Document:

Exhibit 10(xi)

                     2005 Schedule of Director Compensation

In 2005, the directors of the Company and the Bank other than the Chairman of
the Board are compensated for their services in the amount of $750 per board
meeting held. All directors, other than inside directors, also receive a fee of
$450 for each committee meeting held. The Chair of the Audit Committee receives
a fee of $1,800 for each Audit Committee meeting held. All other committee
chairpersons receive $600 for each committee meeting held. The Chairman of the
Board of Directors receives an annual fee of $36,000 and does not receive any
additional compensation for meetings attended.

Directors may defer receipt of fees into a grantor trust established by the
Company. Amounts which are deferred are invested in various mutual funds at the
participant's direction.Agreement and Plan of Merger

 

                                                                Exhibit
10.1

 

AGREEMENT
AND PLAN OF MERGER

 

dated as
of

 

May 23,
2005

 

Among

 

LDMI
TELECOMMUNICATIONS, INC.

 

TALK
AMERICA HOLDINGS, INC.

 

AND

 

LION
ACQUISITION CORP.

 

Table
of Contents

                                                                                                   

 

 

	
      ARTICLE
      I
	
      DEFINITIONS                                                        
	
                         
      

 

1.1. Definitions.                                                                             

 

	
      ARTICLE
      II
	
      THE
      TRANSACTION                                         
	
               

 

2.1. The
Merger.                                                                                 

2.2. The
Closing.                   

2.3. Actions
at the Closing.                                                                         

2.4. Effect
of Merger. 

2.5. Procedure
for Exchange. 

2.6. Escrow. 

2.7. Closing
of Transfer Record. 

 

	
      ARTICLE
      III
	
      REPRESENTATIONS
      AND WARRANTIES OF COMPANY
	
      

 

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

3.2. Capitalization. 

3.3. Noncontravention;
Consents. 

3.4. Compliance
with Laws, Licenses. 

3.5. Customers. 

3.6. No
General Solicitation. 

3.7. Brokers’
Fees. 

3.8. Title
to Assets. 

3.9. Subsidiaries. 

3.10. Financial
Statements. 

3.11. Events
Subsequent to Most Recent Fiscal Year End. 

3.12. Undisclosed
Liabilities. 

3.13. Antitakeover
Statutes. 

3.14. Tax
Matters. 

3.15. Real
Property. 

3.16. Intellectual
Property. 

3.17. Tangible
Assets. 

3.18. Contracts. 

3.19. Notes
and Accounts Receivable. 

3.20. Powers
of Attorney. 

3.21. Insurance. 

3.22. Litigation. 

3.23. Employees. 

3.24. Employee
Benefits. 

3.25. Guaranties. 

3.26. Environmental,
Health and Safety Matters. 

3.27. Certain
Business Relationships with Company and its Subsidiaries. 

3.28. Accounts;
Lockboxes; Safe Deposit Boxes. 

3.29. Securities. 

3.30. Accounting
Matters. 

3.31. Disclosure. 

 

 

 

i

 

	
      ARTICLE
      IV
	
      REPRESENTATIONS
      AND WARRANTIES OF PARENT AND MERGER SUB
	
      

 

4.1. Organization. 

4.2. Capitalization. 

4.3. Authorization
of Transaction. 

4.4. Noncontravention. 

4.5. Brokers’
Fees. 

4.6. Company
Reports. 

4.7. Authorization
for Parent Shares; Capital Resources. 

4.8. NASDAQ
Compliance. 

4.9. No
Material Adverse Changes. 

4.10. Undisclosed
Liabilities. 

4.11. Compliance
with Laws. 

4.12. Litigation. 

4.13. No
General Solicitation. 

 

	
      ARTICLE
      V
	
      COVENANTS
	
      

 

5.1. Interim
Operations. 

5.2. Listing. 

5.3. Filings;
Other Actions; Notification. 

5.4. Company
Financial Statements. 

5.5. Access. 

5.6. Director
and Officer Liability. 

5.7. Employee
Benefits After the Merger. 

5.8. Lockup
Agreement; Transfer Restrictions. 

5.9. Notices
and Filing by Company. 

 

	
      ARTICLE
      VI
	
      CONDITIONS
      TO OBLIGATIONS TO CLOSE
	
      

 

6.1. Conditions
to Each Party’s Obligation. 

6.2. Conditions
to Obligation of Parent and Merger Sub. 

6.3. Conditions
to Obligation of Company. 

 

	
      ARTICLE
      VII
	
      SURVIVAL
      OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
	
      

 

7.1. Survival
of Representations and Warranties. 

7.2. Indemnification. 

 

	
      ARTICLE
      VIII
	
      TERMINATION
	
      

 

8.1. Termination
of Agreement. 

8.2. Effect
of Termination 

 

 

ii

 

 

	
      ARTICLE
      IX
	
      REGISTRATION
      RIGHTS
	
      

 

9.1. Definitions. 

9.2. Shelf
Registration; Suspension of Use of Prospectus. 

9.3. Registration
Procedures. 

9.4. Registration
Expenses. 

9.5. Indemnification
and Contribution. 

9.6. Successors
and Assigns; Survival. 

 

	
      ARTICLE
      X
	
      MISCELLANEOUS
	
      

 

10.1. Press
Releases and Public Announcements. 

10.2. No
Third-Party Beneficiaries. 

10.3. Entire
Agreement. 

10.4. Binding
Effect; Assignment. 

10.5. Counterparts. 

10.6. Headings. 

10.7. Notices. 

10.8. Governing
Law. 

10.9. Amendments
and Waivers. 

10.10. Severability. 

10.11. Expenses. 

10.12. Survival. 

10.13. Construction. 

10.14. Incorporation
of Exhibits and Schedules. 

10.15. Specific
Performance. 

10.16. Submission
to Jurisdiction. 

10.17. Waiver
of Jury Trial. 

Exhibits:

 

A. Form of
Escrow Agreement

iii

 

AGREEMENT
AND PLAN OF MERGER

 

THIS
AGREEMENT AND PLAN OF MERGER (the
“Agreement”) is
dated effective May 23, 2005, by and among TALK
AMERICA HOLDINGS, INC., a
Delaware corporation (“Parent”),
LION
ACQUISITION CORP., a
Michigan corporation and indirectly wholly owned subsidiary of Parent
(“Merger
Sub”), and
LDMI
TELECOMMUNICATIONS, INC., a
Michigan corporation (“Company”).
Parent, Merger Sub and Company are referred to collectively herein as the
“Parties,” and
Company and Merger Sub are sometimes collectively referred to as the
“Constituent
Corporations.”

 

WITNESSETH:

 

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

 

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

 

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

 

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

 

     
ARTICLE I  

DEFINITIONS

 

1.1.  Definitions.

 

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

 

“A/D
Aggregate Preferred Preference Amount” means
the amount equal to the sum of the Series A Preference Amount, the Series B
Preference Amount, the Series C Preference Amount and the Series D Preference
Amount.

 

“A/D
Consideration” means
(x) the Preferred Consideration Amount, minus (y) the sum of (i) the Series E
Preference Amount plus (ii) the A Participation.

 

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

 

 

1

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

 

“A
Participation” means
the product of $0.20 times the
number of shares of Common Stock into which a share of Series A Preferred is
convertible as of the Effective Time.

 

“Cash
Cap” means
$24,000,000, minus the sum of the amount by which Transaction Costs and
Severance Amounts, as set forth in the Closing Costs Certificate, exceeds the
Deduction Amount.

 

“Cash
Component” means
(a) the portion of the aggregate Merger Consideration that is paid in cash and
(b) the cash payable for Employee Options and Warrants pursuant to Section
2.4(g).

 

“Claim
Date” means
the earlier of (a) the 60th day after Parent files its first Annual Report on
Form 10-K with the SEC after the Closing Date and May 31, 2006.

 

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

 

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

 

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

 

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

 

“Confidentiality
Agreement” means
the letter agreement dated February 22, 2005 between Parent and Company, as it
may be amended, providing that, among other things, each Party would maintain
confidential certain information of the other Party.

 

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

 

“Consideration” of a
Series means, as to such Series of Preferred Stock, the amount set forth below
opposite such Series reference:

 

Series A
- amount equal to the sum of (x) the product of (i) the result of (A) the A
Preference Amount divided by (B)
the A/D Aggregate Preferred Preference Amount, multiplied by (ii)
the A/D Consideration, plus (y) the
A Participation.

 

Series B
- amount equal to the product of (x) the result of (i) the B Preference Amount
divided by (ii)
the A/D Aggregate Preferred Preference Amount, multiplied by (y)
the A/D Consideration.

 

2

 

Series C
- amount equal to the product of (x) the result of (i) the C Preference Amount
divided by (ii)
the A/D Aggregate Preferred Preference Amount, multiplied by (y)
the A/D Consideration.

 

Series D
- amount equal to the product of (x) the result of (i) the D Preference Amount
divided by (ii)
the A/D Aggregate Preferred Preference Amount, multiplied by (y) the A/D
Consideration.

 

Series E
- the Series E Preference Amount.

 

“Deduction
Amount” means
$4,500,000.

 

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

 

“Dissenting
Stockholder” means a
Preferred Stockholder that is not a Consenting Stockholder and that demands cash
payment for its Preferred Stock under Section 450.1767 of the Michigan
Law.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“FCC” means
the Federal Communications Commission.

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

“Knowledge” of any
Person that is not an individual means the actual knowledge of (i) such Person’s
executive officers, in the case of Parent and Merger Subsidiary, and (ii)
Patrick O’Leary, Michael Mahoney, Mark Wayne, Kim McDonald or Linda Hanson, in
the case of the Company, in each case after reasonable investigation by such
individual.

 

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

 

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

 

“Main
Leases” means
collectively all leases by Company or any of its Subsidiaries of (i) Suite 100
in the building known as 300 Galleria Officentre, Southfield, Michigan 48034 and
(ii) Suites #400, #500 and #1600 and Storage Spaces #7 and #8 in the building
known as the American Center, located at 27777 Franklin Road, Southfield,
Michigan 48034.

 

 

4

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

 

“Michigan
Law” means
the State of Michigan Business Corporations Act, 1972, PA 284, sections 450.1101
to 450.2098 of the Michigan Compiled Laws, as amended.

 

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

 

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

 

“NASD” means
the National Association of Securities Dealers, Inc.

 

“Nasdaq” means
the Nasdaq National Market.

 

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

 

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

 

“Parent
Share Valuation” means
$8.42 per share of Parent Stock.

 

“Parent
Shares” means
any shares of Parent Stock.

 

“Parent
Stock” means
the common stock, par value $.01 per share, of Parent.

 

“PBGC” means
the Pension Benefit Guaranty Corporation.

 

“Per
Share Preference Amount” of a
Series means, as to such Series of Preferred Stock, the sum of the respective
amounts set forth below opposite such Series reference below, plus the amount
equal to the accrued and unpaid dividends on a share of such Series as of the
Effective Time:

Series A
- $1.87

Series B
- $2.04

Series C
- $4.24

Series D
- $2.15

Series E
- $1.55

 

5

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

 

“Preference
Amount” of a
Series means, as to such Series of Preferred Stock, the amount that equals the
product of such Series’ Per Share Preference Amount times the number of shares
of such Series issued and outstanding as of the Effective Time.

 

“Preferred
Consideration Amount” means
the amount equal to the sum of the Remaining Cash, plus the
Stock Value.

 

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

 

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

 

“Ratio” of a
Series means, as to such Series, the fraction, the numerator of which is the
Consideration Amount of such Series and the denominator of which is the
Preferred Consideration Amount.

 

“Remaining
Cash” means
an amount of cash equal to the Cash Cap, minus the sum of (i) the total amount
of cash payable as Merger Consideration pursuant to Section 2.4(f)(1) and (ii)
the cash payable in respect of the Employee Options and the Warrants pursuant to
Section 2.4(g).

“Remaining
Parent Shares” means
the number of Parent Shares equal to the Stock Cap minus the total number of
Parent Shares payable as Merger Consideration (without giving effect to the
withdrawal of the Escrowed Consideration pursuant to Section 2.5) pursuant to
Section 2.4(f)(2)(E).

 

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

 

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

 

“Requisite
Stockholder Approval” means
approval by the affirmative vote, at a meeting or by written consent, of (i) the
holders of such number of shares of Common Stock or of Preferred Stock
convertible into such number of shares of Common Stock, voting as a single
class, as would in the aggregate equal at least a majority of the sum of the
outstanding shares of Common Stock and the shares of Common Stock issuable upon
conversion of the outstanding shares of Preferred Stock, (ii) the holders of a
majority of each of the outstanding Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred, (iii) the holders of at least 60% of
the outstanding Series C Preferred and Series D Preferred, taken together,
voting on an as-converted basis, and (iv) the holders of at least 60% of the
outstanding Series E Preferred, voting on an as-converted basis.

 

“Resolution
Date” means
the date as of which any potential dissenting Preferred Stockholder either
demands payment or loses its right to demand payment under Section 450.1767 of
the Michigan Law as to its shares of Preferred Stock by reason of the Articles
Amendment.

 

6

“SEC” means
the Securities and Exchange Commission.

