20110225Application.pdf

,
IJåDce J.M.:Steinhart P.G.
Attorney At Law
1720 Windward Concourse
Suite 115
Alpharetta, Georgia 30005
'llit î FEB 25 AM 10: t 1;...."'.! i'
Also Admitted in New York
and Marland
\Dt\11Ct~:rL~,di ;d(d C, ; ,,,i:
TelephonetìlWÒ)1 ~!2:g2DÚ; ;,-;,', . -,j' ,
Facsimile: [phone]
Email: IsteinhariitelecomcounseLcom
Februar 24,2011
VIA OVERNIGHT DELIVERY
Ms. Jean D. Jewell
Idao Public Utilties Commission
Secretar
472 West Washington Street
Boise, Idaho 83702
G Cp-i- tl-ot
Re: GC Pivota, LLC
Dear Ms. Jewell:
Enclosed please fid for fiing an unbound, unstapled and duplexed original and thee (3)
stapled and duplexed copies of GC Pivota, LLC's Application for a Certificate of Public
Convenience and Necessity to Provide Telecommunications Services withn the State ofIdaho. The
company has no local exchange customers at this time in the State of Idaho and ths is a new filing.
I have also enclosed an extra copy of ths letter to be date staped and retued to me in the
enclosed, self addressed, postage prepaid envelope.
If you have any questions or if I may provide you with additional inormation, please do not
hesitate to contact me.
ance J .M. Steinh
Attorney for Global Capacity Group, Inc.,
Global Capacity Direct, LLC and
Global Capacity Holdco, LLC
Enclosure
ec: Mr. Dan Kardatzke
Thomas H. Campbell, Esq.
Mr. Richard Gamer
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
)
)
)
)
)
)
)
)
IN THE MATTER OF THE
APPLICATION OF
GC Pivotal, LLC
for a Certifcate of Public
Convenience and Necessity to
Provide Telecommunications
Services Within the
State of Idaho
'lftH FEB 25 l\M \0: \4
CASE NO.
~cP -(-Ll -0 ~
APPLICATION AND REQUEST FOR AUTHORITY
Application is hereby made to the Idaho Public Utilities Commssion for a Certificate of Public
Convenience and Necessity authorizig GC Pivota, LLC, ("Applicant" or "GC Pivotal") to provide
telecommuncations services pursuat to Idaho Code Sections 61-526 though -528 and IDAPA
31.01.01.111 (Rules 111 & 112) as clarfied by Procedural Order No. 26665 in Case No. GNR-T-96-4.
The following general information and exhbits are fushed in support thereof:
1.) Applicant's legal name, address of its pricipal offces and telephone number are:
GC Pivota, LLC
200 South Wacker Drive, Ste. 1650
Chicago, Ilinois 60606
[phone]
i
The Applicant has no offce located in the State of Idaho. The Applicant intends to provide
resold data services by utilizing the facilities of incumbent local exchange carriers ("LECs ") and
other facilities-based cariers.
2.) Applicant is incorporated in the State of Delaware and is in good standing under the laws of
that state. In addition, the Company is authoried to do business as a foreign GC Pivotal in the State of
Idao. Attched as Exhbit 1 to ths Application is a copy of the Company's Certificate of Formation.
A copy of Applicant's Certificate of Authority to transact business in Idaho is attched hereto
as Exhbit 2.
3.) The name and business address of Applicant's registered agent for service in Idao are:
Incorp Service, Inc.
'921 S. Orchard Street, Suite G
Boise, Idao 83705
4.) Pivotal is a newly formed operating company that was formed to facilitate the ability of its
indirect parent, FFN Investments, LLC ("FFN"), to acquire the telecommunications assets curently
held by Global Capacity Group (GCG) and Global Capacity Direct, LLC (f/ka Vanco USA Direct,
LLC) ("GCD") and then operate those assets. FFN is an Arizona limited liability company with
principal offices located at 3200 East Camelback Road, Suite 295, Phoenix, Arizona 85018. FFN is
the direct 100% parent of Pivotal Global Capacity, LLC ("Pivotal Holdco") which in tu owns
1 00% of Pivotal. FFN is a management company owned and controlled by a series of trsts formed
for the benefit ofF. Francis Najafi and his family members.
Applicant, GCG and GCD have filed applications seeking approval of the Transfer of Assets
of GCG and GCD to Pivota (the "Proposed Transaction") with the FCC and a number of state
regulatory commissions. In addition, Pivota is in the process of obtaining authorizations to provide
service thoughout the United States which will allow Pivota to operate the Assets. GCD was
granted a Certificate of Public Convenience and Necessity to Provide Resold and Facilities-Based
2
Local Exchange Telecommunication Services; Case No. GCG-T-07-01; Certificate No. 471; Order
No. 30460 granted on November 6, 2007.
5.) The names and addresses of the ten common stockholders of Applicant Owng the Greatest
Number of Shares of Common Stock and the Number of Such Shares Owned by Each are:
Name and
Address
Shares Owned Percentage of All
Shares Issued &
Outstanding
Percentage
of Voting
Control
Pivotal Global Capacity, LLC 1,000 100%
Address: Shareholders can be reached at 3200 East Camelback Road, Suite 295, Phoenix, Arzona
85018.
6.) The names, addresses and ownership of Applicant's Officers and Directors are:
Officers:
F. Francis Najafi
Richard Gamer
President
Secretary and Treasurer
Each can be reached at Applicant's primar place of business and telephone number as
follows:
GC Pivotal, LLC
200 South Wacker Drive, Ste. 1650
Chicago, Ilinois 60606
[phone]
7.) The Name and Address of Any Corporation, Association, or Similar Organzation Holding a
5% or Greater Ownership or Management Interest in Applicant are as follows:
See answer to 4 above.
8.) The names and addresses of Subsidiares Owned or Controlled by Applicant are as follows:
Not applicable.
3
9.) The Applicant seeks authority to provide services in the State ofIdaho throughout the
service areas of Qwest North, Qwest South and Verizon. Pivotal wil offer resold data circuits by
utilizing the facilities of incumbent local exchange cariers ("LECs") and other facilities-based
cariers. Pivotal wil not own its own circuits or fiber. Pivotal will resell Layer One (DS-1's &
OCNs), Layer Two (ATM and Frame Relay), and Layer Three (MPLS) data circuits to business
customers only. No voice services will be provided. All services wil be provided pursuant to
contracts between Pivotal and its customers. Pivotal has no plans to install either purchased or
leased facilities in the State of Idaho.
Applicant does not intend to service areas serviced by any LECs which are eligible for a small
or rual carer exemption pursuat to Section 251 of the Federa Telecom Act of 1996.
Biographies of Applicant's corporate offcers are attached as Exhbit 5, along with a
description of Global Capacity's business which is being purchased by PivotaL.
Applicant wil also rely upon the technical expertise of its underlying carers. In addition,
GCG and GCD corporate officers and management team responsible for its day-to-day operations
are expected to remain essentially the same immediately following the Proposed Transaction. The
Proposed Transaction will not have an adverse effect on non-management employees of GCG and
GCD. Finally, all existing customer service numbers/operations, contacts and procedures of GCG
and GCD wil also remain in place afer the Proposed Transaction, including procedures relating to
biling, repair and customer complaints.
4
10.) See Pivotal's Financial Statements as of Februar 14,2011, which is attached hereto as
Exhibit 3. In addition, by Cour Order entered on Januar 26,2011, the Banptcy Cour for the
District of Delaware approved the sale of substantially all of the assets of the jointly-administered
Global Capacity debtors, including direct and indirect subsidiares of Capital Growt Systems, Inc.,
to Pivotal Global Capacity, LLC or its wholly-owned subsidiary assignee GC Pivotal, LLC ("the
Banuptcy Order"). The Banptcy Cour has determined that Pivotal has the financial ability to
close the Proposed Transaction. A copy of the Banptcy Order is attached hereto as Exhibit 4.
11.) A map showig where Applicant is proposing to provide service is attched hereto as Exhbit
6.
12.) A copy of Applicant's ilustrative tariff is attached hereto as Exhbit 7. Applicant will file its
proposed taff establishig its proposed services and charges upon receipt of certification by the
Commssion.
13.) Questions concerng ths application and Applicant's taff should be directed to Applicant's
representative:
Lance J.M. Steinhar
Lance J.M. Steinar, P.C.
1720 Windward Concourse
Suite 115
Alpharetta, Georgia 30005
[phone] (Telephone)
[phone] (Facsimle)
lsteinhariitelecomcounel.com (Email)
5
Customer Complaits and Inquiries are to be addressed to:
Susan Naber
GC Pivotal, LLC
200 South Wacker Drive, Ste. 1650
Chicago, Ilinois 60606
[phone] (Customer Service)
14.) Applicant has not intiated interconnection or resale negotiations.
15.) Applicant has reviewed the laws and reguations of this Commssion governg local exchange
telecommuncations services in Idaho and will provide service in accordance with all laws, rues and
reguations to the extent they are not preempted by the Federal Act.
16.) Applicant will not requie advance payments or deposits; therefore, no escrow account is being
filed.
6
WHEREFORE, GC Pivotal, LLC, requests that the Idaho Public Utilities Commission enter an
order granting a Certficate of Public Convenience and Necessity authoriing GC Pivotal, LLC, to
provide telecommuncations services pursuant to Idaho Code Sections 61-526 though -528 and
IDAP A 31.01.01.111.
Respectfly submitted ths ~\day of ~',2011.
GC PIVOTAL, LLC
By:
L .. Steinhar
Lance J.M. Steinhar, P.e.
1720 Windward Concourse
Suite 115
Alpharetta, Georgia 30005
Telephone: [phone]
Facsimile: 770/232-9208
Email: lsteinhar(Ðtelecomcounsel.com
Attomeyfor
GC PIVOTAL, LLC
7
EXHIBIT 1
EXHIBIT 2
EXHIBIT 3
EXHIBIT 4
EXHIBIT 5
EXHIBIT 6
EXHIBIT 7
LIST OF EXHIBITS
CERTIFICATE OF FORMTION
CERTIFICATE OF AUTHORITY TO TRASACT BUSINESS
FINANCIAL INFORMTION
BANKRUPTCY ORDER
BIOGRAHICAL INFORMATION
SERVICE ARA MA
ILLUSTRATIVE TARF
8
EXHffIT 1- CERTIFICATE OF FORMTION
9
Ðefaware PAGE 1
rf !frst State
I, JEFFRY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF
DELAWAR, DO HEREBY CERTIFY THE ATTACHED AR TRUE AND CORRCT
COPIES OF ALL DOCUMNTS ON FILE OF r'GC PIVOTAL, LLC" AS RECEIVED
AND FILED IN THIS OFFICE.
THE FOLLOWING DOCUMNTS HAVE BEEN CERTIFIED:
CERTIFICATE OF FORMTION, FILED THE TWNTIETH DAY OF MAY,
A.D. 20101 AT 5:20 O'CLOCK P.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID'
CERTIFICATES AR THE ONLY CERTIFICATES ON RECORD OF THE
AFORESAID LIMITED LIABILITY COMPAN, "GC PIVOTAL, LLC"_
4825895 8100H
110076964 DATE: 01-25-11
State of DelawaeSecreta of StateDivision oE Corprations
Delivered 06:13 PM OS/20/2010
FID 05:20 PM OS/20/2010
SRV 100545420 - 4825895 FILE CERTIFICATE OF FORMAT10N
OF
GC PIVOTAL, LLC
The undersigned. an authorized naturl person) for the purpose of forming a
limited liabilty company, under the provisions and subject to the requirements of the State of
Delaware (particularly Chapter 18, Title 6 of the Delaware Code and the acts amendatory thereof
and supplemental thereto, and known) identified, and referred to as the "Delaware Limited
Liabilty Company Act"), hereby certifies that:
FIRST: The name ofthe limited liabilty company (hereinafter called the
"limited liabilty company") is:
GC Pivotal, LLC
SECOND: The address ofthe registered offce and the name and the address of
the registered agent of the limited liabilty company required to be maintained by Section 18-104
of the Delaware Limite Liabilty Company Act are:
Corporation Service Company
2711 Centervile Road, Suite 400
Wílmington, New Castle çounty, Delaware 19808
THIRD: This Certificate ofFonnation shall be effective upon filing.
