Exhibit 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
CAIS INTERNET, INC.,
CIAM CORP.
AND
ATCOM, INC.
DATED AS OF
August 4, 1999
TABLE OF CONTENTS
Page
INDEX OF SCHEDULES AND EXHIBITS............................................... V
ARTICLE I. THE MERGER......................................................... 2
1.1 The Merger............................................................ 2
1.2 The Effective Time.................................................... 2
1.3 The Surviving Corporation............................................. 2
ARTICLE II. TREATMENT OF SHARES.............................................. 3
2.1 Certain Definitions................................................... 3
2.2 Conversion of Shares.................................................. 3
2.3 Mechanics of Exchange................................................. 4
2.4 Escrow................................................................ 5
2.5 Dividends; Transfer Taxes............................................. 5
2.6 No Fractional Shares.................................................. 5
2.7 Closing of Atcom Transfer............................................. 5
2.8 Closing............................................................... 5
2.9 Supplementary Action.................................................. 6
2.10 Dissenting Shares..................................................... 6
2.11 Registration of Option Shares......................................... 6
2.12 Contingent Consideration.............................................. 7
2.13 Restricted Stock...................................................... 7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF ATCOM.......................... 8
3.1 Organization, Good Standing, Qualification............................ 8
3.2 Articles of Incorporation and Bylaws; Records......................... 8
3.3 Capitalization........................................................ 9
3.4 Authority; Binding Nature of Agreements............................... 10
3.5 Non-Contravention; Consents........................................... 10
3.6 Intellectual Property................................................. 11
3.7 Proceedings; Orders................................................... 12
3.8 Financial Statements.................................................. 13
3.9 Title to Assets....................................................... 13
3.10 Contracts............................................................. 14
3.11 Employees............................................................. 15
3.12 Compliance with Legal Requirements.................................... 15
3.13 Governmental Authorizations........................................... 16
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3.14 Tax Matters............................................................ 16
3.15 Securities Laws Compliance; Registration Rights........................ 18
3.16 Finders and Brokers; Fees.............................................. 18
3.17 Environmental Compliance............................................... 18
3.18 Insurance.............................................................. 18
3.19 Related Party Transactions............................................. 19
3.20 Absence of Changes..................................................... 20
3.21 Powers of Attorney..................................................... 21
3.22 Benefit Plans; ERISA................................................... 21
3.23 Bank Accounts.......................................................... 23
3.24 Year 2000 Compliance................................................... 23
3.25 Disclosure............................................................. 24
3.26 Due Diligence Information.............................................. 24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND CAIS.............................................. 24
4.1 Organization; Good Standing............................................ 24
4.2 CAIS Common Stock...................................................... 25
4.3 Authority; Binding Nature of Agreements................................ 25
4.4 Non-Contravention; Consents............................................ 26
4.5 Finders and Brokers.................................................... 27
4.6 Reports and Financial Statements; Absence of Certain Changes........... 27
4.7 Compliance with Applicable Law......................................... 28
4.8 Complete Copies of Requested Reports................................... 28
4.9 Full Disclosure........................................................ 28
4.10 Proceeding; Orders; Current Reports.................................... 28
ARTICLE V. COVENANTS OF ATCOM.................................................. 29
5.1 Access and Investigation............................................... 29
5.2 Operation of Business.................................................. 29
5.3 Filings and Consents; Cooperation...................................... 31
5.4 Notification; Updates to Disclosure Schedule........................... 32
5.5 Payment of Indebtedness by or Due to Related Parties................... 32
5.6 No Negotiation or Solicitation......................................... 33
5.7 Commercially Reasonable Efforts........................................ 33
5.8 Confidentiality; Publicity............................................. 33
5.9 Taxes.................................................................. 34
5.10 Atcom Shareholder's Consent............................................ 34
5.11 Tax Certificate........................................................ 34
5.12 Tax-Free Treatment..................................................... 34
ARTICLE VI. COVENANTS OF CAIS.................................................. 34
6.1 Notification........................................................... 34
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6.2 Filings and Consents; Cooperation...................................... 35
6.3 Commercially Reasonable Efforts........................................ 35
6.4 Confidentiality; Publicity............................................. 36
6.5 Cooperation............................................................ 36
6.6 Disclosure of Trade Secrets............................................ 36
6.7 Indemnification and Insurance.......................................... 37
6.8 Tax Certificate........................................................ 37
6.9 Tax-Free Treatment..................................................... 37
ARTICLE VII. CLOSING CONDITIONS OF CAIS AND THE COMPANY........................ 37
7.1 Accuracy of Representations and Warranties............................. 37
7.2 Additional Conditions to Closing....................................... 38
7.3 Performance of Agreements.............................................. 38
7.4 Consents............................................................... 38
7.5 No Material Adverse Change............................................. 39
7.6 Atcom Closing Certificates............................................. 39
7.7 Transactional Agreements............................................... 39
7.8 Dissenting Shares...................................................... 40
7.9 Employment Agreements.................................................. 40
7.10 Noncompetition Agreement............................................... 40
7.11 Certificate relating to "Tax-Free" treatment........................... 40
7.12 Conversion of Preferred Stock and Exercise of Certain Atcom Warrants... 40
ARTICLE VIII. CLOSING CONDITIONS OF ATCOM...................................... 40
8.1 Employment Agreements.................................................. 40
8.2 Accuracy of Representations and Warranties............................. 40
8.3 Additional Conditions to Closing....................................... 41
8.4 CAIS Closing Certificates.............................................. 41
8.5 No Material Adverse Change............................................. 42
8.6 Performance of Agreements.............................................. 42
8.7 Consents............................................................... 42
8.8 Registration Rights Agreement.......................................... 42
8.9 CAIS Stock............................................................. 43
8.10 Consulting Agreement................................................... 43
8.11 Certificate relating to "Tax-Free" treatment........................... 43
8.12 Conversion of Preferred Stock and Exercise of certain Atcom.Warrants... 43
8.13 Payment of Costs and Expenses.......................................... 43
ARTICLE IX. FURTHER ASSURANCES................................................. 43
ARTICLE X. SURVIVAL; INDEMNIFICATION........................................... 43
10.1 Survival............................................................... 43
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10.2 Indemnification by Shareholders......................................... 44
10.3 Indemnification by CAIS and the Company................................. 44
10.4 Third Person Claims..................................................... 45
10.5 Method of Payment....................................................... 46
10.6 Limitations............................................................. 46
10.7 Maximum Liability and Remedies.......................................... 46
10.8 Exceptions to Limitations............................................... 46
10.9 Shareholder Representative.............................................. 46
ARTICLE XI. RESTRICTIONS ON CAIS COMMON STOCK................................... 47
11.1 Restrictive Legend...................................................... 47
11.2 Lock-Up Agreement....................................................... 48
ARTICLE XII. TERMINATION........................................................ 48
12.1 Termination............................................................. 48
12.2 Termination Procedures.................................................. 49
12.3 Effect of Termination................................................... 49
ARTICLE XIII. MISCELLANEOUS..................................................... 50
13.1 Expenses................................................................ 50
13.2 Entire Agreement........................................................ 50
13.3 Press Releases and Public Announcements................................. 50
13.4 Counterparts............................................................ 51
13.5 Descriptive Headings.................................................... 51
13.6 Notices................................................................. 51
13.7 Choice of Law........................................................... 51
13.8 Binding Effect; Benefits................................................ 52
13.9 Assignability........................................................... 52
13.10 Waiver and Amendment.................................................... 52
13.11 Attorneys' Fees......................................................... 52
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INDEX OF SCHEDULES AND EXHIBITS
Exhibits:
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A. Certain Definitions
B. Form of Escrow Agreement
C. Form of Key Employee Employment Agreement
D. Form of Atcom Tax Certificate
E. Form of Non-Competition Agreement
F. Form of Registration Rights Agreement
G. Form of Xxxxxxxx Consulting Agreement
H. Form of CAIS Tax Certificate
Schedules:
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1. Atcom Securityholders
Atcom Disclosure Schedule
V
AMENDED AND RESTATED
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Agreement")
dated as of August 4, 1999, is entered into by and among CAIS Internet, Inc., a
Delaware corporation ("CAIS"), CIAM Corp., a California corporation (the
"Company"), and Atcom, Inc., a California corporation ("Atcom").
RECITALS
A. The respective Boards of Directors of each of the Company, CAIS and
Atcom have determined that it is in the best interests of their respective
companies and shareholders that the Company and Atcom combine into a single
company through the statutory merger of the Company with and into Atcom, with
Atcom as the surviving corporation (the "Merger").
B. CAIS, as the sole shareholder of the Company, has approved this
Agreement, the Merger and the transactions contemplated by this Agreement
pursuant to action taken by unanimous written consent in accordance with the
requirements of the General Corporation Law of the State of California ("CGCL")
and the Articles of Incorporation and Bylaws of the Company.
C. Pursuant to the Merger, among other things, the outstanding shares of
Atcom Common Stock shall be exchanged for CAIS Common Stock and all options or
warrants for the purchase of Atcom Common Stock shall become options or warrants
for the purchase of CAIS Common Stock.
D. The parties to the Agreement intend that the Merger qualify as a
"merger," within the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and that Atcom, the Company and CAIS will each be
a "party to a reorganization," within the meaning of Section 368(b) of the Code,
with respect to the Merger.
E. Certain capitalized terms used in this Agreement are defined on
Exhibit A.
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AGREEMENT
In consideration of the agreements, provisions and covenants set forth
below, Atcom, the Company and CAIS hereby agree as follows:
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ARTICLE I.
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, on the Effective
Time (as defined below), the Company shall be merged with and into Atcom, Atcom
shall be the surviving corporation (sometimes called the "Surviving
Corporation") in such Merger and the separate existence of the Company shall
thereupon cease. The Merger shall have the effects set forth in the CGCL.