 

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

 

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

 

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

 

“Severance
Amounts” means
all out-of-pocket compensation, bonuses, fees and expenses payable by Company or
any of its Subsidiaries to any of its employees or directors in connection with
or by reason of the transactions contemplated hereby, and any other amount that
is stated elsewhere in this Agreement to be, or be deemed to be, a Severance
Amount.

 

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

 

“Stock
Cap” means
1,800,000 Parent Shares, as such number may be adjusted as the Stock Component
as provided in Section 2.4(e).

 

“Stock
Component” means
that portion of the Merger Consideration that is paid in Parent
Shares.

 

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

 

“Stock
Value” means
the amount equal to the product of the Stock Cap multiplied by the Parent Share
Valuation.

 

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

 

“Switch
Lease” means
the Sublease, dated as of the date of this Agreement, between Parent and
Company, providing for the sublease by Company to a Subsidiary of Parent of
certain space leased by Company at Suite 100 in the building known as 300
Galleria Officentre, Southfield, Michigan 48034.

 

 

7

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

 

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

 

“Total
Merger Consideration” means
cash in the aggregate amount of the Cash Cap and Parent Shares in the aggregate
number of the Stock Cap.

 

“Transaction
Costs” means
all fees and expenses of legal counsel, investment bankers, brokers or other
representatives and consultants, including Brown Brothers Harriman, Dykema
Gossett PLLC (for services subsequent to February 1, 2005), Chadbourne &
Parke LLP and Altman Vilandrie, incurred or accrued by Company, or for which
Company or any of its Subsidiaries is liable, in connection with the
negotiation, execution and delivery of this Agreement, the performance of the
obligations of Company and its Subsidiaries hereunder and the consummation of
the transactions contemplated hereby, and any other amount that is stated
elsewhere in this Agreement to be, or be deemed to be, a Transaction
Cost.

 

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

 

	
      TERM
	
      SECTION

	 	 
	
      Agreement
	
      Preamble

	
      Allocated
      Portion
	
      7.2(e)(2)

	
      Articles
      Amendment
	
      3.1(b)

	
      Basket
      Amount
	
      7.2(f)

	
      Certificate
      of Amendment
	
      2.3

	
      Certificate
      of Merger
	
      2.3

	
      Closing
	
      2.2

	
      Closing
      Costs Certificate
	
      6.2(i)

	
      Closing
      Date
	
      2.2

	
      Common
      Stock
	
      3.2

	
      Communications
      Licenses
	
      3.4

	
      Company
	
      Preamble

	
      Company
      Disclosure Letter
	
      ARTICLE
      III

	
      Company
      Indemnified Party
	
      7.2(a)(2)

	
      Company
      Shares
	
      3.2

	
      Computer
      Software
	
      3.16

	
      Compensation
      Plan
	
      5.1(a)(18)

	
      Constituent
      Corporations
	
      Preamble

	
      Dissenter
      Cash
	
      2.4(f)(4)

	
      Dissenter
      Shares
	
      2.4(f)(4)

	
      Effective
      Time
	
      2.4(a)

	
      Escrowed
      Consideration
	
      2.5(a)

	
      Directors’
      Recommendation
	
      3.1(c)(iii)

	
      Escrow
      Agent
	
      2.6(a)

	
      Escrow
      Agreement
	
      2.6(a)

	
      Escrow
      Amount
	
      7.2(e)(1)

	
      Escrow
      Fund
	
      7.2(e)(1)

	
      Exchange
      Agent
	
      2.5(a)

	
      Exchange
      Fund
	
      2.5(a)

	
      FCC
      Licenses
	
      3.4

	
      Financial
      Statements
	
      3.10

	
      Holder
	
      9.1

	
      Indemnified
      Party
	
      7.2(b)

	
      Indemnified
      Person
	
      5.6(a)

	
      Indemnifying
      Party
	
      7.2(b)(1)

	
      IT
      Assets
	
      3.16

	
      Licenses
	
      3.4

	
      Local
      Licenses
	
      3.4

	
      Majority
      Holder
	
      9.1

	
      Material
      Contract
	
      3.18

	
      Merger
	
      Recitals

	
      Merger
      Consideration
	
      2.4(e)

	
      Merger
      Shares
	
      5.8(a)

	
      Merger
      Sub
	
      Preamble

	
      Most
      Recent Financial Statements
	
      3.10

	
      Most
      Recent Fiscal Month End
	
      3.10

	
      Most
      Recent Fiscal Year End
	
      3.10

	
      Parent
	
      Preamble

	
      Parent
      Indemnified Party
	
      7.2(a)(1)

	
      Parent
      SEC Documents
	
      4.6

	
      Parties
	
      Preamble

	
      Per
      Share Merger Consideration
	
      2.4(e)

	
      Preferred
      Stock
	
      3.2

	
      Prospectus
	
      9.1

	
      Reserved
      Insurance Proceeds
	
      7.2(a)(1)

	
      Securities
	
      9.1

	
      Series
      A Cash Amount
	
      2.4(f)(2)(A)

	
      Series
      A Preferred
	
      3.2

	
      Series
      B Preferred
	
      3.2

	
      Series
      C Preferred
	
      3.2

	
      Series
      D Preferred
	
      3.2

	
      Series
      E Preferred
	
      3.2

	
      Shelf
      Registration
	
      9.2

	
      Shelf
      Registration Period
	
      9.2(b)

	
      Shelf
      Registration Statement
	
      9.1

	
      SOX
      Act
	
      4.6

	
      State
      Licenses
	
      3.4

	
      Stockholder
	
      3.2

	
      Surviving
      Corporation
	
      2.1

	
      Surviving
      Corporation New Plans
	
      5.7(b)

	
      Termination
      Date
	
      8.1(D)

	
      Third
      Party Claim
	
      7.2(b)(1)

	
      Termination
      Fee
	
      8.2(d)

	
      Warrants
	
      3.2(b)

	
      Withheld
      Cash
	
      2.4(f)(4)

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

 

     
ARTICLE II  

THE
TRANSACTION

 

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

 

2.2.  The
Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place (i) at the offices of Dykema Gossett PLLC, 400 Renaissance Center,
Detroit, Michigan, commencing at 9:00 A.M. local time on the first day that is
at least three business day after the satisfaction or waiver of all conditions
set forth in ARTICLE VI (other than those conditions that by their terms are to
be satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) or (ii) at such other place and time or on such other date as Parent
and Company may agree in writing (the “Closing
Date”).

 

8

2.3.  Actions
at the Closing.
At the
Closing, (i) Company will deliver to Parent and Merger Sub the various
certificates, instruments and documents referred to in Section 6.2; (ii) Parent
and Merger Sub will deliver to Company the various certificates, instruments and
documents referred to in Section 6.3; (iii) Company and Merger Sub will execute
and file with the Michigan Department of Labor & Economic Growth, Bureau of
Commercial Services, a Certificate of Merger (the “Certificate
of Merger”) as
provided in Section 450.1707 of the Michigan Law and (iv) Parent will deliver or
cause to be delivered the Exchange Fund to the Exchange Agent in the manner
provided below in this ARTICLE II.

 

2.4.  Effect
of Merger.

 

                          (a)  General. The
Merger shall become effective at the time the Certificate of Merger is filed
with the Michigan Department of 

Labor
& Economic Growth, Bureau of Commercial Services, or at such later time as
the Parties may agree in writing and specify in the Certificate of Merger
(the

“Effective
Time”). The
Merger shall have the effects set forth in the Michigan Law, and from and after
the Effective Time, the Surviving Corporation shall possess all 

the
rights, powers, privileges and franchises and be subject to all the obligations,
liabilities, restrictions and disabilities of the Constituent Corporations, all
as 

provided
under the Michigan Law. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any

document)
in the name and on behalf of either Company or Merger Sub in order to carry out
and effectuate the transactions contemplated by this Agreement.

 

(b)  Articles
of Incorporation. At the
Effective Time, the articles of incorporation of the Surviving Corporation shall
be amended to read in their entirety as did the articles of incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that the
name of the Surviving Corporation shall be LDMI Telecommunications, Inc., and,
as so amended, shall be the articles of incorporation of the Surviving
Corporation until thereafter amended in accordance with their terms and as
provided by law.

 

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

 

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

 

 

9

 

(e)  Conversion
of Company Shares. At and
as of the Effective Time, (A) each issued and outstanding Company Share will be
converted into the right to receive the Merger Consideration set forth below in
Section 2.4(f) (as to each Company Share, its “Per
Share Merger Consideration”), and
all such Company Shares will no longer be outstanding, will be canceled and
retired and will cease to exist, and each holder of a certificate representing
any such Company Shares will thereafter cease to have any rights with respect to
such Company Shares, except the right to receive the respective Per Share Merger
Consideration for each such Company Share to which the holder of such Company
Shares is entitled pursuant to Section 2.4(f) upon the surrender of such
certificate in accordance with Section 2.4(f) (collectively, the “Merger
Consideration”) except
that the Stock Component of the Per Share Merger Consideration shall be subject
to equitable and proportionate adjustment in the event of any Parent stock
split, stock dividend, reverse stock split, subdivision, combination,
recapitalization or similar event or action respecting the Parent Shares between
the date of this Agreement and the Closing Date, and (B) each Company Share
owned by Company or any Subsidiary of Company shall be canceled and retired
without payment of any consideration therefor and shall cease to exist. No
Company Share shall be deemed to be outstanding or to have any rights other than
those set forth above in this Section 2.4(e) after the Effective Time.
Notwithstanding anything to the contrary in this Section 2.4(e), no fractional
Parent Shares shall be issued to then former holders of Company Shares. In lieu
thereof, each then former holder of a Company Share who would otherwise have
been entitled to receive a fraction of a Parent Share (after taking into account
all certificates delivered by such then former holder at any one time) shall
receive an amount in cash equal to such fraction of a Parent Share multiplied by
the Parent Share Valuation.

 

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

(1)  each
share of Common Stock will be converted into the right to receive $0.20 in
cash;

 

(2)  subject
to adjustment as provided in Section 2.4(f)(4), each share of Preferred Stock,
except the shares held by a Dissenting Stockholder, will be converted into the
right to receive the consideration set opposite the Series reference
below:

 

A.  Series A
Preferred - Merger Consideration of (i) cash in the amount equal to the result
of (x) the product of (I) the Series A Ratio times (II) the
Remaining Cash, divided by (y)
the number of shares of Series A Preferred issued and outstanding as of the
Effective Time and (iii) Parent Shares in the number equal to the result of (x)
(i) the product of (I) the Series A Ratio times (II) the
Stock Value, (ii) divided by the
Parent Share Valuation, divided by (y)
the number of shares of Series A Preferred issued and outstanding as of the
Effective Time;

 

10

 

B.  Series B
Preferred - Merger Consideration of (i) cash in the amount equal to the result
of (x) the product of (I) the Series B Ratio times (II) the
Remaining Cash, divided by (y)
the number of shares of Series B Preferred issued and outstanding as of the
Effective Time and (iii) Parent Shares in the number equal to the result of (x)
(i) the product of (I) the Series B Ratio times (II) the
Stock Value, (ii) divided by the
Parent Share Valuation, divided by (y)
the number of shares of Series B Preferred issued and outstanding as of the
Effective Time;

 

C.  Series C
Preferred - Merger Consideration of (i) cash in the amount equal to the result
of (x) the product of (I) the Series C Ratio times (II) the
Remaining Cash, divided by (y)
the number of shares of Series C Preferred issued and outstanding as of the
Effective Time and (iii) Parent Shares in the number equal to the result of (x)
(i) the product of (I) the Series C Ratio times (II) the
Stock Value, (ii) divided by the
Parent Share Valuation, divided by (y)
the number of shares of Series C Preferred issued and outstanding as of the
Effective Time;

 

D.  Series D
Preferred - Merger Consideration of (i) cash in the amount equal to the result
of (x) the product of (I) the Series D Ratio times (II) the
Remaining Cash, divided by (y)
the number of shares of Series D Preferred issued and outstanding as of the
Effective Time and (iii) Parent Shares in the number equal to the result of (x)
(i) the product of (I) the Series D Ratio times (II) the
Stock Value, (ii) divided by the
Parent Share Valuation, divided by (y)
the number of shares of Series D Preferred issued and outstanding as of the
Effective Time; and

 

E.  Series E
Preferred - Merger Consideration of (i) cash in the amount equal to the result
of (x) the product of (I) the Series E Ratio times (II) the
Remaining Cash, divided by (y)
the number of shares of Series E Preferred issued and outstanding as of the
Effective Time and (iii) Parent Shares in the number equal to the result of (x)
(i) the product of (I) the Series E Ratio times (II) the
Stock Value, (ii) divided by the
Parent Share Valuation, divided by (y)
the number of shares of Series E Preferred issued and outstanding as of the
Effective Time.

 

(3)  Notwithstanding
the provisions of Section 2.4(f)(1) or 2.4(f)(2), the aggregate of the Merger
Consideration into which all of the issued and outstanding Company Shares shall
be converted plus the cash payable in respect of the Employee Options and the
Warrants pursuant to Section 2.4(g) shall not exceed the Total Merger
Consideration, the Cash Component shall not exceed the Cash Cap and the Stock
Component shall not exceed the Stock Cap.