Executed on May 20,2010.lsi Eleanor Romanell
Eleanor Romanell
Authorized Person
EXHIBIT 2 - CERTIFICATE OF AUTHORITY TO TRASACT BUSINESS
10
FILED EFFECTIVE
253
! . . - - i AM. .,''. k' ..i....r...; i nu. 'Z.
SECPETARY ,OF STATE
.,:, Te OF' ('0. ,. ,fL. . ~HO
APPLICATION FOR CERTIFICATE
OF AUTHORITY FOR FOREIGN
LIMITED LIABILITY COMPANY
(Instructions on back of application)
1. The name of the limited liabilty company is:
GC Pivotal, LLC
2. If the name of the limited liabilty company is not permissible or is not available in Idaho, the
name the foreign limited liabiliy company will use in Idaho is:
3. The jurisdiction under whose laws the limited liabilty company is formed is: Delaware
4. The name and complete street address of the registered agent in Idaho is:
Incorp Services, Inc.921 S. Orchard Street, Ste. G, Boise, ID 83705
5. The street and mailing address of the limited liabilty company's principal office is:
3200 East Camelback Road, Ste. 295, Phoenix, Arizona 85018
Street Address
Mailing Address, if different
6. The street and mailng address of the limited liabilty company's offce in the jurisdiction
under whose laws it is organized is:
2711 Centerville Road, Ste. 400, Wilmington, DE 19808
Street Address
Mailng Address, if diffrent
7. The name and maHing address of at least one member or manager:
F. Francis Najafi Member 3200 East Camelback Road, Ste. 295, Phoenix, Arizona 85018
8. The mailng address for future correspondence:
Sttvi(. It.. i: ,
9. Signature of an authorized person:
~ GC Pivotal, LLC
By: Pivotê.LG\
1-----.----.---------------.-----~ Secretary of State use only
",'""
Lil
i '"
, LLC, Sole Member i i' ~i Ë il
s '~go:'iê
,gii
I:
IDAHO SECRETARY OF STATE06/01/2010 05:: 00
CK: 301025 CT: 248488 BH: 1224&90
1 ê lØØ.ØØ = iaø.ø0 REGFORGLLC ti 2
1 ~ 20.08 = 20.ØØ EXPEDITE C H 3
W9;?¥5'
i :i
Ðefaware PAGE 1
rn :First State
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF
DELAWAR, DO HEREBY CERTIFY THAT "GC PIVOTAL, LLC" IS DULY
FORMD UNDER THE LAWS OF THE STATE OF DELAWAR AND IS IN GOOD
STANDING AND HAS A LEGAL EXISTENCE NOT HAVING BEEN CANCELLED OR
REVOKED SO FAR AS THE RECORDS OF THIS OFFICE SHOW AND IS DULY
AUTHORIZED TO TRASACT BUSINESS.
THE FOLLOWING DOCUMNT HA BEEN FILED:
CERTIFICATE OF FORMTION, FILED THE TWENTIETH DAY OF MAY,
A.D. 2010, AT 5:20 O'CLOCK P.M.
AND I DO HEREBY FUTHER CERTIFY THAT THE AFORESAID
CERTIFICATE is THE ONLY PAPER OF RECORD, THE LIMITED LIABILITY
COMPAN IN QUESTION NOT HAVING FILED AN AMNDMENT NOR HAVING
MADE ANY CHANGE WHATEVER IN THE ORIGINAL CERTIFICATE AS FILED.
AND I DO HEREBY FURTHER CERTIFY THAT THE ANUAL TAXS HAVE
NOT BEEN ASSESSED TO DATE.
4825895 8315100576370 DATE: 05-26-10
You may verify t:is certificate oniine
a t corp'. deiaware; gov I aut:ver . shti
EXHIBIT 3 - FINANCIAL INFORMTION
11
Financial Statenients
(unaudited)
GC Pivotal, LLC
(a Delaware Limited Liability Company)
February 14, 2011
GC Pivotal, LLC
(a Delaware Limited Liability Company)
Balance Sheet
(unaudited)
February 14,2011
Assets
Cash $1,000,000
$1,000,000
Liabilties and members' capital
Accounts payable $105
Members' capital 999,895
$1,000,000
GC Pivotal, LLC
(a Delaware Limited Liability Company)
Statement of Operations
(unaudited)
For the Period Ended February 14,2011
Revenues and (expenses)
General and administrative
Net loss
$
$
(105)
(105)
GC Pivotal, LLC
(a Delaware Limited Liability Company)
Statement of Members' Capital
(unaudited)
For the Period Ended February 14,201 I
Member's capital, January 1,2011
Contributions
Net loss (1)
Members' capital, Februaiy 14,2011
Pivotal Global
Capacity, LLC
$
1,000,000
(105)
$ 999~895
(1) Net loss allocated to the members is based on estimates and wil be finalized
after review by the Company's tax advisors.
EXHIBIT 4 BANKRUPTCY ORDER
12
IN mE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: )
)
GLOBAL CAPACITY HOLDCO, )LLC, )et a1. i )Debtors. )
1
)
Chapter 11
(Jointly Administere)
Case No. 10-12302 (PJW
Re: Docket No. 171,288,292,305,316,325,369
and 561
ORDER APPROVING (1) BID OF PIVOTAL GLOBAL CAPACITY, LLC OR
SUBSIDIAY AS THE HIGHEST AN BEST SALE QUALIFG BID FOR THE
PURCHASE OF SUBSTANTIALLY ALL OF DEBTORS' ASSETS UNDER AND IN
CONJUNCTION WITH ITS PLAN OF REORGANIZATION; AND (2)
CONSUMMATION OF THE SALE TRASACTION WITH
PIVOTAL GLOBAL CAPACITY, LLC OR ITS SUBSIDIARY, GC PIVOTAL, LLC
On August 1 1, 201 0, Global Capacity Holdeo, LLC and the other above-captioned
debtors in possession (collectively, the "Debtors"i fied and served a motion for entr of an
order approving bidding procedures in connection with the sale of substantially all of the
Debtors' assets (the "Sale"), approving procedures relating to assumption and assignent of
executory contrcts and unexpired leases, approving stalking horse bid protections, approving
the form and maner of notice of a sale hearing, and for entr of an order approving and
authorizing the sale of substantially all of the Debtors' assets free and clear of liens, claims,
interests and encumbrances and authorizing the assumption and assignent of executory
contracts and unexpired leases as part of the sale (DE 115, 142) (the "Sale Motion"). The Sale
i The Debtors in these cases, along with their case numbe, addrsses, and the last four digits of each Debtor's
federal tax identification number, are: Global Capacity Holdco, LLC, 200 S. Wacker Dnve, Suite 1650, Chicago, IL
60606 (10-12302)(8858); Global Capacity Group, Inc., 730 Nort Post Oak Road, Houston, TX 77024 (10-
12303)(0073); 20120 Technologies, Inc., 200 South Wacker, Suite 1650, Chicago, IL 60606 (10-12304)(5612);
Centrepath, Inc., 275 Winter Street, Waltham, MA 02451 (10-12305)(9034); Capital Growth Systems, Inc., 200
South Wacker Dnve, Suite 1650, Chicago, IL 60606 (l 0-12306)(3505); Global Capacity Direct, LLC (:Ua Vanco
Direct USA, LLC), 200 South Wacker Dnve, Suite 1650, Chicago, IL 60606 (10-12307)(1970); FNS 2007, Inc.
(f7a Frontrnner Network Systems, Corp.), 200 South Wacker Dnve, Suite 1650, Chicago, IL 6060 (10-
12308)(7892); Nexvu Technologies, LLC, 200 South Wacker Dnve, Suite 1650, Clucago, IL 60606 (10-12309)
(4626); and 20/20 Technologies I, LLC, 200 South Wacker Dnve, Suite 1650, Clucago, IL 60606 (10-12310)(5514).2 All capitalized term not defined herein have the meaning in the documents referenced therby, including the
Modified Pivotal AP A and the Bidding Procedures.
2278059.14
Motion was filed in conjunction with the Joint Chapter 11 Plan of Reorganization for Global
Capacity Holdco, LLC and Its Filed Affliates Dated as of August 11, 2010 (DE 113) (the
"Plan"), which provided for Plan fuding thugh the Sale.
On August 24, 201 0, the Court entered an order approving sale and contract assumption
and assignent proceures (as amended thereafter, the "Bidding Procedures"), scheduling an
auction (the "Auction") for October 14,2010 and a sale approval hearng (the "Sale Hearg")
for October 19, 2010, and granting related relief (the "Sale Procedures Ordet') (DE 171). The
Debtors filed a Notice of Proposed Asset Purchase Agreeent with Stalking Horse Bidder on
October 1, 2010 (DE 288), which was seed that day on all required paries (DE 306), then filed
a Notice of Terination of Stalking Horse Bidder Status of Global Acquisition NewCo Corp.
("GC Newco"), Modification of Bidding Procedures and Revised Asset Purchase Agreement on
October 4, 2010 (DE 292), which was sered that day on all Required Parties (DE 307), to which
GC Newco objected (DE 300) ("GC Newco Objection"). Furer notices were fied with respect
to Auction procedures and tiing. (DE 305, 316, 325, 369), and timely served (DE 317, 327,
337,390).
On November 8, 2010, the Debtors fied a Motion to Approve Debtors' Selection ofthe
Bid of Pivotal Global Capacity LLC ("Pivotal GC") as the Qualifying Bid for the Purchase of
Substantially all of the Debtors' Assets Under or in Conjunction with its Plan of Reorganization
and Consummation of the Sale Transaction with Pivotal Global Capacity LLC (DE 392) (the
"Pivotal GC Bid Motion"). Objections to the Pivotal GC Bid Motion were fied by Universal
Service Administrative Company ("USAC") (DE 414), supplementing prior objections (DE 136,
310J, with an additional supplemental objection by USAC on Januar 24.2011 (DE 592)
(collectively, "USAC Objection"), by the Prepetition Debenture Holders, Tranche B DIP
Lenders and Stalking Horse Bidder (DE 419) ("Debenture Holders Objection"), in which Global
Telecom & Technology joined (DE 420) ("OTT Joinder"), and by Capstone Investments (DE
429), supplemented on Januar 24, 2011 (DE 588) ("Capstone Objection"). On January 24,
20 i 1, an Opposition and Reservation of Rights was fied by Vanco US, LLC (DE 583) ("Van co
2 2278059.14
Objection"). Objections to Cure Amounts were also filed, as described below. A hearng was
commenced on November 8,2010, and continued on November 19,2010. On December 2,
2010, the Debtors filed a Notice of Withdrawal of the Pivotal Bid Motion (DE 479) afer the
deadline for Cour approval of the Pivotal Bid Motion expired.
The Debtors fied a Motion to Approve Modified Asset Purchase Agreement of Pivotal
Global Capacity LLC ("Pivotal GC") for the Acquisition of the Debtors' Assets Under or in
Conjunction with its Plan of Reorganzation, Consumation of a Transaction with Pivotal GC
and Assumption and Assignent of Mission Cntical Vendor Contracts ("Motion") Januar 12,
2011 (DE) (the "Pivotal GC Sale Motion"). In conjunction with the Pivotal GC Sale Motion,
the Debtors fied a Notice ofNon-Matenal Plan Modifications and Modified Pivotal APA, and
Classes 1-5 Vote for Plan as Modified on Janua 12,2011 (DE 560) (the "Modification Notice"
and attached "Modified Pivotal APA" and "Modified Plan"). The Debtors also filed the Plan
Supplement required by the Plan, attaching the Wind Down Budget, on Januar 12,2011 (DE)
(the "Plan Supplement"). The Debtors also filed a Motion for Order Under 11 U.S.C. §§ 105,
363, 364(c)(l) & (2), and 364(e), Fed. R. Ban. P. 2002, 4001, and 9014: Authonzing Debtors
to Obtain Increased Postpetition Sale Closing Financing on Supernonty and Secured Basis, and
Authorizing the Use of Cash Collateral on Janua 12,2011 (DE) (the "Sale Facilty Motion").
The Pivotal GC Sale Motion, Plan Supplement, Plan Modification Notice and the Sale Facilty
Motion were timely sered on all pares in interest, including all shareholders of record in the
Debtors (DE 575) A Second Notice of Non-Material Modifications to Amended Plan and
Modified Pivotal APA was fied and sered on January 21,2011 (DE 579, 600) ("Second
Modification Notice").
