Commitments And Contingenices

9 Months Ended

Sep. 30, 2011

Commitments And Contingenices [Abstract]

Commitments And Contingenices

NOTE 18: COMMITMENTS AND CONTINGENICES                         

In conjunction with the recent business acquisition (see Note 2) the Company has assumed various contingent liabilities as of September 30, 2011. Pursuant to the Alteva Agreement, the seller shall be paid additional consideration up to $2,000 if certain performance-based conditions are met as of the earn-out calculation dates of August 5, 2012 and August 5, 2013 (or prior to January 1, 2013 depending on certain tax law changes). In addition, at the time of the closing on the Alteva Agreement the Company withheld $750 as security of any future claims against the seller. Such amount is payable on August 5, 2012, less any amounts offset against the holdback amount pursuant to the terms of the Alteva Agreement.

In connection with the Alteva Agreement, the Company placed cash in the amount of $4,000 in escrow, pending the issuance of 272,479 shares of the Company's common stock. The issuance of the shares of common stock is contingent upon receipt by the Company of certain approvals of the PSC and BPU. Such approvals have been received as of October 21, 2011 (see Note 19).

The Alteva Agreement provides for the payment to the seller of a working capital adjustment based on actual amount of working capital, as defined, as of August 5, 2011 compared to the target working capital. As of September 30, 2011 the Company estimated this liability to be $590, of which $322 has been advanced to the seller. However, it is subject to an independent audit to be completed within 145 days of closing.

As of September 30, 2011, the estimated fair value of the aforementioned amount have been recorded as "amounts due in connection with business acquisition" in the accompanying condensed consolidated balance sheet.

Effective October 21, 2011, the Company entered into a Lock-Up and Put Agreement with the members of Alteva (the "Lock-up and Put Agreement) pursuant to which each of the members of Alteva agreed to certain restrictions on their ability to sell the shares of the Company's common stock they were issued in connection with the Alteva Agreement (the "Alteva Shares"). Under the Lock-up and Put Agreement, each member of Alteva may transfer to any of the permitted transferees up to 50% of their Alteva Shares between October 21, 2012 and December 14, 2012. The members of Alteva may sell their remaining Alteva Shares without restriction beginning on December 15, 2012. In addition, the Lock-up and Put Agreement gives each member of Alteva the option to sell their Alteva Shares to the Company within a certain prescribed time period at a certain prescribed price (the "Put"). The Alteva members may exercise their Put with respect to half of their Alteva Shares within a 60-day period commencing on October 21, 2012 and the other half within a 60-day period commencing on December 15, 2012. The purchase price of the Put will be the greater of (i) the closing price of the Company's common stock on the date of exercise of the Put or (ii) $11.74. The Lock-up and Put Agreement also includes a purchase price protection for the Alteva selling shareholders. The purchase price protection provides that if the price of the Company's common stock for the 30 trading days immediately prior to October 21, 2012 or December 15, 2012 (but excluding the three trading days prior to and after the record date for any cash dividend declared by the Company) (the "Release Date Price") is less than $11.74, then the Company will issue to the Alteva members the aggregate number of shares of the Company's common stock equal to the difference between $1,600 and the

market value of 50% of the aggregate Alteva Shares on October 21, 2012 or December 15, 2012 or 100% of the aggregate Alteva Shares if the Release Date Price is less than $11.74 on both dates.

The Company will record the valuation as an estimated contingent liability using a binomial method based on significant inputs not observed in the market and thus will represent a Level 3 instrument. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company's own assumptions in measuring fair value. The final purchase price allocation and its effect on results of operations may differ significantly from the amounts included herein. The Company is in the process of obtaining third-party valuations of the assets acquired, liabilities assumed and the Lock-up and Put Agreement; thus, the allocation of the purchase price is subject to adjustment.

The Company has entered into two-year employment agreement with its Executive Vice President and Chief Operating Officer, its Executive Vice President and Chief Sales Officer, and its Executive Vice President and Chief Network Officer. Their annual salaries per the agreements are $235, $180 and $180, respectively.