Without limiting the generality of the foregoing, on the Effective Time, all of
the property, rights, privileges, powers and franchises of the Company and Atcom
shall vest in the Surviving Corporation.
1.2 The Effective Time.
The Merger shall become effective when a properly executed certificate or
agreement of merger (the "Agreement of Merger"), in such form as may be agreed
by the parties hereto and as required by the relevant provisions of the CGCL is
duly filed with the Secretary of State of the State of California, which filing
shall be made in connection with the closing of the Merger in accordance with
Section 2.8 upon satisfaction or waiver of the conditions set forth in Articles
VII and VIII. When used in this Agreement, the term "Effective Time" shall mean
the date and time at which such Agreement of Merger has been so filed or at such
later time as is provided in the Agreement of Merger.
1.3 The Surviving Corporation.
(a) The Articles of Incorporation of the Company as in effect at the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until duly amended in accordance with applicable law.
(b) The Bylaws of the Company as in effect at the Effective Time
shall be the Bylaws of the Surviving Corporation until thereafter amended in
accordance with applicable law.
(c) (i) The directors of the Company at the Effective Time shall be
the initial directors of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly elected
or appointed and qualified in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by law.
(ii) The officers of the Company at the Effective Time shall be
the initial officers of the Surviving Corporation and shall hold office
from the Effective Time until removed or until their respective successors
are duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law.
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ARTICLE II.
TREATMENT OF SHARES
2.1 Certain Definitions.
(a) "Exchange Ratio" shall be equal to the quotient of (i) the Per
Share Merger Consideration divided by (ii) the Average CAIS Stock Price as of
August 2, 1999, or 0.3553.
(b) "Per Share Merger Consideration" shall be equal to $6.0934.
2.2 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, and subject to Section 2.4, each
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share of Atcom Common Stock that is issued and outstanding immediately prior to
the Effective Time (other than dissenting shares of such class and series) shall
be converted into the right to receive the number of shares of CAIS Common Stock
equal to the Exchange Ratio.
(b) All Atcom stock options and warrants to purchase Atcom Common
Stock (individually, an "Atcom Option" and collectively, the "Atcom Options")
outstanding immediately prior to the Effective Time shall remain outstanding
following the Effective Time. At the Effective Time, such Atcom Options shall,
by virtue of the Merger and without any further action on the part of Atcom or
the holder of any such Atcom Options, be assumed by CAIS. Each Atcom Option
assumed by CAIS shall be exercisable upon the same terms and conditions as those
pertaining to the option immediately prior to the Effective Time, except that in
the case of an Atcom Option to purchase Atcom Common Stock (A) each such Atcom
Option shall be exercisable for that whole number of shares of CAIS Common Stock
(rounded down to the nearest whole share) into which the number of shares of
Atcom Common Stock subject to such Atcom Option immediately prior to the
Effective Time would be converted under this Section 2.2, and (B) the option
price per share of CAIS Common Stock shall be an amount equal to the option
price per share of Atcom Common Stock subject to such Atcom Option in effect
immediately prior to the Effective Time divided by the Exchange Ratio (the price
per share, as so determined, being rounded upward to the nearest full cent).
Within 10 days after the Closing Date, CAIS shall notify each holder of an Atcom
Option of the assumption of such options by CAIS and the revisions to the
options effected thereby. No payment shall be made for fractional interests.
From and after the date of this Agreement, no additional stock options or
warrants shall be granted or issued by Atcom.
(c) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of the common stock of the
Company that is issued and outstanding immediately prior to the Effective Time
shall be converted into and continue as one share of the common stock of the
Surviving Corporation.
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2.3 Mechanics of Exchange.
(a) At the Effective Time, each holder of Atcom Common Stock (each, a
"Shareholder") shall be entitled to surrender the certificate or certificates
that immediately prior to the Effective Time represented the Atcom Common Stock
(the "Certificates"), and which were converted into the right to receive a
portion of the Merger Price, to CAIS for cancellation in exchange for shares of
CAIS Common Stock into which such Atcom shares have been converted by virtue of
the Merger, less such Shareholder's pro rata portion of the Escrow Amount. It
shall be a condition of payment that the Certificates so surrendered shall be
properly endorsed or otherwise in proper form for transfer to CAIS.
(b) From and after the Effective Time, there shall be no transfers on
the stock transfer books of Atcom of Atcom Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates formerly representing Atcom Common Stock are presented to the
Surviving Corporation for payment, they shall be cancelled and exchanged for the
shares of CAIS Common Stock into which the Atcom shares represented thereby were
converted in the Merger.
(c) At or prior to the Effective Time of the Merger, CAIS shall
deliver irrevocably to the Escrow Agent shares of CAIS Common Stock in an
aggregate amount equal to the Escrow Amount.
(d) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Shareholder
claiming such Certificate to be lost, stolen or destroyed, CAIS will issue or
cause to be issued certificates representing CAIS Common Stock in exchange for
such lost, stolen or destroyed Certificate in accordance with the conversion
ratio set forth in Section 2.2. When authorizing such issuance in exchange
therefor, CAIS may, in its discretion and as a condition precedent to the
issuance thereof, require such Shareholder to give CAIS a bond in such sum as it
may direct as indemnity, or such other form of indemnity, as it shall direct,
against any claim that may be made against CAIS with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(e) If any certificate for CAIS Common Stock is to be issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the person
requesting such exchange shall (i) pay to CAIS any transfer or other taxes
required by reason of the issuance of certificates for such securities in a name
other than that of the registered holder of the Certificate surrendered, or (ii)
establish to the satisfaction of CAIS that such tax has been paid or is not
applicable.
(f) Notwithstanding anything in this Agreement to the contrary,
neither CAIS nor any other party hereto shall be liable to a holder of shares of
Atcom Common Stock for any portion of the Merger Price, or dividend on shares of
CAIS Common Stock issued as part of the Merger Price, or in accordance with
Section 2.6 the cash payment for any fractional interests, delivered to a public
official pursuant to applicable escheat laws following the passage of time
specified therein.
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2.4 Escrow.
A total of 291,375 shares of CAIS Common Stock otherwise issuable to
the Shareholders pursuant to Section 2.2 (the "Escrow Amount") shall be issued
in the names of the Shareholders entitled thereto but shall be delivered to and
held in escrow until April 15, 2000 (subject to any pending Claims which exist
on such date) pursuant to an Escrow Agreement in the form attached hereto as
Exhibit B (the "Escrow Agreement") to secure Claims by Indemnified Parties for
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indemnification pursuant to Article XI. Nothing in this Section 2.4 shall be
construed as limiting the liability of the Shareholders under Section 10.8 to
the amount of the Escrow Amount deposited into escrow.
2.5 Dividends; Transfer Taxes.
No dividends that are declared on shares of CAIS Common Stock after the
Effective Time (if any) will be paid to persons entitled to receive certificates
representing shares of CAIS Common Stock until such Persons surrender their
Certificates. Upon such surrender, there shall be paid to the Person in whose
name the certificates representing such shares of CAIS Common Stock shall be
issued any dividends which shall have become payable with respect to such shares
of CAIS Common Stock between the Effective Time and the time of such surrender.
In no event shall the person entitled to receive such dividends be entitled to
receive interest on such dividends.
2.6 No Fractional Shares.
No fraction of a share of CAIS Common Stock shall be issued in the Merger.
In lieu of fractional shares, the Shareholders upon surrender of their
Certificates as set forth in Section 2.3 shall be paid an amount in cash,
without interest, rounded to the nearest cent, determined by multiplying the
fractional interest to which such Shareholder would otherwise be entitled by the
Average CAIS Stock Price as of August 2, 1999, or $17.16.
2.7 Closing of Atcom Transfer Books.
At the Effective Time, the stock transfer books of Atcom shall be closed
and no transfer of shares of Atcom Common Stock shall thereafter be made. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for certificates representing
shares of CAIS Common Stock and cash in accordance with the terms hereof. At and
after the Effective Time, the holders of shares of Atcom Common Stock to be
exchanged for shares of CAIS Common Stock pursuant to this Agreement shall cease
to have any rights as shareholders of Atcom, except for the right to surrender
such Certificates in exchange for shares of CAIS Common Stock as provided
hereunder or such dissenters' rights as are provided under applicable law.
2.8 Closing.
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of Xxxxxxxx & Xxxxxxxx LLP, 000 X.
Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
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90013 at 9:00 a.m., local time, on September 15, 1999 (the "Closing Date"), or
as soon thereafter as is reasonable practical; provided, however, that if all of
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the other conditions set forth in Articles VII and VIII hereof are not satisfied
or waived at such date, the Closing Date shall be the business day following the
day on which all such conditions have been satisfied or waived, or at such other
date, time and place as CAIS and Atcom shall agree.
2.9 Supplementary Action.
If, at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of Atcom, or otherwise to carry out the provisions of this
Agreement, the officers and directors of the Surviving Corporation are hereby
authorized and empowered on behalf of Atcom in the name of and on behalf of
Atcom to execute and deliver any and all things necessary or proper to vest or
to perfect or confirm title to such property or rights in the Surviving
Corporation, and otherwise to carry out the purposes and provisions of this
Agreement.
2.10 Dissenting Shares.
(a) Notwithstanding any provisions of this Agreement to the contrary,
any shares of Atcom Common Stock held by a Shareholder who has exercised such
holder's dissenters' rights in accordance with applicable law and who, as of the
Effective Time, has not effectively withdrawn or lost such dissenters' rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive the Merger Price, but the holder of the Dissenting Shares shall only be
entitled to such rights as are granted by applicable law.
(b) Notwithstanding the provisions of subsection (a) above, if any
holder of Dissenting Shares shall effectively withdraw or lose (through the
failure to perfect or otherwise) such holder's dissenters' rights under the
CGCL, then, as of the Effective Time or the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive the Per Share Merger Consideration upon surrender of the
applicable Certificate(s) as provided herein.