A hearng on the Pivotal GC Sale Motion, the Sale and Plan Confirmation and the Sale
Facilty Motion was held on Januar 26,2011 ("Sale/Confirmation Hearing"), with appearances
as noted on the record at the Sale/Confirmation Hearing. In accordance with the Bidding
Procedures and the Sale-related provisions in the Plan, and the Court having considered the
filings listed above, arguments, evidence, and representations made at the Sale/Confirmation
3 2278059.14
Hearng, and having considered the other matters submitted to the Court in connection with the
approval of the Sale, and good cause appearig,
THE COURT FINDS AND CONCLUDES AS FOLLOWS:
A. The Cour has jurisdiction to consider the Sale Motion and Pivotal GC
Sale Motion in accordance with 28 U.S.C. §§ 157 and 1334. The Sale Motion and Pivotal GC
Sale Motion constitute core proceedings pursuant to 28 U.S.C. §§ 157(b)(2)(A), (N), and (0),
and venue before this Cour is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
B. The Debtors sered the notices required by the Sale Procedures Order on
August 30, 2010 on the paries reuired by and in accordance with the terms and conditions of
the Sale Procedures Order, i.e. (i) the U.S. Trustee; (ii) the members of and counsel to the
Committee; (ii) the DIP Lenders (as defined in that certai Final Order Granting Emergency
Motion for Order Under 11 U.S.C. §§ 105,363, 364(c)(I) & (2), and 364(e), Fed. R. Bank. P.
2002,4001, and 9014, and the Court's General Order on Complex Chapter 11 Cases: (1)
Authoriing Debtors to Obtain Postpetition Financing on Superriority and Secured Basis, (II)
Permitting the Use of Cash Collatera, and (II) Granting Final Relief (DK 125) the "Final DIP
Order")); (iv) counsel to the agent for the DIP Lenders; (v) the Debtors' Pre-Petition Debenture
Holders; (vi) the attorneys general for each of the States in which the Debtors conduct
operations; (vii) all taxing authonties having jurisdiction over any of the Purchased Assets,
including the Internal Revenue Servce; (viii) all paries that have requested or that are required
to receive notice puruant to Bankruptcy Rule 2002~ (ix) any paries who have expressed a
written interest in the Purchased Assets; (x) pares who are known or reasnably believed to
have assered any Hen, encubrace, claim or other interest in the Purchased Assets; and (xi) all
governental agencies that are an interested party with respect to the Sale and transactions
proposed thereunder, with notices regarding assumption and assignent of executory contracts
and unexpired leases also served on all counter-paries to such contracts and leases (the
"Required Paries") and as reflected in the Cerificates of Serice filed with this Court on
September 4, 2010 (DE 208J. Furer notices with respect to the Auction and Sale and Pivotal
4 2278059.14
GC Sale Motion and Modification Notice, and Second Modification Notice were timely served
as set fort above.
C. Mission Critical Vendors and other parties to contracts, executory
contracts and leases were notified on August 31,2010 of procedures to be followed in
connection with the assumption and assignent to the Cour-approved buyer in conjunction with
the Sale, including objections to cure amounts and ters to be set fort on a Cure Schedule (DE
218) (the "Cue Motion"). On September 15,2010, the Debtors served the Notice of Filing of
Cure Schedule Incident to the Debtors' Sale Motion, the Cure Scheduled and Notice of Debtors'
Procedures with Respec to Assumption and/or Assignent of Certain Executory Contracts and
Leases and the Establishment of Cure Costs and Payments Associated Therewith, (DE 218, DE
224). On October 18, 2010 of an amended deadline for objections of October 25, 2010 was
noticed (DE 325, 337). On October 31, 2010, the Debtor filed the Notice of Debtors'
Designation of Successful Bidder in Conjunction with Reorganization Plan Rescheduled Sale
Hearng, and Assumption and Assignent of Contracts, Executory Contrcts and Unexpired
Leases and Objection Deadline (DE 369) ("Cure Schedule"), and timely served it on all counter-
paries to contracts, executory contracts and unexpired leases proposed to be assumed and
assigned to Pivotal GC (DE 390).
D. Objections or reservations of nghts with respect to the Cure Motion were
fied by ColoSpace, Inc. (DE 268), ITS Communications, Inc. (DE 269, 334), Level 3
Communications, LLC and its affliates (DE 270), Qwest Communcations Company LLC and
Qwest Corporation, as supplemented (DE 273), Hobbs Brook Management LLC and 265 Winter
LLC, as supplemented (DE 274,384,586), Verzon Communications, Inc., as supplemented (DE
276,416,581), AboveNet Communications, Inc. (DE 277), Orbitz, LLC (DE 278), Oracle
America, Inc., as supplemented (DE 279, 415,585), AT&T Corp., as supplemented (DE 281,
589), and BCE Nexxia Corporation (DE 282) (collectively, "Cure Amount Objections").
Objections to the Cure Schedule were filed by Verizon Communications, Inc. (DE 416),
5 2278059.14
AboveNet Communications, Inc. (DE 375, 402), Oracle America, Inc. (DE 415), and AT&T
Corp. (DE 387) (collectively, "Cure Schedule Objections").
E. Good and suffcient notice of the Bidding Procedures, as amended; the
Sale Motion; Auction; the Sale Hearng; the Pivotal GC Bid Motion, Pivotal GC PlanSale
Motion and Plan provisions concerng the Sale have bee given so as to provide all creditors
and paries in interest entitled to notice with such notice and such opportnity for hearing as is
appropriate under the facts and circumtances of this bantcy case within the meaning of
section 102(1) ofthe Banptcy Code and as required by 11 U.S.C. § 363(b)(1), and Fed. R.
Ban. P. 2002(a)(2), (c)(l), and (k), and 6004(a) and (c), and no additional or further notice is
required for entr of this Order.
F. Pivotal GC has acquired the Interests and Claims held by the Debentue
Holders and DIP Lenders, and has withdrwn the Debentue Holder Objection, GC Newco
Objection, and the Stalking Horse Bid, and withdrawn the support of the Debenture Holder and
Tranche B DIP Lender for a sale to Global Telecom & Technology, Inc. ("GTT"). The GTT
Joinder has no effect upon withdrawal of the Debenture Holders Objection.
G. Pivotal GC has requested authority to trsfer the Purchased Assets
immediately upon acquisition to its wholly-owned subsidiar, GC Pivotal, LLC, an Arizona
limited liability company ("GC Pivota" and, unless separately referenced hereafter, included
within the defined ten "Pivotal GC"), which has already received certain regulatory approvals
to conduct business in locations where the Debtors operate, reducing the time period required for
obtaining all regulatory approvals required for Closing.
H. The USAC Objection to treatment of its administrative expense claim is
resolved as follows: Subject to, and without waiver or limitation of, the Debtors' and Pivotal
GC's and/or Reorganzed Debtors' rights to dispute invoiced amounts in the ordinary course,
which the parties wil work in good faith to resolve, and with existing contract remedies if they
are unable to resolve any such dispute,
6 2278059.14
1. Debtors shall continue to pay USF Obligations3 incured post-
petition but prior to the Sale Closing when invoiced and due in the ordinar
course. Within i 0 days of the Sale Closing, the Debtors shall pay to USAC any
and all invoice and unpaid USF Obligations which arose on or after the Petition
Date though the date of the Closing;
2. Debtors shall treat USAC's pre-petition claim for unpaid USF
Obligations with other unsecured claims under Debtors' Plan
3. All USF Obligations invoice by USAC prior to the Sale Closing
which arse as a result of Anual True-Ups wil be allocated between pre-petition
and post-petition perods; the pre-petition portion of any such USF Obligations
arsing as a result of Annual True-Ups will be included in the USAC unsecured
clai, and the porton allocated to the post-petition perod wil be paid by the
Debtors when due. -
4. The Buyer shall pay when due any and all post-Closing USF
Obligations as invoiced by USAC including, without limitation:
a. all USF Obligations invoiced by USAC on or after the date
of the Closing;
b. all USF Obligations invoiced by USAC after the date of the
Closing which may arise as a result of the Anual True-Ups,
regardless of the revenue period covered, provided that only the
portion ofUSF Obligations detennined by Annual True-Ups
allocated to the post-petition perod will be paid, while the portion
due pre-petition wil be included in the USAC unsecured claim;
and
3 USF Obligations, Anual True-Ups and Annual Revenue Report have the meanings ascribed thereto in the USAC
Limited Objection.
7 2278059.14
c. all USF Obligations invoiced by USAC after the, Closing
which arse as a result of revised or amended Anual Revenue
Reprt submitted by or on behalf of the Debtors, regardless of the
revenue perod covered, provided that only the porton of USF
Obligations detered by revised or amended Annual Revenue
Reports allocated to the postpetition penod wil be paid, while the
porton due prepetition wil be included in the USAC unsecured
claim.
5. In the event that any Anual True-Up conducted by USAC after
the date of the Closing results in the issuance of credits toward USF Obligations,
the Buyer shall be entitled to the full value of those credts, regardless of the
revenue period covered (except that USAC shall first apply any such credits to its
outstanding pre-petition or post-petition claims. if any. as applicable);
6. In the event that the Buyer, the Debtors, or any entity on the
Debtors' behalf timely submits a revised or amended Anual Revenue Report that
results in the issuance of credits toward USF Obligations, the Buyer shall be
entitled to the full value of those credits regardless of the revenue perod covered
by that revised or amended Annual Revenue Report (except that USAC shall first
apply any such creits to its outstanding pre-petition or post-petition claims, if
any, as applicable);
7. The Debtors shall timely submit all Quarterly and Annual Revenue
Report which become due on or before the date of the Closing;
8. The Buyer shall timely submit all Quarterly and Anual Revenue
Reports that becme due afer the date of the Closing and, ifthose Annual
Revenue Reprts cover revenue periods prior to the Closing date, the Buyer shall
include the Debtors' pre-Closing revenues; and
8 2278059.14
9. Nothing in this Sale Order or in connection with the Sale shall
prohibit, alter or limit USAC's rights to (i) audit the Debtors' reported contrbutor
revenuest including with respect to pre-sale and pre-petitíon perods, (ii) assess
and invoice any USF Obligations resulting frm any such audit, and (iii) pursue
all ofUSAC's rights related to any such audit including, without limitation.
amending previously fied claims agaist the Debtors.
10. Notwithstanding the Administrative Bar Date in the Plan, nothing
herein shall be deemed to limit or restrct USAC's right to amend or supplement
its admnistrtive claim and USAC shall have the right to amend or supplement its
admiistrative claim in the event that (1) the Debtors or the Buyer submits
upwardly revised revenue to USAC and/or (ii) USAC deterines though audit or
otherwise that the Debtors' revenue must be upwardly revised.
The USAC Objection to the Sale is overled in all other respects, as the remainder of the USAC
Objection concerns Plan confirmation issues.
I. The Capstone Objection is overrled as it is a fee allowance issue rather
,All c.l~~ ~ d.6.'U~ ~..-~ .(~4(lU)AoC.~ a.r.~¡/.r.
than a Sale objection.ATo the extent Capstone objects to sufficiency of funds to pay all
Administrative Expenses as finally approved or agree upon by the claiants, the Court
overrles the Capstone Objection to the Sale, as it is a Plan confirmation objection.
J. The Vanco Objection is overled insofar as it seeks a Cure payment,
since the Vanco contract is being rejected under the Modified Pivota AP A. Insofar as Vanco
asserts that the amount for Mission Critical Vendors must be increased to cover Vanco's
constrctive trst claim, on the Closing Date, Pivotal GC wil set aside $1,085,535.78 to satisfy
Vanco's claim as a Mission Critical Vendor claim only ifVanco wins its constructive trust
litigation, in accordance with the October 8,2010 stipulated order (Adv. Pro. 10-53164 DE 11).
which funds shall be owned by Pivotal GC and not be property of the Debtors' estates, and shall
be held in a segregated account pending fuher order of the Court. Such amount shall not be set
aside ifVanco loses its constrctive trst litigation before the Closing Date.
9 2278059.14
..'
K. The Debtors extensively marketed the Sale Assets in good faith, and the
Debtors' investment baners sought equity or debt financing to support the Stalking Horse Bid.
