.

 

(a)    Insurance. Prior
to the Closing Date, ACI will maintain the insurance policies listed on
Schedule
3.17 that are
currently held by ACI. Effective on the Closing Date, the Company will cease to
be a beneficiary and/or insured under any insurance policy maintained by
Seller Parties.
The Buyer shall be
entitled to any insurance premium or other refund related to the removal of the
Company from such insurance policies.

(b)    Assets.
Notwithstanding any provision of this Agreement or the Transaction Documents
whatsoever, neither this Agreement or the Transaction Documents transfers or
grants to the
Buyer or
its
Affiliates
any right, title or interest to or in any Intellectual Property of the
Sellers or their
Affiliates other
than the Business Intellectual Property.

24

(c)    Counsel
Corporation. On or
prior to the Closing Date, the
Buyer shall
provide all bonds and other security necessary to relieve the
Parent and its
Affiliates other than Company of any obligation or liability under and related
to the items identified on Schedule
5.1(c) that are
related to the Company’s Licenses and Permits. On or prior to the Closing Date,
the
Buyer shall
provide all guarantees or other assurances necessary to relieve the
Parent and its
Affiliates of any obligation or liability under and related to the guarantees of
the Company obligations identified on Schedule
5.1(c).

(d)    Acceris
Name. Within
sixty (60) Business Days after the Closing Date, the
Seller Parties shall
make or cause their Affiliates or subsidiaries to make any necessary filings
with any Governmental Entity and take any other action necessary to amend their
respective Organizational Documents so that the name of the
Seller Parties and their Affiliates do not contain the word “Acceris” or any
derivative or variation thereof. The Company hereby grants the Buyer a license
to use the name “Acceris” or any derivative or variation thereof for the purpose
of and so long as necessary to allow the Buyer to give the Company’s customers
any notice of the transaction required by Law and for the purpose of
facilitating the Buyer’s making of required filings with Governmental Entities.
All use of the Company’s trademarks shall be in a manner consistent with the
Company’s prior use of such trademarks.

(e)    Website.
Effective on the Closing Date and for a period of one-year thereafter,
the
Buyer shall
cause the website located at the URL www.acceris.com (the
“ACC
Website”) to
display a prominent hyperlink to a website to be designed by ACI prior to the
Closing (the “ACI
Website”). The
Buyer and ACI shall cooperate to move all content related to ACI from the ACC
Website to the ACI Website effective on the Closing Date.
Effective on the Closing Date, the Buyer shall take control of the website
located at URL www.acceris.com and own the ACC Website.

25

5.2    Stockholder
Approval Mechanics.

(a)    Proxy
Statement. As soon
as reasonably practicable following the Effective Date, the
Seller
Parties shall
prepare and cause to be filed the Proxy Statement with the SEC. The Seller
Parties shall cause the Proxy Statement to comply with the rules and regulations
promulgated by the SEC and shall respond promptly to any comments of the SEC or
its staff. The Buyer and its
counsel shall be given an opportunity to review and
comment
on the Proxy Statement and any comments thereto by the SEC or its staff prior to
any filing with the SEC. If the
Seller
Parties or
the
Buyer
become aware of
any information that should be disclosed in an amendment or supplement to the
Proxy Statement, then it shall promptly inform the other thereof and
the
Seller
Parties shall
file such amendment or supplement with the SEC and, if appropriate, mail such
amendment or supplement to the stockholders of ACI.

(b)    Stockholders’
Meeting.
The
Seller
Parties shall
take all action necessary under all applicable Laws to call, give notice of and
hold a meeting of the holders of ACI’s
capital stock to vote on a proposal to approve this Agreement and the
transactions contemplated by this Agreement (the “ACI
Stockholders Meeting”).
The
Seller
Parties shall use commercially reasonable efforts to solicit proxies in favor of
the adoption of this Agreement, the Transaction Documents and the transactions
contemplated by this Agreement and the Transaction Documents. The ACI
Stockholders Meeting shall be held (on a date selected by the
Seller Parties
) within
a reasonable time period after this Agreement is executed by the
parties.

(c)    Parent
Stock. The
Parent agrees that it will cause all of the shares of capital stock of ACI
beneficially owned by the Parent and its Affiliates, and outstanding as the
record date for any meeting of the stockholders of ACI called to consider and
vote to approve the transactions contemplated by this Agreement, including any
shares of ACI’s capital stock acquired after the Effective Date (the
“Parent
Stock”), to be
voted in favor of this Agreement and the transactions contemplated buy this
Agreement. The Parent further agrees that it will not, and that it will cause
its Affiliates not to, contract to sell, encumber, sell or otherwise transfer or
dispose of any of the Parent Stock or any interest therein or securities
convertible therein to or any voting rights with respect thereto other than (i)
following termination of this Agreement, or (ii) with Buyer’s prior written
consent. After the Execution Date and before the record date for the ACI
Stockholders Meeting, ACI shall not issue any additional capital stock other
than ordinary course issuances and under option plans that would result in a
change of control of ACI. 

5.3    Outstanding
Debt. On or
prior to the Closing Date, the
Seller
Parties shall
satisfy those Debts of the Company that are set forth on Schedule
5.3 and
obtain releases of those Liens that are set forth on Schedule
5.3.

26

5.4    Corrections
to Schedules.
Schedule
3.3 will be
amended by the Seller Parties and such amendment shall be delivered to the Buyer
in the 20 Business days following the Execution Date. If either party discovers
that any of its representations or warranties prior to
the Closing was not
true and correct in any material respect when made, then such party shall
promptly deliver to the other a correction to the applicable Schedule specifying
such change. Any such correction made
prior to the Closing shall be
binding and shall be deemed to supplement or amend the Schedules for the purpose
of determining the accuracy of any of the representations and warranties or
other covenants made by such party in this Agreement as of the Closing Date but
shall not affect the rights of the other party for the misstatement as of the
Effective Date.

5.5    Covenant
Not to Compete; Non-Solicitation.

 

(a)    For a
period of three
(3) years
following the Closing Date, the
Seller Parties shall not (and the Parent will cause its Affiliates to not)
directly or indirectly, (i) own, manage, operate, control, support, financially
or otherwise (e.g., by providing consulting services to, or lending a service or
trade mark to), or participate in the ownership, management, operation, control
or support of, any business that directly or
indirectly competes
with the Business; provided that nothing contained in this Agreement or the
Transaction Documents shall restrict the right of the Seller Parties or their
Affiliates to exploit, by way of sale, license or otherwise, the assets owned or
licensed by the Seller Parties or their Affiliates or continuing to engage in
related research and development activities, or (ii) induce or seek to induce
any customer, supplier, agent, licensee or other Person with a prior or
current business
relationship with the Company to terminate or adversely change its business
relationship with the Buyer or interfere in such relationship in any way other
than as necessary to enforce the rights of the Seller Parties against any such
customer, supplier, agent, licensee or other Person.

(b)    For a
period of twenty
four (24) months
following the Closing Date, none of the Seller Parties or their Affiliates on
one hand nor the Buyer and its Affiliates on the other hand shall directly or
indirectly encourage, induce, attempt to induce, solicit or attempt to solicit,
any employee of the other to terminate his or her relationship with his or her
employer; provided however that each party and its Affiliates may publish
solicitations for employees in the general media in the ordinary course of its
business. Notwithstanding the foregoing, for a period of two (2) years following
the Closing Date, neither the Seller Parties nor Buyer shall, and shall cause
their Affiliates to not, directly or indirectly employ or otherwise engage in
any manner any of their respective employees that are listed on Schedule
5.5(b) attached
hereto.

(c)    Each
party acknowledges that the remedy at Law for breach of the provisions of this
Section
5.5 shall be
inadequate and that, in addition to any other remedy the party may have, it
shall be entitled to an injunction restraining any breach or threatened breach,
without any bond or other security being required and without the necessity of
showing actual damages. If any court construes the covenant in this Section
5.5, or any
part of this Section
5.5, to be
unenforceable in any respect, the court may reduce the duration or area to the
extent necessary so that the provision is enforceable, and the provision, as
reduced, shall then be enforced. 

27

5.6    Compliance.
The Buyer
and the Seller Parties shall
comply with the requirements of applicable Law with respect to the operations of
the Company including preventing access to each other’s competitively sensitive
information.

5.7    Consents.

(a)    Prior to
the Closing, the Seller Parties shall use their commercially reasonable efforts
to obtain the third party Consents listed on Schedule
3.3. If any
consent is not obtained prior to the Closing despite the Seller Parties’
compliance with this Section
5.7(a), then to
the extent it would not constitute a violation of Law, the Buyer may, but is not
required to, deliver to the Seller Parties a written waiver of any condition to
the Closing contained in Section
9.3 with
respect thereto. If such a waiver is delivered to the Seller Parties, the Seller
Parties shall continue to use their commercially reasonable efforts to obtain
such consents for a period of 180 days following the Closing with the
full cooperation and participation of the Seller Parties to obtain such consent
within such one hundred eighty (180) day period.
Notwithstanding the foregoing, if any Consent listed on Schedule
3.3 is not
or cannot be obtained, or if an attempted assignment of the Contract for which
such Consent is required would be ineffective or would affect the applicable
contracting party’s rights so that the Buyer would not receive all of the
benefits under the Contract for which Consent is required, each party to this
Agreement will use its respective commercially reasonable efforts to provide the
Buyer with the benefits and relieve the Sellers of the burdens of the Contract
for which Consent is required, including without limitation enforcement for the
benefit of the Buyer of any and all rights of the Sellers (and the
extinguishment of the burdens of the Seller Parties) against a third party
thereto arising out of the default or cancellation by such third party or
otherwise. 

(b)    Each
party hereby agrees (i) to file all necessary applications for all Consents
required under regulatory Law at the appropriate Governmental Entity with
respect to the transactions contemplated hereby as promptly as practical after
the Effective Date, and (ii) to file all necessary applications for required
consents with PUCs and the
FCC jointly
to the extent permitted under applicable Laws and to the extent reasonably
necessary under the circumstances. Each party further agrees that (1) all such
joint filings shall be prepared by the Buyer in
cooperation with the Seller Parties, and (2)
with respect to all filings, whether or not joint filings, each party shall have
the right to review and comment on in advance drafts of all communications,
petitions, applications and other filings made or prepared by the
Buyer or the
Sellers in
connection with obtaining the requisite Consents required under regulatory Law
from the appropriate Governmental Entity for the transactions contemplated
hereby. 