 

11

 

(4)  Notwithstanding
the provisions of Section 2.4(f)(2), the amounts of cash and numbers of Parent
Shares that are otherwise deliverable pursuant to the terms of Section 2.4(f)(2)
to the Preferred Stockholders are subject to adjustment as follows: (i) at the
Effective Time, the aggregate amount of cash (the “Dissenter
Cash”) and
number of Parent Shares (such Parent Shares, the “Dissenter
Shares”) that
are otherwise deliverable pursuant to Section 2.4(f)(2) to any Preferred
Stockholder that is not a Consenting Stockholder, together with the amount of
cash (the “Withheld
Cash”) equal
to the value of such number of Dissenter Shares, valued at the Parent Share
Valuation, shall be set aside and held by the Exchange Agent until the
Resolution Date, and any distribution to any Consenting Stockholder of the Cash
Component of such Preferred Stockholder prior to the Resolution Date shall be
reduced by such Consenting Stockholder’s pro rata share of the Withheld Cash,
less, in each case, the 5% thereof that is required to be withheld and deposited
in escrow as Escrowed Consideration pursuant to Section 2.5; and (ii) if, as of
the Resolution Date, any Preferred Stockholder that is not a Consenting
Stockholder has taken such action as leaves it only with the right to receive a
cash dissenter payment under Section 450.1769 of the Michigan Law, the number of
Parent Shares that are deliverable as Merger Consideration pursuant to Section
2.4(f)(2) to each Consenting Stockholder will be deemed in all respects to have
been adjusted to increase such amount by each such Consenting Stockholder’s pro
rata share of the Dissenter Shares, other than the portion constituting Escrowed
Consideration, and the amount of cash that is deliverable as Merger
Consideration pursuant to Section 2.4(f)(2) to each Consenting Stockholder will
be deemed in all respects to have been adjusted to decrease such amount by each
such Consenting Stockholder’s pro rata share of the Withheld Cash and (iii) if,
as of the Resolution Date, any Preferred Stockholder that is not a Consenting
Stockholder has not taken the necessary action to be entitled to payment for its
shares of Preferred Stock under Section 450.1767 of the Michigan Law, any cash
withheld from distributions pursuant to clause (i) of this Section 2.4(f)(4),
other than the portion constituting Escrowed Consideration, shall be distributed
pro rata to the Consenting Stockholders from whom so withheld and the amounts of
cash and numbers of Parent Shares that are deliverable pursuant to Section
2.4(f)(2) to the Preferred Stockholders will not be adjusted. In the event of
adjustments as provided in clause (ii) of this Section 2.4(f)(4), the Exchange
Agent shall deliver to Parent from the Exchange Fund an amount of cash equal to
sum of the Withheld Cash and the Dissenter Cash, other than the portion
constituting Escrowed Consideration.

 

(g)  Conversion
of Employee Stock Options; Warrants. At or
immediately prior to the Effective Time, (i) each Employee Option that is
outstanding, unexercised and unexpired, as of the Effective Time, whether or not
vested or exercisable and without regard to any agreements qualifying the right
to retain or exercise any such Employee Option, and (ii) each Warrant that is
outstanding, unexercised and unexpired as of the Effective Time shall be
canceled, and each holder of any such Employee Option or Warrant shall have the
right to receive for each such Employee Option or Warrant cash in the amount
that equals the amount by which the Common Stock Per Share Merger Consideration
exceeds the per
share exercise price or base price, as the case may be, of such Option or
Warrant as of the Effective Time.

 

12

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

 

2.5.  Procedure
for Exchange.

 

(a)  Immediately
after the Effective Time, (A) Parent shall furnish to StockTrans, Inc., its
transfer agent, or such other bank or trust company reasonably acceptable to
Company to act as exchange agent (the “Exchange
Agent”), a
corpus (the “Exchange
Fund”)
consisting of Parent Shares and cash sufficient to permit the Exchange Agent to
make full payment of the Merger Consideration to the holders of all of the
issued and outstanding Company Shares (other than any Company Shares owned by
Company), less such number and amount of the Parent Shares and cash that equals
5% of the aggregate number of Parent Shares and amount of cash that would have
been deliverable to the Preferred Stockholders as Merger Consideration pursuant
to Section 2.4(f)(2) were all outstanding shares of Preferred Stock as of the
Effective Time to be converted and without giving effect to the withholding
therefrom pursuant to this Section 2.5(a) or to any adjustment pursuant to
Section 2.4(f)(4), which number of Parent Shares and amount of cash (the
“Escrowed
Consideration”) will
be withheld from the amounts otherwise to be delivered to the holders of
Preferred Stock as Merger Consideration to which each such holder of Preferred
Stock would, but for this Section 2.5(a), be entitled to be delivered pursuant
to this Agreement, pro
rata in
proportion to the respective amounts of cash and Parent Shares otherwise so
deliverable and (B) Parent will cause the Exchange Agent to mail a letter of
transmittal (with instructions for its use) in a form to be mutually agreed upon
by Company and Parent prior to Closing to each holder of issued and outstanding
Company Shares (other than any Company Shares owned by Company) for the holder
to use in surrendering the certificates that, immediately prior to the Effective
Time, represented his or its Company Shares against payment of the Merger
Consideration to which the holder is entitled pursuant to Section 2.4(f),
subject to the escrow of the Escrowed Consideration pursuant to the Escrow
Agreement. Notwithstanding the withholding of the Escrowed Consideration and
deposit thereof with the Escrow Agent pursuant to Section 2.6(a), each Preferred
Stockholder shall, for all purposes of Section 2.4, be deemed to have received
any such Escrowed Consideration so withheld and deposited. Upon surrender to the
Exchange Agent of these certificates, together with the letter of transmittal,
duly executed and completed in accordance with the letter of transmittal
instructions, subject to the escrow of the Escrow Amount pursuant to the Escrow
Agreement, Parent shall promptly cause to be issued a certificate representing
that number of whole Parent Shares, if any, to which the Persons are entitled
(in each case bearing the legends set forth in Sections 5.8(b) and 5.8(d) and
after
giving effect to any required tax withholdings and the withholding of the
Escrowed Consideration) and a
check representing the sum of (x) the Cash Component (after
giving effect to any required tax withholdings, the withholding of the Escrowed
Consideration and the provisions of Section 2.4(f)(4)) and (y)
the amount of cash in lieu of any fractional shares to which the Persons are
entitled, after giving effect to any required tax withholdings. No interest will
be paid or accrued on the Cash Component or the cash in lieu of fractional
shares payable to recipients of Parent Shares. If payment is to be made to a
Person other than the registered holder of the certificate surrendered, it shall
be a condition of payment that the surrendered certificate must be properly
endorsed or otherwise in proper form for transfer and that the Person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a Person other than the registered holder of the certificate
surrendered or establish to the reasonable satisfaction of the Surviving
Corporation or the Exchange Agent that this tax has been paid or is not
applicable. If any certificate representing Company Shares is lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming a
certificate to be lost, stolen or destroyed, the Exchange Agent will issue in
exchange for this lost, stolen or destroyed certificate the Merger Consideration
deliverable in respect thereof except that the Person to whom this Merger
Consideration is paid shall, as a condition precedent to the payment thereof,
indemnify the Surviving Corporation in a manner reasonably satisfactory to it
against any claim that may be made against the Surviving Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed. No
dividends or other distributions declared after the Effective Time with respect
to Parent Shares and payable to the holders of record thereof will be paid to
the holder of any unsurrendered certificate until the holder thereof shall
surrender this certificate in accordance with this Section 2.5. After the
surrender of a certificate in accordance with this Section 2.5, the record
holder thereof is entitled to receive any such dividends or other distributions,
without any interest thereon, which previously had become payable with respect
to the Parent Shares represented by such certificate. No holder of an
unsurrendered certificate is entitled, until the surrender of such certificate,
to vote the Parent Shares into which his or its Company Shares shall have been
converted.

 

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

 

13

2.6.  Escrow.

 

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

 

(b)  Subject
to the provisions of this Section 2.6 and the Escrow Agreement, the Escrowed
Consideration shall be paid to the Preferred Stockholders on the Claim Date, as
reduced by the amount of any indemnification payments based on, arising from or
in connection with all claims for indemnification asserted in writing prior to
the Claim Date pursuant to Section 7.2 that have not been fully
resolved.

 

(c)  For all
purposes of this Agreement and the Escrow Agreement, whenever Parent Shares
shall be required to be delivered to satisfy an indemnity or contribution
obligation of any Party hereto, each Parent Share shall be valued at the Parent
Share Valuation. In the event of any stock split, reverse stock split, stock
combination or reclassification of the Parent Shares or any merger,
consolidation or combination of Parent with any other entity or entities, the
deemed value specified above for the Parent Shares shall be proportionally
adjusted so that the deemed value of the Parent Shares after such event shall be
the same as the deemed value of the Parent Shares prior to such event. All such
adjustments shall be made successively.

 

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

 

14

ARTICLE
III  

REPRESENTATIONS
AND WARRANTIES OF COMPANY

 

Except as
set forth in the disclosure letter (subject to Section 10.13(c)) delivered to
Parent by Company at or prior to entering into this Agreement (the “Company
Disclosure Letter”),
Company hereby represents and warrants to Parent and Merger Sub
that:

 

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

 

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

 

(b)  The
Company Board has (i) declared that the Merger and the other transactions
contemplated hereby are advisable and has adopted this Agreement, (ii)
determined on a reasonable basis (and as contemplated by Section 450.1703a(2)(d)
of the Michigan Law) that the holders of the Common Stock, as a class, are to
receive consideration under this Agreement upon effectiveness of the Merger that
has a fair value in respect of such Common Stock not less than the fair value
thereof as of the date of the Company Board’s adoption of this Agreement, (iii)
approved the amendment (the “Articles
Amendment”) of
Company’s Articles of Incorporation to permit the payment of Merger
Consideration to the holders of Common Stock as provided herein, (iv)
recommended adoption and approval of this Agreement and the transactions
contemplated hereby, including the Merger, and of the Articles Amendment by the
Stockholders, (v) directed that this Agreement and the transactions contemplated
hereby, including the Merger and the Articles Amendment, be submitted to the
Preferred Stockholders for their approval and adoption on or before the date of
this Agreement, and (vi) taken all necessary action to provide that Employee
Options and Warrants outstanding as of the Effective Time will either be
converted into cash and cancelled pursuant to Section 2.4(a) or otherwise in all
respects cancelled and of no further force and effect from and after the
Effective Time. The approval and adoption of this Agreement and the transactions
contemplated hereby, including the Merger and the Articles Amendment, require
only the Requisite Stockholder Approval. Company has received the consents of
the Consenting Stockholders in the Stockholder Consents, a true and correct copy
of each of which has been provided to Parent, and such consents so received
constitute the Requisite Stockholder Approval. This Agreement and the
transactions contemplated hereby, including the Merger and the Articles
Amendment, have been duly authorized by all necessary corporate
action.

 

(c)  Company
has all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement and to consummate the Merger in accordance with its terms. This
Agreement is a valid and binding agreement of Company enforceable against
Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles and except as indemnification obligations hereunder may be limited by
applicable securities laws. No Stockholder is entitled to any dissenter’s rights
with respect to, or other rights of appraisal of, its Company Shares in respect
or by reason of the Merger, the Articles Amendment or any of the transactions
contemplated hereby, except only that any Preferred Stockholder that is not a
Consenting Stockholder shall have the rights under Section 450.1621 of the
Michigan Law to dissent from the Articles Amendment.

 

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

 

15

3.2.  Capitalization.

 

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

 

(1)  45,000,000
shares of Common Stock, par value $0.01 per share (the “Common
Stock”), of
which 7,990,113 shares were issued and outstanding, an aggregate of 7,680,408
shares were issuable upon exercise of outstanding Employee Options and an
aggregate of 20,680,628 shares were issuable upon conversion of shares of the
Preferred Stock, as set forth below; and

 

(2)  23,050,000
shares of Preferred Stock, no par value (the “Preferred
Stock” and,
collectively with the Common Stock, the “Company
Shares”),
designated as:

 

	                                 (i)
       	
      1,950,000
      shares of Series A Senior Convertible Participating Preferred
      (“Series
      A Preferred”),
      of which 1,938,320 shares were issued and outstanding and were convertible
      into 1,980,687 shares of Common Stock;

 

	                           (ii)
       	
      5,100,000
      shares of Series B Senior Convertible Preferred (“Series
      B Preferred”),
      of which 4,902,000 shares were issued and outstanding and were convertible
      into 5,076,182 shares of Common Stock;

 

	(iii)  	
      4,500,000
      shares of Series C Senior Convertible Preferred (“Series
      C Preferred”),
      of which 4,086,085 shares were issued and outstanding and were convertible
      into 4,921,874 shares of Common Stock;

 

	(iv)  	
      7,500,000
      shares of Series D Senior Convertible Preferred (“Series
      D Preferred”),
      of which 4,651,162 shares were issued and outstanding and were convertible
      into 4,830,917 shares of Common Stock; and

 

	(v)  	
      4,000,000
      shares of Series E Senior Convertible Preferred (“Series
      E Preferred”),
      of which 3,870,968 shares were issued and outstanding and were convertible
      into 3,870,968 shares of Common Stock.