L. By the deadline for submittng bids in the Bidding Procedures, (1) GC
Newco, initially designated as the Stang Horse Bidder, was a Qualified Bidder; (2) Pivotal GC
submitted a bid (as amended, the "Pivotal GC Bid") with attached form of Asset Purchase
Agreement, evidence of financial abilty to close, and all other docuents required to be a
Qualified Bidder; and (3) GTT also submitted a bid without a form of Asset Purchase Agreement
or schedules and without evidence of fiancial abilty to close. The Debtors notified GC Newco,
Pivotal GC, GTT and other required paries on October 20,2010 that Pivotal GC was detennined
to be the lead bidder.
M. On October 21,2010, the Debtors commenced the Auction over the
objection of GC Newco. Durig the Auction. GTT submitted an additional bid. a fonn of Asset
Purchase Agreement (without schedules), and cerain evidence related to its financial ability to
close. The Auction was continued to October 25,2010 to allow all partes in interest to evaluate
the additional GTT documents.
N. On October 25, 2010, the Auction continued. GTT and GC Newco
submitted a combined bid. Pivotal GC submitted an amendment to the Pivotal GC Bid. On
October 26.2010. Pivotal GC provided the Debtors with a formal, wrtten amendment to the
Pivotal GC Bid. On October 26. 2010, the Debtors considered and evaluated the bids, and
deterined that Pivotal GC was the Successful Bidder.
O. The Debtors selected the Pivotal GC as the Successful Bidder based upon
criteria that included, without limitation, the following:
1. The bid was strctured in such a fashion that could confinn a plan;
2. The documentation provided by Pivotal relative to financial abilty
to close had the least risk of default;
3. the offer was a highest and best offer for the greatest number of
classes of creditors; and
10 2278059.14
4. the indication from one of the largest Mission Cntical Vendor was
that Pivotal was the purchaser of choice.
P. The Pivotal GC Bid was withdrawn when it was not approved by the
deadline set fort in the Pivotal GC Bid. However, the Debtors have sought approval ofthe
Modified Pivotal AP A which is substantially similar to the Pivotal GC Bid, with modifications
descrbed in the Pivotal GC Sale Motion and Plan Modification Notice.
Q. Based on the record presented, the Debtors have exercised sound and
considered business judgment in deciding that the Modified Pivotal AP A is the best and highest
bid susceptible of plan confirmation to acquire the Purchased Assets. Based upon such evidence,
the Court finds tht it is in the bes interests of the Debtors and the Debtors' estates: (1) to
consumate the Sale to Pivotal GC in accordance with the Modified Pivotal AP A; and (2) to
assume and assign to Pivotal GC the Assumed Liabilities, as set fort on the Schedules to the
Modified Pivotal AP A.
R. The Modfied Pivotal APA and all schedules and exhibits thereto fully
complied with all of the requirements set forth in the Bidding Proceures, as modified, and the
Plan provisions regarding the Sale. The Contracts and the Real Property Leaes defined in the
Modified Pivotal APA are agreements or are executory contrcts and unexpired leases within the
meaning of Banptcy Code section 365. The Sale and the assumption and assignent of the
Contracts and Real Propery Leases and Assumed Liabilties to Pivotal GC are approved and
authorized under the Bankrptcy Code, including Sections 105, 363, 365 and 1 i 23 of the
Bankrptcy Code.
S. In connection with the Pivotal GC Bid, Pivotal GC submitted sufficient
and satisfactory written evidence that Pivotal GC has the financial wherewithal to close the Sale
and to satisfy Cure obligations and Assumed Liabilities when such obligations become due for
the purpose of demonstrating feasibilty (as required by Banptcy Code section 1 129(a)(1 1)),
adequate assurance of future perorance with respec to the Assumed Liabilties (as required by
section 365) under the Plan and in compliance with the Sale Procedures Order.
11 2278059.14
T. Schedule 2.3(c) to the Modified Pivotal APA and the subparagraphs below
set forth the Debtors' proposed payments and payment tens, if any, that are required pursuant to
sections 365(b)(l)(A) and 365(b)(l)(B) oft1e Banptcy Code and the satisfaction of Claims of
Mission Critical Vendors that are not executory contracts and unexpired leases (collectively, the
"Cure"), all of which are included in the Debtors' assumption and assigient of the Assumed
Liabilties (the "Agree Cures"). The Agreed Cures set fort the amounts and Cu tens
reflected in the Cure Schedule, and amounts and terms agreed to by the holder of Cue Schedule
Objections, as set forth in the Pivotal GC Sale Motion, except as set forth in the following
subparagraphs. Other than as set fort in the Pivotal AP A Schedule 2.3( c) and the subparagraphs
below, or separate order of the Cour no other Cure amounts are due or need be satisfied in order
for the Debtors to assue, and assign to Pivotal GC the Assumed Liabilties. The Assumed
LiabiHties include, and Pivotal GC shall pay curent accrued and unbiled obligations under
assumed Contracts and Real Propert Leases when invoiced and due post-Closing in the ordinar
course.
1. Level 3 Communications, LLC and its affliates: The Debtors wil
pay $805,794.88 to satisfy all pre-petition undisputed amounts, of which
$252,458.21 wil be in the form of application of the adequate assurance deposit
held by Level 3 against the total amounts due, with the net due in cash on the
Closing Date/Plan Effective Date. Level 3 wil receive and Pivotal GC wil
maintain an adequate assurance depsit going forward of$134,548 (one month
current MRC).
2. Qwest Communications Company, LLC f/a Qwest
Communications Corporation and Qwest Corporation: Qwests objection is
resolved pursuant to a separate stipulation with Qwest.
3. Verizon Communications, Inc. and its subsidiares: Verzon
Communications, Inc. and its subsidiares: Debtors wil pay $1,663,157.91 to
satisfy all pre-petition undisputed amounts, satisfied in part by applying the
12 2278059.14
unused portion of the $603,285.88 adequate assurance deposit held by Verizon
against the total amounts due, with the net due in cash on the Closing Date! Plan
Effective Date. To ensure proper application, the Debtors wil tender the cure
amowit though Verzon's counsel and not though the payment lockbox. The
Cerer escrow agreement wil be maintained, as requested. Debtors and Pivotal
GC will separately reach an agreement with Verion on the requirements for
futue deposits and/or minimal cash balance, given the strctue, backing and
health of the new company. Debtors have reached an agreement with Verizon on
the offset of any pre-petition amounts owed by Verion agaist Venzon' s
prepettion non-cure Clai. Per the stipulation betwee the parties, Verzon may,
without furter cour order or relief from stay, immediately offset the pre-petition
amounts owed by Verizon agaist Verizon's prepetition non-cure Claim. Verizon
shall amend its proof of claim to reflect the results of any offset and to further
reflect the payment of cure amounts ordered herein.
4. AT&T Corp. and its affliates: Debtors will pay $4,489,000 to
meet AT&T cure obligations, which shall be satisfied in part by applyig the
$1,021,006.42 adequate assurnce deposit held by AT&T against the total
amounts due, with the net due in cash on the Closing Date! Plan Effective Date.
Debtors and Pivota GC after Closing wil kee the Cemer escrow agreement in
place, as requested.
5. AboveNet Communications, Inc. (DE 277,375,402): The Debtors
are hereby authorized to assume and assign to the Purchaser, effective upon the
payment of the cure amount set forth herein, that certain Master Products and
Serces Agreement by and between the Debtors and AboveNet Communications,
Inc. ("AboveNet") and the supplements, order forms, exhibits and related
agreements executed thereunder (collectively, the "AboveNet Contacts"). Within
thee (3) business days of the Closing, the Debtors and the Purchaser shall pay
13 2278059.14
AboveNet the prepetition cure amount of$18,313.74 (the "Prepetition Cure
Amount") by sending a check to AboveNet Communications, Inc., Attn: Thomas
Kelly, 360 Hamilton Avenue, White Plains, NY 10601. The Prepettion Cure
Amount is net of ceaín depsits in the amount of $ 11,733.77 paid by the Debtors
to AboveNet, which AboveNet is hereby authorized to utilize in satisfaction of the
balance of the prepetition cure amount. The Debtors and the Purchaser shall also
pay AboveNet for any and all outstading postpetition ínvoices issued under the
AboveNet Contracts prior to Closing in the ordinar course of business in
compliance with the ters of the outstanding invoices. In the event the Debtors
and the Purchaser fail to timely do so, AboveNet may move this Cour for
enforcement of this Order and this Cour retain jurisdiction to enforce this
provision.
6. Oracle Amerca, Inc. (DE279, 415): The Debtors have clarfied
with Oracle the specific agreeent being assumed and assigned, i. e. Oracle
serice contract #4961155, which is current and has no pre-petition amounts due.
The other Oracle servce agreeent wil expire in the ordinar course prior to
Closing. The On Demand contrcts referenced in the Oracle Objection are not
assumed, and are accordingly rejected as of the Closing Date. The licenses
referenced in the Oracle Objection are held by Debtors, and wil be assumed and
assigned at the Sale Closing. A list otthe Oracle licenses so assumed and
assigned is attached as Exhibit 1, and Schedule 2.1 (c )(i) is deemed amended to
include such list.
U. The Cure Objections not addressed and satisfied through the foregoing
treatment are resolved or overrled as follows:
1. Co10Space (DE 268): Schedule 2.3(c) includes the Cure Amount
sought by ColoSpace.
14 2278059.14
2. ITS Communications, Inc. (DE 269, 334): The Contract expired by
its ters in accordance with a stipulated order (DE i 56), mooting assumption and
Cure objections. An ITS securty deposit of$79,321.96 was eroneously listed on
Schedule 2. i (d) as a Puchased Asset. ITS may retai and apply such securty
deposit to its prepetition Claim after ITS and the Debtors reconcile the Claim
amount and secuty deposit amount.
3. 265 Winter LLC and Hobbs Brook Management LLC (DE 274,
384): The objection wil be resolved pursuant to a separate stipulation and order.
4. Orbitz, LLC (DE 278): Contrac rejected, as shown on Schedule
2. i (c)(ii), which does not include Orbitz, mooting assumption Cure objections.
5. BCE Nexia(DE 282,602): The assumption and assignent
objection wil be separately addressed in conjunction with resolution of Debtors'
motion to assume and assign this Contract (DE 438)
V. The evidence on recrd regarding the abilty of Pivotal GC to pay the
Purchase Price and to fud the operating expenses of the Debtors' business on a going forward
basis is suffcient evidence of adequate assurce of futue perfonnance by Pivotal GC with
respect to the Assumed Liabilties that constitute executory contracts and unexpired leases, as
required pursuant to sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankptcy Code and the
Bidding Procedures.
W. Effective as of the Closing, the Debtors' banptcy estates shall be
relieved puruant to Section 365(k) of the Banptcy Code from any liabilty for any obligations
under and with respect to the Assued Liabilties that constitute executory contracts and
unexpired leases.
X. The Pivotal GC Bid and Modified Pivotal AP A were proposed by Pivotal
GC under the same procedures available to all bidder and were entered into in good faith
between Pivotal GC and the Debtors after review and approval by the Court and are in good faith
within the meaning of section 363(m) of the Bankruptcy Code. There was no evidence of
15 2278059.14
collusion, fraud, control of the Purchase Price by any agreement among bidders, or actions
prohibited by Banptcy Code section 363(n) raised or admitted in connection with the Pivotal
GC Bid, the Modified Pivotal AP A or the Sale. Pivotal GC is acquiring the Purchased Assets in
good faith and is a good faith purchaser withn the meag of and is entitled to the protections
of Banptcy Code section 363(m). Pivotal GC is a "disinterested" pary within the meang of
11 U.S.C. § 101(14), and is not an insider of the Debtors or related to the Debtors in any way.
Y. The purchase price offered by Pivotal GC under the Modified Pivotal
AP A constitutes the best offer and, under the circumstances, is the highest and best offer for the
Purchased Assets received by the Debtors, and is, ald shall be deemed, to constitute reaonably
equivalent value and fair considertion under the Bankptcy Code and under the laws of the
United States and any State.
Z. The transfer of any assets from Magenta netLogic Limited, UK
("Magenta") to the Debtors, in consideration for release and extinguishment of intercompany
notes, if applicable, is for fair value. Magenta has not received any prepetition or post-petition
advances frm any prepetition or post petition lender of the Debtors.
