-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E5xPaReR0T7xeKtokuNA0Z9JesPq8VX26MFPMNum3UcdQZHMfuKTI3f4NCwH3pi5 XiSNIZhfjyOajJn5AuPVLA== 0000914760-03-000160.txt : 20030804 0000914760-03-000160.hdr.sgml : 20030804 20030804142734 ACCESSION NUMBER: 0000914760-03-000160 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20030804 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CITYNET TELECOMMUNICATIONS INC CENTRAL INDEX KEY: 0001112613 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 203 VIERLING DRIVE CITY: SILVER SPRINGS STATE: MD ZIP: 20904 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL ACCESS GLOBAL HOLDINGS INC CENTRAL INDEX KEY: 0001070699 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 364408076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-58781 FILM NUMBER: 03820191 BUSINESS ADDRESS: STREET 1: 233 SOUTH WACKER DRIVE STREET 2: STE 600 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126605000 MAIL ADDRESS: STREET 1: 233 SOUTH WACKER DRIVE STREET 2: STE 600 CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: UAXS GLOBAL HOLDINGS INC DATE OF NAME CHANGE: 20010718 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL ACCESS INC DATE OF NAME CHANGE: 19991019 SC 13D 1 c66602_sc13d.txt AUGUST 4, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 UNIVERSAL ACCESS GLOBAL HOLDINGS INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $0.01 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) - -------------------------------------------------------------------------------- 91336M105 (CUSIP Number) - -------------------------------------------------------------------------------- with a copy to: CityNet Telecommunications, Inc. McDermott, Will & Emery 8405 Colesville Road 50 Rockefeller Plaza Silver Spring, MD 20910 New York, NY 10020 Attn: Ed Frantz, Esq. Attn: Mark Selinger, Esq. Tel. No.: (301) 608-4013 Tel. (212) 547-5400 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) AUGUST 4, 2003 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ ] The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the act (however, see the Notes). SCHEDULE 13D - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON CITYNET TELECOMMUNICATIONS, INC. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) 51-0391591 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 131,343,368 BENEFICIALLY ----------------------------------------------------- OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON -0- WITH ----------------------------------------------------- 9 SOLE DISPOSITIVE POWER -0- --------------------------------------------- 10 SHARED DISPOSITIVE POWER 131,343,368 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 131,343,368 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 57.4% OF COMMON STOCK* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- * Based on UAXS having 228,795,445 shares of Common Stock outstanding on July 23, 2003. 2 SCHEDULE 13D - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON TELECOM PARTNERS III, L.P. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) 84-1523452 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -0- BENEFICIALLY ----------------------------------------------------- OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON -0- WITH ----------------------------------------------------- 9 SOLE DISPOSITIVE POWER -0- ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER 131,343,368 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 131,343,368 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 57.4% OF COMMON STOCK* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- * Based on UAXS having 228,795,445 shares of Common Stock outstanding on July 23, 2003. 3 SCHEDULE 13D - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON TELECOM MANAGEMENT III, L.L.C. I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) 84-1519395 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -0- BENEFICIALLY ----------------------------------------------------- OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON -0- WITH ----------------------------------------------------- 9 SOLE DISPOSITIVE POWER -0- ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER 131,343,368 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 131,343,368 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 57.4% OF COMMON STOCK* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- * Based on UAXS having 228,795,445 shares of Common Stock outstanding on July 23, 2003. 4 SCHEDULE 13D - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON STEPHEN W. SCHOVEE I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -0- BENEFICIALLY ----------------------------------------------------- OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON -0- WITH ----------------------------------------------------- 9 SOLE DISPOSITIVE POWER -0- ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER 131,343,368 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 131,343,368 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 57.4% OF COMMON STOCK* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- * Based on UAXS having 228,795,445 shares of Common Stock outstanding on July 23, 2003. 5 SCHEDULE 13D - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON WILLIAM J. ELSNER I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES 50,000 BENEFICIALLY ----------------------------------------------------- OWNED BY EACH 8 SHARED VOTING POWER REPORTING PERSON -0- WITH ----------------------------------------------------- 9 SOLE DISPOSITIVE POWER 50,000 ----------------------------------------------------- 10 SHARED DISPOSITIVE POWER 131,343,368 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 131,393,368 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 57.4% OF COMMON STOCK* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- * Based on UAXS having 228,795,445 shares of Common Stock outstanding on July 23, 2003. 6 SCHEDULE 13D ITEM 1. SECURITY AND ISSUER This statement on Schedule 13D (this "Schedule 13D") relates to the common stock, par value $0.01 per share (the "Common Stock") of Universal Access Global Holdings Inc., a Delaware corporation ("UAXS" or the "Issuer"), having its principal executive offices at 233 South Wacker Drive, Suite 600, Chicago, Illinois 60606. ITEM 2. IDENTITY AND BACKGROUND (a) - (b) and (f) This statement is being filed jointly by CityNet Telecommunications, Inc., a Delaware corporation ("CityNet"), Telecom Partners III, L.P., a Delaware partnership ("Telecom Partners"), Telecom Management III, L.L.C., a Delaware limited liability company ("Telecom Management"), Stephen W. Schovee ("Schovee") and William J. Elsner ("Elsner," and collectively with CityNet, Telecom Partners, Telecom Management and Schovee, the "Reporting Persons"). CityNet is a broadband construction company that deploys fiber optic networks through city sewer systems. CityNet's business address is 8405 Colesville Road, Silver Spring, MD 20910. Each of Telecom Partners and Telecom Management is principally engaged in investing and managing funds in various opportunities. The business address of each entity is 4600 South Syracuse, Suite 1000, Denver, CO 80237. Telecom Management is the general partner of Telecom Partners. Each of Schovee and Elsner is a managing member of Telecom Management. The business address of each of Schovee and Elsner is c/o Telecom Management, 4600 South Syracuse, Suite 1000, Denver, CO 80237. Set forth on Schedule I to this Schedule 13D, and incorporated herein by reference, is the name, business address, present principal occupation or employment and citizenship of each executive officer and director of CityNet, and the name of any corporation or other organization in which such employment is conducted, together with the principal business and address of any such corporation or organization other than the aforementioned entities, as the case may be, for which such information is set forth. (d) - (e) During the last five years, none of the Reporting Persons nor, to the knowledge of the Reporting Persons, any executive officer director, general partner or managing member of such entities has been (i) convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) a party to a civil proceeding of a judicial or administrative body resulting in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violations with respect to such laws. 7 ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION CityNet purchased 131,343,368 shares of Common Stock with $16 million in cash from its own accounts, the contribution of $700,000 in assets, and the assumption by UAXS of $2 million of debt owed by CityNet. ITEM 4. PURPOSE OF TRANSACTION On July 23, 2003, pursuant to the Stock Purchase Agreement by and between CityNet and UAXS (the "Purchase Agreement"), CityNet acquired 55% of the Common Stock on a fully-diluted basis (with any options and warrants having an exercise price in excess of $1.00 being excluded from the calculation of "fully-diluted," subject to CityNet's right to receive compensating shares in the event that any of these options or warrants are subsequently exercised), which equals 57.4% of the actual outstanding shares of Common Stock. The description of the Purchase Agreement throughout this Schedule 13D is qualified by reference to such Purchase Agreement, a form of which is filed as Exhibit 1 hereto and is incorporated herein by reference. Leading up to the purchase, Lance. B. Boxer, Mark F. Spagnolo and Roland A. Van der Meer resigned from UAXS' s board of directors. Randall R. Lay, UAXS's Chief Executive Officer was appointed to UAXS's board of directors immediately prior to the purchase. Concurrently with the purchase, Anthony L. Coelho, Anthony S. Daffer, William J. Elsner and Fred A. Vierra were appointed to UAXS's board of directors by a board resolution, each of which were nominated to serve by CityNet. Ronald Kaufman will be appointed to fill the remaining vacancy on UAXS's board of directors ten days after the filing with the Securities and Exchange Commission and mailing to registered holders of the Common Stock of a 14f-1 information statement as required by Rule 14f-1, promulgated under the Securities Exchange Act of 1934, as amended. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) CityNet directly beneficially owns 131,343,368 shares of Common Stock, representing 55% of the Common Stock on a fully-diluted basis (with any options and warrants having an exercise price in excess of $1.00 being excluded from the calculation of "fully-diluted," subject to CityNet's right to receive compensating shares in the event that any of these options or warrants are subsequently exercised), which equals 57.4% of the actual outstanding shares of Common Stock. The calculations included herein are based on UAXS having 228,795,445 shares of Common Stock outstanding on July 23, 2003. CityNet has the sole voting and dispositive power with regard to such shares. By virtue of being appointed as a director of UAXS, Anthony L. Coelho, Anthony S. Daffer, Elsner and Fred A. Vierra were each granted on July 23, 2003 options to acquire 50,000 shares of Common Stock, representing less than 0.1% of the Common Stock outstanding on July 23, 2003 beneficially owned by each such individual. Telecom Partners does not directly own any shares of Common Stock. Telecom Partners owns approximately 49.9% of CityNet's Series A Convertible Preferred Stock, par value $0.001 per share. Consent of a majority of the shares of the CityNet Series A Convertible Preferred Stock is required for certain corporate actions by CityNet pursuant to the Second Amended and Restated Investor Rights Agreement (the "Rights Agreement"), dated December 30, 2002 by and among CityNet and its preferred investors. In addition, Telecom Partners has the ability to appoint 2 out of 9 directors on CityNet's board of directors. These attributes may cause Telecom 8 Partners be deemed the indirect beneficial owner of 131,343,368 shares of Common Stock or 57.4% of the actual outstanding Common Stock. Telecom Management does not directly own any shares of Common Stock. Telecom Management is the general partner of Telecom Partners, and as such may be deemed to be the indirect beneficial owner of 131,343,368 shares of Common Stock, or 57.4% of the actual outstanding Common Stock. Schovee does not directly own any shares of Common Stock. Schovee is a managing member of Telecom Management, and as such may be deemed to be the indirect beneficial owner of 131,343,368 shares of Common Stock, or 57.4% of the actual outstanding Common Stock. Elsner, as disclosed above in this Item, as a director of UAXS, was granted options to purchase 50,000 shares of Common Stock. Additionally, Elsner is a managing member of Telecom Management, and as such may additionally be deemed to be the indirect beneficial owner of 131,343,368 shares of Common Stock, or 57.4% of the actual outstanding Common Stock, for a total of 131,393,368 shares of Common Stock, or 57.4% of the actual outstanding Common Stock. To the best knowledge of the Reporting Persons, except as described herein with respect to Anthony L. Coelho, Anthony S. Daffer, Elsner and Fred A. Vierra, none of the persons listed on Schedule I to this Schedule 13D beneficially owns or has the right to acquire any Common Stock. The filing of this Schedule 13D shall not be construed as an admission by the Reporting Persons that they are, for purposes of Section 13(d) of the Act, the beneficial owner of shares of Common Stock owned by other parties. Each of Telecom Partners, Telecom Management, Elsner and Schovee expressly disclaim beneficial ownership of the 131,343,368 shares of Common Stock owned directly by CityNet. Each of the Reporting Persons disclaims membership in a group with regard to the Common Stock for purposes of Section 13(d) of the Act. (b) By virtue of its ownership of the Common Stock, CityNet has the sole power to vote, and may be deemed to share with the other Reporting Persons the power to dispose of, 131,343,368 shares of Common Stock. By virtue of its ownership of Series A Convertible Preferred Stock in CityNet and the related consent rights under the Rights Agreement, and its ability to appoint two directors to CityNet's board of directors, Telecom Partners may be deemed to share with the other Reporting Persons the power to dispose of 131,343,368 shares of Common Stock. By virtue of it being the general partner of Telecom Partners, Telecom Management may be deemed to share with the other Reporting Persons the power to dispose of 131,343,368 shares of Common Stock. By virtue of him being a managing member of Telecom Management, Schovee may be deemed to share with the other Reporting Persons the power to dispose of 131,343,368 shares of Common Stock. 9 By virtue of him being a managing member of Telecom Management, Elsner may be deemed to share with the other Reporting Persons the power to dispose of 131,343,368 shares of Common Stock. Further, Elsner has the sole power to vote and dispose of options granted to him to purchase 50,000 shares of Common Stock. Telecom Management, as general partner of Telecom Partners, directly owns 1% of Telecom Partners and has an additional carried interest in Telecom Partners. Each of Elsner and Schovee own direct interests in Telecom Management, but together do not own 100% of Telecom Management. (c) Except as described herein and as previously described in this Item and in Item 3 and Item 4 above, no transactions in the Common Stock have been effected by the Reporting Persons, nor to the best knowledge of the Reporting Persons, by the persons listed on Schedule I to this Schedule 13D, during the last 60 days. (d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER CityNet entered into a Voting Agreement, dated as of April 7, 2003 with UAXS and certain of UAXS's stockholders pursuant to which the purchase was approved. A form of the Voting Agreement is attached as Exhibit 3 hereto. Further, CityNet entered into a Stockholders' Agreement, dated as of July 23, 2003 with UAXS and certain of UAXS's stockholders pursuant to which certain individuals nominated by CityNet were appointed to the UAXS board of directors. A form of the Stockholders' Agreement is attached as Exhibit 4 hereto. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 Joint Filing Agreement by and among CityNet, Telecom Partners, Telcom Management, Schovee and Elsner, dated as of August 4, 2003. Exhibit 2 Stock Purchase Agreement by and between CityNet and UAXS, dated as of April 7, 2003. Exhibit 3 Voting Agreement by and among CityNet, UAXS and certain UAXS stockholders, dated as of April 7, 2003. Exhibit 4 Stockholders' Agreement by and among CityNet, UAXS and certain UAXS stockholders, dated as of July 23, 2003. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. 10 Dated: August 4, 2003 CITYNET TELECOMMUNICATIONS, INC. By: /s/Emilio Pardo ------------------------------------- Name: Emilio Pardo Title: Chief Executive Officer TELECOM PARTNERS III, L.P. By: /s/ Telecom Management III, L.L.C. ------------------------------------- Title: General Partner By: /s/ Stephen W. Schovee --------------------------- Name: Stephen W. Schovee Title: Managing member TELECOM MANAGEMENT III, L.L.C. By: /s/ Stephen W. Schovee ------------------------------------- Name: Stephen W. Schovee Title: Managing Member STEPHEN W. SCHOVEE By: /s/ Stephen W. Schovee ------------------------------------- WILLIAM J. ELSNER By: /s/ William J. Elsner ------------------------------------- SCHEDULE I Additional Information Concerning the Reporting Persons Set forth below are the name, position, present principal occupation or employment and business address of each director and executive officer of CityNet. Unless otherwise indicated, 11 each occupation set forth opposite an individual's name refers to employment with CityNet. Each person listed below is a citizen of the United States. - ------------------------------- ---------------------------- ----------------------------- --------------------------- Name Position Principal Occupation Business Address - ------------------------------- ---------------------------- ----------------------------- --------------------------- Anthony Coelho Director Retired c/o CityNet 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Anthony Daffer Director General Partner of c/o CityNet Crescendo Ventures 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- William Elsner Chairman of the Board Managing Member of Telecom c/o CityNet Management II, L.L.C., 8045 Colesville Rd Telecom Management II-A, Silver Spring, MD 20910 L.L.C. and Telecom Management III, L.L.C. - ------------------------------- ---------------------------- ----------------------------- --------------------------- Ronald Kaufman Director Senior Managing Partner of c/o CityNet The Dutko Group 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Fred Vierra Director Retired c/o CityNet 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Emilio Pardo Chief Executive Officer Chief Executive Officer c/o CityNet and Director 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Charles Garner President President c/o CityNet 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Brian Regli Senior Vice President and Senior Vice President and c/o CityNet Chief Operating Officer Chief Operating Officer 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Edward Frantz Senior Vice President and Senior Vice President and c/o CityNet General Counsel General Counsel 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Monique Marcus Senior Vice President and Senior Vice President and c/o CityNet Controller Controller 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- JC Morales Senior Vice President and Senior Vice President and c/o CityNet Treasurer Treasurer 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- 12 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Robert Egan Senior Vice President, Senior Vice President, c/o CityNet Engineering and Operations Engineering and Operations 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- --------------------------- Mark R. Perkell Senior Vice President, Senior Vice President, c/o CityNet Legal and Regulatory Legal and Regulatory 8045 Colesville Rd Silver Spring, MD 20910 - ------------------------------- ---------------------------- ----------------------------- ---------------------------
13 EX-1 3 c66602_x1.txt JOINT FILING AGREEMENT EXHIBIT 1 JOINT FILING AGREEMENT In accordance with Rule 13d-1(k)(1)(iii) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a Statement on Schedule 13D dated August 4, 2003 (including amendments thereto) with respect to the Common Stock of Universal Access Global Holdings Inc. Each party to the Schedule 13D (including amendments thereto) is responsible for the accuracy and completeness of its own disclosure therein. This Joint Filing Agreement shall be filed as an Exhibit to such Statement. Dated: August 4, 2003 CITYNET TELECOMMUNICATIONS, INC. By: /s/Emilio Pardo Name: Emilio Pardo Title: Chief Executive Officer TELECOM PARTNERS III, L.P. By: /s/ Telecom Management III, L.L.C. Title: General Partner By: /s/ ___________________ Name: Stephen W. Schovee Title: Managing member TELECOM MANAGEMENT III, L.L.C. By: /s/ ___________________ Name: Stephen W. Schovee Title: Managing Member STEPHEN W. SCHOVEE By: /s/ Stephen W. Schovee ---------------------- WILLIAM J. ELSNER By: /s/ William J. Elsner ----------------------- EX-2 4 c66602_spa.txt STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT by and between CITYNET TELECOMMUNICATIONS, INC. and UNIVERSAL ACCESS GLOBAL HOLDINGS INC. April 7, 2003 TABLE OF CONTENTS Page Section 1 SALE OF SHARES AND FIBER RING ASSETS AND PURCHASE PRICE 1 1.1. Company Approval; Proxy Statement 1 1.2. Stockholders' Meeting 2 1.3. Issuance and Sale of Shares and Other Consideration 3 1.4. Purchase Price 4 1.5. Time and Place of Closing 4 1.6. Transfer Taxes 4 Section 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4 2.1. Organization and Qualifications of the Company 5 2.2. Capital Stock of the Company; Beneficial Ownership 5 2.3. Subsidiaries 5 2.4. Authority of the Company 6 2.5. SEC Reports; Financial Statements; Liabilities 7 2.6. Absence of Certain Changes or Events 9 2.7. Real and Personal Property. 10 2.8. Taxes 11 2.9. Certain Loans 13 2.10. Inventories 13 2.11. Intellectual Property 14 2.12. Contracts 15 2.13. Litigation 17 2.14. Compliance with Laws 18 2.15. Insurance 18 2.16. Warranty or Other Claims 18 2.17. Finder's Fee 18 2.18. Permits 18 2.19. Transaction with Interested Persons. 19 2.20. Employee Benefit Programs 19 2.21. Environmental Matters 21 -i- TABLE OF CONTENTS (continued) Page 2.22. Employees: Labor Matters. 22 2.23. Customers, Distributors and Suppliers 22 2.24. Unlawful or Undisclosed Payments 23 Section 3 REPRESENTATIONS AND WARRANTIES OF BUYER 23 3.1. Organization of Buyer 23 3.2. Authority of Buyer 23 3.3. Title to Fiber Ring Assets; Sufficiency of Assets. 24 3.4. Intellectual Property. 25 3.5. No Fraudulent Transfer. 25 3.6. Contracts 25 3.7. Litigation 25 3.8. Compliance with Laws 26 3.9. Finder's Fee 26 3.10. Permits 26 3.11. Customers 26 3.12. No Condemnation. 26 3.13. Environmental Matters. 26 3.14. Investment Intention; Experience. 27 3.15. Accredited Investor Status. 27 Section 4 COVENANTS OF THE COMPANY 28 4.1. Conduct of Business 28 4.2. Satisfaction of Conditions; Receipt of Necessary Approvals 28 4.3. Notice of Default 29 4.4. Cooperation of the Company 29 4.5. No Solicitation; Other Offers 29 4.6. Certain Filings 31 4.7. Confidentiality 31 4.8. Maintenance of Listing. 32 Section 5 COVENANTS OF BUYER 32 5.1. Maintenance of Fiber Ring Assets and Assumed Liabilities. 32 -ii- TABLE OF CONTENTS (continued) Page 5.2. Satisfaction of Conditions; Receipt of Necessary Approvals 32 5.3. Notice of Default; Update 33 5.4. Cooperation of Buyer 33 5.5. Certain Filings 33 5.6. Confidentiality 33 Section 6 MUTUAL COVENANTS OF THE PARTIES. 34 6.1. Cooperative Efforts. 34 6.2. Employees; Continuation of Benefits. 34 Section 7 CONDITIONS 35 7.1. Conditions to the Obligations of Each Party 35 7.2. Conditions to the Obligations of Buyer 36 7.3. Conditions to Obligations of the Company 39 Section 8 TERMINATION OF AGREEMENT 39 8.1. Termination 39 8.2. Effect of Termination 41 Section 9 SURVIVAL 41 9.1. Survival of Representations, Warranties Etc 41 Section 10 INDEMNIFICATION. 