28

(c)    Except
with respect to counsel or other advisors retained by a party, for which such
party shall bear its own expenses, the
Buyer on one
hand and the Seller Parties on the other hand shall share equally in all costs,
including attorneys fees, filings fees and the like, incurred in seeking and
obtaining the necessary Consents under regulatory Law. 

5.8    Employee
Benefit Matters.

(a)    The
Sellers shall retain responsibility for any valid claim under a Benefit Plan
made by a Business Employee on or after the Effective Date arising from a claim
incurred on or before the Effective Date that is not an Assumed Liability. Buyer
shall not be responsible for any claim under a Benefit Plan made by a Business
Employee between the Effective Date and the Execution Date that is outside the
ordinary course of Company’s business consistent with the history of the Benefit
Plans, including but not limited to claims arising from death or an
extraordinary or catastrophic injury. For purposes of this Section
5.8(a), (i) a
claim for life insurance is deemed incurred when the death occurs, and (ii) a
medical or dental claim is deemed incurred when the services are rendered, the
supplies are provided or medication is prescribed, and not when the condition
arose, except that claims relating to a hospital confinement that begins before
the Effective Date shall be treated as incurred on or before the Effective Date.
The Sellers shall retain responsibility for any Business Employee who has begun
to receive payments under the Sellers’ long-term disability plans before the
Effective Date. 

(b)    Sellers
shall retain responsibility for satisfying “continuation coverage” requirements
for all “group health plans” under COBRA with respect to (i) each former
employee of the Company who experienced a “qualifying event” under COBRA on or
before the Closing Date and any spouse, dependents or beneficiary of such former
employee, and (ii) Business Employees (and any spouse, dependents or beneficiary
of such employee or other employee) with respect to qualifying events that occur
on or before the Closing Date. The Sellers shall also retain responsibility for
satisfying continuation coverage requirements with respect to Business Employees
who are not hired by the Buyer for any reason. It is the
understanding and intention of the parties that, with respect to Business
Employees who are hired by the Buyer as of the Closing Date, that the Buyer
shall be a “successor employer” and such Business Employees shall not have a
“qualifying event” under COBRA.

(c)    After the
Closing Date, the Sellers shall be solely responsible for all of the Benefit
Plans and all Liabilities arising under the Sellers’ Benefit Plans that are not
Assumed Liabilities. The Buyer shall not assume any of the Benefit Plans or any
of the Liabilities arising under the Sellers’ Benefit Plans except the Assumed
Liabilities.

29

5.9    Employees.

(a)    The
Sellers have provided to the Buyer Schedule
3.19(g) which
identifies all Business Employees. The Sellers will terminate the employment of
each of the Business Employees as of the Closing except those listed on
Schedule
5.5(b). The
Buyer will have the right, but not the obligation, to hire any of such Business
Employees as of the Closing except those listed on Schedule
5.5(b).
No later
than 60 days following the Effective Date, the Sellers shall cooperate in good
faith with the Buyer to transfer to the Buyer such data relating to Business
Employees that the Buyer determines is necessary for the Buyer to determine
which of the Business Employees the Buyer wishes to extend an offer of
employment. Such data shall be updated by the Sellers as of the Closing if
required by the Buyer. The Sellers shall permit the Buyer reasonable access to
the Business Employees for the purpose of conducting interviews and extending
offers of employment. 

 

(b)    Nothing
in this Agreement shall create any rights in favor of any person not a party
hereto, including the Business Employees, or constitute an employment agreement
or condition of employment for any employee of the Sellers or their Affiliates.

 

(c)    On the
Closing Date the Buyer shall pay to each Business Employee an amount equal to
any and all accrued compensation (including without limitation salary,
commission, bonus or incentive pay) and termination benefits (including any
earned and/or accrued and unused vacation pay, or paid time off pay), earned by
such Business Employee as of the Closing, consistent with the Sellers’ policies
and procedures in effect as of the Closing.

 

(d)    The
Sellers shall give any of the Business Employees notice under the WARN Act if
required, and agree to defend, indemnify and hold the Buyer harmless, in
accordance with Article 7 below, from and against any losses, damages and
expenses, including without limitation attorneys’ fees and other costs of
litigation, arising from or relating to any WARN Act claims by Business
Employees and any claims related to the Buyer’s lawful decision to hire or not
to hire any Business Employees.

 

5.10    [Intentionally
Deleted] 

5.11    Break
Up Fee.

(a)    If this
Agreement is terminated other than pursuant to Section
10.1(c) or the
parties otherwise fail to close on the transactions contemplated by this
Agreement, the Buyer shall be entitled to receive from
Sellers an
amount equal to the following and paid in accordance with the Break Up Fee Loan
Documents: (i) any advances made by the Buyer to the Company which were made in
connection with any written agreements between the Buyer and the Sellers, less
the amount of any such advances already recovered by the Buyer; plus (ii) an
amount equal to the net income of the Company from the period beginning on the
Effective Date and ending on the date this Agreement is terminated; plus (iii) an
amount equal to five percent of the net income of the Company from the period
beginning on the Effective Date and ending on the date this Agreement is
terminated (collectively, the “Break
Up Fee”).

30

(b)    As
security for the payment of the Break Up Fee, on or before the Effective Date
the Buyer and the Seller Parties shall have entered into the Break Up Fee Loan
Documents. The Buyer and the Seller Parties shall comply with their respective
obligations under the terms and conditions of the Break Up Fee Loan Documents.

 

5.12    PUC
Consents. If the
Buyer waives or in any way amends or alters the condition precedent of the
Seller Parties set forth in Section
9.3(ii) that all
of the PUCs that are required by Law must be obtained at or before the Closing
date, the Buyer, ACI and the Company will (a) terminate their existing
Management Services Agreement, and (b) enter into a new management services
agreement for any states where such PUC approval has not been obtained, which
shall comport with all applicable Laws and provide that the Buyer will service
the customers in those states where PUC Consents have not been obtained in
consideration of the revenue generated by such customers until such time as such
PUC approval is obtained at which time such new management services agreement
shall automatically terminate. 

5.13    Further
Assurances.

 

(a)    Upon the
terms and subject to the conditions contained herein, each of the parties
agrees, both before and after the Closing Date, (i) to use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement and their
Management Services Agreement, including using its reasonable best efforts to
satisfy the conditions precedent to each party’s obligations hereunder, (ii) to
execute, or cause to be executed, any documents, instruments or conveyances of
any kind which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder or under their Management Services
agreement, and (iii) to reasonably cooperate with each other in connection with
the foregoing. 

(b)    To the
extent the parties determine after the Closing that any of the assets of a party
or its Affiliates are held by the other party or its Affiliates then they shall
cause the holder of such assets to transfer such assets to their rightful owner
without additional consideration and, upon request, to execute and deliver a
bill of sale or other instrument of transfer evidencing such
transfer.

5.14    Confidentiality.
Following the Closing Date, Buyer and the Seller Parties agree to and to cause
their Affiliates to: (a) maintain all Confidential Information in confidence;
(b) not, directly or indirectly, make known or communicate the Confidential
Information to any third party; and (c) protect the Confidential Information
from loss or theft. 

31

5.15    Lien
Releases and Debt Restructuring Matters. On or
before June 25, 2005, the Seller Parties shall deliver the following to the
Buyer: (a) a written agreement from Laurus that the Laurus Interest will be
released on or before the Closing; (b) a written agreement from Laurus that the
Foothills Loan (i) can be assigned to the Buyer without the consent of Laurus,
and (ii) if the Foothills Loan is paid off in full and replaced with another
credit facility, such a credit facility will have a collateral position that has
priority over the Laurus Interest; and (c) a written agreement from Foothills
that upon satisfaction of the Foothills Loan, at the option of the Buyer
Foothills will assign any rights it has in the Foothills Loan to the Buyer or a
third party designated by the Buyer, including without limitation the collateral
position of the Foothills Loan. 

5.16    Proxy
to Vote Shares. On the
Execution Date, the Parent and its applicable Affiliates shall deliver an
irrevocable proxy (which shall be considered coupled with an interest) to the
Buyer signed by any necessary officer of the Parent or such Affiliates to vote
the shares identified on the Schedule 13D/A in favor or the Required ACI
Shareholder Vote. 

5.17    Guaranty.
Guarantor hereby guarantees to the Seller Parties the full and prompt
performance and payment of the Buyer’s obligations under this Agreement and the
Transaction Documents (collectively, the “Guaranteed
Obligations”). Any
act of the Seller Parties consisting of a waiver of any of the terms, covenants
or conditions of the Guaranteed Obligations, or the giving of any consent to any
matter or thing relating to the Guaranteed Obligations, or the granting of any
indulgences or extensions of time to the Buyer or Guarantor, may be done without
notice to Guarantor and without releasing the obligations of Guarantor
hereunder. The obligations of Guarantor hereunder shall not be released by any
of the Seller Parties’ receipt, application or release of any security given for
the payment, performance and observance of any of the Guaranteed Obligations.
Similarly, the obligations of Guarantor hereunder shall not be released by any
modification of any of the terms of the Guaranteed Obligations made by the
Seller Parties and the Buyer, but in the case of any such modification, the
liability of Guarantor shall be deemed modified in accordance with the terms of
any such modification. The liability of Guarantor hereunder shall in no way be
affected by (a) the release or discharge of the Buyer in any creditors’
receivership, bankruptcy or other proceedings, (b) the impairment, limitation or
modification of the liability of the Buyer or the estate of the Buyer in
bankruptcy, or of any remedy for the enforcement of any of the Guaranteed
Obligations resulting from the operation of any present or future provision of
the Federal bankruptcy law or any other statute or the decision of any court,
(c) the rejection or disaffirmance of any instrument, document or agreement
evidencing any of the Guaranteed Obligations in any such proceedings, (d) the
assignment or transfer of any of the Guaranteed Obligations by the Seller
Parties, (e) the cessation from any cause whatsoever of the liability of the
Buyer with respect to the Guaranteed Obligations. This is a guaranty of payment
and performance and not of collection. The liability of Guarantor hereunder
shall be direct and immediate and not conditional or contingent upon the pursuit
of any remedies against the Buyer or any other person, nor against any
collateral available to the Seller Parties. Guarantor hereby waives any right to
require that an action be brought against Buyer or any other person or to
require that resort be had to any collateral in favor of the Seller Parties
prior to discharging its obligations hereunder.