,AA. Predicates exist under one or more applicable subsections of Section
363(f) as well as Section i 123 of the Bankptcy Code to authorize the Sale to Pivotal GC of the
Purchased Assets free and clear of all liens, Encumbrances, Claims and Interests of any nature
and of all paries in the Puchased Assets.
BB. No thrd pary consents are needed for Closing the Modified Pivotal AP A
other than consents from Governental Bodies as set forth in the Modified Pivotal AP A.
CC. Pivotal GC would not have entered into the Modified Pivotal AP A and
would not consummate the transactions contemplated thereby if the sale of the Purchased Assets
to Pivotal GC or (to the extent pennitted) its respective assignees, the assumption, assignment
and sale of the Assumed Contracts and Real Property Leases to Pivotal GC or (to the extent
permitted by the Agreement) its respective assignees, and the assumption of the Assumed
Liabilties by Pivotal GC or (to the extent permitted by the Agreement) its respective assignees
16 2278059.14
were not, excet as otherwise provided in the Modified Pivotal AP A with respect to the Assumed
Liabilities and Pemitted Encumbrances, free and clear of all Claims, Interests and
Encumbrances of any kind or natu whatsoever, or if Pivotal GC would, or in the future could
(except and only to the extent expressly provided ín the Modified Pivotal AP A or any
amendments thereto, and with respect to the Assumed Liabilties), be liable for any of such
Claims, Interests or Encumbrances or other futue liabilties arsing out of past conduct of the
Debtors or the Debtors' past ownership of the Puchased Assets (such other liabilties or
obligations being referred to collectively as the "Successor Liabilties"), including, but not
limited to, Encumbraces or Successor Liabilties in resct of the following (the followíng
being refered to collectively as the "Successor Liabilty Docwnents, Statutes and Claims"):
(1) any employment or labor agreements; (2) all dees of trt and security interests; (3) any
pension or medical benefit plan of the Debtors, compensation or other employee benefit plan of
the Seller, welfare, agreements, practices and progrs; (4) any other employee, worker's
compensation, occupational disease or unemployment or tempora disabilty related claim,
includíng, without limitation, clais that might otherwise arse under or pursuant to: (a) the
Employee Retirement Income Security Act of 1974, as amended, (b) the Fair Labor Standards
Act, (c) Title VII of the Civil Rights Act of 1964, (d) the Federal Rehabiltation Act of 1973,
(e) the National Labor Relations Act, (f) the Worker Adjustment and Retraining Act of 1988,
(g) the Age Discrimination and Employee Act of 1967 and Age Discrimínation in Employment
Act, as amended, (h) the Amercans with Disabilties Act of 1990, (i) the Consolidated Omnibus
Budget Reconciliation Act of 1985, G) state discrimination laws, (k) state unemployment
compensation laws or any other similar state laws, or (1) any other state or federal benefits or
claims relating to any employment with the Sellers or any predecessors; (5) environmental or
other claims or Liens arising from existing conditions on or prior to the Closing (including,
without limitation, the presence of hazardous, toxic, polluting or contaminating substances or
waste) that may be asserted on any basis, including, without limitation, under the Comprehensive
Environmental Response, Compensation, and Liabilty Act, 42 U.S.C. §§ 9601, et seq., or other
17 2278059.14
state statute~ (6) any bulk sales or similar law; and (7) any tax statutes or ordinances, including,
without limitation, the Interal Revenue Code of 1986, as amended, and (8) any theories of
successor liabilty, including any theories on successor products liabilty grounds.
DD. Pivotal GC as the Purchaser is not merely a continuation of the Debtors,
and no common identity of incorporators, directors or stockholder exists between Pivotal GC
and the Debtors. The Sale is not being entered into fraudulently. If the Sale is consummated as
a direct transfer of Purchased Assets, Pivotal GC will not be, as a result of any acton taen in
coimection with the Sale or otherse, (i) a successor to the Debtors or their bankrptcy estates
(other than with respect to the Assumed Obligations and any obligations arsing under the
relevant Assumed Contracts and Real Propey Leases from and afer the Closing); or (2) de
facto or otherwise, have merged or consolidated with or into the Debtors. If the Sale is
consummated though a Reorganzation Alterative, Pivotal GC will be the owner of equity
secunties of one of more ofthe Debtors who wil continue for reguatory and operational
puroses, or Pivotal will be the successor to one or more of the Debtors for reguatory and
operational purposes, but all Claims and liabilties of the Debtors and their banptcy estates
through the Closing Date and all Interests in the Shares, except for the Assumed Liabilities, are
stil discharged under the Plan, and Pivotal GC wil have no Successor Liabilities except to the
extent of the Assumed Liabilties. A transfer of Shars in the Debtors under the Reorganization
Alternative through a direct purchase of the Shares of one or more ofthe Debtors, or by the
cancellation of all existing shares and issuance of new equity interests in the Debtors, or pursuant
to the ters of one or more mergers, consolidations, share exchanges, recapitalizations,
reorganizations or other similar trsactions wil vest in Pivotal GC all right, title and interest in
such transferred Shares free and clear of any and all rights, Interests, Encumbrances and Claims
of any kind or nature, whether imposed by agreement, undertanding, law, equity or otherwise,
all of which shall attach to the net proceeds of the Sale in the order of their priority, with the
same validity, force and effect which they now have and to all claims and defenses the Debtors
or other paries may possess with respect thereto.
18 227&059.14
EE. The Modified Pivota AP A and the assumption and assignent of the
Assumed Liabilties by the Debtors to Pivota GC are approved and authorized under the
Banptcy Code, including Sections LOS, 363, 365 and 1123 of the Banptcy Code.
FF. Nothg contained in the Plan or any plan of reorganization or liquidation
wil alter, conflict with, or derogate from. the provisions of the Modified Pivotal AP A or this
Order, and the terms of the Plan shall be conformed to the extent that any provision ofthe
Pivotal AP A is inconsistent with the Plan.
GG. Pivotal GC, as successor to the DIP Lenders, has been authorized by order
granting the Sale Facility Motion to advance additional amounts under the DIP Loan Documents
(as defined in the Final DIP Order), secured by the collateral pledged thereunder, as a DIP "Sale
Facility" (as defined in the Sale Facilty Motion) for the Purchase Price, including through a
credit bid of all amounts advanced.
HH. All findings of fact and conclusions oflaw made by the Court at the
hearing on the Sale Facilty Motion and Plan Confirmation are incorporated herein.
II. The Debtors have satisfied the applicable provisions of the Sale
Procedures Order, the Bidding Procedures, and the Banptcy Code.
ACCORDINGLY, IT IS HEREBY ORDERED that:
i. The Sale Motion and the Pivotal OC Sale Motion are hereby granted and any
objections or oppositions with respect thereto not previously withdrawn are hereby overred.
2. The Debtors are authorized puruant to (without limitation) Sections 1123(a)(5),
363(b), 363(f), 363(k), 363(1) and 365(b) of the Bankptcy Code to enter into and perform the
Modified Pivotal AP A. The Debtors are authorized to (i) consummate the Sale to Pivotal GC or
its assignee GC Pivotal in accordance with and subject to the terms and conditions ofthe
Modified Pivotal APA and the provisions thereof; (b) execute and deliver, and to perorm fully
under, consummate and implement the Modified Pivotal AP A, together with all additional
instruments and documents contemplated by the Modified Pivotal AP A or that may be
reasonably necessar or desirable to implement the Modified Pivotal AP A, and (iii) take any and
19 2278059.l4
all actions necessar or useful to effectute and comply with the terms of the Modified Pivotal
AP A and all other applicable documents, if any, in order to complete the Sale, including the
transfer of the equity interests in Magenta to Pivotal GC or its assignee GC Pivotal or the transfer
of assets of Magenta to such Debtors holding intercompany claims against Magenta, in
considertion for release of those intercompany claims, which trsfer wil be free and clea of
any liens and clais, and to take any other action with rest to the equity interests and assets
of Magenta as may be deemed appropriate or desirable by Debtors, and to take any other action
with respect to the equity interests and assets of Magenta as may be deemed appropriate or
desirable by the Debtors and Pivotal GC. One or more of the Debtors are authorized to cancel all
existing shaes and issue or trafer shares of stock to Pivotal GC or its assignee GC Pivota to
evidence the direct purchase of such shares, or the issuance of new shares, or the acquisition of
shares puruat to the ter of one or more merger, consolidations, share exchanges,
recapitaizations, reorganizations or other similar trsactons if an Alternative Transaction under
the Modified Pivotal AP A/eorganization Election under the Plan is effeced, and the Interests in
the Shares are deemed to termnate wheter or not docuentation of the Shares is surendered to
the Debtors or transferred to Pivotal GC or GC PivotaL.
3. The Debtors are hereby authoried to: (a) assume and assign to Pivotal GC or GC
Pivotal, effective upon the Closing. each of the Assumed Liabilties. with Cure oblígations paid
and Allowed Claims of the counterpares to Assumed Liabilties satisfied though treatment
under the Plan and Confirmation Order and in accordance with the Agreed Cures set fort in
Schedule 2.3(c) to the Modified Pivotal APA and paragraph ífabove; and (b) execute and
deliver to Pivotal GC or GC Pivotal such documents or other instrents as may be necessar to
assign and transfer each of such Assumed Liabilties to Pivotal GC or GC PivotaL. In accordance
with Banptcy Code section 365(f). all of the Contracts and Real Propert Leases provided for
in the Modified Pivotal AP A are tranferrable notwithstanding any provisions prohibiting or
restricting assignent.
4. The Debtors shall pay all Cure payments required for the Assumed Liabilties at
20 2278059.14
Closing and thereafter as set fort in paragraph R above under the terms of the Plan and
Confirmation Orer, and shall do so first from any estate fuds deemed unencubered to the
extent such fuds have not been used to satisfy Administrative Expenses. The Cure amounts and
ters required for each Assumed Liabilty, if any, shall be the amount set forth in Modified
Pivotal APA Schedule 2.3(c) and pargrph--bove. As of the Closing, other than the Cure for
a resective Assued Liabilty, if any, the non-Debtor par to each Assumed Liabilty shall be,
and hereby is, bared and estopped from assering against the Debtors, their propert, or assets,
or Pivotal GC or GC Pivotal any obligation thereunder which arose or accrued pnor to the
Petition Date, whether by way of affrmative claim, counterclaim, defense, set-off or otherwise.
Each counterpary to an assigned Contract or Real Property Lease is herby forever bared,
estopped, and permanently enjoined from raising or assertng agaist Pivota GC or GC Pivotal
or its property any assignent fee, default, breach, claim, pecuniar loss, liabilty or obligation
(including whether legal or equitable, secured or unsecured, matued or unatured, contingent or
non-contingent, senior or subordinate) arising under or related to the assigned Contracts and Real
Property Leaes existing as of the Closing Date or arsing by reason of the Closing, except for
the Assumed Liabilty Cure, if applicable.
5. Except as expressly permitted or otherwise specifically provided for in the
Modified Pivotal APA or this Order, pursuant to secions 105(a), 1123, and 363(f) of the
Banptcy Code, Pivotal GC or its assignee GC Pivotal is acquirng the Purchased Assets on the
terms and conditions set fort in the Modified Pivotal AP A, and even if accomplished through a
Reorganization Election (Alterative Transaction under the Modified Pivotal APA). upon
Closing such Purchased Assets including Shares shall be free and clear of all líens, Claims,
Interests, obligations and Encumbrances whatsoever, including all debts and claims ansing in
any way in connection with any agreements, acts, or failures to act) of any of the Debtors and
whether imposed by agreement, understanding, law, equity or otherse, including but not
limited to claims otherwise arsing under doctrnes of successor liabilty or vicaous liabilty of
any kind or character arsing at any time prior to the Closing ofthe Sale, including the Successor
21 2278059.14
Liabilties. Except with respect to and limited to Assumed Liabilities, Pivotal GC or its assignee
GC Pivotal shall take title to and possession of the Purchased Assets directly or indirectly free
and clear of all liens, claims, obligations, setoff and recoupment interess and encumbrances and
Interests of any kind or nature whatsoever, including all debts and claims arsing in any way in
connection with any agreements, acts, or failures to act, of any of the Debtors and whether
imposed by agreement, understanding, law, equity or otherwse, including any avoidable transfer
claims against any of the Debtors or thei affiliates, including to the extent their Shares are
Purchased Assets.