 

(b)  All of
the issued and outstanding Company Shares have been duly authorized, are validly
issued, fully paid and nonassessable, and, as of the date of this Agreement, are
held of record by the respective stockholders as set forth in Section 3.2 of the
Company Disclosure Letter (each a “Stockholder” and
collectively, the “Stockholders”). The
Company has no treasury stock. Other than the Employee Options that are
exercisable for 7,680,408 shares of Common Stock as of the date of this
Agreement and warrants (“Warrants”) to
purchase 311,581 shares of Common Stock as of the date of this Agreement (in
each case of the Employee Options and Warrants, as identified in Section 3.2 of
the Company Disclosure Letter with all relevant material information including
but not limited to exercise price, exercise term, transferability restrictions,
employment related conditions (if any) and vesting rights), there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Company to issue, sell or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation or similar rights with
respect to Company. There are no voting trusts, proxies or other agreements or
understandings with respect to the voting of the capital stock of Company,
provided that the foregoing representation and warranty is to the Knowledge of
Company as respects voting trusts, proxies or other agreements or understandings
to which none of Company and its Subsidiaries is a party or has acknowledged in
writing. Each Stockholder holds of record and, to Company’s Knowledge, owns
beneficially, as of the date of this Agreement, the number of Company Shares set
forth next to his or its name and record address in Section 3.2 of the Company
Disclosure Letter, free and clear of any restrictions on transfer (other than
any generally applicable restrictions on transfer under the Securities Act and
state securities laws), Taxes, Security Interests, options, warrants, purchase
rights, contracts, commitments, equities, claims and demands. To Company’s
Knowledge, no Stockholder is a party to any option, warrant, purchase right or
other contract or commitment that could require the Stockholder to sell,
transfer or otherwise dispose of any capital stock of Company (other than this
Agreement). From and after the Effective Time, all Employee Options and Warrants
will be cancelled and shall represent no rights of any holder thereof except
only the right of the holders of certain of the Employee Options and Warrants to
receive cash as and the extent provided in Section 2.4(a).

 

16

 

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

 

3.4.  Compliance
with Laws, Licenses.

 

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

 

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

 

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

 

17

3.5.  Customers.
Listed in
Section 3.5 of the Company Disclosure Letter are the names and addresses of the
50 most significant separate customer billing accounts (by revenue) of Company
and its Subsidiaries for the twelve-month period ended December 31, 2004 and the
amount for which each such customer was invoiced during such period. As of the
date of this Agreement, Company has not received any written notice nor does it
have any Knowledge that any of the above-listed significant customers of Company
or any of its Subsidiaries has ceased, or will cease, to use the products,
equipment, goods or services of Company or any of its Subsidiaries, or has
substantially reduced or will substantially reduce, the use of such products,
equipment, goods or services at any time.

 

3.6.  No
General Solicitation.
Neither
Company nor, to the Knowledge of Company, any Affiliate of Company or any person
acting on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with any offer or sale of the Parent Shares to be delivered
pursuant to this Agreement.

 

3.7.  Brokers’
Fees.
Except
for fees payable to Brown Brothers Harriman & Co. as set forth in the
Company Disclosure Letter, neither Company nor its Subsidiaries has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.

 

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

 

18

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

 

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

 

3.11.  Events
Subsequent to Most Recent Fiscal Year End.
Since the
Most Recent Fiscal Year End, Company and its Subsidiaries have conducted their
businesses only in, and have not engaged in any material transaction other than
in accordance with, the Ordinary Course of Business of Company and its
Subsidiaries. Since the Most Recent Fiscal Year End and prior to the date
hereof, there has not been any Material Adverse Effect on Company. Since the
Most Recent Fiscal Year End and prior to the date hereof:

 

19

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

20

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

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

 

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

 

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

 

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

 

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

 

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

 

(c)  liabilities
or obligations under this Agreement;

 

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

 

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

 

3.13.  Antitakeover
Statutes.
No
anti-takeover or similar statute or regulation under Michigan Law applies to any
of the transactions contemplated by this Agreement. No other “control
share acquisition,”
“fair
price,”
“moratorium” or
other similar anti-takeover laws or regulations enacted under Michigan Law or
under any other laws of the State of Michigan apply to this Agreement or any of
the transactions contemplated hereby.

 

22

3.14.  Tax
Matters.

 

(a)  Each of
Company and its Subsidiaries has filed all Tax Returns that it was required to
file, except, in the case of Tax Returns other than federal or state income,
sales and use Tax Returns, where failure to file such Return would not
reasonably be expected to have a Material Adverse Effect on Company. All such
Tax Returns were correct and complete in all material respects. All Taxes owed
by any of Company and its Subsidiaries (whether or not shown on any Tax Return)
have been paid, except where failure to pay such Taxes would not reasonably be
expected to have a Material Adverse Effect on Company. None of Company and its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Tax Return. No claim has ever been made by a Governmental Entity in
a jurisdiction where any of Company and its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of any of Company and its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.

 

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

 

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

 

(d)  None of
Company and its Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.

 

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

 

23

(f)  Section
3.14 of the Company Disclosure Letter sets forth the following information with
respect to each of Company and its Subsidiaries (or, in the case of clause (B)
below, with respect to each of the Subsidiaries) as of the most recent
practicable date: (A) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax or excess charitable
contribution allocable to Company or Subsidiary; and (B) the amount of any
deferred gain or loss allocable to Company or Subsidiary arising out of any
Deferred Intercompany Transaction. Promptly following the execution of this
Agreement, Company shall update Section 3.14 of the Company Disclosure Letter to
add (C) the basis of Company or Subsidiary in its assets and (D) the basis of
the stockholder(s) of the Subsidiary in its stock (or the amount of any Excess
Loss Account).

 

3.15.  Real
Property.

 

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

 

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

 

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

 

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

 

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

 

24

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.16.  Intellectual
Property.

 

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

 

 

25

 

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

 

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

 

 

26

 

As used
in this Agreement,

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

27

 

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

 

(i)  any
collective bargaining agreement;

 

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

 

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

 

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

 

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

 

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

 

 

28

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

With
respect to each such insurance policy, to Company’s Knowledge: (A) the policy is
legal, valid, binding, enforceable and in full force and effect; (B) the Policy
will continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither any of Company and its Subsidiaries nor any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred that,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification or acceleration under the policy; and (D) no
party to the policy has repudiated any provision thereof. Each of Company and
its Subsidiaries has been covered during the past 5 years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. Neither Company nor any of its Subsidiaries
has maintained any self-insurance arrangements during the past 5
years.

 

 

29

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

 

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

 

30

3.24.  Employee
Benefits.

 

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

 

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

 

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

 

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

 

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

 

 

31

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

 

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

 

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

 

(1)  To the
Knowledge of Company, there have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any material Liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or to the Knowledge of
Company is threatened. None of the directors and officers (and employees with
responsibility for employee benefits matters) of Company and its Subsidiaries
has any Knowledge of any basis for any such action, suit, proceeding, hearing or
investigation.

 

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

 

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

 

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

 

32

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

 

3.26.  Environmental,
Health and Safety Matters.

 

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

 

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

 

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

 

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

 

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

 

 

33

 

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

 

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

 

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

 

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

 

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

 

3.30.  Accounting
Matters.
Listed in
Section 3.30 of the Company Disclosure Letter are all predecessor companies of
Company, the names of any Persons from which, since January 1, 1999, Company
previously acquired material properties or assets in a single transaction or
series of related transactions with a single party in excess of $2,000,000, and
the changes in Company’s capital structure and capital stock ownership since
October 1, 2003.

 

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

 

 

34

 

ARTICLE
IV  

REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB

 

Except as
set forth in the disclosure letter (subject to Section 10.13(c)) delivered to
Company by Parent at or prior to entering into this Agreement (the “Parent
Disclosure Letter”), or,
to the extent that the qualifying nature of such disclosure with respect to a
specific representation and warranty is readily apparent therefrom, as set forth
in the Parent SEC Documents filed prior to the date hereof, Parent hereby
represents and warrants to Company that:

 

4.1.  Organization.
Each of
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation and has
all requisite corporate or similar power and authority to own and operate its
properties and assets and to carry on its business as presently conducted and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its assets or properties
or conduct of its business requires such qualification, except where the failure
to be so organized, validly existing, qualified or in good standing, or to have
such power or authority, would not be reasonably expected to have a Material
Adverse Effect on Parent. Neither of Parent or Merger Sub is in default under or
in violation of any provision of its charter or bylaws. The respective forms of
Parent’s Amended and Restated Certificate of Incorporation and Bylaws, as
incorporated by reference in Parent’s Annual Report on Form 10-K for the year
ended December 31, 2004 filed with the SEC are correct and complete copies of
Parent’s charter and bylaws as amended to the date of this
Agreement.

 

4.2.  Capitalization.
The
entire authorized capital stock of Parent consists of 105,000,000 Parent Shares,
of which 100,000,000 shares are designated as Parent Stock and 5,000,000 shares
are designated as preferred stock. As of March 31, 2005, 27,212,160 shares of
Parent Stock were issued and outstanding, 1,315,789 shares of Parent Stock were
held in treasury and no shares of the authorized Parent preferred stock were
issued or outstanding. Other than options for 4,686,628 shares of Parent Stock,
warrants for 490,472 shares of Parent Stock, the rights under Parent’s Rights
Agreement, dated as of August 19, 1999, as amended, and a maximum of 655,135
additional shares of Parent Stock (subject to increase upon the expiration,
other termination or surrender, unexercised, of any options referenced above
issued pursuant to such plans) authorized and available for grant and issuance
pursuant to employee or director benefit plans, there were, as of March 31,
2005, no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments as of such date that could require Parent to issue, sell or
otherwise cause to become outstanding any of its capital stock. The entire
authorized capital stock of Merger Sub consists of 60,000 shares, no par value,
all of one class designated as common, of which 100 shares are issued and
outstanding.

 

4.3.  Authorization
of Transaction.
Each of
Parent and Merger Sub has all requisite corporate power and authority to, and
has taken all corporate action necessary in order to, execute, deliver and
perform its obligations under this Agreement. This Agreement is a valid and
binding agreement of each of Parent and Merger Sub, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles. The
Subsidiary of Parent executing the Switch Lease has all requisite corporate
power and authority to, and has taken all corporate action necessary in order
to, execute, deliver and perform its obligations under the Switch Lease, and the
Switch Lease, when executed by such Subsidiary, will be a valid and binding
agreement of such Subsidiary, enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors’ rights and to general equity principles and except as indemnification
obligations hereunder may be limited by applicable securities laws.

 

35

4.4.  Noncontravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any provision of the charter
or bylaws of any of Parent and its Subsidiaries or (ii), assuming compliance
with the matters referred to in the next sentence of this Section 4.4, (A)
violate any Laws or Governmental Order to which any of Parent and its
Subsidiaries is subject or (B) with or without notice, lapse of time or both,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which any of Parent and its Subsidiaries is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets),
except, in the case of clause (ii), such violation, breach, default,
acceleration or other change that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent. Except for
(a) any FCC Consent, State PUC Consent or consent or approval of any other
Governmental Entity identified in Section 3.3 of the Company Disclosure Letter
or in Section 4.4 of the Parent Disclosure Letter, in each case as required by
applicable Laws, (b) the filing of the Certificate of Merger with the Michigan
Department of Labor & Economic Growth, Bureau of Commercial Services
pursuant to the Michigan Law and of appropriate documents with relevant
authorities of other states in which Company is qualified to do business to
reflect such Certificate of Merger filing, (c) filings by Parent under, and
compliance by Parent with the requirements under, the Securities Exchange Act,
the Securities Act, applicable state securities laws and the applicable
requirements of Nasdaq and (d) any other third party approvals as are reflected
in Section 4.4 of the Parent Disclosure Letter, the execution, delivery and
performance by Parent and Merger Sub of this Agreement and the transactions
contemplated hereby do not require any consents, waivers, authorizations or
approvals of, or filings with, any Governmental Entity or any other third Person
except for those that the failure to make or obtain would not be reasonably
expected to have a Material Adverse Effect on Parent.

 

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

 

4.6.  Company
Reports.

 

(a)  A true
and complete copy of each annual, quarterly and other report, registration
statement and definitive proxy statement filed by Parent with the SEC since
January 1, 2004 (the forms, statements, reports and documents filed by Parent
with the SEC since January 1, 2004 and those filed with the SEC subsequent to
the date of this Agreement, if any, including any amendments thereto, the
“Parent
SEC Documents”) is
available on the web site maintained by the SEC at http:
//www.sec.gov. As of
their respective filing dates, the Parent SEC Documents complied or will comply
in all material respects with the applicable requirements of the Securities
Exchange Act and the rules and regulations of the SEC promulgated thereunder in
effect on such dates and applicable to such Parent SEC Documents, except in each
case to the extent superseded or amended by a Parent SEC Document filed prior to
the date hereof. As of their respective dates, none of the Parent SEC Documents
contained, and none of the Parent SEC Documents filed with the SEC subsequent to
the date hereof will contain, any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent superseded or amended by Parent SEC
Documents filed subsequently and prior to the date hereof. The Parent SEC
Documents included or will include all certificates required to be included
therein pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as
amended (the “SOX
Act”), and
the internal control report and attestation of Parent’s outside auditors
required by Section 404 of the SOX Act.