(c) Atcom shall give CAIS and the Company (i) prompt written notice
of any written demands for payment with respect to any shares of Atcom capital
stock pursuant to dissenters' rights, and any withdrawals of such demands or
losses of such rights, and any other instruments served pursuant to the CGCL,
and (ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for dissenters' rights. Atcom shall not, except with the
prior written consent of CAIS and the Company, voluntarily make any payment with
respect to demands for dissenters' rights or offer to settle or settle any such
demands.
2.11 Registration of Option Shares
CAIS shall, within two (2) weeks after the Closing Date, file a
Registration Statement on Form S-8 with the SEC covering the shares of CAIS
Common Stock issued or issuable pursuant to options to purchase Atcom Common
Stock assumed by CAIS under Section 2.2(b) hereof.
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2.12 Contingent Consideration
(a) CAIS shall pay, within two (2) business days after the completion
of a Qualified Financing (as defined below), $1.8280 per share of additional
consideration ("Per Share Contingent Consideration") in shares of CAIS Common
Stock to the holders (at the Effective Time) of Atcom Common Stock and to the
holders of CAIS Common Stock who acquired such shares of CAIS Common Stock
pursuant to the exercise of Atcom Options after the Effective Time as provided
in Section 2.12(b) and Atcom Options as provided in Section 2.12(c) if a
Qualified Financing is completed on or before November 21, 1999 (such payment of
Per Share Contingent Consideration shall, in the aggregate, be referred to
herein as the "Contingent Consideration"). For purposes of this Section 2.12, a
"Qualified Financing" shall mean any sale by CAIS of at least $10 million of its
capital stock in a single transaction or a series of related transactions to a
strategic partner or partners pursuant to the terms of that certain letter
agreement between CAIS and Xxxxx Xxxxx Xxxxxx & Company the date hereof.
(b) In order to effect the aforesaid payment of Contingent
Consideration, CAIS shall issue to each holder of Atcom Common Stock immediately
prior to the Effective Time and to each holder of CAIS Common Stock who acquired
such shares of CAIS Common Stock pursuant to the exercise of an Atcom Option
after the Effective Time that number of shares of CAIS Common Stock determined
by multiplying each share of Atcom Common Stock owned immediately prior to the
Effective Time by the Contingent Consideration Exchange Ratio, which shall be
equal to the quotient of (i) the Per Share Contingent Consideration divided by
(ii) the Average CAIS Stock Price as of the date of execution of the definitive
agreement in respect of the Qualified Financing, and, in the case of shares of
CAIS Common Stock acquired pursuant to the exercise of any Atcom Option, by
multiplying (x) the quotient of (A) the CAIS Common Stock so acquired divided by
(B) the Exchange Ratio, times (y) the Contingent Consideration Exchange Ratio.
(c) Notwithstanding anything to the contrary in Section 2.2(b), if
CAIS shall become obligated to pay the Contingent Consideration, each Atcom
Option assumed by CAIS and outstanding on the date of completion of the
Qualified Financing shall be readjusted to give effect to the Contingent
Consideration by (i) changing the number of shares subject to such option by
multiplying the "Adjusted Exchange Ratio" set forth below by the quotient of (W)
the shares still subject to the option divided by (X) the Exchange Ratio, and
(ii) changing the option price per share by dividing the product of (Y) the
adjusted option price (determined pursuant to Section 2.2(b)(B)) multiplied by
(Z) the Exchange Ratio, by the following "Adjusted Exchange Ratio" set forth
below:
Exchange Ratio + Contingent Consideration Exchange Ratio
= Adjusted Exchange Ratio
2.13 Restricted Stock.
The shares of CAIS Common Stock issued in connection with the Merger
(including the shares issued as part of the additional consideration) will not
be registered under the Securities Act, except as provided in the Registration
Rights Agreement. Such shares may not be
7
transferred or resold thereafter, except in compliance with the terms of this
Agreement and the other Transactional Agreements and following registration
under the Securities Act or in reliance on an exemption from registration under
the Securities Act.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF ATCOM
Except as set forth in the Disclosure Schedule attached hereto provided by
Atcom (the "Atcom Disclosure Schedule"), the parts of which are numbered to
correspond to the section numbers of this Agreement, Atcom represents and
warrants to the Company and CAIS, as follows:
3.1 Organization, Good Standing, Qualification.
(a) Atcom is a corporation duly organized, validly existing and in
good standing under the laws of the State of California, is qualified to conduct
business and is in both corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification except where the failure to be so
qualified would not have a material adverse effect on the business or financial
condition of Atcom. Atcom has the requisite corporate power and authority to own
and operate its properties and assets, and to carry out the provisions hereof
and thereof, and to carry on its business as currently conducted.
(b) Atcom has never approved, or commenced any proceeding, or made
any election contemplating, the dissolution or liquidation of Atcom or the
winding up or cessation of Atcom's business or affairs.
(c) Other than securities held by Atcom for financial/cash management
purposes, Atcom has no subsidiaries and does not own, beneficially or otherwise,
any shares or other securities of, or any other direct or any other indirect
interest of any nature in, any Entity.
(d) Atcom was never operated as a sole proprietorship, or any other
business entity, prior to its incorporation.
3.2 Articles of Incorporation and Bylaws; Records.
(a) Atcom has made available to CAIS or its counsel accurate and
complete copies of:
(i) Atcom's Articles of Incorporation and Bylaws,
including all amendments thereto, as presently in effect;
(ii) the stock records of Atcom; and
8
(iii) the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the Shareholders, the Atcom Board and all committees of
the Atcom Board.
(b) Except for ATCOM/INFO (Atcom's d/b/a), Atcom has never conducted
any business under or otherwise used, for any purpose or in any jurisdiction,
any fictitious name, assumed name, trade name or other name.
(c) There has not been any material violation of Atcom's Articles of
Incorporation or Bylaws or of any resolution adopted by the Shareholders, the
Atcom Board or any committee of the Atcom Board.
3.3 Capitalization.
(a) The authorized capital stock of Atcom consists of (i) 10,000,000
shares of Atcom Common Stock, no par value per share, of which 2,320,583 shares
have been issued and are outstanding and (ii) 5,000,000 shares of Preferred
Stock, no par value per share, comprised of (A) 725,849 shares which have been
designated as Series A Preferred Stock and of which 725,849 have been issued and
are outstanding, (B) 265,819 shares which have been designated as Series B
Preferred Stock and of which 265, 819 have been issued and are outstanding, (C)
1,000,000 shares which have been designated as Series C Preferred Stock and of
which 832,010 have been issued and are outstanding, and (D) 3,000,000 shares
which have been designated as Series D Preferred Stock and of which 2,639,685
have been issued and are outstanding (collectively, the "Atcom Preferred
Stock"). All issued and outstanding shares of Atcom's capital stock have been
duly authorized and validly issued, are fully paid and nonassessable, and have
been issued in full compliance with all applicable Legal Requirements. In
addition, Atcom has authorized for issuance up to 2,500,000 shares of Atcom
Common Stock under its incentive stock option plans, of which options to
purchase 2,437,876 shares of Atcom Common Stock have been granted, of which
options to purchase 1,412,989 shares of Atcom Common Stock are vested and
options to purchase 1,024,887 shares of Atcom Common Stock are unvested. Atcom
has also issued warrants to purchase 114,373 shares of Atcom Common Stock and
10,500 shares of Series C Preferred Stock.
(b) Schedule 1 sets forth the names of each holder of outstanding
----------
options and warrants or issued and outstanding capital shares of Atcom (each
such holder is hereinafter referred to as a "Securityholder") and, for each
--------------
Securityholder, the number of options or warrants held, the number and class of
shares of capital stock held and, if applicable, the grant date, expiration
date, vesting schedule and exercise price for any options held. Atcom has
reserved a sufficient number of shares of Atcom Common Stock for issuance upon
exercise of each of the options and warrants, and the conversion of the
Preferred Stock, described in Schedule 1. Immediately prior to the Effective
----------
Time, each share of Series A Preferred Stock and Series D Preferred Stock of
Atcom will convert into one share of Atcom Common Stock; and each share of
Series B Preferred Stock and Series C Preferred Stock will convert into 1.13 and
1.14 shares of Atcom Common Stock, respectively.
(c) Except as set forth on Schedule 1, there is no:
----------
9
(i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of Atcom; or
(ii) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the capital
stock or other securities of Atcom.
(d) Atcom has never repurchased, redeemed or otherwise reacquired (or
agreed, committed or offered (in writing or otherwise) to repurchase, redeem or
otherwise reacquire) any shares of its capital stock or its other securities.
3.4 Authority; Binding Nature of Agreements.
Atcom has the corporate power and authority to enter into and to perform
its obligations under this Agreement and the other Transactional Agreements to
which it is or is contemplated to be a party, and the execution, delivery and
performance by Atcom of this Agreement and such Transactional Agreements have
been duly authorized by all necessary action on the part of the Atcom Board.
This Agreement and the other Transactional Agreements constitute, or upon
execution and delivery will constitute, the legal, valid and binding obligations
of Atcom, enforceable against Atcom in accordance with their respective terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other laws affecting the enforcement of
creditor's rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in law or equity.
3.5 Non-Contravention; Consents.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Merger, by Atcom will not, directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of Atcom's
Articles of Incorporation or Bylaws;
(b) to the Knowledge of Atcom, contravene, conflict with or result in a
material violation of, or give any Governmental Body or other Person the right
to challenge the Merger or to exercise any remedy or obtain any relief (other
than statutory dissenters' rights) under any Legal Requirement or any Order to
which Atcom or any material assets owned or used by it are subject;
(c) to the Knowledge of Atcom, cause any material assets owned or used by
Atcom to be reassessed or revalued by any taxing authority or other Governmental
Body;
(d) to the Knowledge of Atcom, contravene, conflict with or result in a
material violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or
modify, any Governmental Authorization that is
10
held by Atcom or that otherwise relates to Atcom's business or to any of the
material assets owned or used by Atcom;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any material Atcom Contract;
(f) give any Person the right to any payment by Atcom or give rise to
any acceleration or change in the award, grant, vesting or determination of
options, warrants, rights, severance payments or other contingent obligations of
any nature whatsoever of Atcom in favor of any Person, in any such case as a
result of the change in control of Atcom or otherwise resulting from the Merger;
or
(g) result in the imposition or creation of any Encumbrance upon or
with respect to any material asset owned or used by Atcom.