6. Upon the Closing of the Sale and the Effective Date of the Plan, Pivotal GC, GC
Pivotal and the Debtors shall reeive the ful benefit of all discharge, releases and injunctions
provided for in the Plan and section 1141 (d) of the Banptcy Code. All liens, Claims,
Encumbrances and Interests are deemed extinguished and terinated, except for Assumed
Liabilities, but to the extent necessar or useful to establish clear title, paries in interest shall
execute and deliver to the Debtors any instrent or docuent required to effect a release of
liens, Claims, Encumbrances or Interests in accordance with ths Order and the Plan, and Debtors
may execute and deliver any such instruments and documents under power of attorney or
otherwise. Pivotal GC and GC Pivotal are not liable for any pre- or post-petition debts of the
Debtors other than with respect to payment of the Puchase Price and Assumed Liabilties as set
forth in the Modified Pivotal APA, whether or not an Alternative Trasaction under the Modified
Pivotal AP A/Reorganization Election under the Plan is exercised.
7. This Order (a) shall be effecve as a determination, as ofthe Closing, that all
Claims or Interests of any kind or natue whatsoever existig as to the Debtors or the Purchased
Assets, including Shares, prior to the Closing have been unconditionally released, discharged and
terninated as to the Shares and other Purchased Assets, and that the conveyances descrbed
herein have been effected, and (b) shall be binding upon and shall govern the acts of all entities,
including, without limitation, all Governental Bodies and all parties in interest in this case and
their employees, principals and agents. Subject to the Claims and Interests attaching to the
22 2278059.14
proceeds of the Sale, each of the Debtors' creditors, equity interest holders and other paries in
interst is authorized and directed to execute such documents and take all other actions as may be
reasonably necessar to release its Claims and Interests in the Purchased Assets, if any, as such
Interests may have been recorded or otherwise exist, and in the absence of such action, the
Debtors are authorized as attorney in fact for such pares to take such actions.
8. Each and ever federal, state, and local goverent agency or deparent, and
each and ever utility or provider of telephone or other serce, is hereby authorized and direced
to accept any and all documents and instrent, including without limitation a certified copy of
this Order, which are necessary and appropriate to consumate the transactions contemplated by
the Modified Pivotal AP A, including without limitation the transfer of the Purchased Assets to
Pivotal GC or its assignee GC Pivotal directly or indirecly through an Alternative Tranaction
under the Modified Pivotal AP A/eorganation Election under the Plan.
9. Neither Pivotal GC, GC Pivotal, nor any of their affliates, owner, principals,
agents, successors or assigns shall, as a result of the consumation of the Sale, (a) be as
successor to the Debtors or their estates; (b) have, de facto or otherwise, merged or consolidated
with any ofthe Debtors or their estates except to the extent the Reorganzation Election is
exercised through a direct purchase of shares of one or more Debtors or by the cacellation of all
existing shares and issuance of new shar or pursuant to the ters of one or more mergers,
consolidations, share exchanges, recapitalizations, reorganizations or other similar transactions,
with a full discharge of all Interests, Claims, Encumbrances and liabilties through the Closing
except for Assumed Liabilties; (c) be a continuation or substantial or mere continuation of the
Debtors or any enterrise of the Debtors except to the extent the Reorganization Election is
exercised through a direct purchase of shares of one or more Debtors or by the cancellation of all
existing shares and issuance of new shares or puruant to the ters of one or more mergers,
consolidations, share exchanges, recapitalizations, reorganizations or other similar transactions
with a full discharge of all Interests, Claims, Encumbrances and liabilties through the Closing
except for Assumed Liabilities; (d) be deemed to have obtained the Purchased Assets via a
23 2278059.14
fraudulent transfer or conveyance. Except for the Assumed Liabilties, the transfer of the
Purchased Assets to Pivotal GC or its assignee GC Pivota under the Modified Pivotal APA shall
not result in (i) Pivotal GC, GC Pivotal, or any of their affliates, owner, member, principals,
successors, assigns or agents or the Purchased Assets having any liabilty or responsibilty for
any claim against the Debtors or agaist an insider of the Debtors; (ii) Pivotal GC, GC Pivotal,
any of their afliates, members, owners, principals, successors, assign, or agents or the
Purchased Assets having any liabilty or responsibilty whatsoever with respect to or be required
to satisfy in any maner, whether at law or in equity, whether by payment, setoff or otherse,
directly or indirectly, any Interests or Excluded Liabilties; or (iii) Pivotal GC, GC Pivotal, any
of their affliates, members, owners, principals, successors, assigns or agents or the Purchased
Assets having any liabilty or resonsibilty to the Debtors except as expressly set fort in the
Modified Pivotal APA. Without limiting the effect or scope of the foregoing, as of the Closing,
Pivotal GC and GC Pivotal shall have no successor or vicanous liabilities of any kind or
character arsing out of, in connection with, or in any way relating to, the operation of the
Purchased Assets prior to the Closing, including no Successor Liabilties.
10. In the event of an Alterative Transaction/Reorganization Election, (i) the trsfer
of the Shares to the Buyer pursuant to, and subject to the tenns of, the Alternative Transaction
shall constitute a legal, valid and effective transfer of the Shares, and shall, upon the
consummation of the Closing, vest in the Buyer good and marketable title in and to the Shares,
free and clear of all Interests, Claims, liens and Encumbraces of any kind or nature whatsoever,
(ii) all persons and entities, including, but not limited to, all debt secrity holders, equity security
holders, govermental, tax and other regulatory authorities, lenders, trade and other creditors
holding any claims to the Shares, are forever bared and estopped frm asserting against the
Buyer, its successors or assigns (to the extent allowed by law), its propery, its officers, directors
and shareholders or the Shares, such perons' or entities' Claims and Interests, and (ii) all such
Claims and Interests shall be unconditionally released and tenninated as to the Shares.
11. To the extent administered by the Debtors and approved by the Cour, any liens,
24 2278059.14
Encumbrances on, Claims agaist and Interests in the Purchased Assets not satisfied out of
escrow in connection with the Closing of the Sale are deemed tranfered solely to the proceeds
of the Sale. Any such proceeds shall be distributed in accordance with Debtors' Plan, puruant
to an order ofthe Cour or as otherise required by the Banptcy Code.
12. If any Goverental Bodies have not yet granted Regulatory Approval required
for the consumation of the Modified Pivotal APA as of the Regulatory Approval Date defined
in the Modified Pivotal AP A, such that (i) cerain of the Purchased Assets caot be trsfered
to Pivotal GC or its assignee GC Pivotal, or Pivota GC or GC Pivotal has not been authorized to
provide telecommunications serices, (ii) pending receipt of reuisite telecommunications
regulatory authorizations from State and Federal regulatory agencies and/or consent of State and
Federal regulatory agencies to the transfer of such Purchased Assets, or (ii) if an attempted
assignent of any Contract or Real Propery Lease, without the consent of any other Peron that
is a pary thereto, would constitute a breach thereof or in any way negatively affect the rights of
Buyer (l.less the restrictions on assignment would be rendered ineffective pursuant to sections
9-406 though 9-409, inclusive, of the Uniform Commercial Code, as amended), as the assignee
of such Contract or Real Property Lease, as the case may be, thereunder, the Debtors shall retain
title to such assets (the "Non-Transferred Assets") and any Assumed Liabilties related to such
assets, pending receipt of such authorizations and consents, and shall bold and treat such assets
in accordance with the terms set forth in a management agreement to be agreed upon between
Pivotal Ge, its assignee GC Pivotal, and Debtors. Upon receipt from time to tie of any such
necessary consents and approvals, such Non-Transfered Assets as are subject to the consents
and approvals so received shall be trasferred to Pivotal GC or GC Pivotal in accordance with
the Modified Pivotal AP A, and Pivotal GC or GC Pivotal shall assume all related Assumed
Liabilities as if such Non-Transferred Assets and related Assumed Liabilties had been
transfered to and assumed by Pivotal GC or GC Pivotal at the Closing.
13. The acquisition by Pivotal GC or its assignee GC Pivota purant to this Order
and the Modified Pivotal AP A is held to be in good faith, as that ter is used in section 363(m)
25 2278059.14
of the Banptcy Code, an d accordingly, the reversal or modification on appeal of the
authorization provided herein to consummate the Pivotal AP A shall not affect the validity of the
Sale or any rights or protections accorded to Pivota GC or GC Pivotal under the Modified
Pivotal AP A or this Order or the Confirmation Order, unless such authoriation is duly stayed
pending such appeal.
14. Pivotal GC is entitled to credit bid the Pre-Petition Debetues and DIP Facilty as
parial satisfaction of its Purchase Price obligations and to fud and utilize increases ofthe DIP
Facilty, i.e. the Sale Facilty, to satisfy additional amounts payable under the Pivotal AP A. The
credit bid by Pivotal GC of the Interests and Claims held by the Debeture Holders and Tranche
A and Tranche B DIP Lenders and the Pivotal GC-fuded Sale Facility in satisfaction of Pivotal
GC's Purchase Price obligations under the Modified Pivotal APA puruant to Banptcy Code
§ 363(k), and § 1123 to the extent § 363(k) is incorporated therein, is approved.
i 5. The Modified Pivotal APA and any related agreements, docuents or other
instrments may be modified, amended or supplemented by the pares thereto, in a wrting
signed by such paries, and in accordance with the ters thereof, without fuher order of the
Court, provided that any modification, amendment or supplement does not have a materal
adverse effect on the Debtors' estates. As and when requested by any pary, each pary shall
execute and deliver, or cause to be executed and deliver, all such documents and instents
and shall take, or cause to be taken, aU such further or other actions as such other pary may
reasonably deem necessary or desirable to consummate the Sale, including such actions as may
be necessar to vest, perfect or confirm, or record or otherwise, Pivota GC's and GC Pivotal's
right, title and interest in and to the Purchased Assets or to implement an Alterative Transaction
under the Modified Pivotal AP Aleorganization Election under the Plan.
16. If the Reorganization Election is made, new common stock issued to Pivotal GC
or GC Pivotal on and after the Closing need not be registered under the Securties Act or any
state or local securities laws, except as provided in the Plan, and the Reorganized Debtors may
amend their corporate and/or limited liability company strcture, articles of incorporation, by-
26 2278059.14
laws, operating agreements and other operative documents.
This Cour retains jurisdicton: (a) to enorc and implement the ters and provisions of the this
Order and the Modified Pivotal APA, all amendments thereto, any waivers and consents
thereuder, and each of the agreements executed in connection therewith; (b) to resolve or
adjudicate any disputes arsing under or related to the Modified Pivotal APA, the DIP Loan
Documents or the Pivotal GC DIP Facility and Sale Facility; (c) to interret, implement and
enforce the provisions of this Order; (d) protect Pivotal GC, GC Pivota, and/or the Purchased
Assets from or against any Claims or Interests assered in the Purhased Assets or Pivotal GC or
GC Pivotal, including by or though the Debtors; and (e) to the extent penítted by applicable
law, grant injunctive relief, including peranently enjoining each and every holder of any Claim
or Interest from commencing, continuig or otherwise puruing or enforcing any remedy, claim,
cause of actlon or
~
Dated ç 2011
(1. :r1. ~ ?(lu ~èh
- . .f- 0 C ftLi r.4i. ir.L¡'~~~~ ~ -(Vl) C'e. 11\,L. ~ .r ~ porc-ka.~.. ¡n,¿CL ..vL. f''','l;tJ II l:
~ocia¡iJ. ~i~AL A-,ta 3,1 (6)(')(13) r~M.~V1';I1~ rJoJ
rAJ ~+- tJ t: M:?-v;-""z Q-:lrtJ,( V-e.VI ~rS j lia bL
I .llJ"" j ,,L" Æ- çtJr~t:'¡ ¡)r&r-cLt~frr:lotJ.td on. J VU-" ~Tr-J
/ . tD A. iJ .1 .. :".. e:Íi l) r d ~ r-Ô l:, t/¿ Ll)l)r+ áMd. ir i,. " "-'r
f=; 41b tJlJJ
lU't ~,,71t~ e.~e.
Cbi/.t ntA..A,:f-i"l1 CJrcLr-'
h.ec.áI
AJ-L
27 2278059.14
EXHBITS BIOGRAHICAL INFORMATION
13
Biographical Information
F. Francis Najafi, Chief Executive Officer and Founder
Francis Najafi is Founder and Chief Executive Officer of Pivotal Group, a twenty-five year old
investment firm with extensive experience in private equity investments and all major real estate
product types.