41 10.1. Indemnification by the Company 41 10.2. Limitations on Indemnification by the Company 42 10.3. Indemnification by Buyer 43 10.4. Limitation on Indemnification by Buyer 43 10.5. Notice; Defense of Claims 44 Section 11 MISCELLANEOUS 45 11.1. Knowledge 45 11.2. Fees and Expenses 45 11.3. Governing Law 45 11.4. Notices 45 11.5. Further Assurances 46 11.6. Entire Agreement 46 -iii- TABLE OF CONTENTS (continued) Page 11.7. Assignability, Binding Effect 46 11.8. Captions and Gender 46 11.9. Execution in Counterparts 46 11.10. Amendments 46 11.11. Publicity and Disclosures 47 11.12. Consent to Jurisdiction; Waiver of Jury Trial 47 11.13. Specific Performance 47 -iv- EXHIBITS EXHIBIT TITLE Exhibit A Assumed Liabilities Exhibit B Description of Fiber Ring Assets Exhibit C Term Sheet for Maintenance Agreement Exhibit D Registration Rights Agreement Exhibit E Stockholders' Agreement Exhibit F Shefsky & Froelich Legal Opinion Exhibit G McDermott, Will & Emery Legal Opinion SCHEDULES SCHEDULE TITLE Schedule 1.3 Reimbursements Payable at Closing Schedule 2.2 Capital Stock of the Company; Beneficial Ownership Schedule 2.3 Subsidiaries Schedule 2.4 Authority of the Company Schedule 2.5(d) Minimum Revenue Contracts Schedule 2.6 Absence of Certain Changes or Events Schedule 2.7(a) Real Property Schedule 2.7(b) Personal Property Schedule 2.8 Taxes Schedule 2.9 Certain Loans Schedule 2.11 Intellectual Property Schedule 2.12 Contracts Schedule 2.13 Litigation Schedule 2.14 Compliance with Laws Schedule 2.15 Insurance Schedule 2.16 Warranty or Other Claims Schedule 2.19 Transaction with Interested Persons Schedule 2.20 Employee Benefit Programs Schedule 2.21 Environmental Matters Schedule 2.23 Customers, Distributors and Suppliers Schedule 3.1 Organization of Buyer Schedule 3.2 Authority of Buyer Schedule 3.6 Contracts Schedule 3.7 Litigation Schedule 3.11 Customers v STOCK PURCHASE AGREEMENT ------------------------ AGREEMENT entered into as of April 7, 2003 by and between CityNet Telecommunications, Inc., a Delaware corporation ("Buyer"), and Universal Access Global Holdings Inc., a Delawarecorporation (the "Company"). WITNESSETH ---------- WHEREAS, certain Subsidiaries (as defined below) of the Company are independent providers of network infrastructure services that facilitate the interconnection of communications networks between disparate and competing service providers and facilitate the process by which users of communications circuits obtain circuits dedicated for their specific use from multiple vendors; WHEREAS, Buyer desires to sell the Fiber Ring Assets (as defined below) to the Company in exchange for Shares (as defined below) and the Company desires to buy the Fiber Ring Assets; WHEREAS, the Company desires to issue and sell the Shares (as defined below) to Buyer, and Buyer desires to acquire the Shares; and WHEREAS, simultaneously herewith, Buyer and certain stockholders of the Company are entering into agreements regarding such stockholders' undertaking to vote in favor, and to take certain other actions in furtherance, of the Transactions (as defined below). NOW, THEREFORE, in order to consummate said purchase and sale and in consideration of the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1 SALE OF SHARES AND FIBER RING ASSETS AND PURCHASE PRICE. - ------------------------------------------------------------------------- 1.1. Company Approval; Proxy Statement. The Company hereby approves of and consents to the sale of the Shares to Buyer in exchange for the purchase price set forth in Section 1.4 and represents that the Board of Directors of the Company, at a meeting duly called and held, has (i) unanimously approved this Agreement and other Transaction Documents (as defined below) and each of the transactions contemplated hereby and thereby, including, without limitation, the sale of the Shares to Buyer (collectively, the "Transactions"), (ii) unanimously determined that as of the date hereof the Transactions are fair to and in the best interests of the Company's stockholders and (iii) unanimously resolved to recommend that the stockholders of the Company approve the Transactions; provided, however, that such recommendation may be withdrawn, modified or amended if, in the opinion of a majority of the disinterested members of the Board of Directors of the Company, after receipt of a written opinion from its outside legal counsel, such recommendation could reasonably be deemed inconsistent with its fiduciary duties to 1 the Company's stockholders under applicable law. The Company hereby consents to the inclusion in the Proxy Statement (as defined below) of the recommendation of the Board of Directors described above. 1.2. Stockholders' Meeting. (a) As soon as practicable (and, in any event, within 90 days or, in the caseof the applicable portion of clause (ii) below only, within 20 days) following the date hereof, the Company shall, in accordance with applicable law: (i) duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") for the purpose of considering and taking action upon this Agreement and approving the Transactions; (ii) prepare, and file (within 20 days following the date hereof) with the Securities and Exchange Commission (the "SEC") a preliminary proxy statement related to the approval of the Transactions, obtain and furnish the information required to be included by the SEC in the Proxy Statement (as defined below), notify Buyer of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Buyer with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the preliminary proxy statement or the Transactions and, after consultation with Buyer, respond promptly to any comments made by the SEC with respect to the preliminary proxy statement and cause a definitive proxy statement (the "Proxy Statement") to be mailed to its stockholders and obtain the necessary stockholder approval of this Agreement and the Transactions; and (iii) subject to the fiduciary obligations of the Board of Directors under applicable law as determined by the Board of Directors after consultation with its legal counsel, include in the Proxy Statement the recommendation of the Board that the stockholders of the Company vote in favor of approval of the Transactions and the adoption of this Agreement. (b) Buyer agrees that it will provide the Company with the information concerning Buyer, its business, Fiber Ring Assets (as defined below) and Assumed Liabilities (as defined below) and other information reasonably requested by the Company that is required to be included in the Proxy Statement and other filings with the SEC that contain disclosure regarding the Transactions (the "Buyer Filing Information") or in other documents required to be delivered to the Company's stockholders. (c) If at any time prior to the Closing (as defined below), any event with respect to the Company or any Subsidiary should occur which is required to be described in a supplement to the Proxy Statement, such event shall be so described, and the 2 Company shall promptly file such supplement with the SEC and, as required by law, disseminate the same to the stockholders of the Company. With respect to the information relating to the Company, the Proxy Statement will comply as to form and substance in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and other applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company further agrees promptly to correct any information in the Proxy Statement if and to the extent that it shall have become false and misleading in any material respect and the Company further agrees to take all steps necessary to cause the Proxy Statement as so corrected to be filed with the SEC and disseminated to the Company's stockholders, in each case as and to the extent required by applicable federal securities laws. 1.3. Issuance and Sale of Shares and Other Consideration. (a) At the Closing (as defined below), subject to the fulfillment or waiver of the conditions of this Agreement, the Company shall issue to Buyer such number of authorized but unissued shares (the "Shares") of Common Stock, par value $0.01 per share, of the Company (the "Common Stock") or such other number of shares as shall at the Closing represent 55% of the outstanding Common Stock on a fully diluted basis (including the Shares, the shares of Common Stock issuable to Broadmark Capital, LLC("Broadmark") upon Broadmark's exercise of warrants issued to Broadmark by the Company pursuant to the Financial Advisory/Investment Banking Agreement referred to in Section 2.17, the exercise or conversion of all other then outstanding Rights (as defined below) to purchase Common Stock and the issuance pursuant to all other outstanding obligations of the Company to issue Common Stock). (b) At the Closing, subject to the fulfillment or waiver of the conditions of this Agreement, the Company shall assume all of Buyer's obligations in respect of those liabilities set forth in Exhibit A hereto and those contracts, agreements and other obligations of Buyer related to the Fiber Ring Assets set forth in Exhibit B hereto except to the extent such liabilities and obligations, but for an uncured and unwaived breach or default by Buyer, would have been paid, performed or otherwise discharged on or prior to the Closing Date or to the extent such liabilities and obligations arise out of any such uncured and unwaived breach or default (collectively, the "Assumed Liabilities"). The Company shall not assume any liabilities of Buyer or its affiliates or subsidiaries, whether or not presently known or hereafter arising, whether or not fixed, contingent or otherwise, including, without limitation, any contracts, employee benefits or other employee-related liabilities, except for the Assumed Liabilities (collectively, the "Excluded Liabilities"). The Company will, at the Closing, reimburse Buyer for the amount of all security and other deposits, and the amount of all funds held in escrow by the obligees of, or otherwise in connection with, the Assumed Liabilities, each of which is set forth in Schedule 1.3. 3 1.4. Purchase Price. (a) In consideration of the issuance by the Company to Buyer of the Shares and assumption of the Assumed Liabilities, and in reliance upon the representations and warranties of the Company contained herein and in the other Transaction Documents (as defined below), and subject to the satisfaction of all of the conditions contained herein, Buyer agrees that at the Closing it will (a) pay to the Company $16,000,000 by wire transfer of immediately available funds and (b) transfer to the Company all of Buyer's right, title and interest in (i) the tangible assets comprising its fiber optic telecommunications rings in Albuquerque, New Mexico and Indianapolis, Indiana and (ii) its rights under contracts and other agreements with customers related to such rings, including but not limited to the assets set forth in Exhibit B hereto, but excluding the Buyer Intellectual Property (as defined below) and the Maintenance Assets (as defined below) (the "Fiber Ring Assets"). (b) The Company and the Buyer agree that, as between themselves, the value of the Fiber Ring Assets shall be $700,000 (the "Fiber Ring Value"). Neither the Company nor Buyer shall take any position, for tax purposes or otherwise inconsistent with this valuation. 1.5. Time and Place of Closing. The closing of the purchase and sale provided for in this Agreement (herein called the "Closing") shall be held at the offices of McDermott, Will & Emery at 50 Rockefeller Plaza, New York, NY 10020 as soon as practicable following satisfaction or waiver of the conditions set forth in Section 7 (such date and time, the "Closing Date"). 1.6. Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of the Transactions (including, without limitation, the sale and issuance of the Shares to Buyer and the sale and transfer of the Fiber Ring Assets to the Company) shall be borne and paid by the Company, and the Company shall promptly reimburse the Buyer for any such tax, fee, charge, penalty or interest that the Buyer is required to pay under applicable law. Section 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. - ---------------------------------------------------------------- As a material inducement to Buyer to enter into this Agreement and consummate the Transactions, except as expressly disclosed in (i) the Draft Form 10-K (as defined below), and (ii) the Schedules referred to herein, the Company hereby makes the representations and warranties in this Section 2. Subject to the rights of Buyer under Section 8 hereof, the Company may amend any Schedule to this Agreement after the execution of this Agreement, but prior to the Closing, to reflect updated information, events, agreements, transactions, circumstances, developments and occurrences. Subject to the rights of Buyer under Section 8 hereof, any amendment permitted above will be deemed to have amended the Schedule, to have qualified the representations and warranties of the Company to which the Schedule relates and to have cured any misrepresentation or breach of warranty by the Company that otherwise might have existed hereunder or thereunder prior to the amendment. 4 2.1. Organization and Qualifications of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware with full corporate power and authority to own or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is currently conducted or proposed to be conducted. The copies of the Company's Certificate of Incorporation, as amended to date, certified by the Delaware Secretary of State, and of the Company's By-laws, as amended to date, certified by the Company's Secretary, and heretofore delivered to Buyer's counsel, are complete and correct, and no amendments thereto are pending. The Company is not in violation of any term of its Certificate of Incorporation or By-laws. The Company is duly qualified to do business as a foreign corporation in each jurisdiction in which it is required to be licensed or qualified to conduct its business or own its property except to the extent that the Company's failure to be so licensed or qualified could not reasonably be expected to have a material adverse effect on the business, operations, condition (financial or otherwise) or future prospects of the business currently being conducted by the Company and its Subsidiaries, taken as a whole, other than any effect (a) relating to or arising out of an event, matter, occurrence or action (i) affecting the United States or global economy generally; (ii) primarily caused by or related to the announcement or pendency of the Transactions or (iii) resulting from actions taken by the Company or a Subsidiary at the request of Buyer; or (b) arising solely from the decline in the price of the Company's stock (a "Material Adverse Effect"). 2.2. Capital Stock of the Company; Beneficial Ownership. As of the date hereof, the authorized capital stock of the Company consists of (i) 1,000,000,000 shares of Common Stock, of which 99,112,549 shares are duly and validly issued, outstanding, fully paid and non-assessable, and (ii) 20,000,000 shares of Preferred Stock, of which no shares have been issued but shares are issuable pursuant to the Company's Preferred Stock Rights Agreement dated July 31, 2000. Except as set forth in Schedule 2.2, and other than options to purchase up to 12,237,079 shares of Common Stock held by current or former employees, directors and consultants of the Company and the Subsidiaries as described in the Company SEC Reports (as defined below), there are no outstanding options, warrants, rights, commitments, preemptive rights or agreements of any kind for the issuance or sale of, or outstanding securities convertible into, any additional shares of capital stock of any class of the Company (collectively "Rights"). None of the Company's capital stock has been issued in violation of any federal or state law or the rights of any individual, corporation, partnership, limited liability company, association, trust or any other entity or organization of any kind or character, including a governmental department, authority or agency or subdivision thereof (any of the foregoing, a "Person"). Except as set forth in Schedule 2.2 or as contemplated by this Agreement and the Transactions, there are no voting trusts, voting agreements, proxies or other agreements, instruments or undertakings with respect to the voting of the Common Stock to which the Company is a party, or, to the Company's knowledge, among any other Persons. 2.3. Subsidiaries. Except as set forth in Schedule 2.3, the Company does not, directly or indirectly, control whether through the ownership of voting securities, by contract or otherwise any corporation, limited liability company, partnership, joint venture 5 or other entity (collectively, the "Subsidiaries" or individually, a "Subsidiary") or have any Investment. As used herein, the term "Investment" shall mean (A) any direct or indirect purchase or other acquisition or ownership by a Person of any notes, obligations, instruments, stock, securities or ownership interest (including partnership interests and joint venture interests) of any other Person and (B) any capital contribution by such Person to any other Person. Except as set forth in Schedule 2.3, each Subsidiary is a duly organized, validly existing corporation in good standing under the laws of the state of its incorporation with full corporate power and authority to own or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is currently conducted or proposed to be conducted. Except as set forth in Schedule 2.3, all of the outstanding shares of capital stock and other equity interests of each Subsidiary are owned beneficially and of record by the Company free of any lien, restriction or encumbrance and said shares have been duly and validly issued and are outstanding, fully paid and non-assessable. The copies of each Subsidiary's Certificate of Incorporation (or similar governing instrument), as amended to date, certified by the Secretary of State of the jurisdiction in which such Subsidiary is organized and of each Subsidiary's By-laws, as amended to date, certified by the Company's and such Subsidiary's Secretary, and heretofore delivered to Buyer's counsel, are complete and correct, and no amendments thereto are pending. No Subsidiary is in violation of any term of its Certificate of Incorporation (or similar governing instrument) or By-laws. Each Subsidiary is duly qualified to do business as a foreign corporation in each jurisdiction where such qualification is required except to the extent that the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and no Subsidiary is required to be licensed or qualified to conduct its business or own its property in any other jurisdiction. Except as set forth in Schedule 2.3, there are no outstanding warrants, options or other rights to purchase or acquire any of the shares of capital stock of any Subsidiary, or any outstanding securities convertible into such shares or outstanding warrants, options or other rights to acquire any such convertible securities. 2.4. Authority of the Company. The Company has full right, authority and power to enter into this Agreement and each other agreement, document and instrument to be executed and delivered by the Company pursuant to this Agreement or in connection with the Transactions including, without limitation, the Stockholders' Agreement (as defined below), the Registration Rights Agreement (as defined below) and the Maintenance Agreement (as defined below) (collectively the "Transaction Documents"), and, subject only to obtaining approval of the holders of a majority of the outstanding Common Stock, to carry out the Transactions. The execution, delivery and performance by the Company of this Agreement and each such other Transaction Document and the consummation of the Transactions have been duly authorized by all necessary action of the Company and no other action on the part of the Company (other than the stockholder approval referred to above) is required in connection therewith. 6 (a) This Agreement has been duly and validly executed and delivered by the Company. This Agreement and each other Transaction Document constitutes, or when executed and delivered will constitute, valid and binding obligations of the Company enforceable in accordance with their respective terms. Except as set forth in Schedule 2.4, the execution, delivery and performance by the Company of this Agreement and each other Transaction Document and the consummation of the Transactions: (i) do not and will not violate any provision of the Certificate of Incorporationor By-laws of the Company; (ii) do not and will not violate any laws of the United States, or any state or other jurisdiction applicable to the Company, or require the Company to obtain any approval, consent or waiver of, or make any filing with, any Person (governmental or otherwise); and (iii) do not and will not result in a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of any indenture or loan or credit agreement or any other agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which the Company is a party or by which the property of the Company is bound or affected, or result in the creation or imposition of any mortgage, pledge, lien, security interest or other charge or encumbrance on any of the Company's assets or the Shares. (b) The Board of Directors of the Company has approved this Agreement and the Transactions for all purposes under Section 203 of the Delaware General Corporation Law (the "DGCL"), and the Company has heretofore furnished to Buyer a true and correct copy of resolutions duly adopted by the unanimous vote of the Board on April 6, 2003 and the resolutions are in full force and effect on the date hereof. Such action is the only action necessary so that the restrictions on business combinations contained in Section 203 of the DGCL will not apply with respect to or as a result of this Agreement or any of the Transactions. (c) The Board of Directors of the Company has amended the Company's Preferred Stock Rights Agreement dated July 31, 2000 such that Buyer, as a result of the Transactions, cannot become an "Acquiring Person" as defined therein. (d) The affirmative vote of the holders of a majority of the outstanding shares of Common Stock is the only vote of the holders of any class of the Company's capital stock necessary to approve this Agreement and the Transactions. 2.5. SEC Reports; Financial Statements; Liabilities. (a) The Company and the Subsidiaries have filed all reports required to be filed by any of them with the SEC pursuant to the U.S. federal securities laws and the SEC rules and regulations thereunder (collectively, the "Company SEC 7 Reports"), all of which as of their respective dates complied in form and substance in all material respects with applicable requirements of the Exchange Act. None of the Company SEC Reports, including, without limitation, any financial statements or schedules included therein, as of their respective dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) The consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows (including the related notes thereto) of the Company included in the Company SEC Reports comply in form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a basis consistent with prior periods (except as otherwise noted therein and except that unaudited financial information may not contain all footnotes required by GAAP), and present fairly the financial position of the Company and the Subsidiaries as of their respective dates, and the consolidated results of their operations and their cash flows for the periods presented therein (subject, in the case of the unaudited interim financial statements, to normal year-end adjustments). (c) The Company has delivered to Buyer a draft of the Company's Form 10-K for the year ended December 31, 2002 (the "Draft Form 10-K") which includes, among other things, the consolidated balance sheets for the Company and its Subsidiaries as of December 31, 2002 and consolidated statements of cash flows, operations and changes in stockholders' equity of the Company and its Subsidiaries for the year ended December 31, 2002 (the consolidated balance sheet included in the Draft Form 10-K shall be the "Balance Sheet"). The Draft Form 10-K delivered to Buyer will not materially differ from the Company's Form 10-K for the year ended December 31, 2002 filed with the SEC. Except as set forth in the Company SEC Reports and the Draft Form 10-K, and except for liabilities and obligations incurred since the date of the Company SEC Reports and the Draft Form 10-K, in the ordinary and usual course of business consistent with past practice, neither the Company nor any Subsidiary has any material liabilities or obligations of any nature whether accrued, absolute, contingent or otherwise, including without limitation, liabilities as a guarantor or otherwise with respect to obligations of other Persons, liabilities for Taxes due or then accrued or to become due, or contingent or potential liabilities relating to activities of the Company or any Subsidiary or the conduct of their business prior to December 31, 2002 (regardless of whether claims in respect thereof had been asserted as of such date), required by GAAP to be set forth on a consolidated balance sheet of the Company and the Subsidiaries or in the notes thereto. (d) Each contract of the Company or any Subsidiary with telecommunications providers requiring the Company or any Subsidiary to make a minimum revenue commitment regardless of its use or purchase of products or services (each a "Minimum Revenue Contract") is set forth in Schedule 2.5(d). 