Except as contemplated in this Agreement and the other Transactional Agreements,
Atcom will not be required to make any filing with or give any notice to, or
obtain any Consent from, any Person in connection with the execution and
delivery of this Agreement and the other Transactional Agreements or the
consummation or performance of the Merger.
3.6 Intellectual Property.
(a) Part 3.6 of the Atcom Disclosure Schedule sets forth a complete
--------
list, in all material respects, of all patents, trademarks, copyrights,
registered maskworks, trade names and service marks, and any applications
therefor in respect of any of the foregoing, included in Atcom's Proprietary
Assets. Part 3.6 also sets forth a complete list of all material licenses,
--------
sublicenses and other agreements as to which Atcom is a party and pursuant to
which Atcom or any other Person is currently authorized to use any of Atcom's
Proprietary Assets (excluding object code and end-user licenses granted to end-
users in the ordinary course of business that permit use of software products
without a right to modify, distribute or sublicense the same ("End-User
Licenses")) and includes the identity of all parties thereto. Atcom is not in
material violation of any material license, sublicense or agreement listed on
such list except such violations as do not materially impair Atcom's rights
under such license, sublicense or agreement. Except for any consents to transfer
required under any material Atcom Contract, the execution and delivery of this
Agreement by Atcom, and the consummation of the transactions contemplated
hereby, (i) will not cause Atcom to be in material violation or default under
any such material license, sublicense or agreement, (ii) will not entitle any
other party to any such material license, sublicense or agreement to terminate
or modify such material license, sublicense or agreement or (iii) will not
require Atcom to repay any funds already received by it from a third party.
(b) Atcom is the sole and exclusive owner or licensee of (free and
clear of any liens or Encumbrances), Atcom's Proprietary Assets, and has all
necessary rights to the use thereof or the material covered thereby in
connection with the services or products in respect of which Atcom's Proprietary
Assets are being currently used.
11
(c) No claims with respect to Atcom's Proprietary Assets have been
asserted or, to the Knowledge of Atcom, are threatened by any Person nor are
there any valid grounds, to the Knowledge of Atcom, for any bona fide claims (i)
to the effect that the manufacture, sale, licensing or use of any of the
products of Atcom as now manufactured, sold, licensed or used by Atcom infringes
on any third party's Proprietary Assets; (ii) against the use by Atcom of the
Proprietary Assets used in Atcom's business as currently conducted; or (iii)
challenging the ownership by Atcom, validity or effectiveness of any of Atcom's
Proprietary Assets. All registered patents, trademarks, service marks and
copyrights held by Atcom, if any, are valid and subsisting.
(d) To Atcom's Knowledge, there is no material unauthorized use,
infringement or misappropriation of any of Atcom's Proprietary Assets by any
third party, including any employee or former employee of Atcom.
(e) None of Atcom's Proprietary Assets or products is subject to any
outstanding decree, order, judgment, or stipulation by a Governmental Authority
restricting in any manner the licensing thereof by Atcom.
(f) Atcom has not entered into any agreement under which Atcom is
restricted from selling, licensing or otherwise distributing any of its current
or anticipated products to any class of customers, in any geographic area,
during any period of time or in any segment of the market.
(g) Each employee and consultant identified on Part 3.6(g) of the
-----------
Atcom Disclosure Schedule has executed Atcom's form of proprietary information
and invention agreement in substantially the form provided to CAIS or its
counsel.
3.7 Proceedings; Orders.
(a) There is no pending Proceeding, and, to Atcom's Knowledge, no
Person has threatened in writing to commence any Proceeding:
(i) that (x) involves Atcom or (y) otherwise relates to Atcom's
business or any of the material assets owned or used by Atcom (whether or
not Atcom is named as a party thereto), other than Proceedings to which
Atcom is not a party that would affect businesses generally; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or
Atcom's ability to comply with or perform its obligations and covenants
under the Transactional Agreements, and, to the Knowledge of Atcom, no
event has occurred, and no claim, dispute or other condition or
circumstance exists, that might directly or indirectly give rise to or
serve as a basis for the commencement of any such Proceeding.
(b) Atcom has made available to CAIS accurate and complete copies of
all pleadings, correspondence and other written materials to which Atcom has
access that relate to the Proceedings identified in Part 3.7 of the Atcom
--------
Disclosure Schedule, if any.
12
(c) There is no Order to which Atcom, or any of the assets owned or
used by Atcom, is subject.
(d) To Atcom's Knowledge, No officer or employee of Atcom is subject
to any Order that prohibits such officer or employee from engaging in or
continuing any conduct, activity or practice relating to Atcom's business.
3.8 Financial Statements.
(a) Atcom has made available to CAIS the following financial statements
and notes (collectively, the "Financial Statements"), which are attached in Part
----
3.8 of the Atcom Disclosure Schedule:
---
(i) the audited balance sheet of Atcom as of December 31, 1998,
and the related audited statement of operations of Atcom for the period
ended December 31, 1998; and
(ii) the unaudited balance sheet of Atcom as of June 30, 1999
(the "Unaudited Interim Balance Sheet"), and the related unaudited
statement of operations of Atcom for the six (6) months then ended.
(b) All the Financial Statements are accurate and complete in all
material respects. The Financial Statements are in accordance with the books and
records of Atcom and present fairly the financial position of Atcom as of the
respective dates thereof and the results of operations of Atcom for the periods
covered thereby. The Financial Statements have been prepared using the accrual
tax method of accounting used by Atcom to prepare Atcom Returns, applied on a
consistent basis throughout the periods covered.
(c) As of the date of this Agreement, Atcom has no Liabilities in
excess of Twenty-Five Thousand Dollars ($25,000), individually or in the
aggregate, except for (i) Liabilities identified as such in the "liabilities"
column of the Unaudited Interim Balance Sheet and (ii) Liabilities arising out
of the Transactional Agreements and Atcom Contracts.
3.9 Title to Assets.
(a) Atcom owns, and has good, valid and marketable title to, all assets
purported to be owned by it, free and clear of any material Encumbrances, except
liens for Taxes that are not yet due and payable.
(b) Part 3.9(b) of the Atcom Disclosure Schedule lists, as of July 30,
-----------
1999, all equipment, furniture, fixtures, improvements and other tangible assets
owned by Atcom with a value over Ten Thousand Dollars ($10,000), and sets forth
the original cost and book value of each of said assets.
(c) Each asset listed in Part 3.9(b) of the Atcom Disclosure Schedule:
-----------
13
(i) is free of material defects and deficiencies and in good
condition and repair, consistent with its age and intended use (ordinary
wear and tear excepted); and
(ii) is adequate for the uses to which it is being put.
(d) Atcom does not own any real property or any interest in real property,
except for the leaseholds created under the real property leases identified in
Part 3.9(d) of the Atcom Disclosure Schedule (the "Leased Premises").
-----------
Part 3.9(d) of the Atcom Disclosure Schedule lists the Leased Premises covered
-----------
by such leases. Atcom enjoys peaceful and undisturbed possession of the Leased
Premises.
(e) Part 3.9(e) of the Atcom Disclosure Schedule lists all tangible assets
-----------
that are leased to Atcom that have a value in excess of Ten Thousand Dollars
($10,000). All leases pursuant to which Atcom leases real or personal property
are in good standing and are valid and effective in accordance with their
respective terms and, to the Knowledge of Atcom, there exists no material
default thereunder.
3.10 Contracts.
(a) Part 3.10 of the Atcom Disclosure Schedule lists each material
---------
Atcom Contract. Atcom has made available to CAIS or its counsel accurate and
complete copies of all Atcom Contracts identified in Part 3.10 of the Atcom
---------
Disclosure Schedule, including all amendments thereto.
(b) Each material Atcom Contract is currently valid and in full force
and effect, and is enforceable by Atcom in accordance with its terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditor's
rights generally and by general principles of equity regardless of whether such
enforceability is considered in a proceeding in law or equity.
(c) Atcom is not in material default under any material Atcom Contract,
and, to the Knowledge of Atcom, (i) no Person has violated or breached, or
declared or committed any material default under, any Atcom Contract; and (ii)
Atcom has not waived any of its rights under any material Atcom Contract.
(d) (i) Atcom has never guaranteed or otherwise agreed to cause, insure
or become liable for, and has never pledged any of its assets to secure, the
performance or payment of any obligation or other Liability of any other Person;
and (ii) Atcom has never been a party to or bound by any material joint venture
agreement, partnership agreement, profit-sharing agreement, cost-sharing
agreement, loss-sharing agreement or similar Contract.
(e) No Person is renegotiating any amount paid or payable to Atcom
under any Atcom Contract or any other material term or provision of any Atcom
Contract.
(f) No party to any material Atcom Contract has notified Atcom in
writing to the effect that Atcom has failed to perform a material obligation
thereunder.
14
3.11 Employees.
(a) Atcom has made available to CAIS or its counsel a list of all
employees of Atcom as of the date of the Agreement and their respective titles
and annualized compensation.
(b) Part 3.11(b) of the Atcom Disclosure Schedule contains a list of
------------
Persons who are currently performing services for Atcom business and are
classified as "consultants" or "independent contractors."
(c) Atcom has no collective bargaining agreements, union contracts with
any of its employees. To the Knowledge of Atcom, there is no labor union
organizing activity pending or threatened with respect to Atcom. The employment
of each of Atcom's employees is terminable by Atcom at will; and no employee has
any agreement or contract, written or verbal, regarding his or her employment.