Mr. Najafi has substantial board level experience and curently serves as the Chairman of the Board
of NxSystems and is an active Board Member of the EastWest Institute. Additionally, Mr. Najafi
previously severed as a Board Member of both Network Solutions and Western Allance
Bancorporation. He is also active in the World President's Organzation (WPO) Chief Executive's
Organization (CEO), Urban Land Institute (ULI), and serves as Governor of the ULI Foundation
Locally, Mr. Najafi is a member of the Greater Phoenix Leadership (GPL), a Trustee of
Thunderbird - The School of Global Management, and a Foundation Board member of
Translational Genomics Research Institute (TGen). He is also a member of the President's Club at
Arizona State University and serves on the ASU's Business School, Dean's CounciL. Mr. Najafi is
also a patron of numerous cultual and civic organizations.
Mr. Najaf completed his Bachelor of Science degree in engineering at Arizona State University
(ASU), followed by two Masters Degrees one from Thunderbird - The School of Global
Management, and an additional Masters from the University of Southern California (USC). At
USC, he began his entrepreneurial activities while a Ph.D. candidate in International Political
Economy.
Richard Garner, Chief Financial Offcer
Mr. Garner has been an integral par of Pivota Group's management team for over ten years and is
responsible for overseeing the accounting and finance requirements of Pivotal and its portfolio
ventues. As a Certified Public Accountant, he has more than twenty years of accounting, finance
and general business experience, including ten years as a consultat, auditor and business advisor
with the national CPA firms of Ernst & Young and Kenneth Leventhal.
He enjoys communty service, including serving as an active youth leader with the Boy Scouts of
America to help shape the lives of America's youth.
Mr. Gamer received a B.S. in accounting from Nortern Arizona University
Business Information for Global Capacity Group, Inc.
ITEM 1.BUSINESS.
Capital Growth Systems, Inc., dba Global Capacity ("CGSI," "we," "our," "us," or the "Company"), is a
publicly traded corporation that delivers telecom information and logistics solutions to a global client set consisting
of systems integrators, telecommunications companies, and enterprise customers. These solutions enable clients to
address the inefficiencies inherent in access networks globally. The global market for access networks, estimated at
over $200 bilion anually, is highly ineffcient, plagued by market fragmentation, regionalized rules and
regulations, and lack of transparency related to pricing and supply. This creates an environment where clients pay
unnecessarily inflated prices due to inefficient procurement practices and margin stacking. The market is
characterized by a large number of suppliers that offer piece pars of a customer's end-to-end network requirement
that must be effectively combined with assets from other providers to deliver a complete network solution. This
dynamic creates challenges for customers seeking to procure network connectivity globally. Lack of
transparency
relative to the supply and pricing of network assets creates inefficient procurement practices, and lack of expertise to
effectively provision and manage these integrated services creates complex and costly operating environments.
Global Capacity addresses this market ineffciency though two lines of business - Optimization Solutions
and Connectivity Solutions - each of which leverages the Company's core intellectual propert to drive
transparency and automation into the market.
Optimization Solutions provides clients license access to Global Capacity's automated quotation
management platform, CLM, enabling them to automatically generate accurate quotes for access circuits based on
tariffs appropriate for the paricular service. CLM acts as an electronic trading platform, allowing customers to
match their demand against a global cataog of pricing and supply data creating a level of market transparency not
available elsewhere. CLMmay also be customized using a customer's specific infrastrcture and contract data,
creating an automated mechanism to generate customer pricing, reducing back offce cost and accelerating sales.
Optimization Solutions clients may also leverage the CLM platform, along with proprietar network optimization
tools, to deliver network optimization consulting services, in which the Company assesses existing inventories of
access networks, identifying opportities to reduce cost though both financial and physical network grooming.
Realized savings are typically between 10-40% of current spend. Optimization Solutions clients also leverage
Global Capacity's engineering and remote network management services on a professional services basis,
selectively deploying these services against specific opportnities to implement and manage private network
solutions that increase effciency and reduce cost.
Connectivity Solutions clients utilze Global Capacity's logistics expertise to implement access network
solutions that improve efficiency and reduce cost. "One Marketplace," the Company's physical network trading
platform, aggregates network capacity from multiple suppliers at strategically deployed pooling points, using Global
Capacity switching equipment to efficiently deploy capacity against market demand. "One Marketplace" reduces
network costs for clients, while delivering gross margin more similar to facilities-based providers than to resellers.
Global Capacity's Network Novation practice offers outsourced access network operations, including pricing,
procurement, and provisioning and network management. These solutions deliver lower access network costs by
aggregating customer demand, while also reducing client SG&A associated with managing access network
operations. Off-net extension services enable Global Capacity to identify, price, procure, provision and support
competitive off-net access services for large clients, providing access to a broad universe of providers with
transparency and efficiency.
ORGANIZA nON
Going to market as Global Capacity, the Company has integrated the core systems, processes, and personnel
of its five operating subsidiaries and organized them into two business units: Optimization Solutions and
Connectivity Solutions. These business units leverage the systems, processes and expertise of the Company to
deliver a set of offerings comprising taiff quotation management softare, custom pricing softare, network
optimization consulting, engineering services, remote management services, "One Marketplace" network services,
network novation services, and off-net extension services. Utilizing its depth of global telecom supply and pricing
data in an automated fashion with powerful tools and expert analysis, the Company helps bring tranparency to the
fragmented and ineffcient global telecom market - resulting in dramatically reduced cost and improved effciency
for the Company's clients, while producing revenue and margin for the Company.
To service its clients, CGSI has operating offces in several U.S. locations (Chicago, IL, Waltham, MA, New
Yark, NY, Glastonbury, CT, and Houston, TX). It also has a presence in the European Union (Manchester, UK, and
Lisbon, Portgal).
The Company is (and has been since its 2006 reorganization) investing its time, team resources, and capital in
the development of its intellectual propert and the scaling of its systems in order to meet the growing demand
among its clients for its services. At the same time, expenses are managed closely and lower-cost outsource
opportunities are given case-by-case consideration.
HISTORY AND ACQUISITIONS
Currently, CGSI consists of five core-operating entities that comprise the Company's go-forward assets and
offerings: 20/20 Technologies, Inc. (20/20), Magenta netLogic, Ltd. (Magenta), CentrePath, Inc. (CentrePath),
Global Capacity Group, Inc. (GCG), and Vanco Direct USA, LLC. Vanco Direct USA, LLC is now known as
Global Capacity Direct, LLC (GCD).
Prior to 2004, CGSI was a publicly reporting shell corporation with no active business. In January 2004, the
Company acquired, by way of subsidiary merger, Nexv, a development-stage company in the network perfonnance
management business. During 2007, the Company determined the Nexvu product, though a valuable asset, was not
core to the telecom information and logistics model it was pursuing. As a result, the Company shut down Nexvu's
operations (eliminating all operating expense associated with the business). The Company sold Nexvu in August
2008.
In September 2004, CGSI acquired 100% of Frontrer Network Systems Corporation (Frontrunner) via a
subsidiar merger. Frontrer is known as an "interconnect" company, which installs and services customer-
premise voice, data, and video networks. During 2007, the Company determined Frontruner was not core to its
telecom logistics modeL. The Company sold Frontruner in Februar 2008.
During 2006, the Company acquired 20/20, Magenta, CentrePath, and GCG. In November 2008, CGSI
acquired all of the outstanding membership interests ofGCD. See the Acquisitions note to the Company's
consolidated financial statements for additional information.
BUSINESS OVERVIEW FOR 2009
CGSI and its management team adopted a strategy in 2009 by which it furter integrated the assets of its
subsidiary companies to create a suite of capabilities which management believes has never before been available
from a single source telecom information and logistics provider. These capabilities include:
Global market intelligence oftelecom supply and pricing data;
Automated quotation management;
Customized access network pricing;
Powerful network optimization algoriths, tools and practices;
Robust network engineering process and expertise;
World-class remote network management systems, processes, and expertise; and
Strategically deployed network aggregation pooling points.
The successful execution of this strategy provides customers a suite of solutions that individually or
collectively wil help them address the challenges they face in managing the complex market for global networks.
Significant customer contracts in both lines of business in 2009 demonstrate the acceptance by the market of the
Company's telecom information and logistics modeL. For 2009, the Company provided services to a major customer
that represented $9.7 million (15%) of total revenues.
CGSI's goal is to become the leading global telecom information and logistics company providing
optimization and connectivity solutions to systems integrators, telecommunications companies, and enterprise
customers.
SERVICES
Management believes organizing the Company and its offerings between Optimization Solutions and
Connectivity Solutions provide the greatest opportity to deliver targeted solutions that maximize value to the
customer while simultaeously maximizing revenue and margin opportnities for the Company. Customers may buy
Optimization Solutions only, Connectivity Solutions only, or they may buy both. Management believes there are
significant opportnities to leverage offerings from one line of business to drive demandfor the solutions of the
other line of business. Furtermore, the mix of offerings and their different characteristics (non-recurring and
monthly recurring revenue streams) provide diversity of revenue and protect the Company from being overly
dependent or exposed by a single offering or line of business.
Optimization Solutions
The Optimization Business provides five offerigs:
Automated quotation management;
Customized access network pricing;
Network optimization consulting;
Network engineering services; and
Remote network management services (RMS).
Automated quotation management software enables customers to use Global Capacity's CLM system to
match customer demand against a global catalog oftelecom supply and pricing data to generate an accurate, tariff-
based quote for the selected services and locations. This automated process replaces the largely manual process most
companies continue to rely on and dramatically reduces the amount of time it takes to generate an accurate quote,
while increasing the accuracy of the quote. This serves as a baseline for the customer to obtain a competitive market
price, which CLM supports though workflow management fuctionality. This results in a competitive sales
advantage for our customers, while also reducing their operating costs. Automated quotation management software
is sold as an anual softare license.
Customized access network pricing softare uses the CLM automated quotation management system as a
baseline capabilty, but customizes the system to include customer specifc information such as customer points of
presence, negotiated / contracted rates, interconnect points, and business rules. This customization enables the
customer to quickly and accurately generate an automated price, using the customer's contracts, infrastrcture, and
business rules, dramatically improving the speed and responsiveness to customer pricing requests. This capability
reduces the cost of generating a customer price quote, automating the generation of customized pricing at a fraction
of the cost of generating the same price manually. Customized access network pricing softare is sold as an anual
softare license.
Network optimization consulting uses the CLM pricing fuctionality, coupled with powerful optimization
algoriths, in a well-defined methodology to work with clients to collect, cleanse, implement, and analyze network
data - including inventory, cost, and design data - in order to produce a network optimization report that identifies
opportities to improve the effciency and reduce the cost of complex global networks. Recommendations include:
financial grooming, where costs are reduced though identification of overcharges; contractual strategies, including
moving services to new taff strctues and novating existing network contracts to more favorable vehicles; and
physical grooming, where networks are moved to more favorable suppliers, re-homed to different points of
presence, or aggregated to achieve better cost points. The Company then employs its logistics capabilties to help
customers implement and realize the identified savings. The optimization process typically identifies savings of 2-
5% for financial grooming and 15-40% for physical grooming. These savings can total many millons of dollars in
large, complex network environments. The Company contracts for Optimization Consulting engagements on a base
service fee plus contingent fee basis, where the Company is paid a non-recurring fee based upon a percentage of the
savings achieved from the engagement.
Engineering services help customers implement optimized network infrastrcture though a suite of services
that include the design, engineering, build out, testing and tu-up of complex networks. These services leverage
well-developed processes, repeatable methodologies, and deep expertise of the Company to deliver targeted
engagements. The Company has built or augmented hundreds of customer networks. These engagements are
delivered as non-recurg revenue on a statement of work (SOW) basis.
Remote Management Services employ the Company's highly-integrated Operations Support Systems (OSS)
and state of the ar Network Operations Center (NOC) to deliver network monitoring and management of customer
networks. This service can be delivered as a stand-alone service for networks not provided by us or it can be bundled
as par of a complete network solution delivered via the Connectivity Solutions business unit. Remote Management
Services are proactive, 7X24 monitoring and management services that leverage automated fault and performance
management systems, integrated trouble ticketing and reporting systems, and world-class network engineering and
operations expertise to provide a premium level of service for a customer's most critical networks. Remote
Management Services are contracted on a monthly recuring basis.