8 2.6. Absence of Certain Changes or Events. Except as set forth in Schedule 2.6, since December 31, 2002, (i) the business of the Company and the Subsidiaries has been carried on only in the ordinary and usual course, and (ii) there has not occurred any change, effect, occurrence or action which has resulted or would reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect, provided, however, that any change, effect, occurrence or action relating to or arising from any item set forth in Schedule 2.6 shall not constitute, give rise to or be considered to be a Material Adverse Effect. Except as set forth in the Company SEC Reports, Draft Form 10-K or in Schedule 2.6, between December 31, 2002 and the date hereof, there has not been: (a) any circumstance or event that, by itself or in conjunction with all other circumstances or events, whether or not arising in the ordinary and usual course of business, has had or would reasonably be expected to have a Material Adverse Effect; (b) any contingent liability incurred by the Company or any Subsidiary as guarantor or otherwise with respect to the obligations of others or any cancellation of any material debt or claim owing to, or waiver of any material right of, the Company or any Subsidiary; (c) any mortgage, encumbrance or lien placed on any of the properties of the Company or any Subsidiary; (d) any issuance by the Company or any Subsidiary of any capital stock or other security or other right convertible into, or exercisable or exchangeable for, capital stock; (e) any purchase, sale or other disposition, or any agreement or other arrangement for the purchase, sale or other disposition, of any of the properties or assets of the Company or any Subsidiary other than in the ordinary and usual course of business; (f) any damage, destruction or loss, whether or not covered by insurance, affecting the properties, assets or business of the Company or any Subsidiary which has, had or would reasonably be likely to have a Material Adverse Effect; (g) any declaration, setting aside or payment of any dividend by the Company or any Subsidiary, or the making of any other distribution in respect of its capital stock, or any direct or indirect redemption, purchase or other acquisition by the Company or any Subsidiary of its own capital stock; (h) other than in the ordinary and usual course of business (i) any labor trouble or claim of unfair labor practices involving the Company or any Subsidiary, (ii) any change in the compensation payable or to become payable by the Company or any Subsidiary to any of its officers, employees, agents or independent contractors, or (iii) any bonus payment or arrangement made to or with any of such officers, employees, agents or independent contractors; 9 (i) any adverse change with respect to the employment of Lance Boxer, Randall R. Lay, Les W. Hankinson, Annette Erdmann and Chris Conant; (j) any payment or discharge of a material lien or liability of the Company or any Subsidiary which was not shown on the Balance Sheet or incurred in the ordinary and usual course of business thereafter; (k) any obligation or liability incurred by the Company or any Subsidiary to any of its officers, directors, stockholders or employees, or any loans or advances made by the Company or any Subsidiary to any of its officers, directors, stockholders or employees, except normal compensation and expense allowances payable to officers or employees; (l) any change in the outside auditors or the accounting methods or practices, credit practices or collection policies used by the Company or any Subsidiary; (m) any other transaction entered into by the Company or any Subsidiary which has or would reasonably be likely to have a Material Adverse Effect; or (n) any agreement or understanding whether in writing or otherwise, for the Company or any Subsidiary to take any of the actions specified in paragraphs (a) through (m) above other than this Agreement and the Transaction Documents. 2.7. Real and Personal Property. (a) Real Property. Neither the Company nor any Subsidiary, nor any of their respective successors owns, or has in the past owned, any real property. All real property leased by the Company or any Subsidiary is set forth in Schedule 2.7(a) (the "Real Property"). (i) Status of Leases. All leases of Real Property are set forth in Schedule 2.7(a), and true and complete copies thereof have been delivered to Buyer. Each of the leases has been duly authorized and executed by the parties and is in full force and effect. Neither the Company nor any Subsidiary is in default under any of the leases, nor, to the Company's knowledge, has any event occurred which, with notice or the passage of time, or both, would give rise to such a default. To the Company's knowledge, no other party to any of the leases is in default under any of the leases and there is no event which, with notice or the passage of time, or both, would give rise to such a default. (ii) Quiet Enjoyment. The Company has the right to quiet enjoyment of the Real Property for the full term of its lease (and any renewal option related thereto) and the leasehold interest of the Company in the Real Property is not subject or subordinate to any lien (or if subordinate, a non-disturbance agreement has been obtained by the Company from the holder of the lien). Neither the whole nor any part of the Real Property is subject to any pending suit for condemnation or other taking by any public 10 authority or any other matter materially or adversely affecting the current use, occupancy or value thereof and, to the knowledge of the Company, no such condemnation, taking or other matter is currently threatened or contemplated. (iii) Consents. Except as set forth in Schedule 2.7(a), no consent or approval is required with respect to the Transactions from the other parties to any lease of the Real Property. No consent or approval from, and no filing with, any governmental or regulatory authority is required with respect to the Real Property in connection with the Transactions. (iv) Condition of Real Property. Except as set forth in Schedule 2.7(a), the Real Property is sufficient for the Company to conduct its operations as currently conducted and as contemplated by the Plan (as defined below). There has not been any interruption of the operations of the Company due to inadequate maintenance of the Real Property. (b) Personal Property. Except as specifically set forth in Schedule 2.7(b), the Company and each Subsidiary has good and marketable title to all of its personal property, and such personal property, together with the Real Property and the Company's Intellectual Property (as defined below), constitutes all of the assets necessary to conduct the business of the Company and the Subsidiaries as presently conducted and as contemplated by the Plan. None of such personal property or assets is subject to any mortgage, pledge, lien, conditional sale agreement, security title, encumbrance or other charge except as specifically set forth in Schedule 2.7(b). Except as otherwise set forth in Schedule 2.7(b) hereto, all leasehold improvements, furnishings, machinery and equipment of the Company and each Subsidiary are in good repair and good working order. 2.8. Taxes. (a) The Company and each Subsidiary has filed all Tax Returns (as defined below) that it was required to file under applicable laws and regulations. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. Each of the Company and its Subsidiaries: (i) has paid (or, in the case of amounts becoming due after the date hereof and prior to the Closing, will have paid prior to the Closing) all Taxes due or claimed to be due by any taxing authority in connection with any of the Tax Returns; or (ii) have established (or, in the case of amounts becoming due after the date hereof, and prior to the Closing, will have established) in the Balance Sheet adequate reserves (in conformity with GAAP consistently applied) for the payment of such Taxes. The amounts set up as reserves for Taxes on the Balance Sheet are sufficient for the payment of all unpaid Taxes, whether or not such Taxes are disputed or are yet due and payable, for or with respect to the period and for which the Seller or any Subsidiary may be liable. Except as set forth in Schedule 2.8, neither the Company nor any Subsidiary currently is the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company or any 11 Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no liens or other security interests for Taxes (other than Taxes not yet due and payable) upon any of the assets of the Company or any Subsidiary. (b) The defined term "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. The defined term "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 Section 59A of the Internal Revenue Code of 1986, as amended (the "Code")), 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 and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person. (c) The Company and each Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (d) To the Company's knowledge, neither the Company nor any Subsidiary expects any authority to assess any additional Taxes for any period for which Tax Returns have been filed. Except as set forth in Schedule 2.8, no foreign, federal, state, or local tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to the Company or any Subsidiary. Neither the Company nor any Subsidiary has received from any foreign, federal, state, or local taxing authority (including jurisdictions where the Company or a Subsidiary has not filed Tax Returns) any (i) written notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against the Company or any Subsidiary. The Company has delivered to Buyer correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by the Company or any Subsidiary filed on or after, or received since, December 31, 1999. Set forth in Schedule 2.8 is a list of all federal, state, local and foreign income Tax Returns filed with respect to any of the Company and its Subsidiaries for taxable period ended on or after December 31, 1999, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. (e) Neither the Company nor any Subsidiary 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. (f) Neither the Company nor any Subsidiary has filed a consent under Section 341(f) of the Code concerning collapsible corporations. Neither the 12 Company nor any Subsidiary is a party to any agreement, contract, arrangement, or plan that has resulted or would result, separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code (or any similar provision of state, local, or foreign law). Neither the Company nor any Subsidiary has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company nor any Subsidiary is a party to or bound by any Tax allocation or sharing agreement. Neither the Company nor any Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which is the Company) or (ii) has any liability for the Taxes of any Person (other than any of the Company and the Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise. (g) Neither the Company nor any Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) "closing agreement" as described in Section 7121 of the Code (or any similar provision of state, local, or foreign law) executed on or prior to the Closing Date, (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any similar provision of state, local, or foreign law), (iv) installment sale or open transaction disposition made on or prior to the Closing Date, or (v) prepaid amount received on or prior to the Closing Date. (h) Neither the Company nor any Subsidiary has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in while or in part by Section 355 or 361 of the Code. (i) Except as set forth in Schedule 2.8, there will be no sales, transfer or other Taxes (other than Taxes on the income of the parties hereto) due or payable on or in respect of the issuance and sale of the Shares to Buyer or the sale and transfer of the Fiber Ring Assets to the Company. 2.9. Certain Loans. Neither the Company nor any Subsidiary has any accounts or loans receivable from any Person which is affiliated with the Company or any Subsidiary or from any director or officer or, other than in the ordinary and usual course of business, any employee of the Company or any Subsidiary, except as set forth in Schedule 2.9. 2.10. Inventories. Neither the Company nor any Subsidiary maintains any inventory for resale in the ordinary and usual course of business. 13 2.11. Intellectual Property. (a) Except as set forth in Schedule 2.11, the Company and each Subsidiary owns or has the right to use all patent, copyright, trade secret, trademark or other proprietary rights (collectively, "Intellectual Property") used in the business of the Company or such Subsidiary as presently conducted or as proposed to be conducted. Except for the pending federal intent-to-use trademark applications set forth in Schedule 2.11, all of the rights of the Company and each Subsidiary in its owned Intellectual Property are freely transferable. There are no claims or demands of any other person pertaining to its use or ownership of the Intellectual Property and no proceedings have been instituted, or are pending or, to the Company's knowledge, threatened, which challenge the rights of the Company or any Subsidiary in respect thereof, except as set forth in Schedule 2.11. The Company and each Subsidiary has the right to use, in accordance with the terms of any applicable agreement, all customer lists, designs, manufacturing or other processes, computer software, systems, data compilations, research results and other information (including, without limitation, the data comprising the Company's so-called "UIXDatabase") required for or incident to its products or its business as presently conducted or as proposed to be conducted. (b) All patents, patent applications, trademarks, trademark applications and registrations and registered copyrights which are owned by or licensed to the Company or any Subsidiary or used or to be used by the Company or any Subsidiary in their businesses as presently conducted or as proposed to be conducted are set forth in Schedule 2.11. The patents, patent applications, trademark registrations, trademark applications and registered copyrights set forth in Schedule 2.11 and owned by the Company or any Subsidiary have been duly registered in, filed in or issued by the United States Patent and Trademark Office, the United States Register of Copyrights, or the corresponding offices of other jurisdictions as set forth in Schedule 2.11, and, except as set forth in Schedule 2.11, have been properly maintained and renewed in accordance with all applicable provisions of law and administrative regulations of the United States and each such jurisdiction. (c) All licenses or other agreements (other than standard "shrink wrap" or similar licenses for widely disseminated, commercially available software) under which the Company or any Subsidiary is granted rights in Intellectual Property and are, individually or in the aggregate, material to the business are set forth in Schedule 2.11. All said licenses or other agreements are in full force and effect and will not be affected by reason or consummation of the Transactions, and to the Company's knowledge, there is no material default by any party thereto. To the Company's knowledge, the licensors under said licenses and other agreements have and had all requisite power and authority to grant the rights purported to be conferred thereby. True and complete copies of all such licenses or other agreements, and any amendments thereto, have been provided to Buyer. (d) All licenses or other agreements under which the Company or any Subsidiary has granted rights to others in Intellectual Property owned or licensed by the Company or such Subsidiary (other than the Company's standard license agreement for use of its Lattis database software ("Lattis Licenses") and its pricing and ordering 14 applications) are set forth in Schedule 2.11. All of said licenses, including, without limitation, Lattis Licenses, or other agreements are in full force and effect and will not be affected by reason of the consummation of the Transactions, and, to the Company's knowledge, there is no material default by any party thereto. True and complete copies of all such licenses or other agreements (other than Lattis Licenses and the licenses associated with its pricing and ordering applications), and any amendments thereto, have been provided to Buyer. (e) The Company and each Subsidiary have taken all steps required in accordance with sound business practice to establish and preserve their ownership of all Intellectual Property rights with respect to their products, services and technology. The Company and each Subsidiary have required all professional and technical employees having access to valuable non-public information of the Company and such Subsidiary, to execute agreements under which such employees are required to convey to the Company or such Subsidiary ownership of all inventions and developments conceived or created by them in the course of their employment and to maintain the confidentiality of all such information of the Company and the Subsidiaries. Neither the Company nor any Subsidiary has made any such information available to any person other than employees of the Company and the Subsidiaries except pursuant to written agreements requiring the recipients to maintain the confidentiality of such information and appropriately restricting the use thereof. The Company has no knowledge of any infringement by others of any Intellectual Property rights of the Company or any Subsidiary. (f) To the Company's knowledge, the present business, activities and products of the Company and the Subsidiaries do not infringe any Intellectual Property of any other person. No proceeding charging the Company or any Subsidiary with infringement of any adversely held Intellectual Property has been filed or is threatened to be filed. To the Company's knowledge, there exists no unexpired patent or published patent application which includes claims that would be infringed by or otherwise adversely affect the products, activities or business of the Company or any Subsidiary. To the Company's knowledge, neither the Company nor any Subsidiary is making unauthorized use of any confidential information or trade secrets of any person, including without limitation, any former employer of any past or present employee of the Company or any Subsidiary. Except as set forth in Schedule 2.11, neither the Company or any Subsidiary nor, to the knowledge of the Company, any of their employees have any agreements or arrangements with any persons other than the Company or the Subsidiaries related to confidential information or trade secrets of such persons or restricting any such employee's ability to engage in the business conducted by the Company. The activities of their employees on behalf of the Company or any Subsidiary do not violate any such agreements or arrangements known to the Company. 2.12. Contracts. Except for contracts, commitments, plans, agreements, instruments and licenses explicitly described in the Company SEC Reports (true and complete copies of which are included as exhibits to the Company SEC Reports or have been delivered to Buyer), or as set forth in Schedule 2.12 and specifically excluding individual circuit orders, neither the Company nor any Subsidiary is a party to or subject to: 15 (a) any plan or contract providing for bonuses, pensions, options, stock purchases, deferred compensation, retirement payments, profit sharing, collective bargaining or the like other than those plans or contracts set forth in Schedule 2.12, or any contract or agreement with any labor union; (b) any employment contract or contract for services which requires the payment of more than $100,000annually (or which are not otherwise in the aggregate for all such contracts or agreements, material to the Company) or which is not terminable within 30 days by the Company or a Subsidiary without liability for any penalty or severance payment; (c) any Employee Program (as defined below); (d) any contract or agreement for the purchase of telecommunications capacity ("Capacity Contracts") except those Capacity Contracts in the ordinary and usual course requiring the payment of less than $400,000 per year, or $7,000,000 per year in the aggregate for all Capacity Contracts; (e) any (i) contract or agreement for the purchase of any commodity, material or equipment other than Capacity Contracts or (ii) purchase orders requiring the payment of more than $155,000 per year or which, in the aggregate with all other such contracts, agreements and purchase orders, is material to the Company; (f) any other contract or agreement (other than Capacity Contracts) which is not otherwise disclosed elsewhere under this Agreement or which by its terms does not terminate or is not terminable without penalty by the Company or the Subsidiary party thereto or their successors within one year after the date hereof that (i) creates obligations of the Company or any Subsidiary in excess of $155,000 per year or (ii) in the aggregate with all other such contracts or agreements, is material to the Company; (g) any contract or agreement providing for the purchase of all or substantially all of its requirements of a particular product from a supplier; (h) any contract or agreement for the sale or lease of the Company's or Subsidiary's products not made in the ordinary and usual course of business; (i) any contract with any sales agent or distributor of products of the Company or any Subsidiary; (j) other than in the ordinary and usual course of business, any contract containing covenants limiting the freedom of the Company or any Subsidiary to compete in any line of business or with any Person or to disclose information about any party other than the Company or a Subsidiary (a "Non-Disclosure Agreement"); (k) any contract or agreement for the purchase of any fixed asset, whether or not such purchase is in the ordinary and usual course of business, for a price (i) in excess of $155,000 per year or (ii) which, in the aggregate with all other such contracts or agreements, is material to the Company; 16 (l) any license agreement (as licensor or licensee) other than (i) those license agreements set forth in Schedule 2.11; (ii) those licenses granted pursuant to Universal Transport Exchange contracts or similar collocation contracts including but not limited to "meet me room" contracts; (iii) standard "shrink wrap" or similar licenses for widely disseminated, commercially available software; and (iv) those licenses for the Company's or any Subsidiary's commercially available pricing or ordering applications. (m) any indenture, mortgage, promissory note, loan agreement, guaranty or other agreement or commitment, in each case, for the borrowing of money; (n) any contract or agreement with any officer, director or stockholder or, other than in the ordinary and usual course of business, any employee of the Company or any Subsidiary or with any persons or organizations controlled by or affiliated with any of them; or (o) any contract, agreement or other instrument, pursuant to which any consent or waiver is required of any Person in connection with the Transactions, or under which the Transactions would constitute a change of control granting the other party to the contract, agreement or other instrument the right to exercise a remedy or take any action which is or would reasonably be likely to have a Material Adverse Effect. Neither the Company nor any Subsidiary is in default under any such contracts, commitments, plans, agreements or licenses set forth in Schedule 2.12 or has any knowledge of conditions or facts which with notice or passage of time, or both, would constitute a default and neither the Company, nor any Subsidiary has ever been in breach or violation of any Non-Disclosure Agreement with any telecommunication carrier, other than such breaches or violations as have been cured or otherwise waived by the carrier counterparty thereto and the Company and the Subsidiaries released from liability for such breaches and other violations. 2.13. Litigation. Set forth in Schedule 2.13 are all currently pending litigation and governmental or administrative proceedings or investigations to which the Company or any Subsidiary is a party. Except for matters set forth in Schedule 2.13, there is no litigation or governmental or administrative proceeding or investigation pending or, to the knowledge of the Company, threatened, against the Company or any Subsidiary or their affiliates which may have a Material Adverse Effect or which would prevent or hinder the consummation of the Transactions. With respect to each matter set forth therein, Schedule 2.13 or the Company SEC Reports set forth a description of the matter, the forum (if any) in which it is being conducted, the parties thereto and the type and amount of relief sought. 2.14. Compliance with Laws. Except as set forth in the Company SEC Reports or in Schedule 2.14, the Company and each Subsidiary is in compliance in all material respects with all applicable statutes, ordinances, orders, judgments, decrees, rules and regulations promulgated by any federal, state, municipal entity, agency, court or other governmental authority which apply to the Company or any Subsidiary or to the conduct of 17 its business, and neither the Company nor any of the Subsidiaries has received notice of a violation or alleged violation of any such statute, ordinance, order, rule or regulation. 2.15. Insurance. Set forth in Schedule 2.15 is a complete and accurate list of all liability, property, workers' compensation, directors' and officers' liability and other insurance policies in effect that are owned by the Company and each Subsidiary or under which the Company or any Subsidiary is a named insured (the "Insurance Policies"). All Insurance Policies are in full force and effect, all premiums with respect thereto are currently paid, and the Company and each Subsidiary is in compliance in all material respects with the terms thereof. The Insurance Policies are adequate and customary for the business engaged in by the Company and each Subsidiary and is sufficient for compliance by the Company and each Subsidiary with all requirements of law and all agreements and leases to which the Company or any Subsidiary is a party. The directors' and officers' errors and omissions insurance coverage set forth in Schedule 2.15 is in full force and effect and the Company and the Subsidiaries are in full compliance with the terms of each such policy. The Company has no reason to believe that any such coverage will be denied for any reason. 2.16. Warranty or Other Claims. There are no existing, or, to the Company's knowledge, threatened, product liability, warranty or other similar claims, or, to the Company's knowledge, any facts upon which a claim of such nature could be based, against the Company or any Subsidiary for products or services which are defective or fail to meet any product or service warranties and which, individually or in the aggregate, would reasonably be likely to result in a Material Adverse Effect, except as set forth in Schedule 2.16. No claim or claims which would, individually or in the aggregate, reasonably be likely to result in a Material Adverse Effect has been asserted against the Company or any Subsidiary for renegotiation or price redetermination of any business transaction, and, to the Company's knowledge, there are no facts upon which any such claim could be based. 2.17. Finder's Fee. Other than the fee payable to Broadmark pursuant to that certain Financial Advisory/Investment Banking Agreement, dated December 12, 2002, consisting of a fee of $750,000, a retainer of $30,000 and expenses and warrants to purchase 1,000,000 shares of Common Stock, neither the Company nor any Subsidiary has incurred or become liable for any broker's commission or finder's fee relating to or in connection with the Transactions. 