(d) To Atcom's Knowledge, (i) no employee of Atcom, nor any consultant
with whom Atcom has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, Atcom
because of the nature of the business to be conducted by Atcom, and (ii) the
continued employment by Atcom of its present employees, and the performance of
Atcom's contracts with its independent contractors, will not result in any such
violation. Atcom has not received any notice (written or otherwise) alleging
that any such violation has occurred. No employee of Atcom has been granted the
right to continued employment by Atcom or to any material compensation following
termination of employment with Atcom. To the Knowledge of Atcom, no officer or
key employee, or any group of employees, has given notice of his, her or their
intent to terminate his, her or their employment with Atcom and no employee of
Atcom has received an offer to join a business that is or likely would be
competitive with Atcom's business.
3.12 Compliance with Legal Requirements.
(a) Atcom is in full compliance in all material respects with each
Legal Requirement that is applicable to it or to the conduct of its business or
the ownership or use of any of its assets.
(b) Since December 31, 1996, Atcom has not received any written notice
from any Governmental Body or any other Person regarding (i) any actual,
alleged, possible or potential violation of, or failure to comply with, any
Legal Requirement by Atcom, or (ii) any actual, alleged, possible or potential
obligation on the part of Atcom to undertake, or to bear all or any portion of
the cost of, any cleanup or any remedial, corrective or response action of any
nature relating to Hazardous Materials, except to the extent noncompliance would
not materially adversely effect Atcom's financial condition.
15
3.13 Governmental Authorizations.
(a) Except for Governmental Authorization relating to Atcom's
Proprietary Assets, Part 3.13 of the Atcom Disclosure Schedule identifies each
---------
Governmental Authorization held by Atcom. Atcom has made available to CAIS or
its counsel accurate and complete copies of all such Governmental
Authorizations, including all renewals thereof and all amendments thereto. Each
Governmental Authorization listed in Part 3.13 of the Atcom Disclosure
---------
Schedule is valid and in full force and effect.
(b) The Governmental Authorizations identified in Part 3.13 of the
---------
Atcom Disclosure Schedule constitute all the Governmental Authorizations
necessary (i) to enable Atcom to conduct its business in the manner in which its
business is currently being conducted, and (ii) to permit Atcom to own and use
its assets in the manner in which they are currently owned and used.
3.14 Tax Matters.
(a) All Returns required to be filed by or on behalf of Atcom on or
before the Closing Date have been or will be duly filed on a timely basis
(including extensions) and such Returns are or will be true, complete and
correct (the "Atcom Returns"). All Taxes shown to be payable on the Atcom
Returns or on subsequent assessments with respect thereto have been or will be
paid in full on a timely basis, and no other Taxes are payable by Atcom with
respect to items or periods covered by the Atcom Returns (whether or not shown
on or reportable on the Atcom Returns) or with respect to any period ending on
or before the Closing Date. On or before the Closing Date, Atcom will have
withheld and paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid or owing to any employee, creditor, independent contractor,
consultant or other third party with respect to any period ending on or before
the Closing Date.
(b) The amount of Atcom's liability for unpaid Taxes for all periods
ending on or before the Closing Date does not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) of Atcom, as such accruals are reflected on the Unaudited
Interim Balance Sheet.
(c) CAIS has been furnished by Atcom true and complete copies of (i)
relevant portions of income tax audit reports, statements of deficiencies,
closing or other agreements received by the or on behalf of Atcom relating to
Taxes, and (ii) all federal, state and local income or franchise tax returns for
Atcom for all periods ending on and after December 31, 1996. Atcom has never
been a member of a group filing consolidated, unitary or combined Returns. Atcom
does not do business in or derive income from any state, local, territorial or
foreign taxing jurisdiction other than those for which all Returns have been
furnished to CAIS.
(d) The Atcom Returns have never been audited by a government or taxing
authority, nor is any such audit in process, pending or threatened (either in
writing or verbally, formally or informally). No deficiencies exist or have been
asserted (either in writing or verbally, formally
16
or informally) or are expected to be asserted with respect to Taxes of the
Atcom, and Atcom has not received notice (either in writing or verbally,
formally or informally) or expects to receive notice that it has not filed a
Return or paid Taxes required to be filed or paid by it. Atcom is neither a
party to any action or proceeding for assessment or collection of Taxes, nor has
such event been asserted or threatened (either in writing or verbally, formally
or informally) against Atcom or any of its assets. No waiver or extension of any
statute of limitations is in effect with respect to Taxes or the Atcom Returns.
Atcom has disclosed on its federal income tax returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Code Section 6662.
(e) Atcom is not (nor has it ever been) a party to any Tax Sharing
Agreement.
(f) Atcom is not a party to any safe harbor lease within the meaning of
Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982. Atcom has not been a "United States real
property holding corporation," within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code and CAIS is not required to withhold tax with respect the consideration
paid to the Shareholders hereunder by reason of Section 1445 of the Code. Atcom
is not a "consenting corporation" under Section 341(f) of the Code. Atcom has
not entered into any compensatory agreements with respect to the performance of
services which payment thereunder could result in a nondeductible expense to
Atcom pursuant to Sections 162(m) or 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code. Atcom has not
participated in an international boycott as defined in Code Section 999. Atcom
has not agreed, nor is it required to make, any adjustment under Code Section
481(a) by reason of a change in accounting method or otherwise. Atcom is in full
compliance with Section 263A of the Code. Atcom does not have (i) a "permanent
establishment" in any foreign country, as defined in any applicable Tax treaty
or convention between the United States of America and such foreign country, and
(ii) any other fixed place of business in a foreign country. Atcom is not a
party to any joint venture, partnership or other agreement, contract or
arrangement (either in writing or verbally, formally or informally) which could
be treated as a partnership for income tax purposes. Atcom is in compliance with
the terms and conditions of any applicable Tax exemptions, Tax agreements or Tax
orders of any government to which it may be subject or which it may have
claimed, and the transactions contemplated by this Agreement will not have any
adverse effect on such compliance. Atcom is not, nor has it ever been, an "S
corporation, within the meaning of Section 1361(a)(1) of the Code, for federal,
state or local income tax purposes. Atcom has never been in a "consolidated
group" within the meaning of Treasury Regulations Section 1.1502-1(h), and is
not liable for Taxes incurred by any individual, trust, corporation, partnership
or any other Entity either as a transferee, pursuant to Treasury Regulations
Section 1.1502-6, or pursuant to any other provision of federal, territorial,
state, local or foreign law or regulations.
(g) All of the Shareholders are "United States persons," within the
meaning of Section 7701(a)(30) of the Code.
17
(h) Part 3.14(h) of the Atcom Disclosure Schedule contains accurate and
------------
complete description of Atcom's federal income tax basis in its assets, Atcom's
current and accumulated earnings and profits, Atcom's tax carryovers, and tax
elections made by Atcom. Atcom has no net operating losses or other tax
attributes presently subject to limitation under Sections 382, 383, or 384 of
the Code, or the federal consolidated return regulations promulgated under
Section 1502 of the Code.
3.15 Securities Laws Compliance; Registration Rights.
Atcom has complied with all federal and state securities laws in connection
with all offers and sales of securities issued by Atcom prior to the date of
this Agreement. Atcom has not heretofore granted any other purchaser of its
securities the right to require Atcom to register any securities under the
Securities Act or to qualify for any exemption thereunder.
3.16 Finders and Brokers; Fees.
(a) Neither Atcom nor any Person acting on behalf of Atcom has engaged
any finder, broker, intermediary or any similar Person in connection with the
Merger.
(b) Atcom has not entered into a contract or other agreement that
provides that a fee shall be paid to any Person or Entity if the Merger is
consummated.
3.17 Environmental Compliance.
(a) Atcom is in compliance in all material respects with all
Environmental Laws and the requirements of all material environmental permits
required for the handling, use, storage and disposition of Hazardous Materials
under Environmental Laws that are applicable to Atcom's operations as presently
conducted.
(b) There are no pending, or to the Knowledge of Atcom, threatened
Environmental Claims against Atcom or any property leased by Atcom.
(c) To Atcom's Knowledge, there are no facts, circumstances, conditions
or occurrences regarding Atcom, its operations or any property of Atcom that
could form the basis of an Environmental Claim against Atcom.
3.18 Insurance.
(a) Part 3.18 of the Atcom Disclosure Schedule sets forth each
---------
insurance policy maintained by or at the expense of, or for the direct or
indirect benefit of, Atcom, including the following information:
(i) the name of the insurance carrier that issued such policy
and the policy number of such policy;
(ii) whether such policy is a "claims made" or an "occurrences"
policy;
18
(iii) a description of the coverage provided by such policy and
the material terms and provisions of such policy (including all applicable
coverage limits, deductible amounts and co-insurance arrangements);
(iv) the annual premium payable with respect to such policy,
and the cash value (if any) of such policy; and
(v) a description of any claims pending, and any claims that
have been asserted in the past, with respect to such policy.
Part 3.18 shall also identify (1) each pending application for insurance that
---------
has been submitted by or on behalf of Atcom, and (2) each self-insurance or
risk-sharing arrangement affecting Atcom or any of its assets.
(b) Atcom has made available to CAIS or its counsel copies of all of
the insurance policies identified in Part 3.18 of the Atcom Disclosure Schedule
---------
(including all renewals thereof and endorsements thereto) and binders relating
thereto.
(c) Each of the policies identified in Part 3.18 of the Atcom
---------
Disclosure Schedule is in full force and effect. Atcom has paid all premiums
due, and has otherwise performed all of its obligations, under each policy to
which it is a party or that provides coverage to it or any of its directors or
officers in connection with their performance of services to Atcom.