Connectivity Solutions
The Connectivity Solutions Business provides thee offerings:
"One Marketplace"
Network Novations
Off-net Extension
"One Marketplace," the Company's physical network trading platform, aggregates network capacity from
multiple suppliers at strategically deployed pooling points, using Global Capacity switching equipment to efficiently
deploy capacity against market demand. "One Marketplace" reduces network costs for clients, while delivering
gross margin more similar to facilities-based providers than to resellers. The Company is continuously expanding
"One Marketplace" by installng additional aggregation points, and creating interconnections with suppliers
(national, regional, and local) to expand the reach and increase the capacity of the platform. Increased client
demand, as evidenced by the 160% growt experienced on the platform in 2009, enables the continued, profitable
expansion of the platform.
Global Capacity's Network Novation practice offers outsourced access network operations, including pricing,
procurement, and provisioning and network management. These solutions deliver lower access network costs by
aggregating customer demand, while also reducing client SG&A associated with managing access network
operations solution. Global Capacity's network novation practice has developed proven processes to seamlessly
assume the management of existing network contracts, freeing the client to focus on their core business, while
reducing the overall cost of their access network.
Off-net extension services enable Global Capacity to identify, price, procure, provision and support
competitive off-net access services for large clients, providing access to a broad universe of providers with
transparency and effciency. Using the Company's pricing systems, we generate an automated, accurate price quote.
We then manage that quote from initial pricing though ordering, procurement, provisioning, test and tum up, and
operations hand-off, utilizing the Company's proprietar Circuit Lifecycle Manager (CLM) system, which manages
the entire circuit lifecycle. Networks are then monitored and managed by our 7X24 Network Operations Center
(NOC). By leveraging automated systems across the entire telecom supply chain, the Company is able to accelerate
the delivery of an optimal network
Significant progress in gaining customer acceptace of our offerings during 2009 underlies management's
belief that our technology, systems, and logistics capabilties make the Company's business offerings more efficient,
faster, and less expensive for systems integrators, telecommunications companies, and enterprise customers to
manage the telecom supply chain for their complex global networks. By purchasing our solutions to create market-
pricing transparency and improve the effciency of the entire telecom supply chain, our customers are able to
improve the responsiveness of sales, reduce operating expense, improve margins, and deliver better service.
MARKETS AND CUSTOMERS
The global market for access networks is estimated at over $200 bilion anually and represents a significant
percentage of the overall network cost that service providers and large systems integrators incur in delivering
network solutions to their global customers. The global access market is served by over 900 primary suppliers, none
of whom has a ubiquitous footprint. The market is fuher confused by varying business rules, customs, and
regulations in different regions of the world. These factors, coupled with the rapid pace of technology change and
advancement, result in an inefficient, fragmented market where cost strctues are unecessarily high - creating
margin pressure on service providers and systems integrators. Because there is no market transparency relative to the
supply and price of networks globally, most telecommunication companies and systems integrators have a lengty,
manual, ineffcient process to design and price global networks. This results in extended sales cycles, high operating
costs, and inefficient procurement of networks.
One of the fundamental challenges for corporations and other institutions with complex and/or geographically
dispersed data communications networks is the number of service providers and pricing alternatives that must be
pieced together in order to create an end-to-end data connectivity solution. Between any two locations, there are a
varying number of service alternatives and we do not believe there is one single information source, other than our
systems, that enables a buyer to determine the most cost-effective and technically sound alternative. Large
multinational corporations are increasingly seeking to work with fewer vendors and a single network provider that
they can look to for provisioning end-to-end network solutions fits that design. Additionally, service providers,
particularly in regions where facilities-based competition has been introduced, actively market their services with
price as the primai differentiator and network reach being the primai limiting factor. This price-based competition
has stressed already challenged gross margins and, as a result, service providers are actively seeking means to
reduce the costs associated with network quotation management and off-network procurement.
Beyond the telecommunication service providers, expanding enterprises, multi-national corporations,
information service providers, and systems integrators are deploying and managing private network-based solutions
that provide seamless connections in support of the ever-increasing demand for business continuity, disaster
recovery, regulatory compliance, and collaboration capabilities. These private networks can rival the connections of
network service providers. Procuring these networks is achieved utilizig negotiated pricing through a few "trusted"
providers or via an expensive and often deficient bidding solicitation process. Because telecommunications is not
the priiai line of business for these private network operators, but rather a faciltator to their end business goals,
ineffciencies in the procurement process result in most companies paying more than they should for connectivity. In
a competitive environment, such a drain on profitability can be significant.
This confusion is increased by global deregulation, physical fragmentation of the network layer - whether
copper, fiber, coaxial cable, or wireless spectrs - and geographic fragmentation. Due to financial and operational
constraints, no one company can provide a ubiquitous global network. Competig entities therefore buy and sell
from each other to extend their network reach and meet customer demands, which frequently extend globally outside
their networks. Commonly, this buying and selling is done with little efficiency or transparency on an individual
transaction basis or under the auspices of a supply agreement (often called a Master Services Agreement) negotiated
at arm's-length between the principal paries. The absence of a global benchmarking source for regional, market-
based pricing furter impairs the ability to manage costs.
This market environment appears ideal for an information-driven logistics model focused on minimizing the
confusion and ineffciency that plagues the telecom market. The Company believes that it has such a business model
and operating capabilty, as well as a management team experienced in executing such an information-leveraged and
technology-leveraged approach.
We have assembled a vast global knowledgebase of critical information with respect to tariffs, competitive
pricing, physical locations of facilties, and cariers connected to such buildings and nearby points of presence. We
also have combined this information with sophisticated softare tools and algorithms to enable us to often obtain
automated "best of breed" connectivity solutions in seconds, rather than weeks or months. This abilty to automate
the "supply chain" of connectivity provides the Company with a competitive advantage. This process also requires
continuous refreshing, updating, and validation of data and is therefore a continually evolving process to stay current
with changing information and new information. This requirement to constantly acquire and manage new and
updated data sets, combined with the Company's investment in systems, tools, and processes, provides the basis for
the Company's unique positioning as a telecom logistics company.
The Company believes its investment in market intellgence and effciency tools, combined with the robust
processes and deep expertise of its staff, make it uniquely positioned to capitalize on this market opportnity with its
unique, telecom logistics business modeL.
SALES AND MARKTING
Optimization Solutions
Target Markets. Optimization Solutions are targeted at global, national, and regional telecommunications
carriers, systems integrators, and enterprise customers with large, complex global network requirements.
Sales Approach. We have an international sales team that uses a consultative approach to sell Optimization
Solutions to a financial buyer highly placed within our taget customers. We employ a combination of direct and
channel sales to maximiz market penetration and coverage and we offer limited scope "pilot" engagements to
quickly demonstrate the value of the solution. We then use a high-touch, relationship-based approach to extend and
expand our pilot engagements into more meaningful engagements that provide a steady stream of revenue and
margin for the Company.
Connectivity Solutions
Target Markets. Connectivity Solutions are tageted at enterprise, system integrator, and telecommunications
companies seeking a simplified, tuey network connectivity solution.
Sales Approach. We have an international sales team that employs a combination of direct and chanel sales
to maximize market penetration and coverage. The sales team is tasked with identifying and closing new business,
which is then transitioned to account managers to maintain the ongoing relationship, creating additional revenue and
margin from the account. The sales teams work closely with the carier management teams to insure the most robust,
cost effective solutions are sold and delivered.
COMPETITION
Management believes that the combination of capabilties and solutions the Company has integrated and
organized into the Optimization Solutions business and the Connectivity Solutions business is unique in the
marketplace. However, there are competitors in the market for some of the individual solutions that the Company
brings to market.
Optimization Solutions
Optimization Consulting: There are a number of consulting firms that purport to offer network optimiztion
services. Most ofthese, however, are focused on a specifc area of network optimization - tyically overcharge
analysis. This narow focus misses the largest opportity to identify and implement network savings available from
financial and physical grooming. Furermore, Management is not aware of any other company that owns or deploys
a database of global supply and pricing data along with proprietar network optimiztion tools to deliver an
automated network optimization solution.
Automated Pricing Softare: Management is not aware of any other company that has an automated pricing
system that leverages a similar global base of supply and pricing data along with robust pricing algorithms, The
primary competition that we encounter is the legacy pricing system and related processes that are entrenched in
existing suppliers.
Remote Management Services and Professional Services: There is a wide range oftelecommunications
cariers, hardware manufactuers, and services finns that offer NOC services and network implementation services.
Management believes that the unusually high degree of integration and automation used in the delivery of the
Company's NOC services is a competitive differentiator in the marketplace. Furter, the tight integration of the
network management systems with the Company's unique pricing and provisioning systems and technologies make
these solutions very valuable in the highly integrated service delivery model employed by Global Capacity.
Connectivity Solutions
The marketplace for connectivity solutions is highly competitive, including Facility-based Cariers, Viral
Network Operators (VNOs), and Systems Integrators. Despite this, the Company does provide services to carriers
and VNOs and at times wil collaborate with our competition to provide a seamless solution for their end users.
Some examples of competition from the three sectors are the following:
Facility-based Cariers: AT&T, Verizon, Sprint, and Level 3
VNOs: Virela; Global Telecommunications and Technology of America
Systems Integrators: IBM
RESEARCH AND DEVELOPMENT
Research and development includes the cost of developers and system engineers, outside contractors, and
overhead costs while developing our offerings. These costs are not directly borne by customers, but rather are
inherently built into the pricing of our services to our customers. The Company did not incur any significant
research and development costs during 2009 or 2008. Neverteless, considerable progress was made in developing
the Company Portal and Circuit Lifecycle Manager, key elements of our offerings moving forward.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company does not curently hold any patents related to its pricing portal and database and related
proprietar softare code and relies on trade secrets and copyright laws for its protection.
EMPLOYEES
At December 3 i, 2009, we had a total of76 employees who were employed in the following areas: product
development, quality assurance, product marketig, management, and sales. This compares to a total of i 06 at
December 3 i, 2008. We depend on our ability to attact, retai, integrate, and motivate highly-qualified sales,
teclmical, and management personnel- for whom competition is intense. After the sale of Frontrunner in Februar
2008, our headcount was reduced to 65. Our headcount was increased to 106 as of December 3 i, 2008 with the
acquisition of GCD. Due to the market downtu in 2009, we reduced our headcount to 76. We do not anticipate that
this number wil increase significantly in the near future. We believe all relations with our employees are
satisfactory. Our employees are not covered by a collective bargaining agreement and are considered full-time.
GEOGRAHIC INFORMATION
Financial information about geographic areas is incorporated by reference from the Notes to our Consolidated
Financial Statements included elsewhere in this Form 1O-K.
AVAILABLE INFORMTION
Our Web site is htt://www.globalcapacity.com. We have made available though our Web site, free of
charge, our anual report on Form i 0- K, quarerly reports on Form i O-Q, current reports on Form 8- K, and
amendments to those report, as soon as reasonably practicable after we electronically fie such materials with, or
furnish them to, the Securities and Exchange Commission (SEC). In addition, they are available directly on the
SEC's website at htt://www.sec.gov.
EXHIBIT 6 - SERVICE ARA MAP
LEGEND
~~s.iv~
~ IJSI¡Ve ~ ~~PJ
~ IJ aWq b1 ~~.
14
State of Arzona
County of Marcopa
Richard Garer, being first duly sworn, deposes and says that he is the Secretar and Treasurer of GC
Pivotal, LLC, the Applicant in the proceeding entitled above, that he has read the foregoing application
and knows the contents thereof and; that the same are tre of his/her knowledge, except as to matters
which are therein stated on information or belief, and to those matters he believes them to be tre.
GC Pivotal, LLC has also reviewed all of the Commission Rules and agrees to comply with them.
Richard Gam
Secretar and Treasurer
Subscribed and sworn to before this 1l day of fi,tw f4IlJ ' 2011.
t!acO,W.ot Public
My Commission expires: ó- /5-,/
OFFICIAL SEAL
JACKIE A. REED
NOíARY PUBLIC - STACTOE °UF~~ONA
MARICOPA. Expires June 15. 2011My Comm. .~
15