32

SECTION
6. TAX
MATTERS.

 

6.1    Transfer
Taxes.
Notwithstanding
any other provision of this Agreement, the
Seller Parties shall be responsible for (without any right to be reimbursed by
the Buyer) up to $60,000 and the Buyer shall be responsible for the remainder of
any and all sales, transfer, document and stamp, bulk sale, or similar Taxes and
any conveyance fees and charges resulting from the consummation of the
transactions contemplated by this Agreement and the Transaction
Documents.

6.2     Tax
Returns and Contests.

(a)    Any claim
as a result of a notice from a Tax authority shall be treated as a Third Party
Claim subject to the provisions of Section
7.5 hereof.
In applying those provisions, neither
the Buyer nor the Seller Parties shall resolve, settle, compromise, or abandon
any issue or claim without the prior written consent of the Buyer or the Seller
Parties, as applicable, if such action would materially and adversely affect the
Tax liabilities of the Buyer or the Seller Parties, as applicable, in any period
after the Closing Date (including the imposition of any income Tax deficiencies,
the reduction of asset basis on cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization or depreciation
deductions or the reduction of loss or credit carryforwards). Such consent shall
not be unreasonably withheld.

(b)    The Buyer
and the Seller Parties shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of all Tax Returns
and any audit, litigation, or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the request of any other
party) the provision of records and information that are reasonably relevant to
any Tax Return of the Company, audit, litigation, or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Buyer
and the
Seller Parties agree (i) to
retain all books and records with respect to Taxes or Tax matters pertinent to
the Company relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and any extension thereof)
of the respective taxable periods, and (ii) to give the other
party
reasonable written notice before transferring, destroying, or discarding any
such books and records and, if the other
party so requests, to allow the other party to take
possession of such books and records. The Buyer and Seller Parties further
agree, upon request, to use their commercially reasonable efforts to obtain any
certificate or other document from any Governmental Entity or other Person as
may be necessary to mitigate, reduce, or eliminate any Taxes that could be
imposed (including with respect to the consummation of the transactions
contemplated herein).

33

(c)    The
consideration paid for the Acquired Assets shall be allocated among the Acquired
Assets in accordance with a schedule to be mutually agreed upon by Buyer and
Seller Parties within 60 days following Closing. The parties intend such
allocation to be in accordance with the provisions contained in Treasury
Regulation Section 1.1060-1T(d) and the parties agree to report the acquisition
for federal income tax purposes in accordance with such allocation. In
furtherance of the foregoing, the parties agree to execute and deliver Internal
Revenue Service Form 8594 reflecting such allocation. 

SECTION
7. INDEMNIFICATION.

 

7.1    Survival. Each of
the representations and warranties set forth in this Agreement shall survive the
Closing for a period terminating twelve months
after the Closing Date;
provided, however, that the representations and warranties set forth in
Sections
3.1 (Organization, Qualification and Power), 3.2 (Authority), 3.3 (No Conflict
or Violation; Consents), 3.4 (Acquired Assets and Assumed Liabilities),
3.7
(Absence of Undisclosed Liabilities), 3.8 (Tax Matters), 3.16 (Employee Plans),
3.19 (Labor and Employment Matters), 3.20 (Environmental, Health and Safety
Matters) 3.21
(Accounts Receivable and Accounts Payable) and
Section 4 (Buyer Representations) shall survive until the expiration of the
applicable statute of limitations. No Action arising out of or related to a
breach of a representation or warranty under this Agreement shall be asserted by
any indemnified party after the expiration of the applicable time period, if
any, unless notice of such claim or action is given to the indemnifying party
prior to the expiration of such applicable time period. The covenants and
agreements of the parties contained in this Agreement shall survive indefinitely.

7.2    Indemnification
by the
Seller Parties.
The
Seller Parties shall
jointly and severally indemnify defend and hold harmless the Buyer
and its
Affiliates, directors, governors,
officers,
managers,
employees, agents
and
representatives (collectively,
the “Buyer
Indemnitees”) from
any direct damages arising out of or related to third party claims and
Liabilities incurred by any Buyer Indemnitee, to the extent such Liabilities
arise out of or result from any one or more of the following:

(a)    any
breach of any representation or warranty of the
Seller Parties contained in Section
3 of this
Agreement;

(b)    any
breach of or default in the performance of any covenant or agreement of
the
Seller Parties contained
in this Agreement or the
Transaction Documents; or

34

(c)    any
Liabilities arising from or related to the Excluded Assets or the Excluded
Liabilities.

In no
event shall the Seller Parties be required to indemnify the Buyer Indemnitees
from any type of indirect damages, including, but not limited to special,
incidental or consequential damages or lost profits.

7.3    Indemnification
by the Buyer.
The
Buyer shall
indemnify, defend and hold harmless the
Seller Parties and their Affiliates, directors, officers, employees, agents
or
representatives (collectively,
the “Seller
Indemnitees”) from
any direct damages that arise out of or relate to third party claims and
Liabilities incurred by any Seller Indemnitee, to the extent such Liabilities
arise out of or result from, any one or more of the following:

(a)    any
breach of any representation or warranty of the Buyer
contained in Section
4 of this
Agreement; 

(b)    any
breach of or default in the performance of any covenant or agreement of the
Buyer contained
in this Agreement or the
Transaction Documents; or

(c)    any
Liabilities arising from or related to the Acquired Assets or the Assumed
Liabilities, other than the Excluded Liabilities.

In no
event shall the Buyer be required to indemnify the Seller Indemnitees from any
type of indirect damages, including, but not limited to special, incidental or
consequential damages or lost profits.

7.4    Limitations
on Indemnification. The
rights of the Buyer Indemnitees or the Seller Indemnitees to indemnification
under Section
7.2(a) or
7.3(a), as the
case may be, shall be limited as follows: 

(a)    The
aggregate amount of indemnification obligations for all Liabilities under
Section
7.2(a) or
7.3(a) shall
not exceed $2,000,000 (the “Liability
Cap”);

(b)    The
Seller Parties and Buyer shall not be liable for Liabilities under Section
7.2(a) and
7.3(a),
respectively, unless and until such Liabilities exceed an amount equal to
$200,000 in the
aggregate, at which point the other party, shall be liable for all Liabilities
from the
first dollar of such loss amount.

35

(c)    Notwithstanding
anything else in this Agreement to the contrary, the amount of any Liabilities
shall be reduced to the
extent of any indemnitee’s insurance coverage for such Liabilities and such
indemnitee shall be obligated to seek recovery from any available
insurance.

7.5    Procedures
for Indemnification.

 

(a)    Whenever
a claim for Liabilities shall arise for which one party (the “Indemnitee”) shall
be entitled to indemnification hereunder, such Indemnitee shall notify the other
party (the “Indemnitor”) in
writing within thirty
(30) days of
the first receipt of notice of such claim; provided, however, that the failure
to give notice as herein provided shall not relieve the Indemnitor of its
obligation to indemnify the Indemnitee except to the extent that the Indemnitor
shall have been prejudiced in its ability to defend such claim. Such notice
shall describe the nature of such claim, the facts and circumstances that give
rise to such claim and the amount of such claim if reasonably ascertainable at
the time such claim is made, and if not then a good faith estimate thereof. If
the Indemnitor shall be duly notified of such dispute and such dispute is not a
Third Party Claim, the parties shall attempt to settle and compromise the same,
or if unable to do so within twenty (20) days of the Indemnitee’s delivery of
notice of a dispute, the parties may seek whatever remedy they may have in Law
or equity to enforce such indemnification obligations. Any rights of
indemnification established by reason of such settlement, compromise or Action
shall promptly thereafter be paid and satisfied by the Indemnitor.

(b)    Upon
receipt by the Indemnitor of a notice from the Indemnitee with respect to any
claim of a third party against the Indemnitee (a “Third
Party Claim”), for
which the Indemnitee seeks indemnification hereunder, provided that the
Indemnitor has acknowledged in writing its indemnification obligations with
respect to such Third Party Claim within thirty (30) days of the first receipt
of such notice, the
Indemnitor shall have the right to assume the defense of such Third Party Claim,
at its cost and expense, with counsel reasonably satisfactory to the Indemnitee,
and the Indemnitee shall cooperate to the extent reasonably requested by the
Indemnitor in defense or prosecution thereof. If the Indemnitor in a timely
basis elects to assume the defense of such Third Party Claim, the Indemnitee
shall have the right to employ its own counsel in any such case, and the fees
and expenses of such counsel shall be at the expense of the
Indemnitee;
provided that in the case that the Indemnitor assumes the defense of a Third
Party Claim and Indemnitor’s legal counsel determines that it has a conflict
under applicable ethical or legal rules in representing both the Indemnitor and
the Indemnitee in such matter, then the Indemnitee shall have the right to
employ its own counsel in such matter, and the fees and expenses of such counsel
shall be at the expense of Indemnitor. If the
Indemnitor does not in a timely basis assume the defense of a Third Party Claim
and/or disputes the Indemnitee’s right to indemnification, the Indemnitee shall
have the right to assume control of the defense of such Third Party Claim
through counsel of its choice, the reasonable costs of which shall be at the
Indemnitor’s expense in the event that the Indemnitee’s right of indemnification
is ultimately established through settlement, compromise the Indemnitee, the
Indemnitor shall not have the right to settle any Third Party Claim for which
indemnification has been sought and is available hereunder without the prior
written consent of the Indemnitee, such consent not to be unreasonably withheld,
conditioned or delayed, except
for any such settlement that would have an adverse effect upon Buyer or the
Sellers, in which case the party believing (in its sole discretion) that the
settlement would have any adverse effect upon it must consent to such
settlement. If the
Indemnitor has not assumed the defense of a Third Party Claim but the Indemnitee
intends to or attempts to hold the Indemnitor liable, the Indemnitee will not
have the right to settle such Third Party Claim without the prior written
consent of Indemnitor, such consent not to be unreasonably withheld, conditioned
or delayed.