2.18. Permits. The Company and each Subsidiary has obtained all material permits, registrations, licenses, franchises, certifications and other approvals (collectively, the "Approvals") required from federal, state or local authorities in order for the Company and each Subsidiary to conduct its business except to the extent that the Company's or Subsidiary's failure to so obtain such Approvals could not reasonably be expected to have a Material Adverse Effect. All the Approvals are valid and in full force and effect, and the Company and the Subsidiaries are operating in material compliance therewith. Such Approvals include, but are not limited to, those material Approvals required under federal, state or local statutes, ordinances, orders, requirements, rules, 18 regulations, or laws pertaining to environmental protection, public health and safety, worker health and safety, buildings, highways or zoning. 2.19. Transaction with Interested Persons. Except as set forth in the Company SEC Reports or in Schedule 2.19, no executive officer or director of the Company or any Subsidiary, or any of their respective immediate family members has engaged in any transaction which would be required to be disclosed by the Company in the Company SEC Reports under Item 404 of Regulation S-K promulgated under the Securities Act of 1933, as amended. 2.20. Employee Benefit Programs (a) Each Employee Program which has ever been maintained by the Company or any Subsidiary and which has at any time been intended to qualify under Section 401(a) or 501(c)(9) of the Code (i) has received a favorable determination or approval letter from the Internal Revenue Service ("IRS") regarding its qualification under such section, or (ii) is a prototype plan that is within the remedial amendment period for seeking such determination or approval letter, and has, in fact, been operated in all material respects in compliance with the applicable section of the Code from the effective date of such Employee Program through and including the date hereof (or, if earlier, the date that all of such Employee Program's assets were distributed). No event or omission has occurred which would cause any such Employee Program to lose its qualification under the applicable section of the Code. (b) The Company does not know of any failure of any party to comply in all material respects with any laws applicable to the Employee Programs that have been maintained by the Company or any Subsidiary. No litigation, arbitration, or governmental administrative proceeding (or investigation) or other proceeding (other than those relating to routine claims for benefits) is pending or, to the Company's knowledge, threatened with respect to any such Employee Program. (c) Neither the Company nor any Subsidiary nor any Affiliate (as defined below) (i) has ever maintained any Employee Program which has been subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (including, but not limited to, any Multi-employer Plan (as defined below)) or (ii) has ever provided health care or any other non-pension benefits to any employees after their employment is terminated or has ever promised to provide such post-termination benefits (other than as required by part 6 of subtitle B of title I of ERISA). (d) With respect to each Employee Program maintained by the Company or any Subsidiary within the three years preceding the date hereof, complete and correct copies of the following documents (if applicable to such Employee Program) have previously been delivered, or made available, to Buyer: (i) all documents embodying or governing such Employee Program, and any funding medium for the Employee Program (including, without limitation, trust agreements) as they may have been amended; (ii) the most recent IRS determination or approval letter with respect to such Employee Program under Sections 401 or 501(c)(9) of the Code, and any applications for determination or approval 19 subsequently filed with the IRS; (iii) the three most recently filed IRS Forms 5500, with all applicable schedules and accountants' opinions attached thereto; (iv) the summary plan description for such Employee Program (or other descriptions of such Employee Program provided to employees) and all modifications thereto; (v) any insurance policy (including any fiduciary liability insurance policy) related to such Employee Program; and (vi) any documents evidencing any loan to an Employee Program that is a leveraged employee stock ownership plan. (e) Except as set forth in Schedule 2.20, neither the execution and delivery of this Agreement by the Company, nor the consummation of the Transactions will constitute a change of control (or any similar event) under any Employee Program or result in, or give any Person the right to any, acceleration of any benefits or amounts payable under or in connection with any Employee Program (including, without limitation, any employment or consulting agreement). (f) For purposes of this section: (i) "Employee Program" means (A) all employee benefit plans within the meaning of ERISA Section 3(3), including, but not limited to, multiple employer welfare arrangements (within the meaning of ERISA Section 3(40)), plans to which more than one unaffiliated employer contributes and employee benefit plans (such as foreign or excess benefit plans) which are not subject to ERISA; and (B) all stock option plans, bonus or incentive award plans, severance pay policies or agreements, deferred compensation agreements, supplemental income arrangements, vacation plans, and all other employee benefit plans, agreements, and arrangements not described in (A) above. In the case of an Employee Program funded through an organization described in Section 501(c)(9) of the Code, each reference to such Employee Program shall include a reference to such organization. (ii) An entity "maintains" an Employee Program if such entity sponsors, contributes to, or provides (or has promised to provide) benefits under such Employee Program, or has any obligation (by agreement or under applicable law) to contribute to or provide benefits under such Employee Program, or if such Employee Program provides benefits to or otherwise covers employees of such entity, or their spouses, dependents, or beneficiaries. (iii) An entity is an "Affiliate" of the Company or a Subsidiary if it would have ever been considered a single employer with the Company or any Subsidiary under ERISA Section 4001(b) or part of the same "controlled group" as the Company or any Subsidiary for purposes of ERISA Section 302(d)(8)(C). (iv) "Multi-employer Plan" means a (pension or non-pension) employee benefit plan to which more than one employer contributes and which is maintained pursuant to one or more collective bargaining agreements. 20 2.21. Environmental Matters. (a) Except as set forth in Schedule 2.21 hereto, (i) neither the Company nor any Subsidiary has ever generated, transported, used, stored, treated, disposed of, or managed any Hazardous Waste (as defined below); and (ii) to the Company's knowledge, no lien has ever been imposed by any governmental agency on any property, facility, machinery, or equipment owned, operated, leased, or used by the Company or any Subsidiary in connection with the presence of any Hazardous Material (as defined below). (b) Except as set forth in Schedule 2.21 hereto, the Company is, and has at all times been, in compliance in all material respects with all applicable Environmental Laws (as defined below). The Company has not received any written communication that alleges the Company is not in such compliance. (c) There is no Environmental Claim (as defined below) pending or, to the knowledge of the Company, threatened against the Company. (d) To the Company's knowledge, neither PCB's nor asbestos containing materials are present on or in the Real Property. (e) As used in this Agreement, the defined terms: (i) "Hazardous Material" shall mean and include any hazardous waste, hazardous material, hazardous substance, petroleum product, oil, toxic substance, pollutant, contaminant, or other substance which may pose a threat to the environment or to human health or safety, as defined or regulated under any Environmental Law; (ii) Hazardous Waste" shall mean and include any hazardous waste as defined or regulated under any Environmental Law; (iii) "Environmental Claim" means any material claim, action, cause of action, investigation or written notice by any Person alleging potential liability (including potential liability for investigatory costs, cleanup and removal costs, governmental enforcement and response costs, natural resources damaged, property damages, economic loss, personal injuries, or penalties) arising out of, based on or resulting from (A) the presence, discharge or release or threatened discharge or release into the environment, of any Materials of Environmental Concern at any location leased or operated by the Company, or (B) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law by the Company. (iv) "Environmental Law" means all material federal, state, and local laws (as of the relevant applicable date, but in no event as of a date later than the Closing Date) primarily relating to pollution or protection of human health from pollution or the protection of the 21 environment (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata), navigable waters, waters of contiguous and exclusive economic zones, ocean waters and international waters, including laws relating to emissions, discharges, releases or threatened discharge or releases of non-permitted non-consumer quantities of Materials of Environmental Concern or the dredging, handling and disposal of river sediments, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of non-permitted or non-consumer quantities of Materials of Environmental Concern; and (v) "Materials of Environmental Concern" means any hazardous substance defined as such under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. 2.22. Employees: Labor Matters. The Company and the Subsidiaries generally enjoy good employer-employee relationships. Neither the Company nor any Subsidiary is delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed for it to the date hereof or amounts required to be reimbursed to such employees. Neither the Company, any Subsidiary nor Buyer will by reason of the Transactions or anything done prior to the Closing be liable to any of said employees for so-called "severance pay" or any other payments, except as set forth in Schedule 2.20. The Company and each Subsidiary is in compliance in all material respects with all applicable laws and regulations respecting labor, employment, fair employment practices, work place safety and health, terms and conditions of employment, and wages and hours. There are no charges of employment discrimination or unfair labor practices, nor are there any strikes, slowdowns, stoppages of work, or any other concerted interference with normal operations which are existing, pending or, to the Company's knowledge, threatened against or involving the Company or any Subsidiary. No collective bargaining agreement is in effect or is currently being negotiated by the Company or any Subsidiary. Neither the Company nor any Subsidiary has received any information indicating that any of its employment policies or practices is currently being audited or investigated by any federal, state or local government agency. The Company and each Subsidiary is, and at all times has been, in compliance in all material respects with the requirements of the Immigration Reform Control Act of 1986. 2.23. Customers, Distributors and Suppliers. The relationships of the Company and each Subsidiary with their respective material customers, distributors and suppliers are good commercial working relationships within the context of the telecommunications industry. Except as set forth in Schedule 2.23, or in connection with the customer's, distributor's or supplier's prior bankruptcy proceedings, no material customer, distributor or supplier of the Company or any Subsidiary, has cancelled, materially modified, or otherwise terminated its relationship with the Company or any Subsidiary, or has during the last twelve months decreased materially its services, supplies or materials to the Company or any such Subsidiary or its usage or purchase of the services or products of the Company or any Subsidiary, nor, to the knowledge of the Company, 22 does any customer, distributor or supplier have any plan or intention to do any of the foregoing other than disconnections and non-renewals of circuits in the ordinary and usual course of business. 2.24. Unlawful or Undisclosed Payments. In connection with the conduct of the business of the Company and the Subsidiaries, neither the Company, any Subsidiary nor, to the Company's knowledge, anyone acting on any of their behalf, has, in the course of acting for, or on behalf of, the Company or its Subsidiaries, (i) directly or indirectly used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) directly or indirectly made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) directly or indirectly made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government or party official or employee. Section 3 REPRESENTATIONS AND WARRANTIES OF BUYER. - -------------------------------------------------- As a material inducement to the Company to enter into this Agreement and consummate the Transactions, except as disclosed in the Schedules referred to herein, Buyer hereby makes the representations and warranties in this Section 3. Subject to the rights of the Company under Section 8 hereof, Buyer may amend any Schedule to this Agreement after the execution of this Agreement, but prior to the Closing, to reflect updated information, events, agreements, transactions, circumstances, developments, and occurrences. Subject to the rights of the Company under Section 8 hereof, any amendment permitted above will be deemed to have amended the Schedule, to have qualified the representations and warranties of Buyer to which the Schedule relates, and to have cured any misrepresentation or breach of warranty by buyer that otherwise might have existed hereunder or thereunder prior to the amendment. 3.1. Organization of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware with full corporate power to own or lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. Except as set forth in Schedule 3.1 hereto, Buyer is not in violation of any term of its Certificate of Incorporation or By-laws. 3.2. Authority of Buyer. Subject only to obtaining approval of the holders of its Series A Preferred Stock, Buyer has full right, authority and power to enter into this Agreement and each other Transaction Document to which it is a party, and, to carry out the Transactions. The execution, delivery and performance by Buyer of this Agreement and each such other Transaction Document and the consummation of the Transactions have been duly authorized by all necessary action of Buyer and no other action on the part of Buyer (other than the stockholder approval referred to above) is required in connection therewith. 23 This Agreement and each other Transaction Document executed and delivered by Buyer pursuant to this Agreement constitute, or when executed and delivered will constitute, valid and binding obligations of Buyer enforceable in accordance with their terms. Except as set forth on Schedule 3.2, the execution, delivery and performance by Buyer of this Agreement and each such Transaction Document and the consummation of the Transactions: (i) does not and will not violate any provision of the Certificate of Incorporation or By-laws of Buyer; (ii) does not and will not violate any laws of the United States or of any state or any other jurisdiction applicable to Buyer or require Buyer to obtain any approval, consent or waiver of,or make any filing with, any person or entity (governmental or otherwise); and (iii) does not and will not result in a breach of, constitute a default under, accelerate any obligation under, or give rise to a right of termination of any indenture, loan or credit agreement or other agreement, mortgage, lease, permit, order, judgment or decree to which Buyer is a party or by which Buyer is bound or affected, or result in the creation or imposition of any mortgage, pledge, lien, security interest or other charge or encumbrance having a material adverse effect on the operation or condition (financial or otherwise) of the Fiber Ring Assets or result in a material change in the obligations of Buyer under the Assumed Liabilities, taken as a whole, other than any effect relating to or arising out from an event, matter, occurrence or action (a) affecting the United States or global economy generally; (b) primarily caused by or related to the announcement or pendency of the Transactions; or (c) resulting from actions taken by Buyer at the request of the Company (a "Buyer Material Adverse Effect"). 3.3. Title to Fiber Ring Assets; Sufficiency of Assets. A complete description of the machinery, equipment and all other material items of tangible personal property of Buyer constituting the Fiber Ring Assets are set forth in Exhibit B hereto. All such machinery, equipment and personal property set forth in Exhibit B, together with the Buyer Intellectual Property and the Maintenance Assets, constitutes all of the assets necessary to operate the Fiber Ring Assets as presently conducted by Buyer (other than franchises, licenses, permits and other approvals). Except as otherwise set forth in Exhibit B, Buyer has good and marketable title to the machinery, equipment and all other items of personal property constituting the Fiber Ring Assets. Except for the security interest held by Alacatel/ElectroBanque in the Fiber Ring Assets located in Albuquerque, New Mexico, and the leasehold and other rights of customers, none of such Fiber Ring Assets is subject to any mortgage, pledge, lien, conditional sale agreement, security, title, encumbrance or other charge. Except as otherwise set forth in Exhibit B, all Fiber Ring Assets are in good repair and good working order. As used herein, the term "Maintenance Assets" shall mean those tangible and intangible assets of Buyer used in connection with the maintenance and operation of the Fiber Ring Assets as will be necessary or usable in the performance of its obligations under the Maintenance Agreement. 24 3.4. Intellectual Property. Buyer owns or has the right to use all patent, copyright, trade secret, trademark or other proprietary rights (collectively, "Buyer Intellectual Property") necessary to perform its obligations under the Maintenance Agreement. There are no claims or demands of any other person pertaining to the use by Buyer of any of such Buyer Intellectual Property and no proceedings have been instituted or are pending, or, to Buyer's knowledge, threatened, which challenge the rights of the Buyer in respect thereof. 3.5. No Fraudulent Transfer. Buyer has entered into this Agreement and the Transaction Documents without any intent to hinder, delay or defraud any of its creditors. Buyer has received reasonably equivalent value in exchange for the Fiber Ring Assets transferred to the Company. Immediately prior to and after the Closing, the value of Buyer's assets is and will be greater than the amount of its debts, and Buyer is and will be generally able to pay its debts as they become due. 3.6. Contracts. Each of the material contracts, agreements and other obligations of Buyer related to the Fiber Ring Assets (including, without limitation, any contracts granting to Buyer a lease, license or other right to use real property) are set forth in Exhibit B (the "Fiber Ring Contracts") (true and complete copies of each contract have been given to the Company). Each Fiber Ring Contract constitutes a valid and binding obligation of Buyer or its subsidiary party thereto, and to Buyer's knowledge each other party thereto, and is legally enforceable against Buyer or its subsidiary party thereto, and to Buyer's knowledge each other party thereto, is in full force and effect, and has not been modified, amended or altered, in writing or otherwise. Except as set forth in Schedule 3.6 hereto, the Fiber Ring Contracts to be transferred to the Company (as set forth in Exhibit B) may be transferred to the Company pursuant to this Agreement, and will continue in full force and effect thereafter, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder and without the consent, approval or act of, or the making of any filing with, any other party. Buyer is not currently in breach of any of its obligations under each of the Fiber Ring Contracts, and except as set forth in Schedule 3.6, and to the knowledge of Buyer, no other party to any of the Fiber Ring Contracts is currently in breach or default thereunder. 3.7. Litigation. Except for matters set forth in Schedule 3.7 hereto, there are no claims or proceedings pending or, to Buyer's knowledge, threatened against Buyer or its affiliateswhich can reasonably be expected to result in any material liability of Buyer with respect to the Fiber Ring Assets or the Assumed Liabilities or which would prevent or hinder the consummation of the Transactions, transfer of the Fiber Ring Assets or assumption of the Assumed Liabilities. 3.8. Compliance with Laws. Buyer is in compliance in all material respects with all applicable statutes, ordinances, orders, judgments, decrees, rules and regulations promulgated by any federal, state, municipal entity, agency, court or other governmental authority which applies to Buyer's ownership and operation of the Fiber Ring Assets and to the Assumed Liabilities, and Buyer has not received notice of any violation or alleged violation of any such statute, ordinance, order, rule or regulation. 25 3.9. Finder's Fee. Buyer has not incurred or become liable for any broker's commission or finder's fee relating to or in connection with the Transactions. 3.10. Permits. Buyer has obtained all material permits, registrations, licenses, franchises, certifications and other approvals (collectively, the "Approvals") required from federal, state or local authorities in order for Buyer to own, operate and maintain the Fiber Ring Assets except to the extent that Buyer's failure to so obtain such Approvals could not reasonably be expected to have a Buyer Material Adverse Effect. All the Approvals are valid and in full force and effect, and Buyer is operating the Fiber Ring Assets in material compliance therewith. Such Approvals include, but are not limited to, those material Approvals required under federal, state or local statutes, ordinances, orders, requirements, rules, regulations or laws pertaining to environmental protection, public health and safety, worker health and safety, buildings, highways or zoning. 3.11. Customers. Set forth in Schedule 3.11 is a list of all of the customers of Buyer relating to the Fiber Ring Assets. Except as set forth in Schedule 3.11, the relationships of Buyer with such customers are good commercial working relationships. Except as set forth in Schedule 3.11, or in connection with the customer's prior bankruptcy proceedings, no such customer has cancelled, materially modified, or otherwise terminated its relationship with Buyer, or has threatened to cancel, materially modify or otherwise terminate its relationship with Buyer. 3.12. No Condemnation. To Buyer's knowledge, neither the whole nor any portion of the Fiber Ring Assets is subject to any governmental decree or order to be sold or is being condemned, expropriated or otherwise taken by any public authority, with or without payment of compensation therefor, nor, to Buyer's knowledge, has any such condemnation, expropriation or taking been proposed. 3.13. Environmental Matters. (a) In connection with Buyer's ownership and operation of the Fiber Ring Assets, (i) Buyer has never generated, transported, used, stored, treated, disposed of, or managed any Hazardous Waste; and (ii) to Buyer's knowledge, no lien has ever been imposed by any governmental agency on any property, facility, machinery, or equipment owned, operated, leased, or used by Buyer in connection with the presence of any Hazardous Material. (b) In connection with Buyer's ownership and operation of the Fiber Ring Assets, Buyer is, and has at all times been, in compliance in all material respects with all applicable Environmental Laws. Buyer has not received any written communication that alleges that Buyer is not in such compliance. (c) There is no Environmental Claim, in connection with Buyer's ownership and operation of the Fiber Ring Assets, pending or, to the knowledge of Buyer, threatened against Buyer. 26 (d) To Buyer's knowledge, neither PCB's nor asbestos containing materials are present on or in the Fiber Ring Assets. 3.14. Investment Intention; Experience. (a) Buyer understands and acknowledges that the Shares have not been and will not be registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction (together "Securities Laws"); that the Shares will be issued in reliance on exemptions from the registration requirements thereof; and that the Company's reliance upon such exemptions is predicated in part on the representations and covenants contained in this Section 3.14. (b) Buyer represents and warrants that: (i) the Shares are being and will be acquired for the account of Buyer and not, directly or indirectly, on behalf of any other person or persons and not with a view to, or for sale in connection with, any, direct or indirect, distribution thereof in violation of applicable Securities Laws; (ii) it will not, directly or indirectly, transfer the Shares except in compliance with applicable Securities Laws and any applicable rules and regulations promulgated thereunder; (iii) it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Shares; and (iv) it has had access to or received such information with respect to the Company and the Shares as it deems advisable in connection with making a decision to invest in the Shares; that it has had the opportunity to review the Company SEC Reports; and that it has had the opportunity to question and receive answers from representatives of the Company with respect to the terms and conditions of the sale of the Shares. 