 

36

(b)  Management
of Parent has established and maintains disclosure controls and procedures (as
such term is defined in Rule 13a-15(e) under the Securities Exchange Act). Such
disclosure controls and procedures: (i) are designed to ensure that material
information relating to Parent and its Subsidiaries is made known to Parent’s
chief executive officer and its chief financial officer by others within those
entities, particularly during the periods in which Parent’s reports and filings
under the Securities Exchange Act are being prepared, (ii) have been evaluated
for effectiveness as of the end of the most recent annual period reported to the
SEC, and (iii) except as may be indicated in the Parent SEC Documents, are
effective to perform the functions for which they were established. Neither
Parent’s auditors nor the Audit Committee of the Parent Board have been advised
of: (x) except as may be indicated in the Parent SEC Documents, any significant
deficiencies or material weaknesses in the design or operation of the internal
controls over financial reporting (as such term is defined in Rule 13a-15(f)
under the Securities Exchange Act) of Parent that have materially affected
Parent’s internal control over financial reporting; or (y) any fraud, whether or
not material, that involves management or other employees who have a role in the
internal controls over financial reporting of Parent.

 

(c)  Since
December 31, 2003, neither Parent, any of its Subsidiaries, nor any director,
officer, employee, auditor, accountant or representative of Parent or its
Subsidiaries, has received or otherwise had or obtained knowledge of any
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
either of Parent, its Subsidiaries or its internal accounting controls,
including any material complaint, allegation, assertion or claim that Parent or
its Subsidiaries has engaged in questionable accounting or auditing practices,
and (ii) no attorney representing Parent or its Subsidiaries, whether or not
employed by Parent or its Subsidiaries, has reported evidence of a violation of
securities laws, breach of fiduciary duty or similar violation by Parent or its
Subsidiaries or any of their officers, directors, employees or agents to the
board of directors of Parent or its Subsidiaries or any committee thereof or to
any director or officer of Parent or its Subsidiaries.

 

(d)  The
consolidated financial statements of Parent included in the Parent SEC
Documents, in each case as they may have been amended or superseded by Parent
SEC Documents filed subsequently and prior to the date hereof, complied or, in
the case of Parent SEC Documents filed with the SEC subsequent to the date
hereof, will comply as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, have been prepared or, in the
case of Parent SEC Documents filed with the SEC subsequent to the date hereof,
will be prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated and consistent with each other (except that
unaudited financial statements do not contain footnotes and other presentation
items that may be required by GAAP) and fairly present or, in the case of Parent
SEC Documents filed with the SEC subsequent to the date hereof, will fairly
present Parent’s consolidated financial condition, operating results and cash
flows as of the dates and during the periods indicated therein, subject in the
case of the unaudited financial statements to normal year end adjustments that
will not be material in amount or effect.

 

37

4.7.  Authorization
for Parent Shares; Capital Resources.

 

(a)  Parent
will take all necessary action prior to the Closing Date to permit it to issue
the number of Parent Shares required to be issued in the Merger pursuant to this
Agreement.

 

(b)  All of
the Parent Shares to be issued in the Merger have been duly authorized and, upon
consummation of the Merger and issuance thereof in exchange for Company Shares
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable, and no Person will have any preemptive right of
subscription or purchase in respect thereof.

 

(c)  All
Parent Shares issued pursuant to this Agreement will, when issued, be registered
or exempt from registration under the Securities Act and the Securities Exchange
Act and registered or exempt from registration under any applicable state
securities laws.

 

(d)  Parent
has sufficient capital resources to pay the Cash Component of the Merger
Consideration.

 

4.8.  NASDAQ
Compliance.
Parent is
in compliance with all applicable maintenance criteria and other requirements
necessary to permit continued listing of the Parent Shares on the NASDAQ, and
Parent has not received evidence to the contrary from the NASD.

 

4.9.  No
Material Adverse Changes.
Since
December 31, 2004, Parent and its Subsidiaries have conducted their businesses
only in, and have not engaged in any material transaction other than in
accordance with, the Ordinary Course of Business of Parent and its Subsidiaries.
Since December 31, 2004 to the date hereof, there has not been any Material
Adverse Effect on Parent.

 

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

 

(a)  liabilities
or obligations to the extent (i) reflected on the consolidated balance sheet of
Parent or (ii) readily apparent in the notes thereto, in each case included in
Parent’s annual report on Form 10-K for the year ended December 31,
2004;

 

(b)  liabilities
or obligations incurred in the Ordinary Course of Business since December 31,
2004 (none of which results from, arises out of, relates to, is in the nature of
or was caused by any breach of contract, breach of warranty, tort, infringement
or violation of law);

 

(c)  liabilities
or obligations under this Agreement;

 

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

 

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

 

38

4.11.  Compliance
with Laws.
The
businesses of Parent and each of its Subsidiaries have not been conducted in
violation of any Laws, except for violations that would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect on
Parent. No investigation or review by any Governmental Entity with respect to
Parent or any of its Subsidiaries is pending or, to the Knowledge of Parent,
threatened in writing, except for any such investigations or reviews that would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect on Parent. Each of Parent and its Subsidiaries has
obtained and is in substantial compliance with all Licenses necessary to conduct
its business as presently conducted, except those the absence of which or the
noncompliance with which would not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect on Parent.

 

4.12.  Litigation. 
There is
no action, suit, investigation or proceeding pending, or, to the Knowledge of
Parent, threatened in writing, against Parent, any of its Subsidiaries, any
present or former officer, director or employee of Parent or any of its
Subsidiaries or any other Person for whom Parent or any such Subsidiary may be
liable before any court or arbitrator or before or by any governmental body,
agency or official, domestic or foreign, as to which there is a reasonable
likelihood that such action, suit, investigation or proceeding will be resolved
in a manner adverse to Parent or any of its Subsidiaries, except where such
adverse resolution would not reasonably be expected to have a Material Adverse
Effect on Parent.

 

4.13.  No
General Solicitation. 
Neither
Parent nor, to the Knowledge of Parent, any Affiliate of Parent or any person
acting on its or their behalf has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) in connection with any offer or sale of the Parent Shares to be delivered
pursuant to this Agreement.

 

 

39

 

       
ARTICLE V  

COVENANTS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

40

 

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

 

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

 

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

 

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

 

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

 

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

 

 

41

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

 

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

 

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

 

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

 

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

 

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

 

 

42

 

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

 

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

 

(b)  Parent
shall not knowingly take or permit any of its Subsidiaries to take any action or
refrain from taking any action the result of which would be reasonably and
foreseeably likely to prevent the consummation of the Merger by the Termination
Date. Without limiting the generality of the foregoing, from the date of this
Agreement until the Effective Time, except (A) as otherwise expressly required
by this Agreement, (B) as Company may approve in writing or (C) as set forth in
Section 5.1(b) of the Parent Disclosure Letter, Parent will not and will not
permit its Subsidiaries to:

 

(1)  adopt or
propose any material change in Parent’s certificate of incorporation or by laws
or other applicable governing instruments or amend any term of the shares of
Parent Stock;

 

(2)  merge or
consolidate Parent or Merger Sub with any other Person, sell all or
substantially all of Parent’s assets or adopt a plan of liquidation of
Parent;

 

(3)  enter
into or acquire any new line of business that (i) is material to Parent and its
Subsidiaries taken as a whole and (ii) is not strategically related to the
current business or operations of Parent and its Subsidiaries;

 

(4)  except
for shares of Parent Stock issued for fair value in arm’s length transactions
and other than the issuance of shares in the ordinary course of business
consistent with past practices pursuant to Parent employee benefit plans, issue,
sell, pledge, dispose of, grant, transfer, lease, license, guarantee, encumber,
or authorize the issuance, sale, pledge, disposition, grant, transfer, lease,
license, guarantee or encumbrance of, any shares of capital stock of Parent or
any of its Subsidiaries (other than the issuance of shares by a wholly owned
Subsidiary of Parent to Parent or another wholly owned Subsidiary of Parent), or
securities convertible or exchangeable into or exercisable for any shares of
such capital stock, or any options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements, calls, commitments or other rights of any kind to acquire any
shares of such capital stock or such convertible or exchangeable
securities;

 

(5)  declare,
set aside or pay any dividend or distribution (whether in cash, stock or
property or any combination thereof) on any shares of Parent Stock or on any
shares of capital stock of any Subsidiary, other than by wholly owned
Subsidiaries;

 

 

43

(6)  reclassify,
split, combine or subdivide, or repurchase, redeem or otherwise acquire at
prices above fair market value, directly or indirectly, any of its capital stock
or securities convertible or exchangeable into or exercisable for any shares of
its capital stock; or

 

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

 

5.2.  Listing.
Parent
shall use commercially reasonable efforts to cause the Parent Shares to be
issued in connection with the Merger to be approved for listing on Nasdaq,
subject to official notice of issuance, prior to the Closing Date.

 

5.3.  Filings;
Other Actions; Notification.

 

(a)  Company
shall promptly after the date of this Agreement prepare and distribute to the
Stockholders a notice of the Company Special Meeting and related
materials.

 

(b)  Company
and Parent shall cooperate with each other and use (and shall cause their
respective Subsidiaries to use) their respective reasonable best efforts to take
or cause to be taken all actions, and do or cause to be done all things,
necessary, proper or advisable on its part under this Agreement and applicable
Laws to consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including preparing and
filing as promptly as practicable all documentation to effect all necessary
notices, reports and other filings (including by filing no later than 5 business
days after the date of this Agreement all applications required to be filed with
the FCC; provided,
however, that
the failure to file within 5 business days will not constitute a breach of this
Agreement) and to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in order to consummate the Merger
or any of the other transactions contemplated by this Agreement; provided,
however, that
nothing in this Section 5.3 (i) shall require, or be construed to require,
Parent to take or to refrain from taking any action, to agree to any restriction
with respect to any assets or operations of Parent or its Subsidiaries, or to
cause its Subsidiaries to do or agree to do any of the foregoing, in each case
that would take effect prior to the Effective Time, or (ii) shall require, or be
construed to require, Parent to take or to refrain from taking any action, to
agree to any restriction with respect to any assets or operations of Parent or
Company or its respective Subsidiaries, or to cause its Subsidiaries to do or
agree to do any of the foregoing, if any such action, failure to act,
restriction or agreement, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on it or a Combined Material Adverse
Effect. Subject to applicable Laws relating to the exchange of information,
Parent and Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all of the information relating to
Parent or Company, as the case may be, and any of their respective Subsidiaries,
that appears in any filing made with, or written materials submitted to, any
third party and/or any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement. To the extent permitted by
law, each Party shall provide the other with copies of all correspondence
between it (or its advisors) and any Governmental Entity relating to the
transactions contemplated by this Agreement and, to the extent reasonably
practicable, all telephone calls and meetings with a Governmental Entity
regarding the transactions contemplated by this Agreement shall include
representatives of Parent and Company. In exercising the foregoing rights, each
of Company and Parent shall act reasonably and as promptly as
practicable.

 

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

 

 

44

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

 

(e)  Subject
to the proviso set forth in Section 5.3(b), Parent’s and Company’s obligations
under this Section 5.3 shall include, without limitation, the obligation to use
their respective reasonable best efforts to defend any lawsuits or other legal
proceedings, whether judicial or administrative, challenging the consummation of
the Merger or the other transactions contemplated hereby, including using
reasonable best efforts to seek to have any stay or other injunctive relief
which would prevent or materially delay or impair the consummation of the
transactions contemplated by this Agreement entered by any court or other
Governmental Entity reversed on appeal or vacated.

 

5.4.  Company
Financial Statements.
As soon
as reasonably practicable, but in any event within 20 days after the end of each
calendar month commencing with May 2005, Company will deliver to Parent
unaudited consolidated balance sheets of Company and its Subsidiaries as of the
end of such calendar month and as at the end of the comparative month in the
preceding year, together with unaudited summaries of consolidated earnings of
Company and its Subsidiaries for such such calendar month and for the
comparative month in the preceding year. As soon as reasonably practicable, but
in any event within 45 days after the end of each fiscal quarter of Company,
commencing with the quarter ended March 31, 2005, Company will deliver to Parent
unaudited consolidated balance sheets of Company and its Subsidiaries as at the
end of such fiscal quarter and as at the end of the comparative fiscal quarter
of the preceding year, together with the unaudited statements of consolidated
income and cash flows for the fiscal quarters then ended.