36

7.6    Character
of Payments. Any
payments made pursuant to this Section
7 shall be
treated by the
Buyer and the
Seller Parties as adjustments to the Purchase Price for all
purposes.

7.7    Cooperation.
Notwithstanding anything to the contrary contained in this Section
7, the
parties shall cooperate with each other in connection with any Action for
indemnification hereunder, including keeping each other reasonably informed with
respect to the status of any Action and to obtain the benefits of any insurance
coverage for Third Party Claims that may be in effect at the time a Third Party
Claim is asserted. Each Indemnitee shall make commercially reasonable efforts to
mitigate any claim or liability that such Indemnitee asserts under this
Agreement. In the event that an Indemnitee shall fail to make such commercially
reasonable efforts to mitigate any claim or liability, then notwithstanding
anything else to the contrary contained herein, the Indemnitor shall not be
required to indemnify such Indemnitee for that portion of any Loss that could
reasonably be expected to have been avoided if such Indemnitee had made such
efforts. The
parties specifically acknowledge that the litigation listed on Schedule
3.14 shall be
considered Actions for which the Seller Parties have agreed by signing this
Agreement to be covered by the indemnity provisions of this Agreement. The
Seller Parties will defend such Actions. The Buyer shall be free to hire its own
legal counsel at its own expense; provided, however, that in the event that
defense of the Buyer is necessary and the legal counsel for the Seller Parties
determines it has a conflict under applicable ethical or legal rules in
representing both the Seller Parties and the Buyer in such Actions, then the
Buyer shall have the right to employ its own counsel in such matter, and the
fees and expenses of such counsel with respect to such Actions (including all
out of pocket costs and expenses, court costs, judgments or settlement amounts
of the Buyer related to such settlement or trial of such Actions) shall be at
the expense of the Seller Parties.

7.8    Exclusive
Remedy. Except
with respect to specific performance, the rights of each Indemnitee under this
Section 7 shall be the sole and exclusive remedies of any Indemnitee and their
respective Affiliates with respect to claims covered by Section 7.2, 7.3 or
otherwise arising out of or related to this Agreement.

37

 

SECTION
8.   CONDITIONS
PRECEDENT TO PERFORMANCE BY THE SELLER PARTIES.

The
obligations of Seller Parties to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, at or before the Closing Date, of
the following conditions, any one or more of which may be waived by Seller
Parties in their sole discretion:

8.1    Representations
and Warranties of the Buyer. All
representations and warranties made by the Buyer in this
Agreement shall be true and correct in all material respects as of the
date(s)
specified in Section
4
hereof. 

8.2    Performance
of the Obligations of the Buyer. The
Buyer shall
have performed, in all material respects, all covenants, agreements and
obligations required under this Agreement to be performed by it on or before the
Closing Date, and Seller Parties shall have received a certificate to that
effect dated the Closing Date and signed by a manager of the
Buyer.

8.3    Transaction
Documents. The
Buyer shall have executed and delivered to the
Seller
Parties the
Transaction Documents and such documents as the Seller Parties may reasonably
request in order to effect the transactions contemplated hereunder.

8.4    No
Violation of Orders. No
preliminary or permanent injunction or other order issued by any court or other
Governmental Entity, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any Governmental Entity that declares this
Agreement invalid or unenforceable in any respect or which prevents the
consummation of the transactions contemplated hereby shall be in effect; and no
Action before any Governmental Entity shall have been instituted or threatened
by any Governmental Entity or by any other Person, which seeks to prevent the
consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement, and which in any
such case has a reasonable likelihood of success in the written opinion of
counsel to the
Seller Parties.

8.5    Required
Consents. The
following
Consents shall
have been obtained or granted by and be in full force and effect on the Closing
Date:
(a) all
Consents that are required by the FCC under the Communications Act and the rules
and regulations promulgated thereunder by the FCC;
and
(b)
the
number of ACI stock holders necessary under ACI’s Organizational Documents and
applicable Law shall have approved this Agreement, the Transaction Documents and
the transactions contemplated by this Agreement and the Transaction Documents
pursuant to the Required ACI Stockholder Vote.

38

8.6    Buyer
Legal Opinion. On or
before the Closing Date the Seller Parties shall have received a legal opinion
from the Buyer’s counsel in form and substance reasonably satisfactory to the
Seller Parties and their counsel. 

SECTION
9. CONDITIONS
PRECEDENT TO PERFORMANCE BY THE BUYER.

The
obligations of the Buyer to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, at or before the Effective
Date and on the Closing
Date, of the following conditions, any one or more of which may be waived by the
Buyer in its
sole discretion: 

9.1    Representations
and Warranties of Seller
Parties. All
representations and warranties made by Seller Parties shall be true and correct
in all material respects as of the date(s)
specified in Section
3
hereof.

9.2    Performance
of the Obligations of Seller
Parties. The
Seller Parties shall have performed, in all material respects, all covenants,
agreements and obligations required under this Agreement to be performed by them
on or before the Closing Date, and the Buyer shall
have received a certificate to that effect dated the Closing Date and signed by
an executive officer of each of
the Seller
Parties.

9.3    Required
Consents. The
following
Consents shall
have been obtained or granted by and be in full force and effect on the Closing
Date:
(i) all
Consents that are required by the FCC under the Communications Act and the rules
and regulations promulgated thereunder by the FCC;
(ii) the
PUCs that are required by Law; (iii)
the
number of ACI stockholders necessary under ACI’s Organizational Documents and
applicable Law shall have approved this Agreement, the Transaction Documents and
the transactions contemplated by this Agreement and the Transaction Documents
pursuant to the Required ACI Stockholder Vote; and
(iv) the consents described on Schedule 3.3. 

9.4    Transaction
Documents.
The
Seller
Parties shall
have executed and delivered to the Buyer the
Transaction Documents and such
documents as the Buyer may
reasonably request in order to effect the transactions contemplated
hereunder.

39

9.5    No
Violation of Orders. No
preliminary or permanent injunction or other order issued by any court or other
Governmental Entity, nor any statute, rule, regulation, decree or executive
order promulgated or enacted by any Governmental Entity that declares this
Agreement invalid or unenforceable in any respect or which prevents the
consummation of the transactions contemplated hereby shall be in effect; and no
Action before any Governmental Entity shall have been instituted or threatened
by any Governmental Entity or by any other Person, which seeks to prevent the
consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement, and which in any
such case has a reasonable likelihood of success in the written opinion of
counsel to the Buyer.

9.6    Seller
Parties’ Legal Opinion. On or
before the Closing Date the Buyer shall have received a legal opinion from the
Seller Parties’ counsel in form and substance reasonably satisfactory to the
Buyer and its counsel. 

9.7    Tax
Clearance Letters.
The Buyer
shall have received Tax
clearance letters from the applicable state Taxing agencies of the states of
California, Florida, New York, New Jersey and Pennsylvania.

9.8    FIRPTA
Affidavit. The
Sellers shall have delivered to the Buyer an affidavit they are not “foreign
persons” in the form and substance required by the Treasury Regulations pursuant
to Code Section 1445. 

9.9    Seller
Party Liens. The
Seller Parties shall have delivered
releases and terminations of any Liens held by any of the Seller Parties or
their Affiliates on the Acquired Assets on or before the Closing. 

9.10   USF
Settlement.
 The
Company and/or the Buyer and the Universal Services Administrative Company (the
“USAC”) shall
have entered into a settlement proposal with USAC for approval by the FCC and
the FCC petition to approve a written settlement agreement on such terms shall
have been filed for approval with the FCC on terms reasonably acceptable to the
Buyer with respect to amounts owed to the USAC by the Company which are included
within the Assumed Liabilities. If the term of repayment of the final FCC
approved written repayment agreement is more than 24 but less than 36 months
from the Execution Date, the Seller Parties shall loan to the Buyer the
difference monthly of the amount due to USF under the written settlement
agreement versus the amount due monthly to USF if the repayment term were 36
months at such time of the written settlement agreement to be repaid by the
Buyer to the Seller Parties at 9% interest upon such terms as the Buyer and
Seller Parties so agree such that the cash flow effect of the actual USF
repayment plan and the repayment of the Seller Parties loan is the same cash
flow as if the USF written settlement agreement provided for 36 monthly
payments.

40

SECTION
10. TERMINATION.

10.1    Termination
Before Termination Restriction Date.
Notwithstanding anything to the contrary contained herein, this Agreement may be
terminated at any time before the Termination Restriction Date
only:

(a)    By mutual
consent of the Seller Parties and the Buyer;

 

(b)    By the
Buyer, if the Seller Parties have materially breached any representation,
warranty, covenant, obligation or agreement contained in this Agreement and have
not, in the case of a material breach of a covenant or agreement, cured such
material breach within twenty (20) Business Days after written notice to the
Seller Parties;

 

(c)    By the
Seller Parties, if the Buyer has materially breached any representation,
warranty, covenant, obligation or agreement contained in this Agreement and has
not, in the case of a material breach of a covenant or agreement, cured such
material breach within twenty (20) Business Days after written notice to the
Buyer;

 

(d)    By the
Buyer if: (i) there shall be an order or administrative ruling of the FCC, a
PUC, or a federal or state court in effect preventing the consummation of the
transactions contemplated hereby; or (ii) there shall be any final action taken,
or any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the transactions contemplated hereby by any Governmental
Entity which would make consummation of the transactions contemplated hereby
illegal;

 

(e)    By the
Seller Parties if the Closing Date shall not have been consummated by December
31, 2005; 

 

(f)    By the
Buyer if the Closing Date shall not have been consummated by September 30, 2005;
provided, however, that this shall not be exercised if the Seller Parties comply
with the terms of 10.2(c) below on or prior to September 30, 2005; or
 

(g)    By the
Buyer or the Seller Parties, if the ACI Stockholders Meeting (including any
adjournments and postponements thereof) shall have been held and ACI’s
stockholders shall have taken a final vote on a proposal to adopt this Agreement
and this Agreement shall not have been adopted by the Required ACI Stockholder
Vote.