3.15. Accredited Investor Status. Buyer is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. 27 Section 4 COVENANTS OF THE COMPANY. - ------------------------------------------ 4.1. Conduct of Business. Between the date of this Agreement and the Closing Date, the Company will, and will cause each Subsidiary to: (a) conduct its business only in the ordinary and usual course and refrain from changing or introducing any method of management or operations except in the ordinary and usual course of business and consistent with prior practices; (b) refrain from (i) making any purchase, sale, disposition, lease or sublease of any asset or property other than in the ordinary and usual course of business and other than subleases or dispositions of (A) the Company's interest in its leases in the Sears Tower, Chicago, Illinois and on Madison Avenue in New York, New York and (B) UTX facilities, (ii) purchasing any capital asset not reflected in the Company's budget, as set forth in Schedule 4.1, and (iii) mortgaging, pledging, subjecting to a lien or otherwise encumbering any of its properties or assets other than in the ordinary and usual course of business or to Buyer; (c) refrain from making any change or incurring any obligation to make a change in its Certificate of Incorporation, By-laws or authorized or issued capital stock other than as contemplated hereby; (d) use its commercially reasonable efforts to prevent any adverse change with respect to the continued employment of Lance Boxer, Randall R. Lay, Les W. Hankinson, Annette Erdmann and Chris Conant; (e) diligently operate its business substantially as previously operated and diligently preserve intact its organization, goodwill and relationships with suppliers, customers, independent contractors and others having business relations with it; (f) furnish Buyer with unaudited monthly balance sheets and statements of income and retained earnings and cash flows of the Company and each Subsidiary on a consolidated and consolidating basis within thirty (30) days after each month end; (g) furnish Buyer with copies of all filings and submissions to be made by the Company or any Subsidiary with or to the SEC a reasonable time prior to such filing or submission, and reflect therein all reasonable comments of Buyer and its counsel thereon; and (h) refrain from taking any action that could reasonably be expected to cause the representation contained in Section 2.6 to be untrue as of the Closing. 4.2. Satisfaction of Conditions; Receipt of Necessary Approvals. Subject to the terms and conditions herein provided, the Company shall, and shall cause the Subsidiaries to, use their respective commercially reasonable efforts to (i) promptly effect all necessary registrations, submissions and filings required or requested by governmental authorities, in connection with the consummation of the Transactions, (ii) defend any 28 lawsuit or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Transactions, including, without limitation, seeking to have any stay or temporary restraining order entered by any court or other governmental entity vacated or reversed, (iii) use all reasonable efforts to take all other action and to do all other things necessary, proper or advisable to satisfy the conditions precedent to the Closing, to consummate and make effective as promptly as practicable the Transactions, and to fully carry out the purposes of, this Agreement and (iv) use all reasonable efforts to obtain all other necessary or appropriate waivers, consents and approvals (including but not limited to such filings, consents, approvals, orders, registrations and declarations as may be required under the laws of any foreign country in which the Company or any of the Subsidiaries conducts any business or owns any assets) and to lift any injunction or other legal bar to the Transactions (and, in such case, to proceed with the Transactions as expeditiously as possible), subject, however, to the requisite vote of the stockholders of the Company. 4.3. Notice of Default. (a) Promptly upon the occurrence of, or promptly upon the Company becoming aware of the impending or threatened occurrence of, any event which would cause or constitute a breach or default, or would have caused or constituted a breach or default had such event occurred or been known to the Company prior to the date hereof, of any of the representations, warranties or covenants of the Company contained in or referred to in this Agreement or in any Schedule or Exhibit referred to in this Agreement, the Company shall give detailed written notice thereof to Buyer and the Company shall use its best efforts to prevent or promptly remedy the same. (b) Promptly upon the occurrence of, or promptly upon the Company becoming aware of the impending or threatened occurrence of, any event with regard to the Company or a Subsidiary which if such event had occurred prior to the execution of this Agreement would have been required to be disclosed by the Company on a Schedule to this Agreement, the Company shall promptly update any such Schedule and deliver such Schedule to Buyer. 4.4. Cooperation of the Company. The Company shall cooperate with all reasonable requests of Buyer and Buyer's counsel in connection with the consummation of the Transactions. 4.5. No Solicitation; Other Offers. (a) The Company shall not, and shall not permit any Subsidiary to, and shall use its best efforts to ensure that its officers, directors or employees, or any investment bankers, consultants or other agents retained by it or any Subsidiary to not, solicit, initiate or encourage the submission of any Acquisition Proposal (as defined below) or engage in discussions or negotiations or furnish to any Person any information with respect to an Acquisition Proposal or knowingly facilitate any effort or attempt to make an Acquisition Proposal. The Company will notify Buyer within 48 hours of receipt by the Company or any Subsidiary of any Acquisition Proposal or any request for nonpublic 29 information relating to the Company or any Subsidiary by any Person who, to the knowledge of the Company, is making or considering making or who has made, an Acquisition Proposal. The Company shall provide such notice orally and in writing including the terms and conditions of any such Acquisition Proposal or request. The Company shall, and shall cause the Subsidiaries and directors, employees and other agents of the Company and the Subsidiaries to, cease immediately and cause to be terminated all activities, discussions and negotiations, if any, with any Persons conducted prior to the date hereof with respect to any Acquisition Proposal. Nothing contained in this Agreement shall prevent the Board of Directors of the Company from complying with applicable rules and regulations under the Exchange Act with respect to any Acquisition Proposal or making any disclosure to the Company's stockholders if, in the good faith judgment of a majority of the disinterested members of the Board of Directors of the Company after receipt of a written opinion from its outside legal counsel, failure to so disclose could reasonably be deemed to be inconsistent with its fiduciary duties under applicable law. For purposes of this Section, a "disinterested member of the Board of Directors" is a member of the Board of Directors who is not an "interested director" as defined under DGCL. (b) Notwithstanding the first sentence of this Section 4.5, the Company may negotiate or otherwise engage in substantive discussions with, and furnish nonpublic information to, any Person in response to an unsolicited Acquisition Proposal by such Person if the Company has complied with the terms of this Section 4.5, a majority of the disinterested members of the Board of Directors of the Company reasonably determines in good faith that such Acquisition Proposal could reasonably be expected to result in a Superior Proposal and, after receipt of a written opinion from its outside legal counsel, that the failure to take such action could reasonably be deemed to be inconsistent with its fiduciary duties under applicable law, and such person executes a confidentiality agreement in customary form (including standstill provisions). (c) Except as permitted by the second sentence of this Subsection 4.5(c), neither the Board of Directors of the Company nor any committee thereof shall withdraw or modify, or publicly propose to withdraw or modify, in a manner adverse to Buyer, or take any action not explicitly permitted by this Agreement that would be inconsistent with its approval of the Transactions, approve or recommend, or publicly propose to approve or recommend, any Acquisition Proposal or cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or similar agreement related to any Acquisition Proposal. The Board of Directors of the Company shall be permitted (i) not to recommend to its stockholders acceptance of the Transactions and/or approval of this Agreement, (ii) to withdraw, or modify in a manner adverse to Buyer, its recommendation to its stockholders referred to in Section 1.1 hereof, (iii) approve or recommend any Superior Proposal or (iv) terminate this Agreement and in connection therewith enter into an agreement with respect to such Superior Proposal, but only if (x) the Company has complied with the terms of this Section 4.5, (y) the Company has received an unsolicited Acquisition Proposal which a majority of the disinterested members of the Board of Directors determines in good faith constitutes a Superior Proposal, and (z) a majority of the disinterested members of the Board of Directors of the Company determines in good faith, after receipt of a written opinion from its outside legal 30 counsel, that the failure to take such action could reasonably be deemed to be inconsistent with its fiduciary duties under applicable law. (d) For purposes of this Agreement: "Acquisition Proposal" means any offer or proposal for a merger, reorganization, consolidation, share exchange, business combination, or other similar transaction involving the Company or any Subsidiary or any proposal or offer to acquire, directly or indirectly, securities representing more than 25% of the voting power of the Company, or all or substantially all of the assets of the Company and the Subsidiaries taken as a whole, other than the Transactions. "Superior Proposal" means any bona fide written Acquisition Proposal which (i) a majority of the disinterested members of the Board of Directors of the Company determines in good faith (after consultation with a financial advisor of nationally recognized reputation and taking into account all the terms and conditions of the Acquisition Proposal) is more favorable to the Company's stockholders (in their capacities as stockholders) and/or, if applicable, the Company's creditors than the Transactions; and (ii) any conditions to such Acquisition Proposal are reasonably capable of being satisfied promptly, including a conclusion that financing for such Acquisition Proposal, to the extent required, is then committed or is in the good faith judgment of a majority of the disinterested members of the Board of Directors of the Company, reasonably available to the person making such Acquisition Proposal. 4.6. Certain Filings. The Company shall and shall cause the Subsidiaries to, reasonably cooperate with Buyer (a) in connection with the preparation of the Proxy Statement and any filings required to be made by Buyer with governmental authorities, (b) in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the Transactions, and (c) in seeking any such actions, consents, approvals, or waivers or making any such filings, furnishing information required in connection therewith or with the Proxy Statement and such other filings and seeking timely to obtain any such actions, consents, approvals or waivers. 4.7. Confidentiality. The Company agrees that, unless and until the Closing has been consummated, each of the Company, the Subsidiaries and their officers, directors, agents and representatives will hold in strict confidence, and will not use, any confidential or proprietary data or information of, or relating to, Buyer with respect to its business or financial condition except for the purpose of evaluating, negotiating and completing the Transactions. Notwithstanding the foregoing, the obligations specified above will not apply to any confidential or proprietary information that: (a) is or becomes publicly available without breach of this Agreement; (b) is rightfully received from a third party without, to the knowledge of the Company, a similar restriction on the third party's 31 rights; (c) is required to be disclosed in response to a valid judicial or governmental order or otherwise required by law; or (d) is disclosed with the prior consent of Buyer. If the Transactions are not consummated, the Company and the Subsidiaries will return to Buyer (or certify that they have destroyed) all copies of such data and information, including but not limited to financial information, customer lists, business and corporate records, worksheets, test reports, tax returns, lists, memoranda and other documents prepared by or made available to the Company or the Subsidiaries by Buyer in connection with the Transactions, provided, however, that nothing herein shall require the Company or any Subsidiary to return (or certify that they have destroyed) any data or information that the Company or any Subsidiary is required to retain under applicable law. 4.8. Maintenance of Listing. The Company shall use all commercially reasonable efforts to maintain the listing of the Common Stock on the Nasdaq Small Cap Market, including, but not limited to, the authorization and consummation of a reverse stock split of the Common Stock. Section 5 COVENANTS OF BUYER. - ------------------------------------ 5.1. Maintenance of Fiber Ring Assets and Assumed Liabilities. Between the date of this Agreement and the Closing Date, Buyer will: (a) maintain the Fiber Ring Assets in good repair and working order; (b) refrain from (i) making any sale, disposition, lease or sublease of any the Fiber Ring Assets other than in the ordinary and usual course of business; and (ii) from mortgaging, pledging, subjecting to a lien or otherwise encumbering any of the Fiber Ring Assets other than in the ordinary and usual course of business; (c) diligently operate the Fiber Ring Assets in the ordinary and usual course, in compliance with the terms and conditions of the Fiber Ring Contracts and in material compliance with all laws applicable to the operation of the Fiber Ring Assets the failure of which would result in a Buyer Material Adverse Effect or constitute a breach of default under the Fiber Ring Contracts; and (d) refrain from taking any action or incurring any obligation that would result in a Buyer Material Adverse Effect. 5.2. Satisfaction of Conditions; Receipt of Necessary Approvals. (a) Subject to the terms and conditions herein provided, Buyer shall use commercially reasonable efforts to (i) promptly effect all necessary registrations, submissions and filings required or requested by governmental authorities, in connection with the consummation of the Transactions, (ii) defend any lawsuit or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Transactions, including, without limitation, seeking to have any stay or temporary restraining order entered by any court or other governmental entity vacated or reversed, (iii) use all reasonable efforts to take all other action and to do all other things 32 necessary to consummate and make effective as promptly as practicable the Transactions, and to fully carry out the purposes of, this Agreement and (iv) use all reasonable efforts to obtain all other necessary waivers, consents and approvals (including but not limited to, in connection with the Fiber Ring Assets and Assumed Liabilities and such filings, consents, approvals, orders, registrations and declarations as may be required under the laws of any foreign country in which Buyer conducts any business or owns any assets) and to lift any injunction or other legal bar to the Transactions (and, in such case, to proceed with the Transactions as expeditiously as possible). 5.3. Notice of Default; Update. (a) Promptly upon the occurrence of, or promptly upon Buyer becoming aware of the impending or threatened occurrence of, any event which would cause or constitute a breach or default, or would have caused or constituted a breach or default had such event occurred or been known to Buyer prior to the date hereof, of any of the representations, warranties or covenants Buyer contained in or referred to in this Agreement or in any Schedule or Exhibit referred to in this Agreement, Buyer shall give detailed written notice thereof to the Company and Buyer shall use its best efforts to prevent or promptly remedy the same. (b) Promptly upon the occurrence of, or promptly upon Buyer becoming aware of the impending or threatened occurrence of, any event with respect to Buyer which if such event had occurred prior to the execution of this Agreement would have been required to be disclosed by Buyer on a Schedule to this Agreement, Buyer shall promptly inform the Company. 5.4. Cooperation of Buyer. Buyer shall cooperate with all reasonable requests of the Company and Company's counsel in connection with the consummation of the Transactions. 5.5. Certain Filings. Buyer shall reasonably cooperate with the Company (a) in connection with the preparation of the Proxy Statement and any filings required to be made by the Company with governmental authorities, (b) in determining whether any action by or in respect of, or filing with, any governmental body, agency or official, or authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the Transactions, and (c) in seeking any such actions, consents, approvals, or waivers or making any such filings, furnishing information required in connection therewith or with the Proxy Statement and such other filings and seeking timely to obtain any such actions, consents, approvals or waivers. 5.6. Confidentiality. Buyer agrees that, unless and until the Closing has been consummated, Buyer and its officers, directors, agents and representatives will hold in strict confidence, and will not use, any confidential or proprietary data or information of, or relating to, the Company or it Subsidiaries with respect to their business or financial condition except for the purpose of evaluating, negotiating and completing the Transactions. Notwithstanding the foregoing, the obligations specified above will not 33 apply to any confidential or proprietary information that: (a) is or becomes publicly available without breach of this Agreement; (b) is rightfully received from a third party without, to the knowledge of Buyer, a similar restriction on the third party's rights; (c) is required to be disclosed in response to a valid judicial or governmental order or otherwise required by law; or (d) is disclosed with the prior consent of the Company or its Subsidiary, as the case may be. If the Transactions are not consummated, Buyer will return to the Company and its Subsidiaries (or certify that it has destroyed) all copies of such data and information, including but not limited to financial information, customer lists, business and corporate records, worksheets, test reports, tax returns, lists, memoranda, and other documents prepared by or made available to Buyer by the Company and its Subsidiaries in connection with the Transactions. 5.7. Transferred Employees. From and after the time that a current employee of Buyer is determined (upon agreement of Buyer and the Company) to be a Transferred Employees, Buyer shall not alter the terms or conditions of employment or change the compensation of or benefits available to or grant or declare any bonus payable to any such employee. Nothing in this Agreement shall be deemed to create a contract of employment or to limit the ability of Buyer to terminate the employment of any Transferred Employee. Section 6 MUTUAL COVENANTS OF THE PARTIES. - ------------------------------------------------- 6.1. Cooperative Efforts. To the extent that an approval or consent necessary to transfer all or any portion of the Fiber Ring Assets to the Company is not obtained, or any person shall commence litigation or other proceedings seeking to restrict, or obtain an order of a court or other governmental authority restricting, such transfer, then (i) the Company and Buyer shall use all commercially reasonable efforts to obtain such consent or have such litigation or other proceeding dismissed or such order withdrawn, and (ii) if they are unsuccessful in such efforts, the affected Fiber Ring Assets shall not be required to be transferred at the Closing, and the Company and Buyer shall in good faith seek to transfer to the Company the economic benefit and cost of the ownership of the affected Fiber Ring Assets and shall close the remainder of the Transactions notwithstanding such event. In the event that the Company and Buyer proceed under clause (ii) of the immediately preceding sentence, then, unless otherwise agreed to by the Company and Buyer, following the Closing, they shall continue to use commercially reasonably efforts to transfer the affected Fiber Ring Assets to the Company. 6.2. Employees; Continuation of Benefits. (a) Prior to the Closing, Buyer and the Company shall mutually agree on those current employees of Buyer who shall become employees of the Company as of the Closing (the "Transferred Employees"). From and after the Closing Date, the Company shall provide or cause to be provided to the Transferred Employees compensation opportunities (consisting of base pay, commissions, equity compensation and bonus opportunities) and employee benefits that are comparable, in the aggregate, to the compensation and the benefits (exclusive of any such compensation and benefits consisting of or based on any equity securities) provided to similarly situated employees of 34 the Company and the Subsidiaries (after consideration of qualifications and job performance) immediately prior to the Closing. (b) Subject to clause (c) below, each Transferred Employee shall be given full credit for all service with Buyer under any plans or arrangements providing vacation, sick pay, severance, retirement, pension or retiree welfare benefits maintained by the Company or for all purposes (other than for benefit accrual purposes under any defined benefit pension plan). (c) The Company agrees to employ all Transferred Employees on substantially the same terms and conditions as provided in such employee's written employment agreement with the Buyer (true and complete copies of which have been delivered to the Company), provided, however, that the Company shall not be required to create any new or alter any of its existing benefit plans or policies. Section 7 CONDITIONS. - ---------------------------- 7.1. Conditions to the Obligations of Each Party. The respective obligations of each party to effect the Transactions are subject to the satisfaction at or prior to the Closing of the following conditions precedent: (a) This Agreement and the issuance of the Shares hereunder shall have been duly approved by the stockholders of the Company entitled to vote with respect thereto in accordance with applicable law and the Certificate of Incorporation and By-laws of the Company; (b) Subject to the terms and provisions of Section 6.1 hereof, there shall not be in effect any statute, rule, regulation, executive order, decree, ruling or injunction or other order of a court or governmental or regulatory agency of competent jurisdiction directing that the Transactions not be consummated, or making such consummation unlawful; provided, however, that, subject to the terms and provisions herein provided, prior to invoking this condition each party shall use its reasonable efforts to have any such decree, ruling, injunction or order vacated; (c) Subject to the terms and provisions herein provided, all third party and governmental consents, orders and approvals legally required for the consummation of the Transactions shall have been obtained and be in effect at the Closing, including, without limitation, any consent necessary to provide that the Transactions will not result in the acceleration or vesting of any rights of any third party in agreements with the Company or any Subsidiary or otherwise, as a result of the Transactions (provided that only those third party consents necessary to vest in the Company title to the Fiber Ring Assets or those consents, orders or approvals, the failure of which to obtain would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on the Company or which would prohibit or materially limit or restrict the consummation of the Transactions, shall serve as conditions precedent to the obligations of either party); and 35 (d) The Company and Buyer (or one or more affiliates of Buyer) shall have entered into a mutually acceptable maintenance and transition services agreement related to the Fiber Ring Assets (the "Maintenance Agreement"), containing terms as set forth in Exhibit C hereto. 