 

 

45

5.5.  Access.
Each
Party shall permit (and shall cause each of its Subsidiaries to permit)
representatives of the other Parties to have reasonable access to all premises,
properties, personnel, books, records (including Tax records), contracts and
documents of or pertaining to each Party and their respective Subsidiaries,
other than information or documentation relating to Acquisition proposals by
third parties, except as provided in Section 5.8, and provided that no
investigation pursuant to this Section 5.5 shall affect or be deemed to modify
any representation or warranty made by any Party herein. Any investigation
pursuant to this Section 5.5 shall be conducted in such manner as not to
interfere unreasonably with the conduct of the business of the Parties and their
Subsidiaries.

 

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

 

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

 

(b)  Any
Indemnified Person wishing to claim indemnification under Section 5.6(a), upon
learning of any such claim, action, suit, proceeding or investigation that may
give rise to such claim, shall promptly notify Parent thereof, but the failure
to so notify shall not relieve Parent or the Surviving Corporation of any
liability it may have to such Indemnified Person except to the extent such
failure materially and actually prejudices the indemnifying party. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Parent or the Surviving Corporation
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Persons for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Persons in
connection with the defense thereof, except that if Parent or the Surviving
Corporation does not elect to assume such defense or counsel for the Indemnified
Persons advises that there are issues that raise conflicts of interest between
Parent or the Surviving Corporation and the Indemnified Persons, the Indemnified
Persons may retain counsel satisfactory to them, and Parent and the Surviving
Corporation shall jointly and severally be obligated to pay all reasonable fees
and expenses of such counsel for the Indemnified Persons promptly as statements
therefor are received; provided,
however, that
Parent and the Surviving Corporation shall be obligated pursuant to this Section
5.6(b) to pay for only one firm of counsel for all Indemnified Persons in any
jurisdiction unless the use of one counsel for such Indemnified Persons would
present such counsel with a conflict of interest; provided, that
the fewest number of counsel necessary to avoid conflicts of interest shall be
used; (ii) the Indemnified Persons will use their reasonable efforts to
cooperate in the defense of any such matter, and (iii) Parent and the Surviving
Corporation shall not be liable for any settlement effected without their prior
written consent (such consent not to be unreasonably withheld or delayed); and
provided,
further, that
Parent and the Surviving Corporation shall not have any obligation under this
Agreement to any Indemnified Person if and when a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Person in the manner
contemplated hereby is prohibited by applicable law.

 

 

46

(c)  If
Parent, the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.6.

 

(d)  Company
may purchase a six-year “tail” prepaid
policy prior to the Effective Time on terms with respect to coverage and amount
substantially comparable to, but no less favorable to Company and the
Indemnified Persons than, those under the directors’ and officers’ liability
policy maintained by Company and in effect on the date hereof, provided that the
amount paid by Company for such “tail” policy
shall not exceed $90,000 unless the full amount of the excess is included as a
Transaction Expense.

 

(e)  The
rights of each Indemnified Person under this Section 5.6 shall be in addition to
any rights such Person may have under the articles of incorporation or bylaws of
the Company or any of its Subsidiaries, or under Michigan Law or any other
applicable laws. These rights shall survive consummation of the Merger and are
intended to benefit, and shall be enforceable by, each Indemnified Person and
may not be changed as to an Indemnified Person without the consent of the
Indemnified Person.

 

(f)  The
provisions of this Section 5.6 are intended to be for the benefit of, and shall
be enforceable by, each of the Indemnified Persons and their heirs and legal
representatives.

 

5.7.  Employee
Benefits After the Merger.

 

(a)  Until at
least the earlier of the 120th day
after the Effective Time and December 31, 2005, Parent shall cause the Surviving
Corporation to provide those of its and its Subsidiaries’ employees who were
employed by Company or its Subsidiaries immediately prior to the Effective Time
with compensation and employee benefits at least as favorable, in the aggregate,
as the compensation and benefits provided by Company and its Subsidiaries to
such employees immediately prior to the date hereof. The preceding sentence
shall not preclude Parent or the Surviving Corporation at any time following the
Effective Time from terminating the employment of any Company
employee.

 

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

 

47

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

 

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

 

(e)  Parent
acknowledges and agrees that the consummation of the transactions contemplated
by this Agreement will constitute a “change
of control” of the
Company for purposes of each Company Benefit Plan and each program, policy and
agreement covering any current or former employee of the Company and its
Subsidiaries as has been specifically indicated in Section 5.7(e) of the Company
Disclosure Letter to have any such “change
of control”
provisions, and, accordingly agrees to, and agrees to cause the Surviving
Corporation to, honor all provisions relating to a change of control under such
Company Benefit Plans, programs, policies and agreements as have been
specifically indicated in Section 5.7(e) of the Company Disclosure Letter to
have any such “change
of control”
provisions.

 

(f)  Notwithstanding
the foregoing, nothing in this Section 5.7 shall preclude Parent from seeking to
(i) modify any employment agreement with the consent of the affected employee or
employees or (ii) modify any Company Benefit Plan to the extent such
modification is permitted by the terms of such Company Benefit Plan and is
consistent with Section 5.7(a).

 

5.8.  Lockup
Agreement; Transfer Restrictions.
Each
Preferred Stockholder, by its receipt of any Parent Shares as Merger
Consideration and without any further action by or on behalf of such Preferred
Stockholder, and in part consideration of the issuance of such Parent Shares to
it, shall be deemed to have acknowledged and agreed, and acknowledges and
agrees, with and for the benefit of Parent as follows, and all Parent Shares
issued as Merger Consideration are subject, and all holders of such Parent
Shares are bound by, to the following:

 

 

48

(a)  Except
only as provided in the last sentence of this Section 5.8(a), such Preferred
Stockholder shall not, for the period from the Closing Date and ending on the
first anniversary of the Closing Date, offer, sell, contract to sell, pledge,
grant any option to purchase, make any short sale or otherwise dispose of any
part of the Parent Shares issued to it in accordance with the terms of this
Agreement (the “Merger
Shares”), any
options or warrants convertible or exercisable into such Merger Shares, or any
other securities convertible into, exchangeable for or that represent the right
to receive such Merger Shares (except pursuant to the Escrow Agreement). The
foregoing restriction precludes such Preferred Stockholder from engaging in any
hedging or other transaction that is designed to or that reasonably could be
expected to lead to or result in a sale or disposition of such Merger Shares
even if such Merger Shares would be disposed of by someone other than such
Preferred Stockholder, and such prohibited hedging or other transactions would
include any short sale or any purchase, sale or grant of any right (including
any put or call option) with respect to any of such Merger Shares or with
respect to any security that includes, relates to, or derives any part of its
value from such Merger Shares. Notwithstanding the foregoing, but subject to any
other provisions of this Section 5.8(a), such Preferred Stockholder may sell,
pledge or otherwise dispose of up to an amount equal to 25% of such Merger
Shares in any three-month period, commencing on the first day of the calendar
month beginning after the Closing Date.

 

(b)  Stop
transfer instructions will be given to Parent’s transfer agents with respect to
the Merger Shares and there will be placed on the certificates for the Merger
Shares, or any substitutions therefor, a legend stating in
substance:

 

“The
shares represented by this certificate are subject to and may only be
transferred in accordance with the terms of an agreement dated May 23, 2005,
between the registered holder hereof and Talk America Holdings, Inc., a copy of
which agreement is on file at the principal offices of Talk America Holdings,
Inc.”

 

(c)  The
Merger Shares were offered and issued in a transaction not involving a public
offering, have not been registered under the Securities Act and cannot be
resold, pledged, assigned or otherwise disposed of except pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act, and in each case in
accordance with any applicable securities laws of any state of the United
States.

 

(d)  Stop
transfer instructions will be given to Parent’s transfer agents with respect to
the Merger Shares and there will be placed on the certificates for the Merger
Shares, or any substitutions therefor, a legend stating in
substance:

 

“The
shares represented by this certificate have not been registered under the
Securities Act of 1933 and such shares may not be sold or otherwise transferred
except in accordance with an exemption from the registration requirements of the
Securities Act of 1933 or pursuant to an effective registration statement under
the Securities Act of 1933. The shares represented by this certificate may only
be transferred in accordance with the terms of an agreement dated May 23, 2005
between the registered holder hereof and Talk America Holdings, Inc., a copy of
which agreement is on file at the principal offices of Talk America Holdings,
Inc.”

 

 

49

 

(e)  The
legend set forth in Section 5.8(d) shall be removed from a certificate
representing Merger Shares by delivery of substitute certificates without such
legend if such Preferred Stockholder shall have delivered to Parent a copy of a
letter from the staff of the Commission, or an opinion of counsel in form and
substance reasonably satisfactory to Parent, to the effect that such legend is
not required for purposes of the Securities Act or upon sale of the Merger
Shares represented by such certificate pursuant to an effective registration
statement under the Securities Act.

 

5.9.  Notices
and Filing by Company.
As
promptly as practicable, but in no event more than three business days, after
the date hereof, Company shall give to all Stockholders the notices of the
approval and adoption of this Agreement and the Merger and the approval of the
Articles Amendment required to be given pursuant to Section 450.1407 of the
Michigan Law and the Secretary of Company shall certify in writing to Parent
that such notice has been given as so required.

 

 
(b)  Not later than
immediately prior to the Closing, Company shall execute and file with the
Michigan Department of Labor & Economic Growth, Bureau of Commercial
Services, a certificate of amendment (the “Certificate
of Amendment”) with
respect to the Articles Amendment as provided in Section 450.1631 of the
Michigan Law and shall give notice thereof to the Stockholders as and to the
extent required by Section 450.1764(2) of the Michigan Law, and the Secretary of
Company shall certify in writing to Parent that such notice has been given as so
required.

 

ARTICLE
VI  

CONDITIONS
TO OBLIGATIONS TO CLOSE

 

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

 

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

 

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

 

(c)  The
Parent Shares to be issued in the Merger shall be approved for listing on
Nasdaq, subject to official notice of issuance;

 

 

50

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

 

(a)  (i) Each
of the representations and warranties of Company set forth in the first three
and the last sentences of Section 3.1(a) and in Sections 3.1(b), 3.1(c), 3.1(d),
3.2, 3.3(i) and 3.13 of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent any such representation
and warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date);
and (ii) Parent shall have received a certificate signed on behalf of Company by
the chief executive officer and the chief financial officer of Company to such
effect.

 

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

 

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

 

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

 

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

 

 

51

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

 

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

 

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

 

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

 

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

 

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

 

(a)  (i) Each
of the representations and warranties of Parent and Merger Sub set forth in
Sections 4.1, 4.2, 4.3 and 4.4(i) of this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except to the extent any such
representation and warranty expressly speaks as of an earlier date, in which
case such representation and warranty shall be true and correct as of such
earlier date); and (ii) Company shall have received a certificate signed on
behalf of Parent and Merger Sub by the chief executive officer and the chief
financial officer of Parent to such effect.

 

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

 

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

 

(d)  There
shall not have been any material default by Parent or its Subsidiaries under the
Switch Lease and the Switch Lease shall be in full force and
effect.

 

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

 

 

52

ARTICLE
VII  

SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

 

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

 

7.2.  Indemnification.

 

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

 

(1)  From the
Escrow Fund and as provided in, and subject to the terms and conditions of, this
Section 7.2, Parent and its officers, directors, affiliates (including the
Surviving Corporation), employees, agents and representatives (each a
“Parent
Indemnified Party” and,
collectively, the “Parent
Indemnified Parties”), shall
be indemnified and held harmless against all claims (including without
limitation Third Party Claims, as defined below, and any claims for
indemnification against Company, Surviving Corporation or Parent by officers,
directors or employees of Company), losses, liabilities, damages, diminutions in
value (which term shall be deemed to exclude any decline in the price of the
Parent Stock), deficiencies, costs, interest, awards, amounts paid in
settlement, judgments, penalties and expenses, including reasonable attorneys’
and consultants’ fees and expenses and including any such expenses incurred in
connection with investigating, defending against or settling any of the
foregoing, but excluding liability for any lost profits or incidental,
consequential, indirect or special damages (hereinafter individually a
“Loss” and
collectively “Losses”),
incurred or sustained by the Parent Indemnified Parties, or any of them,
directly or indirectly, arising out of or by reason of or as a result of (x) any
breach or inaccuracy of a representation or warranty of Company contained in
this Agreement or in any certificate or other instrument delivered by or on
behalf of Company pursuant to this Agreement or (y) any claim by any holder of
Common Stock in respect of or arising out of or as a result or by reason of (or
alleged to be in respect of or to arise out of or as a result or by reason of)
this Agreement or the transactions contemplated thereby, including the Merger,
the approval or adoption thereof or any solicitation of such approval or
adoption, except to the extent that any such claim in this clause (y) arises out
of or is based upon any untrue statement or omission in written materials
furnished by Company to the Stockholders in connection with such solicitation in
reliance upon and in conformity with written information furnished to Company by
or on behalf of Parent specifically for inclusion in such furnished written
materials or (iii) the amount, if any, by which the payment required to be paid
to any Dissenting Stockholder in respect of its Preferred Stock exceeds the sum
of the Withheld Cash and the Dissenter Cash delivered to Parent pursuant to
Section 2.4(f)(4). as provided in, and subject to the terms and conditions of,
this Section 7.2, or (iv) the amount, if any, by which the sum of the
Transaction Costs and the Severance Amount exceed the Deducted Amount (other
than the amount of any such excess as shall have been reflected as a reduction
of the amount of the Cash Cap as provided in the definition thereof based on the
information in the Closing Costs Certificate.