 

(h)    By the
Buyer, if any of the Seller Parties liquidates or voluntarily files, or has
filed against them involuntarily, a petition under the United States Bankruptcy
Code, the Canadian bankruptcy code or a similar state statutory scheme.

 

41

(i)    By the
Buyer, if the
Seller Parties are unable to comply with their obligations under Section 5.15 of
this Agreement. 

10.2    Termination After
Termination Restriction Date.
Notwithstanding anything to the contrary contained herein, this Agreement may be
terminated at any time on or
after the Termination Restriction Date only: 

(a)    By mutual
consent of the Seller Parties and the Buyer; 

 

(b)    By the
Buyer if: (i) there
shall be an order or administrative ruling of the FCC, a PUC, or a federal or
state court in effect preventing the consummation of the transactions
contemplated hereby; or (ii) there shall be any final action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated hereby by any Governmental Entity
which would make consummation of the transactions contemplated hereby illegal;

(c)    By the
Seller Parties or the
Buyer, if the
Closing
Date shall
not have been consummated by December
31, 2005; provided that Buyer may terminate this Agreement at any time after
September 30, 2005, if the Seller Parties do not arrange to fund and fund
in advance the
ordinary course expenses of operating Company on a weekly basis after September
30, 2005; or

(d)    By the
Buyer or
Seller Parties if the ACI Stockholders Meeting (including any adjournments and
postponements thereof) shall have been held and ACI’s stockholders shall have
taken a final vote on a proposal to adopt this Agreement and this Agreement
shall not have been adopted by the Required ACI Stockholder Vote.

(e)    By the
Buyer, if any of the Seller Parties liquidates or voluntarily files, or has
filed against them involuntarily, a petition under the United States Bankruptcy
Code, the Canadian bankruptcy code or a similar state statutory scheme.

 

(f)    By the
Buyer, if the Seller Parties are unable to comply with their obligations under
Section 5.15 of this Agreement. 

10.3    Effect
of Termination. In the
event of the termination of this Agreement, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of the
Seller Parties or the Buyer, or
their respective Affiliates, officers, directors, stockholders, partners or
other Persons under their control; provided, however, that any termination of
this Agreement pursuant to Section
10.1(b) or
Section
10.1(c) shall
not relieve the defaulting or breaching party from any liability to the
non-defaulting or non-breaching party. Notwithstanding
the foregoing, if this Agreement is terminated other than pursuant to
Section
10.1(c), Company
shall pay the Break Up Fee to the Buyer. In addition, a termination other than
pursuant to Section
10.1(c) shall
constitute an event of default under the Break Up Fee Loan Documents that will
enable the Buyer to avail itself to the remedies available to it under the Break
Up Fee Loan Documents and under applicable Law.

42

SECTION
11. MISCELLANEOUS.

11.1    Successors
and Assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be directly or indirectly assigned (by change of control, operation of Law or
otherwise) without the prior written consent of the other party hereto. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective permitted
successors and assigns. Any purported assignment in violation of this
Section
11.1 shall be
null and void and of no force or effect.

11.2    Governing
Law, Jurisdiction. This
Agreement shall be construed, performed and enforced in accordance with, and
governed by, the Laws of the State of Illinois,
without giving effect to the conflict or choice of Law rules thereof.
Each of
the parties submits to the exclusive jurisdiction of any state or federal court
sitting in Cook County, Illinois, in any action or proceeding arising out of or
relating to this Agreement or the Transaction Documents and agrees that all
claims in respect of the action or proceeding shall be heard and determined
there. 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 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. Each party agrees that a final judgment in any action or
proceeding so brought will be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or in equity.

11.3    Expenses. Except
as otherwise expressly provided in this Agreement, all of the fees, expenses and
costs (including
legal, accounting or other advisor fees and costs and court costs) incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party hereto incurring such fees, expenses and costs.

11.4    Severability. Each
provision of this Agreement is intended to be severable. Should any provision of
this Agreement or the application thereof be judicially, or by arbitral award,
declared to be or become illegal, invalid, unenforceable or void, the remainder
of this Agreement will continue in full force and effect and the application of
such provision to other Persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties.

43

11.5    Notices. All
notices, requests, demands and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is to be given; (ii) on
the day of transmission if sent via facsimile transmission to the facsimile
number given below, with confirmation of receipt and followed by notice given
pursuant to any of the other methods permitted by this Section
11.5; (iii)
on the day after delivery to Federal Express or similar overnight courier or the
Express Mail service maintained by the United States Postal Service; or (iv) on
the fifth calendar day after mailing, if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows: 

 

	
      If
      to any Seller Party:
	
      Acceris
      Communications Corp.

	 	
      c/o
      Counsel Corporation

	 	
      Scotia
      Plaza, Suite 3200

	 	
      40
      King Street West

	 	
      Toronto,
      Ontario M5H 3Y2

	 	
      Canada

	 	
      Attn:
      Chief Executive Officer

	 	
      Facsimile:
      416-866-3061

	 	 
	
      Copy
      to:
	
      Harwell
      Howard Hyne Gabbert & Manner, P.C. 

	 	
      315
      Deaderick Street, Suite 1800

	 	
      Nashville,
      TN 37238-1800

	 	
      Attn:
      Curtis Capeling

	 	
      Facsimile:
      (615)-251-1059

	 	 
	
      If
      to the Buyer:
      
	
      Acceris
      Management and Acquisition LLC

	 	
      c/o
      North Central Equity LLC

	 	
      60
      South Sixth Street, Suite 2535

	 	
      Minneapolis,
      MN 55402

	 	
      Attn:
      Elam Baer and Drew S. Backstrand, Esq.

	 	
      Facsimile:
      (612) 455-1022

	 	 

 

44

 

	
      Copy
      to: 
	
      Gray,
      Plant, Mooty Mooty & Bennett, P.A.

	 	
      500
      IDS Center

	 	
      80
      South Eighth Street

	 	
      Minneapolis,
      MN 55402

	 	
      Attn:
      J.C. Anderson, Esq.

	 	
      Facsimile:
      (612)
      632-4444

 

Any party
may change its address for the purpose of this Section by giving the other party
written notice of its new address in the manner set forth above.

11.6    Amendments;
Waivers. This
Agreement may be amended or modified, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or of
the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall not be deemed
to be nor construed as a further or continuing waiver of any such condition, or
of the breach of any other provision, term, covenant, representation or warranty
of this Agreement.

11.7    Public
Announcements. Except
as may be required by applicable Law, no party to this Agreement shall, or shall
allow any of its Affiliates, to make any public announcements in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without prior consent of the other party, and the parties shall
cooperate as to the timing and contents of any such announcement. 

11.8    Entire
Agreement. This
Agreement shall not constitute or evidence a binding agreement between the
parties until it has been executed and delivered by the parties. This Agreement
and the Transaction Documents contain the entire understanding among the parties
hereto with respect to the transactions contemplated hereby and supersede and
replace all prior and contemporaneous agreements and understandings, oral or
written, with regard to such transactions. All schedules hereto are expressly
made a part of this Agreement, as fully as though completely set forth
herein and
shall constitute part of any representation or warranty, covenant or agreement
stated by the party providing such schedules under the Agreement.

11.9    Parties
in Interest. Nothing
in this Agreement is intended to confer any rights or remedies under or by
reason of this Agreement on any Persons other than parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement is
intended to relieve or discharge the obligations or liability of any third
Persons to the
Seller Parties or the
Buyer. No
provision of this Agreement shall give any third parties any right of
subrogation or action over or against the
Seller Parties or the
Buyer.

45

11.10    Section
and Paragraph Headings. The
section and paragraph headings in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement.

11.11    Counterparts;
Facsimile Signatures. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which shall constitute the same instrument. This Agreement,
the Stockholder Support Agreement and the Management Services Agreement and any
other document or agreement executed in connection herewith (other than any
document for which an originally executed signature page is required by Law) may
be executed by delivery of a facsimile copy of an executed signature page with
the same force and effect as the delivery of an originally executed signature
page. In the event any party delivers a facsimile copy of a signature page to
this Agreement, the Management Services Agreement or any other document or
agreement executed in connection herewith, such party shall deliver an
originally executed signature page within three (3) Business Days of delivering
such facsimile signature page or at any time thereafter upon request; provided,
however, that the failure to deliver any such originally executed signature page
shall not affect the validity of the signature page delivered by facsimile,
which has and shall continue to have the same force and effect as the originally
executed signature page.

11.12    Interpretation. Except
as otherwise provided or if the context otherwise requires, whenever used in
this Agreement, (a) any noun or pronoun shall be deemed to include the plural
and the singular, (b) the terms “include” and “including” shall be deemed to be
followed by the phrase “without limitation,” (c) unless the context otherwise
requires, all references to Articles and Sections refer to Articles and Sections
of this Agreement, all references to Schedules are to Schedules attached to this
Agreement, and all references to Exhibits are to Exhibits attached to this
Agreement, each of which is made a part of this Agreement for all purposes, (d)
the words “herein,” “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Section or other
subdivision, (e) any definition of or reference to any Law, agreement,
instrument or other document herein will be construed as referring to such Law,
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, (f) any definition of or reference to any
statute will be construed as referring also to any rules and regulations
promulgated thereunder, and (g) any use of “Dollars” or “$” shall refer to
United States dollars and any component thereof. The parties hereto have
participated jointly in the negotiations 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.

46

11.13    Specific
Performance. Each of
the parties acknowledge and agree that the other party 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 agree that the other party is entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement in any action instituted in
any court of the United States or any state having jurisdiction over the parties
and the matter (subject to the provisions set forth in Section
11.2 above),
in addition to any other remedy to which it may be entitled, at law or in
equity.

REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK. 

 

SIGNATURE
PAGE FOLLOWS

 

47

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and made effective as of the Execution Date. 

 

	 	 	 
	 	BUYER:
	 	
	 	
      ACCERIS
      MANAGEMENT AND ACQUISITION
      LLC

	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name: Elam Baer
	 	Title:   Chief Executive
      Officer

 

	 	 	 
	 	SELLER PARTIES:
	 	 
	 	COUNSEL
      CORPORATION
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title:

 

		 	 
	 	ACCERIS COMMUNICATIONS
      INC.
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title:

 

		 	 
	 	GUARANTOR:
	 	 
	 	NORTH CENTRAL EQUITY
      LLC
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name: Elam
      Baer
	 	Title:   Chief Executive
      Officer

 

[Signature
Page to Asset Purchase Agreement]

 

48

TABLE
OF CONTENTS

	
      Section
      1
	
      Definitions
	
      1

	 	 	 
	
      Section
      2
	
      Basic
      Transaction
	
      9

	
      2.1
      
	
      Sale
      of Acquired Assets
	
      9

	
      2.2
	
      Assumption
      of Assumed Liabilities
	
      10

	
      2.3
	
      Post-Effective
      Date Adjustment and Payment
	
      10

	
      2.4
	
      Adjustment
      to Company Balance Sheet
	
      10

	
      2.5
	
      The
      Closing
	
      10

	
      2.6
	
      Deliveries
      at the Closing
	
      11

	 	 	 
	
      Section
      3
	
      Representations
      and Warranties
	
      11

	
      3.1
	
      Organization,
      Qualification and Power
	
      11

	
      3.2
	
      Authority
	
      11

	
      3.3
	
      No
      Conflict or Violation; Consents
	
      12

	
      3.4
	
      Acquired
      Assets and Assumed Liabilities
	
      12

	
      3.5
	
      Financial
      Statements
	
      12

	
      3.6
	
      Absence
      of Certain Changes or Events
	
      13

	
      3.7
	
      Absence
      of Undisclosed Liabilities
	
      13

	
      3.8
	
      Tax
      Matters
	
      13

	
      3.9
	
      Real
      Property
	
      14

	
      3.10
	
      Personal
      Property
	
      14

	
      3.11
	
      Intellectual
      Property
	
      14

	
      3.12
	
      Licenses
      and Permits
	
      15

	
      3.13
	
      Compliance
      with Laws
	
      15

	
      3.14
	
      Litigation
	
      15

	
      3.15
	
      Contracts
	
      15

	
      3.16
	
      Employee
      Plans
	
      16

	
      3.17
	
      Insurance
	
      18

	
      3.18
	
      Transactions
      with Sellers and Affiliates
	
      18

	
      3.19
	
      Labor
      and Employment Matters
	
      18

	
      3.20
	
      Environmental,
      Health and Safety Matters
	
      19

	
      3.21
	
      Accounts
      Receivable; Accounts Payable
	
      19

	
      3.22
	
      No
      Brokers
	
      19

	
      3.23
	
      Customer
      Relations
	
      20

	
      3.24
	
      Parent
      Stock
	
      20

	
      3.25
	
      Qualifications
	
      20

	 	 	 
	
      Section
      4
	
      Representations
      and Warranties of the Buyer
	
      20

	
      4.1
	
      Corporate
      Organization
	
      20

	
      4.2
	
      Authorization
	
      20

	
      4.3
	
      No
      Conflict or Violation
	
      21

	
      4.4
	
      Consents
      and Approvals
	
      21

49

	
      4.5
	
      No
      Brokers
	
      21

	
      4.6
	
      Proxy
      Statements
	
      21

	 	 	 
	
      Section
      5
	
      Covenants
      of the Parties
	
      21

	
      5.1
	
      Restructuring
      Matters
	
      21

	
      5.2
	
      Stockholder
      Approval Mechanics
	
      22

	
      5.3
	
      Outstanding
      Debt
	
      23

	
      5.4
	
      Corrections
      to Schedules
	
      23

	
      5.5
	
      Covenant
      Not to Compete; Non-Solicitation
	
      23

	
      5.6
	
      Compliance
	
      24

	
      5.7
	
      Consents
	
      24

	
      5.8
	
      Employee
      Benefit Matters
	
      25

	
      5.9
	
      Employees
	
      26

	
      5.10
	
      [Intentionally
      Deleted]
	
      26

	
      5.11
	
      Break
      Up Fee
	
      26

	
      5.12
	
      PUC
      Consents
	
      27

	
      5.13
	
      Further
      Assurances
	
      27

	
      5.14
	
      Confidentiality
	
      27

	
      5.15
	
      Lien
      Releases and Debt Restructuring Matters
	
      27

	
      5.16
	
      Proxy
      to Vote Shares
	
      28

	
      5.17
	
      Guaranty
	
      28

	 	 	 
	
      Section
      6
	
      Tax
      Matters
	
      28

	
      6.1
	
      Transfer
      Taxes
	
      28

	
      6.2
	
      Tax
      Returns and Contests
	
      29

	
       
	 	 
	
      Section
      7
	
      Indemnification
	
      29

	
      7.1
	
      Survival
	
      29

	
      7.2
	
      Indemnification
      by the Seller Parties
	
      30

	
      7.3
	
      Indemnification
      by the Buyer
	
      30

	
      7.4
	
      Limitations
      on Indemnification
	
      31

	
      7.5
	
      Procedures
      for Indemnification
	
      31

	
      7.6
	
      Character
      of Payments
	
      32

	
      7.7
	
      Cooperation
	
      32

	
      7.8
	
      Exclusive
      Remedy
	
      33

	 	 	 
	
      Section
      8
	
      Conditions
      Precedent to Performance by the Seller Parties
	
      33

	
      8.1
	
      Representations
      and Warranties of the Buyer
	
      33

	
      8.2
	
      Performance
      of the Obligations of the Buyer
	
      33

	
      8.3
	
      Transaction
      Documents
	
      33

	
      8.4
	
      No
      Violation of Orders
	
      33

	
      8.5
	
      Required
      Consents
	
      33

	
      8.6
	
      Buyer
      Legal Opinion
	
      34

 

50

 

	
      Section
      9
	
      Conditions
      Precedent to Performance by the Buyer
	
      34

	
      9.1
	
      Representations
      and Warranties of Seller Parties
	
      34

	
      9.2
	
      Performance
      of the Obligations of Seller Parties
	
      34

	
      9.3
	
      Required
      Consents
	
      34

	
      9.4
	
      Transaction
      Documents
	
      34

	
      9.5
	
      No
      Violation of Orders
	
      34

	
      9.6
	
      Seller
      Parties’ Legal Opinion
	
      35

	
      9.7
	
      Tax
      Clearance Letters
	
      35

	
      9.8
	
      FIRPTA
      Affidavit
	
      35

	
      9.9
	
      Seller
      Party Liens
	
      35

	
      9.10
	
      USF
      Settlement
	
      35

	 	 	 
	
      Section
      10
	
      Termination
	
      35

	
      10.1
	
      Termination
      Before Termination Restriction Date
	
      36

	
      10.2
	
      Termination
      After Termination Restriction Date
	
      36

	
      10.3
	
      Effect
      of Termination
	
      37

	 	 	 
	
      Section
      11
	
      Miscellaneous
	
      37

	
      11.1
	
      Successors
      and Assigns
	
      37

	
      11.2
	
      Governing
      Law, Jurisdiction
	
      37

	
      11.3
	
      Expenses
	
      38

	
      11.4
	
      Severability
	
      38

	
      11.5
	
      Notices
	
      38

	
      11.6
	
      Amendments;
      Waivers
	
      39

	
      11.7
	
      Public
      Announcements
	
      39

	
      11.8
	
      Entire
      Agreement
	
      39

	
      11.9
	
      Parties
      in Interest
	
      39

	
      11.10
	
      Section
      and Paragraph Headings
	
      40

	
      11.11
	
      Counterparts;
      Facsimile Signatures
	
      40

	
      11.12
	
      Interpretation
	
      40

	
      11.13
	
      Specific
      Performance
	
      40

 

51

 

EXHIBITS
AND SCHEDULES

Exhibit A
- Secured Promissory Note

Exhibit
B- Security Agreement

Exhibit C
- Guaranty of Counsel Corporation

Schedule
1.1 - Acquired Assets and Excluded Assets 

Schedule
1.2 - Assumed Liabilities and Excluded Liabilities

Schedule
1.3 - Permitted Liens

Schedule
3.1 - Good Standing

Schedule
3.3 - Consents

Schedule
3.5 - Financial Statements

Schedule
3.8 - Tax
Matters

Schedule
3.9 - Leases

Schedule
3.10 - Personal Property Leases

Schedule
3.11(a) - Intellectual Property

Schedule
3.11(b) - Infringement

Schedule
3.12 - Licenses and Permits

Schedule
3.14 - Litigation

Schedule
3.15 - Material Contracts

Schedule
3.16 - Benefit Plans

Schedule
3.17 - Insurance

Schedule
3.18 - Related Party Contracts

Schedule
3.19(b) - Labor Matters

Schedule
3.19(f) - Employment Agreements

Schedule
3.19(g) - Employees

Schedule
3.23 - Customer Relations

Schedule
5.1(c) - Guarantees

Schedule
5.3 - Debts and Liens

Schedule
5.5(b) - Restricted Employees

 

52Exhibit
10.2

MANAGEMENT
SERVICES AGREEMENT

THIS
MANAGEMENT SERVICES AGREEMENT (“Agreement”) is made and entered into as of May
19, 2005 (“Effective Date”) by and among Acceris Management and Acquisition LLC,
a Minnesota limited liability company (“Manager”),
Acceris Communications Corp., a Delaware corporation (“Company”), Acceris
Communications Inc., a Florida corporation (“ACI,” and together with the
Company, the “Sellers”), Counsel
Corporation, an Ontario, Canada company (“Counsel”) (collectively the Company,
ACI and Counsel are the “Company Parties”), and,
for the sole purpose of making the guaranty contained in Section 22, North
Central Equity LLC, a Minnesota limited liability company
(“Guarantor”).