(d) There is no pending claim under or based upon any of the policies
identified in Part 3.18 of the Atcom Disclosure Schedule, and, to Atcom's
---------
Knowledge, no event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) directly or indirectly give rise
to or serve as a basis for any such claim.
(e) Atcom has not received:
(i) any written notice or other communication regarding the
actual or possible cancellation or invalidation of any of the policies
identified in Part 3.18 of the Atcom Disclosure Schedule or regarding any
---------
actual or possible adjustment in the amount of the premiums payable with
respect to any of said policies; or
(ii) any written notice or other communication regarding any
actual or possible refusal of coverage under, or any actual or possible
rejection of any claim under, any of the policies identified in Part 3.18
---------
of the Atcom Disclosure Schedule.
3.19 Related Party Transactions.
(a) To Atcom's Knowledge, no Related Party has, and no Related Party
has at any time since December 31, 1998, had, any direct or indirect material
interest of any nature in any material asset of Atcom or any Atcom Contract.
19
(b) No Related Party is, or has at any time since December 31, 1998,
been, indebted to Atcom for an amount, individually or in the aggregate, in
excess of Ten Thousand Dollars ($10,000).
(c) To Atcom's Knowledge, since December 31, 1998, no Related Party has
entered into, or has had any direct or indirect material financial interest in,
any Atcom Contract, transaction or business dealing of any nature involving
Atcom.
(d) To Atcom's Knowledge, no Related Party is competing, or has at any
time since December 31, 1998, competed, directly or indirectly, with Atcom in
any market served by Atcom.
3.20 Absence of Changes.
Since June 30, 1999:
(a) there has not been any material adverse change in Atcom's business,
assets, liabilities, or operations, and, to the Knowledge of Atcom, no event has
occurred that is likely to have a material adverse effect on Atcom's business,
assets, liabilities, or operations;
(b) Atcom has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock;
(c) Atcom has not amended its Articles of Incorporation or Bylaws and
has not effected or been a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(d) Atcom has not made any individual capital expenditure in excess of
Twenty Five Thousand Dollars ($25,000);
(e) Atcom has not pledged or hypothecated any of its material assets or
otherwise permitted any of its material assets to become subject to any
Encumbrance;
(f) Atcom has not made any loan or advance in excess of Ten Thousand
Dollars ($10,000) to any Person;
(g) Atcom has not paid any bonus or made any profit-sharing or similar
payment to, or increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its directors,
officers or employees;
(h) there has been no resignation or termination of employment of any
officer or key employee of Atcom;
(i) there has been no borrowing or agreement to borrow by Atcom or
material change in the contingent obligations of Atcom by way of guaranty,
endorsement, indemnity, warranty or otherwise or grant of a mortgage or security
interest in any property of Atcom;
20
(j) Atcom has not discharged any Encumbrance or discharged, paid or
forgiven any indebtedness or other Liability in excess of Ten Thousand Dollars
($10,000), individually or in the aggregate, except for accounts payable that
(i) are reflected as current liabilities in the "liabilities" column of the
Unaudited Interim Balance Sheet or have been incurred by Atcom since the date of
the Unaudited Interim Balance Sheet in the Ordinary Course of Business and (ii)
have been discharged or paid in the Ordinary Course of Business;
(k) Atcom has released or waived any material right or claim;
(l) Atcom has not changed any of its accountants or its methods of
accounting or accounting practices in any material respect;
(m) Atcom has not received written notice that there has been a loss
of, or cancellation of a material order by, any customer of Atcom; and
(n) Atcom has not agreed, committed or offered (in writing or
otherwise), and has not attempted, to take any of the actions referred to in
clauses (c) through (m) above.
3.21 Powers of Attorney.
Except in connection with the prosecution of Atcom's Proprietary Assets,
Atcom has not given a power of attorney to any Person.
3.22 Benefit Plans; ERISA.
(a) Part 3.22 of the Atcom Disclosure Schedule lists (i) all "employee
---------
benefit plans" within the meaning of Section 3(3) of ERISA, (ii) all employment
agreements, including, but not limited to, any individual benefit arrangement,
policy or practice with respect to any current employee or director of Atcom or
Member of the Controlled Group, and (iii) all other employee benefit, bonus or
other incentive compensation, stock option, stock purchase, stock appreciation,
severance pay, lay-off or reduction in force, change in control, sick pay,
vacation pay, salary continuation, retainer, leave of absence, educational
assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, which Atcom or any Member of the Controlled
Group maintains, contributes to or has any obligation to or liability for
(collectively, the "Plans").
(b) None of the Plans is a Pension Plan, and neither Atcom nor any Member
of the Controlled Group has ever sponsored, maintained or contributed to, or
ever been obligated to contribute to, a Pension Plan that could reasonably be
expected to result in a material amount of liability under Title IV of ERISA.
(c) None of the Plans is a Multiemployer Plan, and neither Atcom nor any
Member of the Controlled Group has ever contributed to, or ever been obligated
to contribute to, a Multiemployer Plan that could reasonably be expected to
result in a material amount of liability under Title IV of ERISA.
21
(d) Atcom does not maintain or contribute to any welfare benefit plan
which provides health benefits to an employee after the employee's termination
of employment or retirement except as required under Section 4980B of the Code
and Sections 601 through 608 of ERISA.
(e) Each Plan that is an "employee benefit plan," as defined in Section
3(3) of ERISA, complies in all material respects by its terms and in operation
with the requirements provided by any and all statutes, orders or governmental
rules or regulations currently in effect and applicable to the Plan, including
but not limited to ERISA and the Code.
(f) All material reports, forms and other documents required to be filed
with any government entity with respect to any Plan (including, without
limitation, summary plan descriptions, Forms 5500 and summary annual reports)
have been timely filed and are accurate.
(g) Each Plan intended to qualify under Section 401(a) of the Code is the
subject of a favorable determination letter issued by the Internal Revenue
Service. To Atcom's Knowledge, nothing has occurred since the date of the
Internal Revenue Service's favorable determination letter that could adversely
affect the qualification of the Plan and its related trust. Atcom and each
Member of the Controlled Group have timely and properly applied for a written
determination by the Internal Revenue Service on the qualification of each such
Plan and its related trust under Section 401(a) of the Code, as amended by the
Tax Reform Act of 1986 and subsequent legislation enacted through the date
hereof, and Section 501 of the Code.
(h) All contributions owed for all periods ending prior to the Closing
Date (including periods from the first day of the current plan year to the
Closing Date) under any Plan have been or will be made prior to the Closing Date
in accordance with past practice and the recommended contribution in any
applicable actuarial report.
(i) All insurance premiums have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to the Plans for
plan years ending on or before the Closing Date.
(j) With respect to each Plan:
(i) no prohibited transactions (as defined in Section 406 or
407 of ERISA or Section 4975 of the Code) have occurred for which an
exemption is not available that could reasonably be expected to result in a
material amount of liability to Atcom;
(ii) no actions or claims (other than routine claims for
benefits made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) are pending, or, to
Atcom's Knowledge, threatened or imminent against or with respect to the
Plan, any employer who is participating (or who has participated) in the Plan
or any fiduciary (as defined in Section 3(21) of ERISA) of the Plan that
could reasonably be expected to result in a material amount of liability to
Atcom;
22
(iii) To Atcom's Knowledge, no facts exist which could give rise
to any such action or claim; and
(iv) the Plan provides that it may be amended or terminated at
any time and, except for benefits protected under Section 411(d) of
the Code, all benefits payable to current, terminated employees or any
beneficiary may be amended or terminated by Atcom at any time without
a material amount of liability to Atcom.
(k) Neither Atcom nor any Member of the Controlled Group has any Plan-
related liability or is threatened with any liability (whether joint or several)
(i) for any excise tax imposed by Section 4971, 4975, 4976, 4977 or 4979 of the
Code, or (ii) for a fine under Section 502 of ERISA that could reasonably be
expected to result in a material amount of liability to Atcom.
(l) All the "group health plans" (as defined in Section 607(1) or
733(a)(1) of ERISA or Section 4980B(g)(2) of the Code) that are part of the
Plans listed in the Atcom Disclosure Schedule are in material compliance with
the continuation of group health coverage provisions contained in Section 4980B
of the Code and Sections 601 through 608 of ERISA.
(m) Copies of all documents creating or evidencing any Plan listed in the
Disclosure Schedule, and all reports, forms and other documents required to be
filed with any governmental entity (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for all plans subject to
ERISA), have been delivered or made available to CAIS. There are no
negotiations, demands or proposals which are pending or have been made which
concern matters now covered, or that would be covered, by any Plan listed in the
Atcom Disclosure Schedule.
(n) All expenses and liabilities relating to contributions required by law
and the terms of the Plans described in the Atcom Disclosure Schedule have been,
and on the Closing Date will be, fully and properly accrued on the appropriate
employer's books and records and disclosed in accordance with GAAP and in Plan
financial statements.
3.23 Bank Accounts.
Part 3.23 of the Atcom Disclosure Schedule sets forth with respect to each
---------
account maintained by or for the benefit of Atcom at any bank or other financial
institution:
(a) the name and location of the institution at which such account is
maintained; and
(b) the names of all individuals authorized to draw on or make withdrawals
from such account.
3.24 Year 2000 Compliance.
Atcom has conducted a comprehensive review of its internal computer systems
and software to identify the systems that are not Year 2000 Compliant. Atcom's
business, financial
23
condition and results of operations will not be materially adversely affected by
Year 2000 Compliance related issues. The term "Year 2000 Compliant" as used
herein means that (i) each such technology, equipment or system, on dates on and
after January 1, 2000 (the "Millennial Dates"), will calculate any information
dependent on or relating to dates on or after January 1, 2000 in the same
manner, and with the same functionality, data integrity and performance, as such
technology, equipment or system records, stores, processes, calculates and
presents calendar dates on or before any Millennial Date, and (ii) the
Millennial Dates will not adversely affect the operation of such technology,
equipment or system with respect to date-dependent data or computations, output,
or other routines or functions.