 

53

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

 

(b)  Third
Party Claims.

 

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

 

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

 

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

 

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

 

	                                                                                                                 (ii) 
      	
      no
      Indemnifying Party shall consent to the entry of any judgment or enter
      into any settlement that does  not include as an unconditional term
      thereof the giving by each claimant or plaintiff to each Indemnified Party
      of a release from all liability in respect of such claim;
    and

 

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

 

 

54

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

 

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

 

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

 

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

 

55

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

 

(d)  Termination
of Indemnification.

 

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

 

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

 

(e)  Escrow
Fund; Maximum Payments; Remedy.

 

(1)  By virtue
of this Section 7.2 and as security for the indemnity obligations provided for
in Section 7.2(a) hereof, at the Effective Time, Parent will deposit with the
Escrow Agent the Escrowed Consideration as provided in Section 2.5(a). Such
deposit of cash and Parent Shares constituting the Escrowed Consideration (the
aggregate value of which, valuing the Parent Shares at the Parent Share
Valuation, the “Escrow
Amount”) shall
constitute an escrow fund (the “Escrow
Fund”) to be
governed by the terms set forth in the Escrow Agreement. Solely for purposes of
this Section 7.2 and the allocation of interests in the Escrow Fund among the
Preferred Stockholders, and without limitation of the amount of the Escrow Fund
available for satisfaction of claims by the Parent Indemnified Parties under
this Section 7.2, each Preferred Stockholder shall be deemed to have received
and deposited such Preferred Stockholder’s pro
rata share of
the Escrow Fund (plus any additional Parent Shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time with respect to the Parent Shares constituting part of the Escrow
Fund) with the Escrow Agent as provided in Section 2.5(a) of this Agreement. The
Escrow Fund shall be deposited with, and shall be held by, the Escrow Agent and
shall be available to compensate the Parent Indemnified Parties for any claims
by such parties for any Losses suffered or incurred by them and for which they
are entitled to recovery under this Agreement. Claims by the Parent Indemnified
Parties under this Section 7.2 for Losses shall be limited to, and shall be
satisfied solely from, the Escrow Fund.

 

56

(2)  Any
payment to any Parent Indemnified Party under this Section 7.2 from the Escrow
Fund shall be deemed made by the Preferred Stockholders on a joint and several
basis, provided that
each Preferred Stockholder shall have the option to elect, by instruction to the
Escrow Agent given as provided in the Escrow Agreement, to have its Allocated
Portion (as defined below) of any such payment paid by delivery of (i) cash,
(ii) Parent Shares or (iii) a combination of cash and Parent Shares, in each
case to the extent of such Preferred Stockholder’s Allocated Portion of the
Escrow Amount and of the cash and Parent Shares constituting such Preferred
Stockholder’s Allocated Portion of the Escrow Fund, and with the Parent Shares
valued for purposes of such payment at the Parent Share Valuation. At any time,
any Preferred Stockholder may substitute cash for such Preferred Stockholder’s
Parent Shares constituting part of the Escrow Fund, with the Parent Shares being
valued for such purpose at the Parent Share Valuation. In connection with any
payment as provided in this Section 7.2(e)(2) that shall be made by causing the
delivery of Parent Stock out of the Escrow Fund, each of Parent and the
Preferred Stockholders shall cooperate in good faith and use its reasonable best
efforts to promptly make and promptly process all necessary filings and
applications and obtain all consents, approvals, orders, authorizations,
registrations and declarations and to comply with all applicable laws necessary
for the Preferred Stockholders to make such payment. The “Allocated
Portion” of any
Preferred Stockholder of (i) any payment to any Parent Indemnified Party or the
Escrow Amount is the portion thereof as bears the same relationship to the total
payment or the Escrow Amount, as the case may be, as the value of the Merger
Consideration to be received by such Preferred Stockholder in accordance with
this Agreement (valuing any Parent Shares received at the Parent Share
Valuation) bears to the Escrow Amount, and (ii) cash, Parent Shares and the
Escrow Fund is the cash and Parent Shares that were to be received as Merger
Consideration by such Preferred Stockholder and were deposited in the Escrow
Fund, in each case as such Parent Shares may have been replaced by cash by such
Preferred Stockholder as herein provided.

 

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

 

(f)  Basket
Amount.
Notwithstanding any provision of this Section 7.2 to the contrary, an
Indemnified Party may not recover any Losses under Section 7.2(a) hereof unless
and until such Losses exceed $150,000 (the “Basket
Amount”), in
which case the Indemnified Party shall be entitled to recover all Losses,
including the Basket Amount.

 

57

(g)  Insurance;
Tax Benefit; Mitigation.

 

(1)  All
indemnification or reimbursement payments required pursuant to this Section 7.2
shall be (i) made net of all insurance proceeds actually received by the party
to be indemnified, and (ii) reduced to take account of any net tax benefit when
and as realized by the indemnified party arising from the incurrence or payment
of any Loss. Proceeds received from an insurance carrier which are subject to a
reservation of rights by the carrier that has not been released in writing by
the carrier (“Reserved
Insurance Proceeds”) shall
be taken into account in the calculation of Losses once received by the party to
be indemnified; provided,
however, that
Reserved Insurance Proceeds with respect to which the insurance carrier
subsequently obtains reimbursement shall be deemed to be Losses on a dollar for
dollar basis with the amount by which Losses were previously reduced as a result
of the receipt of such proceeds. Purchaser Indemnified Parties and Company
Indemnified Parties shall each use commercially reasonable efforts to obtain a
release of a reservation of rights from the insurance carrier promptly following
the settlement or final adjudication of the claim or proceeding to which the
Reserved Insurance Proceeds related.

 

(2)  Each
Indemnified Party shall use commercially reasonable efforts to mitigate Losses,
including seeking recovery under insurance policies. If a Parent Indemnified
Party is the Indemnified Party, it shall reimburse the Escrow Fund (if the
Escrow Agreement is still in effect) or the Preferred Stockholders (if the
Escrow Agreement has been terminated), or (y) if a Company Indemnified Party is
the Indemnified Party, it shall reimburse Parent, for any Loss indemnified by
them to the extent all or a portion of such Loss (net of reasonable collection
costs) is subsequently recovered by the Indemnified Party under any such
insurance, but in each case only to the extent that the amount of such recovery
exceeds the amount of the Losses claimed by such Indemnified Party that have not
been paid to such Indemnified Party because of the limitations of Section 6
hereof.

 

(h)  Exclusive
Remedy.

 

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

 

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

 

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

 

58

    
ARTICLE VIII  

TERMINATION

 

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

 

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

 

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

 

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

 

(d)  either
Company or Parent may terminate this Agreement with the prior authorization of
its respective board of directors by giving written notice to the other Party if
(i) the Closing shall not have occurred on or before December 31, 2005 (the
“Termination
Date”), by
reason of the failure of any condition precedent under ARTICLE VI hereof; or
(ii) there shall be any law or regulation that makes consummation of the Merger
illegal or otherwise prohibited or any judgment, injunction, order or decree of
any court or governmental body having competent jurisdiction enjoining Company
or Parent from consummating the Merger and such judgment, injunction, order or
decree shall have become final and nonappealable; provided that the
right to terminate this Agreement pursuant to this Section 8.1(d) shall not be
available to any Party that has breached its obligations under this Agreement or
under any other agreement contemplated hereunder in any manner that shall have
proximately contributed to the occurrence of the failure of a condition to the
consummation of the Merger.

 

8.2.  Effect
of Termination. If this
Agreement is terminated pursuant to Section 8.1, all rights and obligations of
the Parties hereunder shall terminate without any liability of any Party to any
other Party, except that the provisions of the Confidentiality Agreement and the
provisions of Sections 8.2 and 10.11 shall survive any such termination, and
provided,
however, except
as otherwise provided herein, no such termination shall relieve any Party of any
liability or damages resulting from any willful or intentional breach of any
covenant in this Agreement.

 

59

ARTICLE
IX  

REGISTRATION
RIGHTS

 

9.1.  Definitions.
For
purposes of this ARTICLE IX, the following capitalized terms shall have the
following meanings:

 

“Holder” means
the holders, from time to time, of the Securities.

 

“Majority
Holders” means,
at any time after the effectiveness of a Shelf Registration Statement under this
ARTICLE IX, the Holders of a majority of the then outstanding number of
Securities registered under a Shelf Registration Statement and means, at any
time after the date of this Agreement and prior to the effectiveness of a Shelf
Registration Statement under this ARTICLE IX, the Holders of a majority of the
then outstanding number of Securities.

 

“Prospectus” means
the prospectus included in any Shelf Registration Statement (including, without
limitation, a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Securities covered by such Shelf Registration Statement, and all
amendments and supplements to such prospectus, including post-effective
amendments.

 

“Securities” means
the Parent Shares issued as Merger Consideration pursuant to Section 2.4(f)(2)
of this Agreement, except such Parent Shares as shall have been sold pursuant to
the Shelf Registration Statement or otherwise transferred by the Holder thereof
pursuant to an exemption from registration under the Securities Act as a result
of which exempt transfer the transferee’s disposition of the Parent Shares would
not be restricted under the Securities Act.

 

“Shelf
Registration” means a
registration effected pursuant to Section 9.2.

 

“Shelf
Registration Period” has the
meaning set forth in Section 9.2(b).

 

“Shelf
Registration Statement” means a
“shelf”
registration statement of Parent pursuant to the provisions of Section 9.2
hereof that covers some or all of the Securities, as applicable, on an
appropriate form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.

 

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9.2.  Shelf
Registration; Suspension of Use of Prospectus.

 

(a)  After the
Closing Date, Parent shall prepare and, as promptly as practicable after the
Closing Date, but not later than 45 days (or 71 days if the delay in filing
within such 45-day period is due to the failure of Company and Company’s
independent auditors to provide all Company’s financial information (and pro
forma financial information based thereon) required to be included in the Shelf
Registration Statement beginning promptly after the date hereof or to otherwise
cooperate in preparing such financial information (and pro forma financial
information)) following the Closing Date, shall file with the SEC a Shelf
Registration Statement relating to the offer and sale of the Securities by the
Holders from time to time in accordance with the methods of distribution elected
by such Holders and set forth in such Shelf Registration Statement, and
thereafter shall use its best efforts to cause such Shelf Registration to be
declared effective under the Securities Act.

 

(b)  Parent
shall use its best efforts to keep the Shelf Registration Statement continuously
effective in order to permit the Prospectus forming part thereof to be usable by
Holders until the earliest of (i) the second anniversary of the Closing Date,
(ii) the date on which the Securities may be sold pursuant to paragraph (k) of
Rule 144 (or any successor provision) promulgated by the SEC under the
Securities Act by a person that is not, and has not been during the preceding
three months, an “affiliate,” as
such term is used in such paragraph (k), of Parent, and (iii) such date as of
which all the Securities have been sold pursuant to the Shelf Registration
Statement or otherwise transferred by the Holder thereof pursuant to an
exemption from registration under the Securities Act as a result of which exempt
transfer the transferee’s disposition of the Parent Shares would not be
restricted under the Securities Act (in any such case, such period being called
the “Shelf
Registration Period”).
Parent shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Securities covered thereby not
being able to offer and sell such Securities during that period, unless such
action is required (x) by applicable law or (y) pursuant to Section 9.2(c)
hereof, and, in either case, so long as Parent promptly thereafter complies with
the requirements of Section 9.3(i) hereof, if applicable.

 

(c)  Parent
may suspend the use of the Prospectus for a period not to exceed 45 days in any
three-month period or for three periods not to exceed an aggregate of 60 days in
any twelve-month period for valid business reasons, to be determined by Parent
Board in its sole reasonable judgment (not including avoidance of Parent’s
obligations hereunder), including, without limitation, the acquisition or
divestiture of assets, public filings with the SEC, pending corporate
developments and similar events; provided that
Parent promptly thereafter complies with the requirements of Section 9.3(i)
hereof, if applicable.

 

61

9.3.  Registration
Procedures.
In
connection with any Shelf Registration Statement, the following provisions shall
apply:

 

(a)  Parent
shall furnish to the Holders, prior to the filing thereof with the SEC, a copy
of any Shelf Registration Statement, and each amendment thereof and each
amendment or supplement, if any, to the Prospectus included
therein.

 

(b)  Parent
shall ensure that (i) any Shelf Registration Statement and any amendment thereto
and any Prospectus forming part thereof and any amendment or supplement thereto
comply in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any Prospectus
forming part of any Shelf Registration Statement, and any amendment or
supplement to such Prospectus, does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that no
representation or agreement is made hereby with respect to information provided
in writing by any Holder with respect to such Holder required to be included in
any Shelf Registration or Prospectus pursuant to the Securities Act or the rules
and regulations thereunder.