BACKGROUND

WHEREAS,
the Sellers have agreed to retain the Manager to manage the Company during the
interim period from the Execution Date to the Closing Date under the Asset
Purchase Agreement (the “Purchase Agreement”) among the Company Parties and the
Manager.

WHEREAS,
the Closing under the Purchase Agreement will not occur until after, among other
things, the receipt of all governmental consents required by the Purchase
Agreement and the approval of ACI’s stockholders; 

WHEREAS,
the Sellers desire to utilize Manager’s services on an exclusive basis to
manage, to fullest extent permissible under Law (as defined below), the
operations of the Company pending receipt of the foregoing consents and
approvals and Manager desires to provide such services to the Company on the
terms and subject to the conditions stated herein.

NOW,
THEREFORE, in consideration of the above recitals and mutual promises and other
good and adequate consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, agree as follows:

1.    Definitions. “Funds
Advance” means for any period of calculations for the Company the sum of: (i)
operating cash flow as determined in accordance with GAAP, (ii) actual
capital
expenditures as
determined in accordance with GAAP, (iii) payments with respect to the Leases
and Personal Property Leases, and (iv) reductions in the Wells
Fargo, Inc.
asset based loan facility, less any payments made by the Manager in
respect of Excluded Liabilities.
Payments by Manager or Company of Excluded Liabilities shall not be deemed to be
or included in the definition of Funds Advance.
Capitalized terms used in this Agreement and not otherwise defined shall have
the meaning assigned in the Purchase Agreement.

 

2.    Compliance
with Applicable Laws and Regulations.

2.1    The
Company Parties and Manager desire that this Agreement and the obligations
performed hereunder be in substantial and good faith compliance with (i) all
applicable rules, regulations and policies of the Federal Communications
Commission (“FCC”) and any state public utility commission(s) (the “State
PUC(s)”); (ii) the Communications Act of 1934, as amended (the “Act”), 47 U.S.C
151, et seq., (iii) applicable state and provincial laws applicable to the
Company Parties and (iv) any other applicable Canadian or US federal, state and
local law, regulation or policy (collectively, “Law(s)”). 

2.2    It is
expressly understood by the parties that nothing in this Agreement is intended
to give Manager any right that would be deemed to constitute a transfer of
control (as is defined in the Act and/or any applicable FCC or other relevant
Law) of any of the applicable licenses from the Company to Manager to the extent
prohibited by applicable Law. Each party shall perform its obligations under
this Agreement in accordance with applicable Law.

2.3    If the
FCC or any State PUC or other governmental body of competent jurisdiction
determines that a provision of this Agreement violates any applicable Law, or if
the staff of the FCC or any State PUC has advised the parties, orally or in
writing, that the review of any request by the parties for authority for the
transactions contemplated hereby will be inordinately delayed or will likely be
determined adversely to the parties, the parties will use their respective
reasonable efforts to negotiate in good faith to modify this Agreement to the
minimum extent necessary so as to comply with such order, decree, action or
determination and/or remove any controversy identified by the FCC or a State PUC
without material economic detriment or effect to either party, and to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible. This Agreement, as so
modified, shall then continue in full force and effect. 

3.    Appointment
of Manager. The
Sellers hereby appoint Manager, to the fullest extent permissible under Law, as
the sole and exclusive provider of all services necessary or appropriate for the
supervision and management of the Company, as described more fully in Section 4
(the “Services”). The Company Parties consent to and agree to the appointment of
the Manager. Manager hereby accepts such appointment on the terms and subject to
the conditions stated herein.

4.    Scope
of the Services.

4.1    Management. During
the Term (defined below), and under the supervision, control and direction from
time to time of the Company and the Company’s Board of Directors and by its
Designated Executive (as defined below), Manager shall establish and implement
operational policies and provide general management and direction of the
day-to-day operations of the Company and shall exercise general supervision and
direction of the Company and the affairs of the Company to the fullest extent
permissible under Law and shall make decisions with respect to operations of the
Company, subject to the reporting duties to the Designated Executive (defined
below) and the Company’s Board of Directors. 

(a)    Manager
agrees to report regularly at mutually agreeable times to the Company’s chief
executive officer or a designee of the chief executive officer (“Designated
Executive”) concerning the status of the operations of the Company, but no less
frequently than bi-monthly, unless such update is waived by the Company or the
Company Parties. 

2

(b)    It is
understood that the Sellers have not given Manager any authority to pay or cause
the Company to pay any Excluded Liabilities, and that the Sellers have
instructed Manager that Manager shall not cause the Company to pay any Excluded
Liabilities.

 

(c)    Manager
shall manage the Company and report to the Designated Executive from time to
time as provided for in this Agreement and shall use its best efforts to manage
the Company in substantial good faith compliance with its obligations under this
Agreement. Manager shall use its good faith best efforts to manage the
responsibilities of operating and managing the Company’s operations under this
Agreement. Day to day operations shall include customer billing, management of
Company cash flows and cash collections and outflows, processing employee
payroll and other related duties.

 

5.    Responsibilities
of the Company. During
the Term the Company Parties shall assist and fully cooperate on a timely basis
with Manager in its performance of the Services. Time is of the essence under
this Agreement and all Company Parties will work diligently to make decisions
and execute any agreements or action plans for the Company in as reasonably
expeditious manner as reasonably possible to allow Manager to perform the
Services. The Company Parties shall have the Designated Executive [available
either on site or by telephone during all regular business hours and such
Designated Executive shall have full and complete authority to bind the Company
to decisions regarding operation of the Company, check signing for the Company,
and contractual obligations or agreements that the Manager recommends that the
Company execute or perform during the Term. To the extent that, in the
reasonable opinion of Manager, the Designated Executive is not reasonably
fulfilling these cooperation, signing or approval requirements under this
Agreement to allow the Manager to successfully perform its duties under this
Agreement, the Manager’s obligation to advance funds under the second sentence
of Section 7 shall cease until such time as the Company Parties have cured or
remedied such decision making issue to the reasonable satisfaction of the
Manager. Without limiting the foregoing, the Company Parties shall undertake the
following responsibilities to assist the Manager and to allow the Manager to
manage the day to day operations of the Company: 

(a)    shall
provide Manager with all information and materials in their possession or
subject to their control to enable Manager to provide the Services under this
Agreement;

(b)    shall
perform any acts reasonably necessary to conduct the operations of the Company,
excluding those acts that are to be performed by Manager in connection with the
Services, pursuant to and in accordance with the request of
Manager;

(c)    shall
continue to communicate with third parties, including state and federal
regulatory commissions, in cooperation with Manager, including responding to
their inquiries, requests and correspondence;

(d)    shall
promptly inform Manager, and provide Manager with copies of, all correspondence
and communications relating to the Company from third parties; and 

(e)    At the
request of Manager, they shall cause the Company to timely exercise rights it
has under any of the contracts or agreements of the Company, including, but not
limited to, rights, whether in law or equity, with respect to breach,
termination, set-off, indemnity, waiver, sub-contracting and assignment and
shall execute commitments, agreements, contracts, instruments or agreements as
are reasonable for operation of the Business and are requested by the
Manager.

3

(f)    shall be
responsible for preparing and filing federal, state or local income tax returns
due during the Term of this Agreement.

(g)    Sellers
currently maintain directors and officer’s liability, commercial general
liability
and umbrella
liability
insurance policies related to the operations of the Company. Sellers shall use
their commercially reasonable best efforts to cause the Manager to be named as
an additional insured, with respect to this Agreement, under the foregoing
policies and to give to Manager  endorsements
naming the Manager as an additional insured. Manager
shall pay any related premium or other charge required by any insurer or
agent.

6.    Independent
Contractor Status. Manager
is an independent contractor in the performance of the Services under this
Agreement and shall determine the method, details and means of performing the
Services. Without limiting the generality of the foregoing, Manager shall be
permitted, in its sole discretion, but in no way shall be required to (i) enter
into and perform contracts and agreements in its own name for the furnishing of
services, equipment, parts and supplies in connection with the Services, and
(ii) recruit and hire and terminate its own employees and independent
contractors to provide the Services. Manager shall solely establish the terms
and conditions of employment for its employees and shall pay all salaries and
other compensation due to such employees. 

7.    Compensation. As its
compensation for the Services, the Company shall pay Manager a fee equal to the
net income (determined according to GAAP) of the Company during the Term, plus
5% of such net income (the “Fee”). It is further agreed that in performing the
Services, Manager will provide to or procure for the Company funds in an amount
equal to the Funds
Advance. The
parties agree that if the net income of the Company is not sufficient to entitle
Manager to the Fee, then Manager shall not be entitled to the Fee or any
reimbursement from Company Parties for funds it may have advanced to or for the
Company under this Agreement and that such advances instead shall be considered
non-reimbursable expenses incurred by Manager in the performance of this
Agreement. Nothing herein shall be construed to limit Managers right to recover
the Break Up Fee, it being expressly understood that that Manager’s right to
recover the Break Up Fee survives this Section 7 and is in no way limited by
this Section 7.

8.    Expenses. Except
as may be otherwise specifically provided herein, the parties hereto shall pay
their own legal fees, accounting and other expenses incurred in connection with
the negotiation and consummation of the transactions contemplated by this
Agreement.

9.    Term. The
term of this Agreement (the “Term”) shall commence on the Effective Date hereof
and shall expire upon the earlier of: (i) the Closing Date; or (ii) the
termination of the Purchase Agreement pursuant to the terms thereof. Upon the
termination of this Agreement, neither party shall be further obligated under
this Agreement except for the parties’ respective indemnification obligations
set forth in Section 10. 