7.2. Conditions to the Obligations of Buyer. In addition to the conditions set forth in Section 7.1, the obligation of Buyer to consummate this Agreement and the Transactions are subject to the fulfillment, at or prior to the Closing, of the following additional conditions precedent: (a) Each of the representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms as to materiality, which representations and warranties as so qualified shall be true and correct in all respects) as of the date of this Agreement and as of the Closing as though made on and as of the Closing; and the Company shall, on or before the Closing, have performed all of its obligations hereunder which by the terms hereof are to be performed on or before the Closing. (b) There shall have been no event or series of events that has had or could reasonably be expected to have a Material Adverse Effect since the date hereof. (c) The Company shall have delivered to Buyer a certificate of the Company's President and Chief Financial Officer dated as of the Closing (i) to the effect that the statements set forth in paragraphs (a) and (b) above and paragraphs (k), (l), (n) and (o) below in this Section 7.2 are true and correct, and (ii) certifying as to the number of shares of Common Stock outstanding on a fully diluted basis (after giving effect to the issuance of Common Stock upon the exercise or conversion of all outstanding Rights and other securities, other than any such Rights or other securities having an exercise or strike price that equates to more than $1.00 per share). (d) The Company shall have executed and delivered to Buyer the agreement (the "Registration Rights Agreement"), substantially in the form set forth in Exhibit D hereto, relating to the registration of the Shares under applicable federal and state securities laws. (e) Buyer shall have received the agreement (the "Stockholders' Agreement"), substantially in the form set forth in Exhibit E hereto, of certain stockholders of the Company, including but not limited to ICG Holdings, Inc., Communication Ventures III, L.P., Communication Ventures III CEO & Entrepreneurs' Fund, L.P., ComVen III, L.L.C., Robert Pommer and Patrick Shutt, not to transfer or in any way dispose of any shares of Common Stock owned by each such stockholder for a term not less than twelve months, tovote for Buyer's designees for a majority of the members of the Board of Directors of the COMPANY, and as to those other matters set forth therein. (f) The Board of Directors of the Company shall consist of nine members, five of whom shall be those 36 persons designated by Buyer and four shall be those persons designated by the Company. The Chairman of the Board shall be a director designated by Buyer. (g) The Company shall have issued to Buyer one or more certificates representing the Shares. (h) The Company shall have assumed the Assumed Liabilities by execution and delivery of an instrument reasonably satisfactory to Buyer and its counsel (including the agreement to require that all subsequent transferees of any of the Fiber Ring Assets agree to be bound by, comply with and perform all of Buyer's (and its affiliates') obligations (i) to municipalities and other governmental authorities under city rights grants and agreements and (ii) under customer and other agreements, in each case related to such transferred assets) and Buyer shall have been released or otherwise indemnified to its reasonable satisfaction from all obligations related thereto. (i) The Company and Buyer shall have mutually agreed upon the identity of the Transferred Employees and the compensation and benefits to be made available to each of such individuals. (j) The Company shall have consolidated its obligation to satisfy the minimum revenue commitments that apply regardless of its use or purchase of products or services pursuant to the following agreements: (i) GTE Telecom Incorporated Capacity Agreement (CA No. Universal-99001) with Level 3 Communications, LLC (pursuant to an assignment from Genuity Telecom Inc.) dated August 20, 1999, as amended and (ii) Terms and Conditions for Delivery of Service with Level 3 Communications, LLC executed by Universal Access, Inc. on November 15, 1999, as amended or supplemented, into one minimum revenue commitment totaling no more than $175,000 per month. The aggregate cash payments (other than cash payments for actual services utilized and billed at then fair market value) paid by the Company and the Subsidiaries for the consolidation of such minimum revenue commitments shall not exceed $1,400,000. (k) The Company shall have been dismissed from the litigation between the Company and Qwest described in the Company SEC Reports pursuant to that Settlement Agreement by and between the Company and Qwest dated March 24, 2003 and such Settlement Agreement shall be in full force and effect and shall not have been modified, amended or supplemented in any manner adverse to the Company. (l) The Company shall have completed its financial statements for the fiscal year ending December 31, 2002 and received an unqualified audit opinion of PriceWaterhouseCoopers which does not contain any exceptions relating to the scope of the audit or the ability of the Company to continue as a "going concern." (m) As of the Closing, the Company and the Subsidiaries shall have cash and cash equivalents (including restricted and unrestricted cash and cash equivalents on a consolidated basis) of not less than: (i) $5,000,000 if the Closing occurs prior to June 1, 2003; 37 (ii) $4,000,000 if the Closing occurs on or after June 1, 2003 but prior to July 1, 2003; or (iii) $2,000,000 if the Closing occurs on or after July 1, 2003. (n) As of the Closing, the Company and the Subsidiaries shall have net working capital (consisting of cash, cash equivalents and accounts receivable (net of reserves), less current liabilities, in each case, calculated in accordance with GAAP and consistent with past practice and the Company's audited financial statements included in the Company SEC Reports and Draft Form 10-K), on a consolidated basis, of not less than: (i) $(22,000,000) if the Closing occurs prior to June 1, 2003; (ii) $(23,000,000) if the Closing occurs on or after June 1, 2003 but prior to July 1, 2003; or (iii) $(25,000,000) if the Closing occurs on or after July 1, 2003. (o) All actions, proceedings, instruments and documents required to carry out this Agreement and the Transactions and all related legal matters contemplated by this Agreement shall have been approved by McDermott, Will & Emery, as counsel for Buyer, and such counsel shall have received on behalf of Buyer such other certificates, opinions, and documents in form satisfactory to such counsel, as Buyer may reasonably require from the Company to evidence compliance with the terms and conditions hereof as of the Closing and the correctness as of the Closing of the Company's representations and warranties and the fulfillment of the covenants by the Company. (p) Buyer shall have received from Shefsky & Froelich Ltd., counsel for the Company, an opinion as of said date, in form set forth in Exhibit F hereto. (q) On the Closing Date, the Buyer shall have received written evidence satisfactory to it evidencing (i) the Company's assumption of Two Million Dollars in principal amount of that Promissory Note executed by Buyer and made to Electro Banque dated December 30, 2002 (the "Note") on the same terms and conditions (including, without limitation, interest rate and maturity) set forth in the Note as in effect on the date hereof, (ii) the release of Buyer from its obligations on account of the portion of the Note so assumed and (iii) the release of any assets to be retained by Buyer after the Closing Date as collateral security for the portion of the Note so assumed. It is understood and agreed that the Company shall have no obligation on account of the portion of the Note not so assumed by it and that no assets of the Company (after giving effect to the Transaction) shall secure the portion of the Note that is not so assumed by it. 7.3. Conditions to Obligations of the Company. In addition to the conditions set forth in Section 7.1, the obligation of the Company to consummate this 38 Agreement and the Transactions are subject to the fulfillment, at or prior to the Closing, of the following additional conditions precedent: (a) Each of the representations and warranties of Buyer contained in Section 3 shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms as to materiality, which representations and warranties as so qualified shall be true and correct in all respects) as of the date of this Agreement and as of the closing as though made on and as of the Closing; Buyer shall, on or before the Closing, have performed all of its obligations hereunder which by the terms hereof are to be performed on or before the Closing. (b) There shall have been no event or series of events that has had or would reasonably be expected to have a Buyer Material Adverse Effect. (c) All actions, proceedings, instruments and documents required to carry out this Agreement and the transactions contemplated hereby and all related legal matters contemplated by this Agreement shall have been approved by Shefsky & Froelich Ltd., as counsel for the Company, and such counsel shall have received on behalf of the Company such other certificates, opinions and documents in form satisfactory to such counsel as the Company may reasonably require from Buyer to evidence compliance with the terms and conditions hereof as of the Closing and the correctness as of the Closing of the representations and warranties of Buyer and the fulfillment of its covenants. (d) On the Closing Date, the Company shall have received from Buyer a bill of sale, in form and substance reasonably satisfactory to the Company and its counsel, transferring all of Buyer's right, title and interest in and to the Fiber Ring Assets to the Company. (e) On the Closing Date, the Company shall have received from McDermott, Will & Emery, counsel for Buyer, an opinion as of said date, in form set forth in Exhibit G hereto. Section 8 TERMINATION OF AGREEMENT. - ------------------------------------------ 8.1. Termination. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Closing, whether before or after stockholder approval thereof: (a) by the mutual consent of Buyer and the Company. (b) by either the Company or Buyer: (i) if the Closing shall not have occurred on or prior to August 31, 2003; provided, however, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or prior to such date; or 39 (ii) if any governmental entity of competent jurisdiction in the United States shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their respective reasonable efforts to lift), in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable. (c) by the Board of Directors of the Company, if, prior to the Closing, (i) the Board of Directors of the Company shall have entered into or shall have publicly announced its intention to enter into an agreement or an agreement in principle with respect to any Acquisition Proposal that the Board of Directors determines, in good faith after consultation with its financial advisors, is a Superior Proposal; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(c) shall not be available (A) if the Company has breached its obligations under Section 4.5, (B) if, prior to, concurrently with or immediately after any purported termination pursuant to this Section 8.1(c), the Company shall not have paid any fee that may have been required to be paid pursuant to Section 8.2, or (C) if the Company has not provided Buyer with three (3) business days prior written notice of its intention to so terminate this Agreement; (ii) any representation or warranty made by Buyer in this Agreement shall not have been true and correct in all material respects when made, or Buyer shall have failed to observe or perform in any material respect any of its material obligations under this Agreement, provided, that prior to exercising such right of termination, the Company shall give prompt written notice to Buyer of such misrepresentation or breach of warranty or failure to observe or perform; provided, further, that the Company shall not have such right of termination if the condition resulting in such misrepresentation or breach of warranty or failure to observe or perform is cured not later than ten (10) business days following delivery of such notice; or (iii) Buyer shall have made any amendments to the Schedules delivered pursuant to Section 3 of this Agreement other than amendments that are, in the reasonable judgment of the Company, positive or in the aggregate, immaterial; (d) by Buyer, if, prior to the Closing, (i) the Board of Directors of the Company (A) shall have withdrawn, or modified or changed in a manner adverse to Buyer its approval or recommendation of the Transactions or (B) shall have recommended an Acquisition Proposal or shall have executed, or shall have announced its intention to enter into, an agreement in principle or definitive agreement relating to an Acquisition Proposal with a person or entity other than Buyer or its affiliates (or the Board of Directors of the Company resolves to do any of the foregoing); (ii) any person or group (as defined in Section 13(d)(3) of the Exchange Act) (other than Buyer or any of its affiliates) shall have become, after the date of this Agreement, the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the outstanding shares of Common Stock; (iii) the Company shall have made any amendments to the Schedules delivered pursuant to Section 2 of this Agreement other than amendments that are, in the reasonable judgement of Buyer, positive or in the aggregate, immaterial, or (iv) any representation or warranty made by the Company in this Agreement shall not have been true and correct in all material respects when made and shall have resulted in, or is reasonably likely to result in, a Material Adverse Effect, or the Company shall have failed 40 to observe or perform in any material respect any of its material obligations under this Agreement; provided, that prior to exercising such right of termination, Buyer shall give prompt written notice to the Company of such misrepresentation or breach of warranty or failure to observe or perform; provided, further, that Buyer shall not have such right of termination if the condition resulting in such misrepresentation or breach of warranty or failure to observe or perform is cured not later than ten (10) business days following delivery of such notice. 8.2. Effect of Termination. In the event of the termination of this Agreement as provided in Section 8.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith terminate, and there shall be no further liability or obligations on the part of Buyer or the Company or their respective directors, officers, employees, representatives, agents, advisors or stockholders, except that the agreements contained in Sections 4.7, 5.6 and Section 11 shall survive the termination hereof; provided, however, that if this Agreement is terminated (a) pursuant to Section 8.1(c)(i) or 8.1(d), immediately following such termination, the Company shall pay to Buyer a termination fee of $750,000, and (b) pursuant to Section 8.1(b)(i), 8.1 (c)(i) or 8.1(d) and if at any time within the twelve-month period following such termination, the Board of Directors of the Company accepts an Acquisition Proposal or the Company otherwise enters into a transaction contemplated by the definition of the term "Acquisition Proposal," the Company shall, promptly upon accepting such Acquisition Proposal or entering into such transaction, pay to Buyer a termination fee (in addition to any fee payable pursuant to clause (a) of this Section 8.2) of $2,250,000. Nothing contained in this Section 8.2 shall relieve any party from liability for fraud or for willful breach of this Agreement. Section 9 SURVIVAL. - -------------------------- 9.1. Survival of Representations, Warranties Etc. Each of the representations, warranties, agreements, covenants and obligations herein or in any Schedule, Exhibit, certificate or financial statement delivered by any party to the other party incident to the transactions contemplated hereby are material, shall be deemed to have been relied upon by the other party and shall survive the Closing regardless of any investigation and shall not merge in the performance of any obligation by either party hereto; provided, however, that such representations and warranties, shall expire on the same dates as and to the extent that the rights to indemnification with respect thereto under Section 10 shall expire. Section 10 INDEMNIFICATION. - --------------------------- 10.1. Indemnification by the Company. (a) The Company agrees subsequent to the Closing to indemnify and hold the Buyer and its subsidiaries and affiliates and persons serving as officers, directors, partners or employees thereof (individually a "Buyer Indemnified Party" and collectively the "Buyer Indemnified Parties") harmless from and against any damages, liabilities, losses, taxes, fines, penalties, costs, and expenses (including, without limitation, 41 reasonable fees of counsel) of any kind or nature whatsoever (whether or not arising out of third-party claims and including all amounts paid in investigation, defense or settlement of the foregoing) which may be sustained or suffered by any of them arising out of or based upon (i) any breach of any representation, warranty or covenant of the Company under this Agreement or in any certificate, Schedule or Exhibit delivered pursuant hereto, or by reason of any claim, action or proceeding asserted or instituted growing out of any matter or thing constituting a breach of such representations, warranties or covenants, (ii) the Assumed Liabilities, (iii) the operation of the Fiber Ring Assets following the Closing (if not caused solely by the action or inaction of Buyer or its affiliates (other than the Company)), (iv) any untrue or alleged untrue statement of a material fact contained in the Proxy Statement or any other report filed by the Company with the SEC in connection with consummating the Transactions or any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission of 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 that such untrue or alleged untrue statement or omission or alleged omission was made in reliance on, and in conformity with, the Buyer Filing Information, or (v) any transfer taxes related to the sale and issuance of the Shares to Buyer or the sale and transfer of the Fiber Ring Assets to the Company. (b) Buyer hereby acknowledges and agrees that (except in the case of fraud or willful breach of covenant, in which case Buyer reserves any and all rights and remedies available to it) its sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement and the Transactions shall be pursuant to the indemnification provisions set forth in this Section 10 and specific performance as contemplated by Section 11.13. 10.2. Limitations on Indemnification by the Company. Notwithstanding the foregoing, the right of Buyer Indemnified Parties to indemnification under Section 10.1 shall be subject to the following provisions: (a) No indemnification shall be payable pursuant to Section 10.1 above to any Buyer Indemnified Party, unless the total of all claims for indemnification pursuant to Section 10.1 shall exceed $150,000 in the aggregate, whereupon the full amount of such claims shall be recoverable in accordance with the terms hereof, provided, however that in no event shall the Company's liability under Section 10.1 exceed $16,000,000; and (b) No indemnification shall be payable to a Buyer Indemnified Party with respect to claims asserted pursuant to Section 10.1 after the first anniversary of the Closing Date (the "Indemnification Cut-Off Date"), other than claims asserted (i) pursuant to Sections 10.1(a)(ii), (a)(iii), (a)(iv) and (a)(v) which may be asserted at any time prior to the expiration of the statute of limitations, (ii) pursuant to Sections 2.5, 2.8, 2.19, 2.20, 2.21 and 2.24, which may be asserted at any time prior to six months after the expiration of the applicable statute of limitations, and (iii) with regard to the Assumed Liabilities or pursuant to Sections 2.2, 2.4(b), 2.4(c) and 2.4(d), which may be asserted at any time. 42 10.3. Indemnification by Buyer. (a) Buyer agrees subsequent to the Closing to indemnify and hold the Company and its Subsidiaries and affiliates and persons serving as officers, directors, partners or employees thereof (individually, a "Company Indemnified Party" and collectively, the "Company Indemnified Parties") harmless from and against any damages, liabilities, losses, taxes, fines, penalties, costs and expenses (including, without limitation, reasonable fees of counsel) of any kind or nature whatsoever (whether or not arising out of third-party claims and including all amounts paid in investigation, defense or settlement of the foregoing) which may be sustained or suffered by any of them arising out of or based upon (i) any breach of any representation, warranty or covenant made by Buyer in this Agreement or in any certificate delivered by Buyer hereunder, or by reason of any claim, action or proceeding asserted or instituted growing out of any matter or thing constituting a breach of such representations, warranties or covenants, (ii) any claim made by or with respect to any employee of Buyer who is identified as a Transferred Employee who resigns or is or was terminated by Buyer prior to the Closing Date or is on a leave of absence from Buyer and does not return to active service, (iii) any claim made by any employee of Buyer who is identified as a Transferred Employee or any former employee of Buyer for severance pay or other post-termination benefits by reason of the transactions contemplated by this Agreement, (iv) any Excluded Liabilities, or (v) any untrue or alleged untrue statement of a material fact contained in the Proxy Statement or any other report filed by the Company with the SEC in connection with consummating the Transactions or any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission of 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 to the extent, but only to the extent that such untrue or alleged untrue statement or omission or alleged omission was made in reliance on, and in conformity with, the Buyer Filing Information. (b) The Company hereby acknowledges and agrees that (except in the case of fraud or willful breach of any covenant, in which case the Company reserves any and all rights and remedies available to it) its sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement and the Transactions shall be pursuant to the indemnification provisions set forth in this Section 10. 10.4. Limitation on Indemnification by Buyer. Notwithstanding the foregoing, the right of the Company Indemnified Parties to indemnification under Section 10.3 shall be subject to the following provisions: (a) No indemnification pursuant to Section 10.3(a)(i) shall be payable to any Company Indemnified Parties, unless the total of all claims for indemnification pursuant to Section 10.3(a)(i) shall exceed $150,000 in the aggregate, whereupon the full amount of such claims shall be recoverable in accordance with the terms hereof, provided, however that in no event shall Buyer's liability under Section 10.3 exceed $4,000,000; and 43 (b) No indemnification shall be payable to the Company Indemnified Party with respect to claims asserted pursuant to Section 10.3 above after the Indemnification Cut-Off Date other than claims described in Section 10.3(a)(ii), (a)(iii) and (a)(v) which may be asserted at any time prior to the expiration of the statute of limitations, and other than claims pursuant to Section 3.4 and claims asserted regarding the Excluded Liabilities which may be asserted at any time. 10.5. Notice; Defense of Claims. An indemnified party may make claims for indemnification hereunder by giving written notice thereof to the indemnifying party within the period in which indemnification claims can be made hereunder. If indemnification is sought for a claim or liability asserted by a third party, the indemnified party shall also give written notice thereof to the indemnifying party promptly after it receives notice of the claim or liability being asserted, but the failure to do so shall not relieve the indemnifying party from any liability except to the extent that it is prejudiced by the failure or delay in giving such notice. Such notice shall summarize the bases for the claim for indemnification and any claim or liability being asserted by a third party. Within 20 days after receiving such notice the indemnifying party shall give written notice to the indemnified party stating whether it disputes the claim for indemnification and whether it will defend against any third party claim or liability at its own cost and expense. If the indemnifying party fails to give notice that it disputes an indemnification claim within 20 days after receipt of notice thereof, it shall be deemed to have accepted and agreed to the claim, which shall become immediately due and payable. The indemnifying party shall be entitled to direct the defense against a third party claim or liability with counsel selected by it (subject to the consent of the indemnified party, which consent shall not be unreasonably withheld) as long as the indemnifying party is conducting a good faith and diligent defense. The indemnified party shall at all times have the right to fully participate in the defense of a third party claim or liability at its own expense directly or through counsel; provided, however, that if the named parties to the action or proceeding include both the indemnifying party and the indemnified party and the indemnified party is advised that representation of both parties by the same counsel would be inappropriate under applicable standards of professional conduct, the indemnified party may engage separate counsel at the expense of the indemnifying party. If no such notice of intent to dispute and defend a third party claim or liability is given by the indemnifying party, or if such good faith and diligent defense is not being or ceases to be conducted by the indemnifying party, the indemnified party shall have the right, at the expense of the indemnifying party, to undertake the defense of such claim or liability (with counsel selected by the indemnified party), and to compromise or settle it, exercising reasonable business judgment. If the third party claim or liability is one that by its nature cannot be defended solely by the indemnifying party, then the indemnified party shall make available such information and assistance as the indemnifying party may reasonably request and shall cooperate with the indemnifying party in such defense, at the expense of the indemnifying party. 