3.25 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto), nor any of the Transactional Agreements, contains any untrue statement
of material fact; and none of such documents omits to state any material fact
necessary to make any of the representations, warranties or other statements or
information contained therein when read collectively not misleading.
(b) There is no fact within the Knowledge of Atcom (other than
publicly known facts relating exclusively to political or economic matters of
general applicability that will adversely affect all comparable Entities) that
may have a material adverse effect on Atcom's business, financial condition,
assets, liabilities, operations, financial performance, or net income.
(c) All the information set forth in the Atcom Disclosure Schedule,
and all other information (including copies of documents) regarding or relating
to Atcom and its business, condition, assets, liabilities, operations, financial
performance, and net income that has been furnished to CAIS or any of its
representatives by or on behalf of Atcom or any of its representatives, is
accurate and complete in all material respects.
3.26 Due Diligence Information.
Atcom has provided CAIS and CAIS's Representatives with full and complete
access to all of Atcom's records and other documents and data, and has produced
all documents and related materials in response to the reasonable requests of
CAIS or its counsel.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CAIS
The Company and CAIS hereby represent and warrant to Atcom as of the date
hereof:
4.1 Organization; Good Standing.
(a) CAIS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, is qualified to conduct
business and is in both corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or the
24
ownership or leasing of its properties requires such qualification. CAIS has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted.
(b) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, is qualified to
conduct business and is in both corporate and tax good standing under the laws
of each jurisdiction in which the nature of its business or the ownership or
leasing of its properties requires such qualification. The Company has the
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as currently conducted
4.2 CAIS Common Stock.
The CAIS Common Stock to be issued to the Shareholders, when issued in
connection with this Agreement and the other Transactional Agreements, will be
duly authorized, validly issued, fully paid and nonassessable.
4.3 Authority; Binding Nature of Agreements.
(a) The execution, delivery and performance of this Agreement, the
Transactional Agreements, and all other agreements and instruments contemplated
to be executed and delivered by CAIS or the Company, as the case may be, in
connection herewith have been duly authorized by all necessary corporate action
on the part of CAIS and the Company and their respective board of directors.
(b) This Agreement, the Transactional Agreements, and all other
agreements and instruments contemplated to be executed and delivered by CAIS and
the Company each constitute the legal, valid and binding obligation of CAIS and
the Company, enforceable against CAIS and the Company in accordance with their
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, merger, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity
regardless of whether such enforceability is considered in a proceeding in law
or equity.
(c) There is no pending Proceeding, and, to CAIS's Knowledge, no
Person has threatened to commence any Proceeding that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with, the Merger or CAIS's or the Company's ability to comply with or perform
its obligations and covenants under the Transactional Agreements, and, to the
Knowledge of CAIS, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise to
or serve as a basis for the commencement of any such Proceeding.
25
4.4 Non-Contravention; Consents.
The execution and delivery of this Agreement and the other Transactional
Agreements, and the consummation of the Merger, by CAIS and the Company will
not, directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a material violation of
(i) CAIS and the Company's Certificate of Incorporation or Bylaws, or (ii) any
resolution adopted by CAIS and the Company Board or any committee thereof or the
stockholders of CAIS and the Company;
(b) to the Knowledge of CAIS and the Company, contravene, conflict
with or result in a material violation of, or give any Governmental Body the
right to challenge the Merger or to exercise any remedy or obtain any relief
under, any legal requirement or any Order to which CAIS and the Company or any
material assets owned or used by it are subject;
(c) to the Knowledge of CAIS and the Company, cause any material
assets owned or used by CAIS and the Company to be reassessed or revalued by any
taxing authority or other Governmental Body;
(d) to the Knowledge of CAIS and the Company, contravene, conflict
with or result in a material violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by CAIS or the
Company or any of their respective employees or that otherwise relates to CAIS
and the Company's business or to any of the material assets owned or used by
CAIS and the Company;
(e) contravene, conflict with or result in a material violation or
material breach of, or material default under, any Contract to which CAIS or the
Company is a party;
(f) give any Person the right to any payment by CAIS or the Company
or give rise to any acceleration or change in the award, grant, vesting or
determination of options, warrants, rights, severance payments or other
contingent obligations of any nature whatsoever of CAIS or the Company in favor
of any Person, in any such case as a result of the change in control of the
Company or otherwise resulting from the Merger; or
(g) result in the imposition or creation of any material Encumbrance
upon or with respect to any material asset owned or used by CAIS and the
Company.
Except as contemplated in this Agreement and the other Transactional
Agreements, CAIS and the Company will not be required to make any filing with or
give any notice to, or obtain any Consent from, any Person in connection with
the execution and delivery of this Agreement and the other Transactional
Agreements or the consummation or performance of the Merger.
26
4.5 Finders and Brokers.
(a) Neither CAIS or the Company nor any Person acting on behalf of
CAIS or the Company has engaged any finder, broker, intermediary or any similar
Person in connection with the Merger.
(b) Neither CAIS nor the Company has entered into a contract or other
agreement that provides that a fee shall be paid to any Person or Entity if the
Merger is consummated.
4.6 Reports and Financial Statements; Absence of Certain Changes.
(a) CAIS has filed all reports required to be filed with the SEC
pursuant to the Exchange Act since its initial public offering on May 21, 1999
(all such reports, including those to be filed prior to the Closing Date and all
registration statements and prospectuses filed by CAIS with the SEC in
connection with CAIS's initial public offering, are collectively referred to as
the "CAIS SEC Reports"), and has previously furnished or made available to Atcom
true and complete copies of all the CAIS SEC Reports filed, if any, with respect
to periods ending after May 21, 1999 (including any exhibits thereto) and will
promptly deliver to Atcom any CAIS SEC Reports filed between the date hereof and
the Effective Time. All of such CAIS SEC Reports complied at the time they were
filed and declared effective, if applicable, in all material respects with
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations thereunder. None of such CAIS SEC Reports, as of their
respective dates (as amended through the date hereof), contained or, with
respect to CAIS SEC Reports filed after the date hereof, will contain any untrue
statement of a material fact or omitted or, with respect to CAIS SEC Reports
filed after the date hereof, will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements of CAIS included in the CAIS SEC Reports comply in all material
respects with the published rules and regulations of the SEC with respect
thereto, and such audited financial statements (i) were prepared from the books
and records of CAIS, (ii) were prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto) and (iii) present fairly the financial position of CAIS as of
the dates thereof and the results of operations and cash flows for the periods
then ended. The unaudited financial statements included in the CAIS SEC Reports
comply in all material respects with the published rules and regulations of the
SEC with respect thereto; and such unaudited financial statements (i) were
prepared from the books and records of CAIS, (ii) were prepared in accordance
with GAAP, except as otherwise permitted under the Exchange Act and the rules
and regulations thereunder, on a consistent basis (except as may be indicated
therein or in the notes or schedules thereto) and (iii) present fairly the
financial position of CAIS as of the dates thereof and the results of operations
and cash flows (or changes in financial condition) for the periods then ended,
subject to normal year-end adjustments and any other adjustments described
therein or in the notes or schedules thereto. The foregoing representations and
warranties shall also be deemed to be made with respect to all filings made with
the SEC on or before the Effective Time.
27
(b) Except as specifically contemplated by this Agreement or
reflected in the CAIS SEC Reports, since May 21, 1999 there has not been (i) any
material adverse change in CAIS's business, assets, liabilities, operations,
and, to the Knowledge of CAIS, no event has occurred that is likely to have a
material adverse effect on CAIS's business, assets, liabilities or operations,
(ii) any declarations setting aside or payment of any dividend or distribution
with respect to the CAIS Common Stock other than consistent with past practices,
(iii) any material change in CAIS's accounting principles, procedures or
methods, (iv) cancellation in writing of any material customer contract or (v)
the loss of any customer relationship which would have a material adverse effect
on CAIS's business, assets, liabilities or operations.
4.7 Compliance with Applicable Law.
Except as disclosed in the CAIS SEC Reports filed prior to the date of this
Agreement, CAIS holds all Governmental Authorizations necessary for the lawful
conduct of its business under and pursuant to, and the business of CAIS is not
being conducted in violation of, any Governmental Authorization applicable to
CAIS, except to the extent that the failure or violation would not in the
aggregate have a material adverse effect on the business, results of operations
or financial condition of CAIS.
4.8 Complete Copies of Requested Reports.
CAIS has delivered or made available true and complete copies of each
document that has been reasonably requested by Atcom.
4.9 Full Disclosure.
(a) Neither this Agreement (including all Schedules and Exhibits
hereto) nor any of the Transactional Agreements contemplated to be executed and
delivered by CAIS or the Company in connection with this Agreement contains any
untrue statement of material fact; and none of such documents omits to state any
material fact necessary to make any of the representations, warranties or other
statements or information contained therein not misleading.
(b) All of the information set forth in the prospectus and all other
information regarding CAIS or the Company and the business, condition, assets,
liabilities, operations, financial performance, net income and prospects of
either that has been furnished to Atcom by or on behalf of CAIS, the Company or
any of the CAIS's Representatives, is accurate and complete in all material
respects.
4.10 Proceeding; Orders; Current Reports.
(a) Since May 21, 1999, there have been no Proceeding commenced, and
to CAIS's Knowledge no Person has threatened to commence, any Proceeding that
involves CAIS.
(b) Since May 21, 1999, no events or circumstances have occurred
which would require CAIS to file a form 8-K with the SEC.
28
ARTICLE V.