4

10.    Indemnification.

(a)    Subject
to the other terms and conditions contained in this Agreement, the Company
Parties will indemnify, defend and hold harmless the Manager and any of its
Affiliates from and against any and all damages, liabilities, losses, costs and
expenses (including all reasonable attorneys’, fees and costs) (collectively,
“Losses”) incurred by the Manager arising our of or related to (i) the Company
Parties’ breach of this Agreement, or (ii) the defense or disposition of any
action, claim, suit, demand, litigation, arbitration, mediation or other
proceeding initiated by a third party by or before any governmental entity or
arbitral forum (each, an “Action”), whether civil, administrative, investigative
or criminal, out of or related to the Manager’s performance under this Agreement
or relating to the operations of the Company by the Company Parties. In the
event Manager requests indemnification from the Company Parties with respect to
the defense of any Action, the Company Parties shall advance such defense costs
as Manager may reasonably request. If the Company Parties do not advance such
defense costs, Manager shall have no obligation to cooperate or provide
information to the Company Parties with respect to their defense of such claims.

(b)    The
Company Parties expressly agree that Manager will have no liability to them or
any third party based on the failure of the Company to achieve profitability,
minimize losses, or based upon Manager’s lawful decision-making with respect to
operation of the Company under this Agreement. Any claim of either party arising
under or relating to this Agreement shall be made only against the other party
as a corporation or limited liability company, as the case may be, and any
liability relating thereto shall be enforceable only against the corporate or
limited liability company assets of the party. No party shall seek to pierce the
corporate veil or otherwise seek to impose any liability relating to, or arising
from, this Agreement against any parent company, Affiliated company, subsidiary,
shareholder, employee, officer or director of the other party

(c)    Notwithstanding
anything to the contrary contained in this Section 10 (except for the
exception provided for with respect to Manager in 10(a)), the parties shall
cooperate with each other in connection with any Action, including keeping each
other reasonably informed with respect to the status of any Action and to obtain
the benefits of any insurance coverage for third party claims that may be in
effect at the time a third party claim is asserted.

11.    Notices. All
notices, requests, demands and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (i) on the date of
service if served personally on the party to whom notice is to be given; (ii) on
the day of transmission if sent via facsimile transmission to the facsimile
number given below, and confirmation of receipt is obtained promptly after
completion of transmission; (iii) on the day after delivery to Federal Express
or similar overnight courier or the Express Mail service maintained by the
United States Postal Service; or (iv) on the fifth calendar day after mailing,
if mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid and properly addressed, to the party as
follows:

 

5

 

	
      If
      to the Company Parties:
	
      Acceris
      Communications Corp.

	 	
      c/o
      Counsel Corporation

	 	
      Scotia
      Plaza, Suite 3200

	 	
      40
      King Street West

	 	
      Toronto,
      Ontario M5H 3Y2

	 	
      Canada

	 	
      Attn:
      Chief Executive Officer

	 	
      Facsimile:
      416-866-3061

	 	 
	
      Copy
      to:
	
      Harwell
      Howard Hyne Gabbert & Manner, P.C.

	 	
      315
      Deaderick Street, Suite 1800

	 	
      Nashville,
      TN 37238-1800

	 	
      Attn:
      Curtis Capeling

	 	
      Facsimile:
      615-251-1059

	 	 
	
      If
      to Manager:
	
      Acceris
      Management and Acquisition LLC

	 	
      60
      South Sixth Street, Suite 2535

	 	
      Minneapolis,
      MN 55402

	 	
      Attention:
      Drew S. Backstrand, Esq. and Elam Baer

	 	
      Facsimile:
      612-455-1022

Any party
may change its address for the purpose of this Section by giving the other party
written notice of its new address in the manner set forth above.

12.    Entire
Agreement. This
Agreement constitutes the entire agreement among the parties hereto relating to
the subject matter hereof (the management services agreement), and all prior
agreements, correspondence, discussions and understandings of the parties
(whether oral or written) relating to the subject matter hereof are merged
herein and superseded hereby, it being the intention of the parties hereto that
this Agreement and the instruments and agreements contemplated hereby shall
serve as the complete and exclusive statement of the terms of their agreement
together, except for the matters agreed to by the parties in the Purchase
Agreement and related Transaction Documents.

13.    Assignment. Neither
this Agreement nor any of the rights or obligations hereunder may be assigned by
any party (by contract, operation of law, change of control or otherwise)
without the prior written consent of the other parties. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.

14.    Section
and Paragraph Headings. The
section and paragraph headings in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this
Agreement.

6

15.    Severability. Each
provision of this Agreement is intended to be severable. Should any provision of
this Agreement or the application thereof be judicially, or by arbitral award,
declared to be or become illegal, invalid, unenforceable or void, the remainder
of this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties.

16.    Governing
Law; Venue and Jurisdiction. This
Agreement shall be governed by and construed according to the laws of the State
of Illinois, without regard to the conflict of law rules of Illinois or any
other state. The parties hereto consent to the exclusive venue and jurisdiction
of an appropriate federal or state court in Cook County, Illinois for any suit
or action arising out of or related to this Agreement. The parties hereto waive
any arguments of forum non conveniens in any matter relating to this
Agreement.

17.    Parties
in Interest—No Third Party Beneficiaries. Nothing
in this Agreement is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement is
intended to relieve or discharge the obligations or liability of any third
persons to the Company Parties or Manager. No provision of this Agreement shall
give any third parties any right of subrogation or action over or against the
Company Parties or Manager.

18.    Amendments;
Waivers. This
Agreement may be amended or modified, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition, or of
the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall not be deemed
to be nor construed as a further or continuing waiver of any such condition, or
of the breach of any other provision, term, covenant, representation or warranty
of this Agreement.

19.    Counterparts. This
Agreement may be executed in one or more original or facsimile counterparts, all
of which shall be considered but one and the same agreement, and shall become
effective when one or more such counterparts have been executed by each of the
parties and delivered to the other parties. This Agreement may be executed in
facsimile copy with the same binding effect as an original.

20.    Interpretation. Except
as otherwise provided or if the context otherwise requires, whenever used in
this Agreement, (a) any noun or pronoun shall be deemed to include the plural
and the singular, (b) the terms “include” and “including” shall be deemed to be
followed by the phrase “without limitation,” (c) unless the context otherwise
requires, all references to Sections refer to Sections of this Agreement, (d)
the words “herein,” “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Section or other
subdivision, (e) any definition of or reference to any Law, agreement,
instrument or other document herein will be construed as referring to such Law,
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified, (f) any definition of or reference to any
statute will be construed as referring also to any rules and regulations
promulgated thereunder, and (g) any use of “Dollars” or “$” shall refer to
United States dollars and any component thereof. 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 provisions of this Agreement.

7

21.    WAIVER
OF JURY TRIAL. COMPANY
PARTIES AND THE MANAGER EACH ACKNOWLEDGE THAT, AS TO ANY AND ALL DISPUTES THAT
MAY ARISE BETWEEN THE PARTIES, THE COMMERCIAL NATURE OF THE TRANSACTION OUT OF
WHICH THIS AGREEMENT ARISES WOULD MAKE ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY
JURY. ACCORDINGLY, THE PARTIES BY THEIR ACCEPTANCE OF THIS AGREEMENT WAIVE ANY
RIGHT TO TRIAL BY JURY AS TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO
THIS AGREEMENT OR TO ANY OF THE OTHER INSTRUMENTS OR DOCUMENTS EXECUTED IN
CONNECTION HEREWITH.

22.    Guaranty.
Guarantor hereby guarantees to the Company Parties the full and prompt
performance and payment of the Manager’s obligations under Section 7 of this
Agreement (the “Guaranteed Obligations”). Any act of the Company Parties
consisting of a waiver of any of the terms, covenants or conditions of the
Guaranteed Obligations, or the giving of any consent to any matter or thing
relating to the Guaranteed Obligations, or the granting of any indulgences or
extensions of time to the Manager or Guarantor, may be done without notice to
Guarantor and without releasing the obligations of Guarantor hereunder. The
obligations of Guarantor hereunder shall not be released by any of the Company
Parties’ receipt, application or release of any security given for the payment,
performance and observance of any of the Guaranteed Obligations. Similarly, the
obligations of Guarantor hereunder shall not be released by any modification of
any of the terms of the Guaranteed Obligations made by the Company Parties and
the Manager, but in the case of any such modification, the liability of
Guarantor shall be deemed modified in accordance with the terms of any such
modification. The liability of Guarantor hereunder shall in no way be affected
by (a) the release or discharge of the Manager in any creditors’ receivership,
bankruptcy or other proceedings, (b) the impairment, limitation or modification
of the liability of the Manager or the estate of the Manager in bankruptcy, or
of any remedy for the enforcement of any of the Guaranteed Obligations resulting
from the operation of any present or future provision of the Federal bankruptcy
law or any other statute or the decision of any court, (c) the rejection or
disaffirmance of any instrument, document or agreement evidencing any of the
Guaranteed Obligations in any such proceedings, (d) the assignment or transfer
of any of the Guaranteed Obligations by the Company Parties, (e) the cessation
from any cause whatsoever of the liability of the Manager with respect to the
Guaranteed Obligations (except for the Managers right to cease the Funds Advance
as provided in this Agreement or except upon termination of this Agreement).
This is a guaranty of payment and not of collection. The liability of Guarantor
hereunder shall be direct and immediate and not conditional or contingent upon
the pursuit of any remedies against the Manager or any other person, nor against
any collateral available to the Company Parties. Guarantor hereby waives any
right to require that an action be brought against Manager or any other person
or to require that resort be had to any collateral in favor of the Company
Parties prior to discharging its obligations hereunder.

8

IN
WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.

 

	 	 	 
	 	MANAGER:
	 	 
	 	
      ACCERIS
      MANAGEMENT AND ACQUISITION LLC

	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name: Elam
      Baer
	 	Title:   Chief Executive
      Officer

 

	 	 	 
	 	COMPANY PARTIES:
	 	 
	 	COUNSEL CORPORATION
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title:

 

		 	 
	 	ACCERIS
      COMMUNICATIONS INC.
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title:

 

		 	 
	 	ACCERIS COMMUNICATIONS CORP.
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title:

 

		 	 
	 	GUARANTOR:
	 	 
	 	NORTH CENTRAL
      EQUITY LLC
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:  Elam Baer
	 	Title:    Chief
      Executive Officer

     

[Signature
Page to Management Services Agreement]

 

9

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