44 Section 11 MISCELLANEOUS. - ------------------------- 11.1. Knowledge. As used in this Agreement, the term "KNOWLEDGE OF THE COMPANY" mean the actual or constructive knowledge or awareness of any executive officer of the Company. 11.2. Fees and Expenses. Except as set forth in Section 8.2, each of the parties will bear its own expenses in connection with the negotiation of this Agreement, the Transaction Documents and the consummation of the transactions contemplated hereunder and thereunder. 11.3. Governing Law. This Agreement shall be construed under and governed by the internal laws of the state of Delaware without regard to its conflict of laws provisions. 11.4. Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered or sent by facsimile transmission, upon receipt, if by hand delivery, upon receipt, if sent by nationally recognized overnight courier service, one day after deposit with such, or if sent by registered or certified mail, upon the sooner of the date on which receipt is acknowledged or the expiration of three days after deposit in United States post office facilities properly addressed with postage prepaid. All notices to a party will be sent to the addresses set forth below or to such other address or person as such party may designate by notice to each other party hereunder: TO BUYER: CityNet Telecommunications, Inc. 8405 Colesville Road 6th Floor Silver Spring, Maryland 20910 Attention: General Counsel Facsimile: 301-608-8121 With a copy to: McDermott, Will & Emery 50 Rockefeller Plaza New York, NY 10020 Attention: Mark Selinger Facsimile: 212-547-5444 TO COMPANY: Universal Access Global Holdings Inc. 233 S. Wacker Drive, Suite 600 Chicago, IL 60606 Attention: Scott Fehlan Facsimile: 312-660-1290 With a copy to: Shefsky & Froelich Ltd. 444 N. Michigan Avenue, Suite 2500 45 Chicago, IL 60611 Attention: Michael J. Choate Facsimile: 312-527-5921 Any notice given hereunder may be given on behalf of any party by his counsel or other authorized representatives. 11.5. Further Assurances. The parties hereto from time to time after the Closing at the request of another party and without further consideration shall execute and deliver further instruments of transfer and assignment and take such other action as the requesting party may reasonably require to more effectively transfer and assign to, and vest in, Buyer the Shares and all rights thereto, and to fully implement the provisions of this Agreement and to consummate the Transactions. 11.6. Entire Agreement. This Agreement, including the Schedules and Exhibits referred to herein and the other writings specifically identified herein or contemplated hereby including, without limitation, the Company SEC Reports and Draft Form 10-K, is complete, reflects the entire agreement of the parties with respect to its subject matter, and supersedes all previous written or oral negotiations, commitments and writings. No promises, representations, understandings, warranties and agreements have been made by any of the parties hereto except as referred to herein or in such Schedules and Exhibits or in such other writings; and all inducements to the making of this Agreement relied upon by either party hereto have been expressed herein or in such Schedules or Exhibits or in such other writings. 11.7. Assignability, Binding Effect. This Agreement shall only be assignable by Buyer to a corporation or partnership controlling, controlled by or under common control with Buyer upon written notice to the Company. This Agreement may not be assigned by the Company without the prior written consent of Buyer. This Agreement shall be binding upon and enforceable by, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns. 11.8. Captions and Gender. The captions in this Agreement are for convenience only and shall not affect the construction or interpretation of any term or provision hereof. The use in this Agreement of the masculine pronoun in reference to a party hereto shall be deemed to include the feminine or neuter, as the context may require. 11.9. Execution in Counterparts. For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document. 11.10. Amendments. This Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by each party hereto, or in the case of a waiver, the party waiving compliance. 46 11.11. Publicity and Disclosures. No press releases or public disclosure, either written or oral, of the Transactions, shall be made by a party to this Agreement without the prior knowledge and written consent of Buyer and the Company. Buyer and the Company agree to jointly prepare a press release related to the Transactions, to be issued by both of them upon execution of this Agreement. 11.12. Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties hereby agrees that any dispute among them or any claim, suit or proceeding arising under this Agreement shall be brought before the federal or state courts sitting in Delaware, and hereby consents to personal jurisdiction, service of process and venue in the federal or state courts of Delaware for such claim, suit or proceeding, or in the case of a third party claim subject to indemnification hereunder, in the court where such claim is brought. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH OF BUYER AND THE COMPANY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT. 11.13. Specific Performance. The parties agree that it would be difficult to measure damages which might result from a breach of this Agreement by the Company and that money damages would be an inadequate remedy for such a breach. Accordingly, if there is a breach or proposed breach of any provision of this Agreement by the Company, and Buyer does not elect to terminate under Section 8, Buyer shall be entitled, in addition to any other remedies which it may have, to an injunction or other appropriate equitable relief to restrain such breach without having to show or prove actual damage to Buyer. 47 IN WITNESS WHEREOF the parties hereto have caused this Stock Purchase Agreement to be executed as of the date set forth above by their duly authorized representatives. CITYNET TELECOMMUNICATIONS, INC. By: _______________________________ Name: Title: UNIVERSAL ACCESS GLOBAL HOLDINGS INC. By: _______________________________ Name: Title: EX-3 5 c66602_va.txt VOTING AGREEMENT VOTING AGREEMENT AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, the "Agreement"), dated as of April 7, 2003 by and among CityNet Telecommunications Inc., a Delaware corporation ("CityNet"), and those holders of Common Stock of Universal Access Global Holdings Inc., a Delaware corporation (the "Company"), set forth on the signature pages hereto (each a "Stockholder" and collectively, the "Stockholders"). WITNESSETH ---------- WHEREAS, CityNet and the Company are entering into a Stock Purchase Agreement (the "Purchase Agreement"), of even date herewith, pursuant to which CityNet will pay $16 million and transfer the Fiber Ring Assets to the Company in exchange for the Shares and the Company's assumption of the Assumed Liabilities. All terms not otherwise defined herein shall have the meanings given to them in the Purchase Agreement. WHEREAS, each Stockholder holds that number of shares of Common Stock set forth opposite such Stockholder's name on the signature pages hereto (the "Stockholder Shares"). WHEREAS, as a condition to the willingness of CityNet to enter into the Purchase Agreement, CityNet has required each of the Stockholders to, and in order to induce CityNet to enter into the Purchase Agreement, each Stockholder has agreed to, enter into this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: Section 1 VOTE BY STOCKHOLDERS. - -------------------------------------- 1.1. Agreement to Vote Subject Shares. (a) At every meeting of the stockholders of the Company called with respect to any of the following matters, and at every adjournment thereof, and on every action or approval by written consent of the stockholders of the Company or other action taken by stockholders of the Company with respect to any of the following matters, each Stockholder shall vote or cause to be voted the Stockholder Shares held (beneficially or of record) or controlled by such Stockholder: (i) in favor of approval of the Purchase Agreement and the Transactions; (ii) in favor of CityNet's designees for the Board of Directors of the Company to the extent CityNet has such rights pursuant to the Transaction Documents, and (iii) in favor of any other matter that could reasonably be expected to facilitate the Transactions. Each Stockholder agrees not to take any actions contrary to such Stockholder's obligations pursuant to this Agreement. (b) In furtherance of the foregoing, by execution hereof, each Stockholder does hereby constitute and appoint CityNet as such Stockholder's proxy with respect to the Stockholder Shares held by such Stockholder, to attend meetings of the stockholders of the Company to be held at any time, or any continuation or adjournment thereof, with full power to vote and act for such Stockholder and in such Stockholder's name, place and stead, in the same manner, to the same extent, and with the same effect that such Stockholder might were such Stockholder personally present thereat (or by written consent in lieu thereof), giving to CityNet full power of substitution and revocation, in each case with respect to the matters set forth in clauses (i) through (iv) of subsection (a) above. Each Stockholder hereby acknowledges and agrees that the foregoing grant by such Stockholder to CityNet is in connection with this Agreement and the Purchase Agreement, is coupled with an interest, is irrevocable, shall survive such Stockholder's liquidation or termination, and shall remain in place in accordance with Section 3.2 hereof. (c) Any proxy or proxies heretofore given by any Stockholder to any person or persons with respect to any of the Stockholder Shares held by such Stockholder are hereby revoked. 1.2. Adjustments Upon Changes in Capitalization or Ownership. In the event of: (i) any change in the number of issued and outstanding shares of Common Stock by reason of any stock dividend, subdivision, merger, recapitalization, combination, conversion or exchange of shares, or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of an extraordinary dividend of cash or securities); or (ii) the acquisition, by exercise of convertible securities or otherwise, of additional shares of Common Stock by any of the Shareholders, the term "Stockholder Shares" shall be deemed to refer to and include the Stockholder Shares as well as all such stock dividends and distributions, all such acquired shares of Common Stock and any shares into which or for which any or all of the Stockholder Shares may be changed or exchanged. 1.3. Regulatory Compliance. No provision in this Agreement shall require any Stockholder to take any action that would result in the Company's Board of Directors or any committee of the Board of Directors to cease to be in compliance with any requirement of federal securities laws or regulations or interpretations by the Securities and Exchange Commission thereunder, or any rules or regulations of Nasdaq or any other exchange or trading system through which shares of the Company's common stock are quoted or traded. Section 2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE STOCKHOLDERS. - ------------------------------------------------------------------------------- Each Stockholder severally (and not jointly) represents, warrants and covenants, as applicable, to CityNet that: 2 2.1. Ownership of Shares. Such Stockholder (i) is and will be at the time of the action of the stockholders of the Company on the Purchase Agreement and Transactions, and any matter that could reasonably be expected to facilitate the Transactions, the beneficial owner of the Stockholder Shares set forth below each Stockholder's name on the signature page hereto, free and clear of all liens, claims, options, charges or other encumbrances other than those in favor of the Company or arising under this Agreement and other than restrictions on transfer pursuant to applicable securities laws; (ii) does not own, beneficially or of record, or control any shares of capital stock of the Company other than the Stockholder Shares (excluding shares as to which such Stockholder currently disclaims beneficial ownership in accordance with applicable law); and (iii) has full power and authority to make, enter into and carry out the terms of this Agreement. 2.2. No Other Rights. There are no outstanding options, warrants or rights to purchase or acquire such Stockholder Shares of such Stockholder. 2.3. No Proxies or Solicitations. (a) Such Stockholder shall not grant any proxy or power of attorney with respect to the voting of Stockholder Shares (each a "Voting Proxy") to any person except to vote in favor of any of the Purchase Agreement, the Transactions or any matter that could reasonably be expected to facilitate the Transactions. Such Stockholder has granted no Voting Proxy which is currently (or which will hereafter become) effective with respect to the Stockholder Shares owned by such Stockholder except a Voting Proxy, if any, granted to another Stockholder, and if such Stockholder has granted a Voting Proxy to any person other than a Stockholder, such Voting Proxy is hereby revoked. No Voting Proxy shall be given or written consent executed by such Stockholder after the date hereof with respect to such Stockholder's Stockholder Shares (and if given or executed, shall not be effective) so long as this Agreement remains in effect. (b) Such Stockholder shall not, and shall not permit any entity under such Stockholder's control to: (i) solicit proxies or become a "participant" in a "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act) with respect to an Acquisition Proposal or otherwise encourage or assist any party in taking or planning any action that would compete with, restrain or otherwise serve to interfere with or inhibit the timely consummation of the Transactions in accordance with the terms of the Purchase Agreement; (ii) initiate a stockholders' vote or action by consent of stockholders of the Company with respect to an Acquisition Proposal; or (iii) become a member of a "group" (as such term is used in Section 13(d) of the Exchange Act) with respect to any voting securities of the Company that takes any action in support of an Acquisition Proposal other than pursuant to this Agreement. 2.4. Validity. This Agreement is the legal, valid and binding agreement of such Stockholder enforceable against such Stockholder in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights generally and except that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. Simultaneously herewith, counsel to such Stockholder has delivered to CityNet an opinion that this Agreement has been duly executed and delivered and is enforceable against such Stockholder. 3 2.5. Non-Contravention. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) by such Stockholder under, or give rise to a right of termination, cancellation or acceleration of any obligation under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of such Stockholder under, any provision of (i) the charter or organizational documents, if any, of such Stockholder, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to such Stockholder or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such Stockholder or any of its or his properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, liens, security interests, charges or encumbrances that, individually or in the aggregate, would not materially impair the ability of such Stockholder to perform its or his obligations hereunder or prevent, limit or restrict the consummation of any of the transactions contemplated hereby. 2.6. Agreement to Retain Shares. Such Stockholder will not transfer (except as may be specifically required by court order), sell, exchange, pledge or otherwise dispose of or encumber any of the Stockholder Shares held by such Stockholder, or make any offer or agreement relating thereto, at any time prior to termination of this Agreement. Section 3 MISCELLANEOUS. - ------------------------------- 3.1. No Limitation on Discretion as Director. This Agreement is intended solely to apply to the exercise by a Stockholder in such Stockholder's individual capacity of rights attaching to ownership of the Stockholder Shares, and nothing herein shall be deemed to apply to, or to limit in any manner the discretion of such Stockholder with respect to any action which may be taken or omitted by such Stockholder acting in a fiduciary capacity as a director of the Company, if applicable. 3.2. Effectiveness; Termination; No Survival. This Agreement shall become effective upon the execution by CityNet and the Stockholders and upon the execution of the Purchase Agreement by CityNet and the Company. This Agreement may be terminated as to each Stockholder at any time by mutual written consent of such Stockholder and CityNet. This Agreement shall terminate, without any action by the parties hereto upon the earliest to occur of (a) in the event the Purchase Agreement is validly terminated by any party thereto, upon such termination; (b) in the event the Transactions are consummated, upon the Closing Date; and (c) October 31, 2003. The representations, warranties and covenants of the Stockholders set forth in Section 2 shall survive the termination of this Agreement pursuant to clause (b) of this Section 3.2. 3.3. Further Assurances. Subject to the terms of this Agreement, each Stockholder shall use its best efforts to take, or cause to be taken, all actions, and to do or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transaction contemplated by this Agreement. 4 3.4. Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered or sent by facsimile transmission, upon receipt, if by hand delivery, upon receipt, if sent by nationally recognized overnight courier service, one day after deposit with such, or if sent by registered or certified mail, upon the sooner of the date on which receipt is acknowledged or the expiration of three days after deposit in United States post office facilities properly addressed with postage prepaid. All notices to a party will be sent to the addresses set forth below or to such other address or person as such party may designate by notice to each other party hereunder: If to CityNet: CityNet Telecommunications, Inc. 8405 Colesville Road 6th Floor Silver Spring, Maryland 20910 Attention: General Counsel Facsimile: 301-608-8121 With a copy to: McDermott, Will & Emery 50 Rockefeller Plaza New York, NY 10020 Attention: Mark Selinger Facsimile: 212-547-5444 If to a Stockholder at the address for such Stockholder set forth on the signature page hereto. Any notice given hereunder may be given on behalf of any party by his counsel or other authorized representative. 3.5. Severability. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. 3.6. Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, devisees, legatees, legal representatives, successors and assigns. 3.7. Entire Agreement. This Agreement is complete, reflects the entire agreement of the parties with regard to its subject matter, and supersedes all previous written or oral negotiations, commitments and writings between the parties hereto with respect to the subject matter hereof. 5 3.8. Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless such amendment modification, supplement or waiver is in writing and signed by CityNet, and if such amendment adversely impacts a Stockholder, by such Stockholder. 3.9. Captions and Gender. The captions in this Agreement are for convenience only and shall not affect the construction or interpretation of any term or provision hereof. The use in this Agreement of the masculine pronoun in reference to a party hereto shall be deemed to include the feminine or neuter, as the context may require. 3.10. Execution in Counterparts. For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document. 3.11. Specific Performance. Each Stockholder acknowledges and agrees that CityNet would be irreparably damaged in the event any of the provisions of this Agreement were not performed by such Stockholder in accordance with their specific terms or were otherwise breached. It is accordingly agreed that CityNet shall be entitled to an injunction or injunctions to redress the breaches of this Agreement and to specifically enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which such party may be entitled at law or in equity. 3.12. Governing Law; Jurisdiction. (a) This Agreement shall be construed under and governed by the internal laws of the state of Delaware without regard to its conflict of laws provisions. (b) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction, of the federal and state courts sitting in the state of Delaware in any action, suit or proceeding arising in connection with this Agreement, and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein). Service of process upon any party hereto in any action, suit or proceeding arising in connection with this Agreement may be made anywhere in the world. Any such process or summons to be served upon any of the parties (at the option of the party bringing such action, proceeding or claim) may be served by transmitting a copy thereof, by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 3.4 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the party so served in any action, proceeding or claim. Nothing herein shall affect the right of any party hereto to serve process in any other manner permitted by law. 3.13. Expenses. Each of the parties shall pay its own expenses in connection with the negotiation, execution and performance of the Agreement. 3.14. Effect of Headings. The section headings herein are for convenience only and shall not affect the meaning or interpretation of this Agreement. 6 3.15 Confidentiality. Each Stockholder acknowledges that the information contained in this Voting Agreement is confidential and acknowledges that such Stockholder has a legal obligation not to purchase or sell the Company's securities on the basis of material non-public information. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 7 IN WITNESS WHEREOF, the parties have executed this Voting Agreement to take effect as of the date set forth above. CITYNET TELECOMMUNICATIONS INC. By:______________________________ Name: Title: ICG HOLDINGS, INC. By:______________________________ Name: Anthony Dolanski Title: Number of shares of Common Stock held by such Stockholder: 21,664,124 435 Devon Park Drive 600 Building Wayne, PA 19087 COMMUNICATIONS VENTURES III, L.P. By:______________________________ Name: Roland Van der Meer Title: Member Number of shares of Common Stock held by such Stockholder: 12,390,375 305 Lytton Avenue Palo Alto, California 94301 COMMUNICATIONS VENTURES III, CEO & ENTREPRENEURS' FUND, L.P. By:______________________________ Name: Roland Van der Meer Title: Member Number of shares of Common Stock held by such Stockholder: 625,221 305 Lytton Avenue Palo Alto, California 94301 ROBERT J. POMMER, JR. DECLARATION OF TRUST By:______________________________ Name: Robert J. Pommer, Jr. Title: Trustee Number of shares of Common Stock held by such Stockholder: 3,345,533* *Approximately 440,000 shares of common stock are in the process of being transferred to Patrick Shutt or his family, and the recipients will enter into voting agreements as to these 440,000 shares. [ADDRESS] [ADDRESS] POMMER FAMILY LIMITED PARTNERSHIP By:______________________________ Name: Robert J. Pommer, Jr. Title: General Partner Number of shares of Common Stock held by such Stockholder: 1,000,000 [ADDRESS] [ADDRESS] ELIZABETH M. POMMER DECLARATION OF TRUST By:______________________________ Name: Elizabeth M. Pommer Title: Trustee Number of shares of Common Stock held by such Stockholder: 199,545 [ADDRESS] [ADDRESS] ROBERT J. POMMER, JR. By:______________________________ Name: Robert J. Pommer, Jr. Number of shares of Common Stock held by such Stockholder: 150,000 [ADDRESS] [ADDRESS] PATRICK C. SHUTT DECLARATION OF TRUST By:______________________________ Name: Patrick C. Shutt Title: Trustee Number of shares of Common Stock held by such Stockholder: 2,500,235* *879,996 shares of common stock are in the process of being transferred to the Thomas Kapsalis Declaration of Trust, which has entered into this voting agreement as to these 879,996 shares. [ADDRESS] [ADDRESS] SHUTT FAMILY LIMITED PARTNERSHIP By:______________________________ Name: Patrick C. Shutt Title: General Partner Number of shares of Common Stock held by such Stockholder: 870,000 [ADDRESS] [ADDRESS] TRANCEKA, LLC By:______________________________ Name: Joseph L. Schocken Title: Number of shares of Common Stock held by such Stockholder: 1,673,126 600 University Street Seattle, WA 98101 SAM ZARCONE DECLARATION OF TRUST By:______________________________ Name: Sam Zarcone Title: Trustee Number of shares of Common Stock held by such Stockholder: 1,600,017 [ADDRESS] [ADDRESS] ZARCONE FAMILY LIMITED PARTNERSHIP By:______________________________ Name: Sam Zarcone Title: General Partner Number of shares of Common Stock held by such Stockholder: 3,082,444 [ADDRESS] [ADDRESS] SAM ZARCONE DECLARATION OF TRUST By:______________________________ Name: Sam Zarcone Title: Trustee Number of shares of Common Stock held by such Stockholder: 1,600,017 [ADDRESS] [ADDRESS] THOMAS KAPSALIS DECLARATION OF TRUST By:______________________________ Name: Thomas Kapsalis Title: Trustee Number of shares of Common Stock held by such Stockholder: This voting agreement is limited to the 879,996 shares of common stock which are in the process of being transferred from Patrick Shutt to Thomas Kapsalis and does not cover any other shares owned by Thomas Kapsalis or his affiliates. [ADDRESS] [ADDRESS] EX-4 6 c66602_sa.txt STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this "Agreement") dated as of July 23, 2003 by and among Universal Access Global Holdings Inc., a Delaware corporation (the "Company"), CityNet Telecommunications Inc., a Delaware corporation ("CityNet"), ICG Holdings, Inc., Communication Ventures III, L.P., Communication Ventures III CEO & Entrepreneurs' Fund, L.P., ComVen III, L.L.C., Robert Pommer, Patrick Shutt and each party that executes a Joinder Agreement in the form of Exhibit A hereto (other than the Company, each, individually and together with each of their respective successors and assigns, a "Stockholder" and collectively the "Stockholders" and other than the Company and CityNet, each, individually and together with each of their respective successors and assigns, an "Other Stockholder" and collectively the "Other Stockholders"). WITNESSETH ---------- WHEREAS, CityNet and Universal Access Global Holdings Inc., a Delaware corporation ("the Company"), are entering into a Stock Purchase Agreement (the "Purchase Agreement"), of even date herewith, pursuant to which CityNet will pay $16 million and transfer the Fiber Ring Assets to the Company in exchange for the Shares and the Company's assumption of the Assumed Liabilities. All terms not otherwise defined herein shall have the meanings given to them in the Purchase Agreement. WHEREAS, as a condition to the willingness of CityNet to enter into the Purchase Agreement, CityNet has required each of the Stockholders, and in order to induce CityNet to enter into the Purchase Agreement, each Stockholder has agreed, to enter into this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: SECTION 1. DefinitIONS As used herein, each of the following terms shall have the meaning set forth or referred to below: "Affiliate" of any Person (hereinafter "first Person") shall mean (i) any other Person who, directly or indirectly, is in Control of, is Controlled by or is under common Control with such first Person; (ii) any Person who is a director or executive officer (as defined in Rule 3b-7 promulgated under the Exchange Act) of such first Person or any Person described in clause (i) above; or (iii) any Person who is an Immediate Family Member of any Person described in clause (ii) above. "Beneficially Own" shall mean with respect to any security to, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise have (i) voting power which includes the power to vote or to direct the voting of such security; and/or (ii) investment power which includes the power to dispose or to direct the disposition of such security. "Board" shall mean the board of directors of the Company. "Business Day" shall mean any day that is not a Saturday, Sunday or legal holiday on which banking institutions in the State of New York are authorized or obligated to close. "CityNet Holders" shall mean CityNet and its Permitted Transferees. "CityNet Termination Event" shall mean the time at which the CityNet Holders collectively Beneficially Own less than fifty percent (50%) of the Common Stock Beneficially Owned by CityNet on the date hereof (after adjustment to eliminate the effects of any stock splits, stock dividends, stock issuances/sales, dilutive transactions or other similar events). For purposes hereof, it is understood and agreed that the percentage of the total number of outstanding shares of Common Stock of the Company which is Beneficially Owned by CityNet shall have no bearing in determining whether a CityNet Termination Event has occurred. "Common Stock" shall mean common shares (of any class or series), nominal value $0.01 per share, of the Company, and any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock. "Control" of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "Controlling" and "Controlled" have meanings correlative to the foregoing. "Exchange Act" shall mean the United States Securities Exchange Act of 1934, as amended. "Fully Diluted Outstanding" shall mean, at any date, all Common Stock outstanding at such date and all Common Stock issuable in respect of options or warrants to purchase, or securities convertible (directly or indirectly) into, Common Stock outstanding on such date, whether or not such options, warrants or other securities are presently convertible or exercisable. "Immediate Family Member" shall mean a Person's spouse, parent or lineal descendant (whether by blood or adoption) or a trust primarily for the benefit of any of the foregoing. "Majority CityNet Holders" shall mean holders of a majority of the Common Stock held by the CityNet Holders. "Other Stockholder Termination Event" shall mean the time at which the Other Stockholders and their Permitted Transferees collectively Beneficially Own less than fifty percent (50%) of the Common Stock Beneficially Owned by the Other Stockholders on the date hereof (after adjustment to eliminate the effects of any stock splits, stock dividends, stock 2 issuances/sales, dilutive transactions or other similar events). For purposes hereof, it is understood and agreed that the percentage of the total number of outstanding shares of Common Stock of the Company which is Beneficially Owned by the Other Stockholders shall have no bearing in determining whether an Other Stockholder Termination Event has occurred. "Permitted Transferee" shall mean, as to a Stockholder, a Person who is (a) an Affiliate of such Stockholder, (b) a stockholder, member or limited partner of a Stockholder (an "Indirect Stockholder") or (c) a stockholder, member or limited partner of an Indirect Stockholder. "Person" shall mean any natural person, corporation, limited partnership, limited liability company, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization whether or not a legal entity, and any government or agency or political subdivision thereof. "SEC" shall mean the Securities and Exchange Commission or any successor agency thereto administering federal securities laws. "Securities" shall mean Common Stock and options, warrants and other rights to subscribe for, and securities convertible into or exchangeable or exercisable for, Common Stock. "Security" shall refer to the singular form of Securities. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the SEC promulgated thereunder, all as the same shall be in effect from time to time. "Transfer" shall mean any direct or indirect, voluntary or involuntary, sale, assignment, gift, pledge, encumbrance or other transfer (whether outright or conditional) of any Securities, and the terms "Transfers" and "Transferred" shall have meanings correlative to the foregoing. "Transferee" shall mean a Person to whom Securities have been Transferred. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. The word "or" is not exclusive and the word "including" means "including without limitation." SECTION 2. Transfers of Securities 2.1. Lockup. For a period of twelve (12) months following the date hereof, except as otherwise agreed to by the vote of a majority of the Board, no Stockholder shall Transfer any Securities, provided, however, that the restriction contained in this Section 2.1 shall not apply to (a) those Transfers set forth on Schedule B, annexed hereto, or (b) a Transfer to a Permitted Transferee of the Transferring Stockholders, in each case, only if the Transferee in respect of such Transfer executes a Joinder Agreement to this Agreement in the form attached hereto as Exhibit A, whereby it agrees to be bound by terms of this Agreement, including, without limitation, this Section 2.1. Nothing in this Section 2.1 shall create any obligation on the part of 3 the Board, the Company or any other party to consent or agree to any Transfer of Securities, or other waiver of the provisions of this Agreement, such decision to be made in the sole discretion of such parties. Notwithstanding anything in this Section 2.1 to the contrary, in the event that the Board approves any Transfer of Securities by a CityNet Holder during the twelve-month lockup described above, subject to the fiduciary duties of the Board, each Other Stockholder shall be permitted to Transfer the equivalent percentage of Securities owned by such Other Stockholder as the percentage of Securities owned by such CityNet Holder represented by the Securities that were Transferred pursuant to such Board approval, provided that any Transfer by Other Stockholders pursuant to this sentence shall be on terms that are substantially the same (or more advantageous to the Transferring Other Stockholder) and for an equal or greater price, as the Transfer by a CityNet Holder giving rise to this right. The Board, in each case that a CityNet Holder Transfers Securities with approval of the Board pursuant to this Section 2.1, shall notify each of the Other Stockholders of such Transfer by a CityNet Holder during the twelve-month lockup period. 2.2. Restrictions on Transfer. At all times when this Agreement is in effect with respect to the transferring Stockholder, no Stockholder shall Transfer any Securities to any Person other than (i) through a public sale of Securities or any sale permitted under Rule 144 promulgated under the Securities Act) or (ii) to a Transferee that executes a Joinder Agreement to this Agreement in the form attached hereto as Exhibit A. 2.3. Non-Compliant Transfers Void. Any Transfer not in compliance with this Section 2 shall not be effective and shall not be recognized by the Company. SECTION 3. Additional Obligations 3.1. Board of Directors. (a) (i) The rights of the CityNet Holders under this Section 3.1 (including, without limitation, to designate directors, remove directors, consent to changes in the size of the Board and have representation on committees of the Board), but not their obligations hereunder, shall cease upon the occurrence of a CityNet Termination Event. (ii) The rights of the Other Stockholders under this Section 3.1 (including, without limitation, to designate directors, remove directors and consent to changes in the size of the Board), but not their obligations hereunder, shall cease upon the occurrence of a Other Stockholder Termination Event. (b) Unless otherwise agreed to by (x) the Majority CityNet Holders and (y) holders of a majority of the Common Stock held by the Other Stockholders, the Board of the Directors of Company shall consist of nine (9) members. The Stockholders hereby agree to take all actions reasonably necessary or desirable within their power (including, but not limited to, the voting of shares of Common Stock owned by them, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all reasonably necessary or desirable actions within its control 4 (including, without limitation, calling special board and stockholder meetings), to effectuate and carry out the provisions of this Section 3.1. (c) The CityNet Holders shall be entitled to designate five (5) members of the Board (the "CityNet Designees"), one (1) of whom shall be a Class I Director, two (2) of whom shall be Class II Directors and two (2) of whom shall be Class III Directors, as such terms are defined in the Bylaws of the Company, provided that at least two (2) of the CityNet Designees shall satisfy the criteria to be an "independent director" as defined by any applicable rules of the NASDAQ Stock Market (or the primary stock exchange on which the Common Stock is then listed, if any). (d) The members of the Board who are not CityNet Designees (the "Company Designees") shall include such individuals so as to be in compliance with applicable law, regulation and rules of the NASDAQ Stock Market (or the primary stock exchange on which the Common Stock is then listed, if any). (e) In accordance with Rule 14f-1 promulgated under the Exchange Act, four (4) CityNet Designees will become members of the Board on the date hereof, and one (1) CityNet Designee will become a member of the Board ten (10) days after the Company files and mails to record holders of the Common Stock a 14f-1 information statement. Ten (10) days after the filing and mailing of such information statement, the members of the Board shall consist of: (i) Ronald Kaufman as the CityNet Designee to be a Class I Director, William J. Elsner and Anthony L. Coelho as CityNet Designees to be Class II Directors, Fred Vierra and Anthony S. Daffer as CityNet Designees to be Class III Directors, of which Messrs. _________ and _________ each qualify as an "independent director" under the currently applicable NASDAQ definition; and (ii) Anthony P. Dolanski and Carolyn F. Katz as Company Designees to be Class I Directors, Randall R. Lay as a Company Designee to be a Class II Director and H. Robert Gill as a Company Designee to be a Class III Director, of which Messrs. Dolanski and Gill and Ms. Katz qualify as "independent directors" under the currently applicable NASDAQ definition. (f) A CityNet Designee may only be removed from the Board upon the agreement of the Majority CityNet Holders. A Company Designee may only be removed from the Board upon the agreement of holders of a majority of the Common Stock held by the Other Stockholders. (g) In the event that any vacancy is created on the Board by reason of the death, resignation or removal of any CityNet Designee, such vacancy shall be filled by a substitute director designated by the CityNet Holders. In the event that any vacancy is created on the Board by reason of the death, resignation or removal of any Company Designee, such vacancy shall be filled by a substitute director designated by holders of a majority of the Common Stock held by the Other Stockholders. Each of the Stockholders shall cause its designated directors to elect the person designated to fill any such vacancy. 5 (h) The Stockholders hereby agree to vote all of the voting securities of the Company owned by them for the election of the directors designated in accordance with Sections 3.1(c) and 3.1(d), for the removal of directors in accordance with Section 3.1(f) or to cause the directors then in office to elect replacements in the case of a vacancy in accordance with Section 3.1(g) and otherwise in accordance with this Section 3.1. (i) Provided that one or more of the CityNet Designees meet the requirements (under applicable law, SEC rules and regulation and the rules of NASDAQ or the primary exchange on which the Common Stock is listed) to serve on any committee of the Board (including, without limitation, the audit committee, the nominating committee and the compensation committee), the CityNet Designees shall be entitled to representation on each such committee at least proportionate to their representation on the Board. 3.2. Certain Restrictions. No Stockholder shall grant any proxy, enter into or agree to be bound by any voting trust agreement or arrangement of any kind with respect to any voting Securities, or enter into any stockholder agreements or arrangement of any kind with respect to any Securities, any of which is inconsistent with the provisions of this Agreement, including, but not limited to, any agreement or arrangement with respect to the voting of voting securities of the Company, nor shall any Stockholder act as a member of a group or in concert with any other Person in connection with the acquisition of any Securities in any manner inconsistent with the provisions of this Agreement. 3.3. Directors' and Officers' Liability Insurance. The Company shall maintain directors' and officers' liability insurance coverage in form, dollar limits and types of claims covered of at least equal to that of the directors' and officers' liability insurance currently maintained by the Company and from insurers having a "financial strength" rating from A.M. Best (or an equivalent rating agency) of A- or better. SECTION 4. Miscellaneous Provisions 4.1. Term. This Agreement shall take effect on the date of execution by each Stockholder and shall terminate on the occurrence of a CityNet Termination Event. 4.2. Specific Performance. Each of the parties hereto acknowledges and agrees that the other would be irreparably damaged in the event any of the provisions of this Agreement were not performed by the other in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each party shall be entitled to an injunction or injunctions to redress the breaches of this Agreement and to specifically enforce the terms and provisions hereof in any action instituted in any court having jurisdiction, subject to Section 4.4, in addition to any other remedy to which such party may be entitled at law or in equity. 4.3. Severability. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. 4.4. Governing Law; Jurisdiction. 6 (a) This Agreement shall be construed under and governed by the internal laws of the state of Delaware without regard to its conflict of laws provisions. (b) Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction, of the federal and state courts sitting in the state of Delaware in any action, suit or proceeding arising in connection with this Agreement, and agrees that any such action, suit or proceeding shall be brought only in such court (and waives any objection based on forum non conveniens or any other objection to venue therein). Service of process upon any party hereto in any action, suit or proceeding arising in connection with this Agreement may be made anywhere in the world. Any such process or summons to be served upon any of the parties (at the option of the party bringing such action, proceeding or claim) may be served by transmitting a copy thereof, by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 4.6 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the party so served in any action, proceeding or claim. Nothing herein shall affect the right of any party hereto to serve process in any other manner permitted by law. 4.5. Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and each Stockholder; this Agreement does not create, and shall not be construed as creating, any rights enforceable by any other Person. If any involuntary Transferee acquires Securities in any manner, whether by operation of law or otherwise, such Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Securities, such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. 4.6. Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered or sent by facsimile transmission, upon receipt, if by hand delivery, upon receipt, if sent by nationally recognized overnight courier service, one day after deposit with such, or if sent by registered or certified mail, upon the sooner of the date on which receipt is acknowledged or the expiration of three days after deposit in United States post office facilities properly addressed with postage prepaid. All notices to a party will be sent to the addresses set forth below or to such other address or person as such party may designate by notice to each other party hereunder: If to CityNet: CityNet Telecommunications, Inc. 8405 Colesville Road 6th Floor Silver Spring, Maryland 20910 Attention: General Counsel Facsimile: 301-608-8121 With a copy to: McDermott, Will & Emery 7 50 Rockefeller Plaza New York, NY 10020 Attention: Mark Selinger Facsimile: 212-547-5444 If to the Company: Universal Access Global Holdings Inc. 233 S. Wacker Drive, Suite 600 Chicago, IL 60606 Attention: Scott Fehlan Facsimile: 312-660-1290 With a copy to: Shefsky & Froelich Ltd. 444 N. Michigan Avenue, Suite 2500 Chicago, IL 60611 Attention: Michael J. Choate Facsimile: 312-527-5921 If to an Other Stockholder, the address of such Stockholder in the records of the Company. Any notice given hereunder may be given on behalf of any party by his counsel or other authorized representative. 4.7. Entire Agreement; Amendment. This Agreement is complete, reflects the entire agreement of the parties with regard to its subject matter, supersedes all previous written or oral negotiations, commitments and writings between the parties hereto with respect to the subject matter hereof, if any, and, except as otherwise provided herein, may not be amended, supplemented or discharged except by an instrument in writing signed in any such case (a) by the Majority CityNet Holders and (b) by the holders of a majority of the Common Stock held by the Other Stockholders. 4.8. Waiver. Any waiver by any party of a breach of any provisions of this Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be evidenced by a writing signed by the party against whom the waiver is sought to be enforced. 4.9. Captions and Gender. The captions in this Agreement are for convenience only and shall not affect the construction or interpretation of any term or provision hereof. The use in this Agreement of the masculine pronoun in reference to a party hereto shall be deemed to include the feminine or neuter, as the context may require. 8 4.10. Execution in Counterparts. For the convenience of the parties and to facilitate execution, this Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document. 4.11. Expenses. Each of the parties shall pay its own expenses in connection with the negotiation, execution and performance of the Agreement. 4.12. Effect of Headings. The section headings herein are for convenience only and shall not affect the meaning or interpretation of this Agreement. 4.13. Inspection. So long as this Agreement is in effect, this Agreement shall be made available for inspection by any holder of Common Stock at the Company's principal offices. The Company shall send a copy of this Agreement to any legitimately interested party without charge upon receipt of a written request therefor. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 9 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year first above written. CITYNET TELECOMMUNICATIONS INC. By:______________________________ Name: Title: UNIVERSAL ACCESS GLOBAL HOLDINGS INC. By:______________________________ Name: Title: [CONTINUED ON NEXT PAGE] ICG HOLDINGS, INC. By:__________________________________ Name: Title: Number of shares of Common Stock held by such Stockholder: 21,664,124 [ADDRESS] [ADDRESS] COMMUNICATIONS VENTURES III, L.P. By:__________________________________ Name: Title: Number of shares of Common Stock held by such Stockholder: 12,390,375 [ADDRESS] [ADDRESS] COMMUNICATIONS VENTURES III CEO & ENTREPRENEURS' FUND, L.P. By:__________________________________ Name: Title: Number of shares of Common Stock held by such Stockholder: 625,221 [ADDRESS] [ADDRESS] COMVEN III, L.L.C. By:__________________________________ Name: Title: Number of shares of Common Stock held by such Stockholder: ___________ [ADDRESS] [ADDRESS] ROBERT J. POMMER, JR. By:__________________________________ Name: Number of shares of Common Stock held by such Stockholder: 150,000 [ADDRESS] [ADDRESS] PATRICK C. SHUTT By:__________________________________ Name: Number of shares of Common Stock held by such Stockholder: ___________ [ADDRESS] [ADDRESS] EXHIBIT A FORM OF JOINDER AGREEMENT ------------------------- AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, the "Agreement"), dated as of [__________ __], 2003, is made by [INSERT JOINING PARTY] (the "Joining Party"). RECITALS: --------- WHEREAS, pursuant to that certain Stockholders' Agreement (the "Stockholders' Agreement"), dated as of [________ __], 2003, a copy of which is attached hereto as Appendix 1, by and between Universal Access Global Holdings Inc. (the "Company"), CityNet Telecommunications, Inc., ICG Holdings, Inc., Communication Ventures III, L.P., Communication Ventures III CEO & Entrepreneurs' Fund, L.P., ComVen III, L.L.C., Robert Pommer, Patrick Shutt and each signatory to a Joinder Agreement in the form hereof, parties thereto have agreed, inter alia, to vote their voting securities in the Company in the manner set forth in Stockholders' Agreement; and WHEREAS, the Joining Party wishes to purchase securities of the Company in accordance with the terms and conditions set forth in the Stockholders' Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is agreed as follows: 1. Joinder to Stockholders' Agreement. The Joining Party hereby joins in the Stockholders' Agreement and agrees to be bound thereunder as if the Joining Party were an original party thereto. 2. Entire Agreement. The Joining Party hereby acknowledges that this Agreement and the Stockholders' Agreement embody the entire agreement and understanding of the Joining Party and the other parties to the Stockholders' Agreement in respect of the subject matter contained herein or therein. There are no agreements, representatives, warranties or covenants other than those expressly set forth herein or therein. This Agreement and the Stockholders' Agreement supersede all prior agreements and understandings between the parties hereto, whether written or oral, express or implied, with respect to such subject matter herein or therein. 3. Severability. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. 4. Binding Effect. This Agreement shall take effect as of the date and year first above written and shall be binding upon the parties hereto and shall be binding on their respective heirs, executors, administrators, personal representatives, successors and assigns, as the case may be. The parties hereto may not assign or transfer any of their rights or obligations under this Agreement. 5. Governing Law. This Agreement shall be construed under and governed by the internal laws of the state of Delaware without regard to its conflict of laws provisions. IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the date set forth above by its duly authorized representative. [JOINING PARTY] By:________________________ Name: Title: SCHEDULE B ---------- 1. Patrick Shutt to transfer up to 120,000 shares of Common Stock to Tom Kapsalis 2. Robert Pommer to transfer up to a total of 60,000 shares of Common Stock to Patrick Shutt and/or Tom Kapsalis. -----END PRIVACY-ENHANCED MESSAGE-----