 

(c)  (1) Parent
shall advise the Holders and, if requested by any such Holder, confirm such
advice in writing:

 

	                                       (i) 	
      when
      a Shelf Registration Statement and any amendment thereto has been filed
      with the SEC and when the Shelf Registration Statement or any
      post-effective amendment thereto has become effective;
  and

 

	                                                                                                                  (ii) 
      	
      of
      any request by the SEC for amendments or supplements to the Shelf
      Registration Statement or the Prospectus included therein or for
      additional information and of receipt of any comment letters from the SEC
      in respect of the Shelf Registration Statement or the
      Prospectus.

                                

                                    (2)  Parent
shall advise the Holders and, if requested by any such Holder, confirm such
advice in writing:

 

	                                     (i) 	
      of
      the issuance by the SEC of any stop order suspending the effectiveness of
      the Shelf Registration Statement or the initiation of any proceedings for
      that purpose;

 

	                                       (ii)  	
      of
      the receipt by Parent of any notification with respect to the suspension
      of the qualification of the Securities included in any Shelf Registration
      Statement for sale in any jurisdiction or the initiation or threat of any
      proceeding for such purpose; and

 

	                                      (iii) 
     	
      of
      the suspension of the use of the Prospectus pursuant to Section 2(c)
      hereof or of the happening of any event that requires the making of any
      changes in the Shelf Registration Statement or the Prospectus so that, as
      of such date, the statements therein are not misleading and do not omit to
      state a material fact required to be stated therein or necessary to make
      the statements therein (in the case of the Prospectus, in light of the
      circumstances under which they were made) not misleading (which advice
      shall be accompanied by an instruction to suspend the use of the
      Prospectus until the requisite changes have been
made).

 

62

(d)  Parent
shall use its best efforts to obtain the withdrawal of any order suspending the
effectiveness of any Shelf Registration Statement at the earliest possible
time.

 

(e)  Parent
shall furnish to each Holder of Securities included within the coverage of any
Shelf Registration Statement, without charge, at least one copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those incorporated by reference).

 

(f)  Parent
shall, during the Shelf Registration Period, deliver to each Holder of
Securities included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and Parent consents to
the use of the Prospectus or any amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the Securities
covered by the Prospectus or any amendment or supplement thereto.

 

(g)  Prior to
any offering of Securities pursuant to any Shelf Registration Statement, Parent
shall register or qualify or cooperate with the Holders of Securities included
therein and their respective counsel in connection with the registration or
qualification of such Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Holders reasonably request in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities covered by such Shelf
Registration Statement; provided,
however, that
Parent will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.

 

(h)  Parent
shall cooperate with the Holders to facilitate the timely preparation and
delivery of certificates representing Securities to be sold pursuant to any
Shelf Registration Statement free of any restrictive legends (except such as may
be required by Section 5.8) and in such denominations and registered in such
names as Holders may request prior to sales of Securities pursuant to such Shelf
Registration Statement.

 

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(i)  Upon the
occurrence of any event contemplated by Section 9.3(c)(2)(iii) above, Parent
shall promptly prepare a post-effective amendment to any Shelf Registration
Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Securities included therein, the Prospectus will not include an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

 

(j)  Parent
may require each Holder of Securities to be sold pursuant to any Shelf
Registration Statement to furnish to Parent such information regarding the
Holder and the distribution of such Securities as may, from time to time, be
required by the Securities Act and the rules and regulations promulgated
thereunder, and the obligations of Parent to any Holder hereunder shall be
expressly conditioned on the compliance of such Holder with such
request.

 

9.4.  Registration
Expenses.
Parent
shall bear all expenses incurred in connection with the performance of its
obligations under Sections 9.2 and 9.3 hereof. Notwithstanding the provisions of
this Section 9.4, each Holder shall bear the expense of any broker’s commission,
agency fee or any other discount or commission.

 

9.5.  Indemnification
and Contribution.

 

(a)  In
connection with any Shelf Registration Statement, Parent agrees to indemnify and
hold harmless each Holder of Securities covered thereby, the directors,
officers, employees and agents of each such Holder and each person who controls
any such Holder within the meaning of either the Securities Act or the
Securities Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, the Securities Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement as originally filed or in any
amendment thereof, or in any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that
Parent will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon (A) any such untrue statement
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to Parent by
or on behalf of any such Holder specifically for inclusion therein, (B) use of a
Shelf Registration Statement or the related Prospectus during a period when a
stop order has been issued in respect of such Shelf Registration or any
proceedings for that purpose have been initiated or use of a Prospectus when use
of such Prospectus has been suspended pursuant to Section 9.2(c); provided,
further, in each
case, that Holders received prior notice of such stop order, initiation of
proceedings or suspension or (C) if the Holder fails to deliver a Prospectus or
the then current Prospectus to the extent required. This indemnity agreement
will be in addition to any liability that Parent may otherwise
have.

 

64

(b)  Each
Holder of Securities covered by a Shelf Registration Statement (including the
Initial Stockholders) severally agrees to indemnify and hold harmless (i)
Parent, (ii) each of its directors, (iii) each of its officers who signs such
Shelf Registration Statement and (iv) each person who controls Parent within the
meaning of either the Securities Act or the Securities Exchange Act to the same
extent as the foregoing indemnity from Parent to each such Holder, but only with
reference to written information relating to such Holder furnished to Parent by
or on behalf of such Holder specifically for inclusion in the documents referred
to in the foregoing indemnity. This indemnity agreement will be in addition to
any liability that any such Holder may otherwise have.

 

(c)  Promptly
after receipt by an indemnified party under this Section 9.5 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 9.5,
notify the indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it from
liability under Section 9.5(a) or 9.5(b) above unless and to the extent it did
not otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in Section
9.5(a) or 9.5(b) above. The indemnifying party shall be entitled to appoint
counsel of the indemnifying party’s choice at the indemnifying party’s expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); provided,
however, that
such counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party’s election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to, and may conflict with, those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after notice of the institution
of such action or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party;
provided
further, that
the indemnifying party shall not be responsible for the fees and expenses of
more than one separate counsel (together with appropriate local counsel)
representing all the indemnified parties under Section 9.5(a) or 9.5(b) above.
An indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.

 

 

65

(d)  In the
event that the indemnity provided in Section 9.5(a) or 9.5(b) is unavailable to
or insufficient to hold harmless an indemnified party for any reason, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall have a joint and several obligation to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
“Losses”) to
which such indemnified party may be subject in such proportion in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand, in
connection with the statements or omissions that resulted in such Losses. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
Parent or the Holders of Securities covered by the Registration Statement in
question and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties agree
that it would not be just and equitable if contribution were determined by
pro
rata
allocation or any other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 9.5(d), (i) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation, and (ii) no party shall be liable for contribution under this
Section 9.5(d) except to the extent and under such circumstances as such party
would have been liable to indemnify under this Section 9.5 if such
indemnification were enforceable under applicable law. For purposes of this
Section 9.5, each person who controls a Holder within the meaning of either the
Securities Act or the Securities Exchange Act and each director, officer,
employee and agent of such Holder shall have the same rights to contribution as
such Holder, and each person who controls Parent within the meaning of either
the Securities Act or the Securities Exchange Act, each officer of Parent who
shall have signed the Shelf Registration Statement and each director of Parent
shall have the same rights to contribution as Parent, subject in each case to
the applicable terms and conditions of this Section 9.5(d).

 

(e)  The
provisions of this Section 9.5 will remain in full force and effect, regardless
of any investigation made by or on behalf of any Holder or Parent or any of the
officers, directors or controlling persons referred to in Section 9.5 hereof,
and will survive the sale by a Holder of Securities covered by a Shelf
Registration Statement.

 

9.6.  Successors
and Assigns; Survival.
The
provisions of this ARTICLE IX shall inure to the benefit of and be binding upon
the successors and assigns of each of Parent and the Holders, including, without
the need for an express assignment or any consent by Parent thereto, subsequent
Holders. Parent hereby agrees to extend the benefits of the provisions of this
ARTICLE IX to any Holder and any such Holder may specifically enforce the
provisions of this ARTICLE IX as if an original Holder. The provisions of this
ARTICLE IX shall survive the consummation of the Merger and shall terminate on
the last day of the Shelf Registration Period, except that the provisions of
Section 9.5 shall survive until the sixth anniversary of the last day of the
Shelf Registration Period and the provisions of Section 9.4 shall survive such
termination of this ARTICLE IX.

 

66

     
ARTICLE X  

MISCELLANEOUS

 

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

 

10.2.  No
Third-Party Beneficiaries.
This
Agreement is not intended to, and does not, confer any rights or remedies
hereunder upon any Person other than the Parties and their respective successors
and permitted assigns; provided,
however, that
(a) the Stockholders shall be deemed third party beneficiaries solely with
respect to the right to receive the Per Share Merger Consideration pursuant to
ARTICLE II hereof, (b) the Indemnified Parties shall be deemed third party
beneficiaries solely with respect to Section 7.2, (c) the Indemnified Persons
shall be deemed third party beneficiaries solely with respect to Section 5.6,
and (d) the Holders shall be deemed third party beneficiaries solely with
respect to ARTICLE IX.

 

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

 

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

 

67

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

 

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

 

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

 

If to
Company: 

 

LDMI
Telecommunications, Inc.

277777
Franklin Road, Suite 500

Southfield,
Michigan 48034

Attention:
Patrick O’Leary, President and Chief Executive Officer

Facsimile: (888)
877-5364

 

with
a Copy to: 

 

Dykema
Gossett PLLC

400
Renaissance Center

Detroit,
Michigan 48243

Attention: Thomas S.
Vaughn, Esq.

Facsimile: (313)
568-6915

 

If to
Parent: 

 

Talk
America Holdings, Inc.

6805
Route 202

New Hope,
PA 18938

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

Facsimile: 215.862.1960

 

68

with
a Copy to: 

 

Arnold
& Porter LLP

399 Park
Avenue

New York,
New York 10022

Attention: Jonathan
C. Stapleton, Esq.

Facsimile: (212)
715-1111

 

If to
Merger Sub: 

 

Lion
Acquisition Corp.

c/o Talk
America Holdings, Inc.

6805
Route 202

New Hope,
PA 18938

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

Facsimile: 215.862.1960

 

with
a Copy to: 

 

Arnold
& Porter LLP

399 Park
Avenue

New York,
New York 10022

Attention: Jonathan
C. Stapleton, Esq.

Facsimile: (212)
715-1111,

 

if to
any Holder under ARTICLE IX: 

 

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

 

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

 

69

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

 

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

 

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

 

10.12.  Survival.
This
ARTICLE X and the agreements of Company, Parent and Merger Sub contained in
Sections 5.6, 5.7, 5.8 and 7.2 and in ARTICLE IX and the agreements of the
Preferred Stockholders in Section 5.8 shall survive the consummation of the
Merger. This ARTICLE X and the agreements of Company, Parent and Merger Sub
contained in Section 10.11 (Expenses) and Section 8.2 (Effect of Termination)
and the Confidentiality Agreement shall survive the termination of this
Agreement. If the Merger shall be consummated, the representations and
warranties of Company set forth in ARTICLE III and the representations and
warranties of Parent set forth in ARTICLE IV shall survive the consummation of
the Merger for the period set forth in Section 7.1; except as otherwise set
forth in this Section 10.12, all other representations, warranties, covenants
and agreements in this Agreement shall not survive the consummation of the
Merger or the termination of this Agreement.

 

70

 

10.13.  Construction.

 

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

 

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

 

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

 

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

 

10.15.  Specific
Performance.
Each of
the Parties acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or other equitable relief to prevent breaches of the provisions
of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter (subject
to the provisions set forth in Section 10.16 below), in addition to any other
remedy to which they may be entitled, at law or in equity.

 

 

71

10.16.  Submission
to Jurisdiction.
Each
Party irrevocably submits to the jurisdiction of the courts of the State of
Delaware and the federal courts of the United States of America located in the
State of Delaware for the purposes of any suit, action or other proceeding
arising out of this Agreement and of the documents referred to in this Agreement
and any transaction contemplated hereby. Each Party irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or any transaction contemplated
hereby in said courts and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient forum.
Each Party further irrevocably consents to the service of process out of any of
the aforementioned courts in any such suit, action or other proceeding by the
mailing of copies thereof by mail to such party at its address set forth in this
Agreement, such service of process to be effective upon acknowledgment of
receipt of such registered mail; provided that nothing in this Section 10.16
shall affect the right of any party to serve legal process in any other manner
permitted by law. The consent to jurisdiction set forth in this Section 10.16
shall not constitute a general consent to service of process in the State of
Delaware and shall have no effect for any purpose except as provided in this
Section 10.16. The parties agree that a final judgment in any such suit, action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

10.17.  Waiver
of Jury Trial.
EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i)
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.17.

 

72

 

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

 

 

LDMI
TELECOMMUNICATIONS, INC.

 

By: 
/s/ Pat O'Leary

 

Name: Pat
O'Leary

Title:
CEO

 

 

LION
ACQUISITION CORP.

 

By:
/s/ Aloysius T. Lawn IV

 

Name:
Aloysius T. Lawn IV

Title:
EVP-General Counsel

 

 

TALK
AMERICA HOLDINGS, INC.

 

By:
/s/ Aloysius T. Lawn IV

 

Name:
Aloysius T. Lawn IV

Title:
EVP-General Counsel

 

73

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