COVENANTS OF ATCOM
5.1 Access and Investigation.
Atcom shall ensure that, at all times during the Pre-Closing Period:
(a) Atcom and its Representatives provide CAIS and its
Representatives access, at reasonable times and with reasonable notice from CAIS
to Atcom, to all of Atcom's premises and assets, to all existing books, records,
Returns, work papers and other documents and information relating to Atcom, and
to responsible officers and employees of Atcom, and Atcom and its
Representatives provide CAIS and its Representatives with copies of such
existing books, records, Returns, work papers and other documents and
information relating to Atcom as CAIS may request in good faith;
(b) Atcom and its Representatives confer regularly (not less than
semi-monthly and as CAIS may otherwise request) with CAIS concerning operational
matters and otherwise report regularly (not less than semi-monthly and as CAIS
may otherwise request) to CAIS and discuss with CAIS and its Representatives
concerning the status of Atcom's business, condition, assets, liabilities,
operations, and financial performance, and promptly notify CAIS of any material
change in Atcom's business, condition, assets, liabilities, operations, and
financial performance, or any event reasonably likely to lead to any such
change.
5.2 Operation of Business.
Atcom shall ensure that, during the Pre-Closing Period:
(a) Atcom conducts its operations in the Ordinary Course of Business
and in the same manner as such operations have been conducted prior to the date
of this Agreement;
(b) Atcom uses its commercially reasonable efforts to preserve intact
its current business organization, keep available the services of its current
officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with Atcom;
(c) Atcom keeps in full force all insurance policies identified in
Part 3.18 of the Atcom Disclosure Schedule;
---------
(d) Atcom immediately notifies CAIS in writing of any inquiry,
proposal or offer from any Person relating to any Acquisition Proposal;
(e) Atcom does not declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock, and does
not repurchase, redeem or otherwise reacquire any shares of capital stock or
other securities of Atcom, except with respect
29
to the repurchase of shares of Atcom Common Stock upon termination of employees
at the original purchase price pursuant to agreements existing at the date
hereof;
(f) Atcom does not sell or otherwise issue (or grant any warrants,
options or other rights to purchase) any shares of capital stock or any other
securities, except the issuance of shares of Atcom Common Stock pursuant to
option grants to employees made under the Option Plan in the Ordinary Course of
Business;
(g) Atcom does not amend its Articles of Incorporation or Bylaws, and
does not effect or become a party to any transaction related to an Acquisition
Proposal or any recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
(h) Atcom does not form any subsidiary or acquire any equity interest
or other interest in any other Entity;
(i) Atcom does not establish or adopt any Employee Benefit Plan, and
does not pay any bonus or make any profit sharing or similar payment to, or
increase the amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees;
(j) Atcom does not change any of its methods of accounting or
accounting practices in any respect;
(k) Atcom does not make any Tax election;
(l) Atcom does not commence any Proceeding;
(m) Atcom does not (i) acquire, dispose of, transfer, lease, license,
mortgage, pledge or encumber any fixed or other assets, other than in the
Ordinary Course of Business; (ii) incur, assume or prepay any indebtedness,
Liability or obligation or any other liabilities or issue any debt securities,
other than in the Ordinary Course of Business; (iii) assume, guarantee, endorse
for the obligations of any other person, other than in the Ordinary Course of
Business; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person, other than in the Ordinary Course of Business;
or (v) fail to maintain insurance consistent with past practices for its
business and property;
(n) Atcom pays all debts and Taxes, files all Atcom Returns (as
provided herein) and pays or performs all other obligations, when due;
(o) Atcom does not transfer to any Person any Proprietary Asset,
other than in the Ordinary Course of Business;
(p) Atcom does not enter into or amend any agreements pursuant to
which any other Person is granted distribution, marketing or other rights of any
type or scope with respect to any of its services, products or technology;
30
(q) Atcom does not pay, discharge or satisfy, in any amount in excess
of $25,000 in any one case or $50,000 in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise)
arising other than in the Ordinary Course of Business, other than the payment,
discharge or satisfaction of liabilities reflected or reserved against in the
Financial Statements or which CAIS has consented to in writing;
(r) Atcom does not hire any new officer-level employee;
(s) Atcom gives all notices and other information (including any
notices and information required based on any instructions of CAIS related to
post-Closing operations) required prior to the Closing to be given to the
employees of Atcom and any applicable Governmental Body under the National Labor
Relations Act, the Code, the Consolidated Omnibus Budget Reconciliation Act, and
other applicable law in connection with the Merger;
(t) Atcom does not revalue any of its assets, including, without
limitation, writing down the value of inventory or writing off notes or accounts
receivable, except as required under GAAP and in the Ordinary Course of
Business;
(u) Except as otherwise contemplated hereunder, Atcom does not enter
into any transaction or take any other action outside the Ordinary Course of
Business; and
(v) Atcom does not enter into any transaction or take any other
action that likely would cause or constitute a Breach of any representation or
warranty made by Atcom in this Agreement.
5.3 Filings and Consents; Cooperation.
Atcom shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by Atcom or
the Shareholders in connection with the execution and delivery of any of the
Transactional Agreements, or in connection with the consummation or performance
of the Merger, is made or given as soon as possible after the date of this
Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by Atcom or the Shareholders
in connection with the execution and delivery of any of the Transactional
Agreements, or in connection with the consummation or performance of the Merger
(including each of the Consents identified in Part 3.5 of the Atcom Disclosure
--------
Schedule), is obtained as soon as possible after the date of this Agreement and
remains in full force and effect through the Closing Date;
(c) Atcom promptly delivers to CAIS a copy of each filing made, each
notice given and each Consent obtained by Atcom during the Pre-Closing Period;
and
31
(d) During the Pre-Closing Period, Atcom and its Representatives
cooperate with CAIS and CAIS's Representatives, and prepare and make available
such documents and take such other actions as CAIS may request in good faith, in
connection with any filing, notice or Consent that CAIS is required or elects to
make, give or obtain.
5.4 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, Atcom shall promptly notify CAIS
in writing of:
(i) the discovery by Atcom of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a Breach of any representation or
warranty made by Atcom in this Agreement or in any of the other
Transactional Agreements;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement (except as a
result of actions taken pursuant to the written consent of CAIS) and that
would cause or constitute a Breach of any representation or warranty made
by Atcom in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such
event, condition, fact or circumstance, or (B) such extent, condition, fact
or circumstance had occurred, arisen or existed on or prior to the date of
this Agreement;
(iii) any Breach of any covenant or obligation of Atcom; and
(iv) any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Article
VII or Article VIII impossible or unlikely.
(b) If any event, condition, fact or circumstances that is required
to be disclosed pursuant to Section 5.4(a) requires any material change in the
Atcom Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Atcom Disclosure Schedule were dated as
of the date of the occurrence, existence or discovery of such event, condition,
fact or circumstances, then Atcom shall promptly deliver to CAIS an update to
the Atcom Disclosure Schedule specifying such change (a "Disclosure Schedule
Update").
(c) Atcom will promptly update any relevant and material information
provided to CAIS after the date hereof pursuant to the terms of this Agreement.
5.5 Payment of Indebtedness by or Due to Related Parties.
Except as otherwise provided in Part 3.19 of the Atcom Disclosure Schedule,
---------
Atcom shall cause all indebtedness and other Liabilities of each Related Party
to Atcom to be discharged and paid in full, and Atcom shall discharge and pay in
full all of its indebtedness and other Liabilities due to its Related Parties,
at or prior to the Closing.
32
5.6 No Negotiation or Solicitation.
Atcom shall not, and shall use its commercially reasonable efforts to
ensure that none of Atcom's Representatives directly or indirectly do not, from
the date hereof until the earlier of termination of this Agreement or
consummation of the Merger, (a) initiate, solicit or encourage, or take any
other action to facilitate any inquiries or the making of any proposal with
respect to, or (b) consider the merits or engage or participate in negotiations
concerning, provide any nonpublic information or data to, or have any
discussions with, any person other than a party hereto or their Representatives
relating to, any (i) acquisition, (ii) tender offer (including a self-tender
offer), (iii) exchange offer, (iv) merger, (v) consolidation, (vi) acquisition
of beneficial ownership of (or the right to vote securities representing) any
securities of Atcom, or any rights to acquire, or other instruments convertible
into, securities of Atcom, (vii) dissolution, (viii) business combination, (ix)
purchase of all or any significant portion of the assets or any division of (or
any equity interest in) Atcom or any subsidiary, or (x) any similar transaction
other than the Merger (such proposals, announcements, or transactions being
referred to as "Acquisition Proposals"). Notwithstanding the foregoing, any
transaction which could give rise to the payment of additional consideration
under Section 2.12 shall not be an Acquisition Proposal. Atcom will notify CAIS
orally (within one business day) and in writing (as promptly as practicable) if
any such Acquisition Proposals (including the identity of the persons making
such proposals and the terms of such proposals) are received and furnish to CAIS
a copy of any written proposal relating thereto.
5.7 Commercially Reasonable Efforts.
During the Pre-Closing Period, Atcom shall use its commercially reasonable
efforts to cause the conditions set forth in Article VII and Article VIII to be
satisfied on a timely basis and so that the Closing can take place on or before
September 15, 1999 or as soon thereafter as is reasonably practical, in
accordance with Section 2.7, and shall not take any action or omit to take any
action, the taking or omission of which would or could reasonably be expected to
result in any of the representations and warranties of Atcom set forth in this
Agreement becoming untrue, or in any of the conditions of Closing set forth in
Article VII or Article VIII not being satisfied.
5.8 Confidentiality; Publicity.
Atcom shall use its commercially reasonable efforts to ensure that, during
the Pre-Closing Period:
(a) Atcom and its Representatives keep strictly confidential the
existence and terms of this Agreement prior to the issuance or dissemination of
any mutually agreed upon press release or other disclosure of the Merger; and
(b) neither Atcom nor any of its Representatives issues or
disseminates any press release or other publicity or otherwise makes any
disclosure of any nature (to any of Atcom's suppliers, customers, landlords,
creditors or employees or to any other Person) regarding any of the Merger;
33
except in each case to the extent that Atcom is required by law to make any such
disclosure regarding such transactions or as separately agreed by the parties;
provided, however, that if Atcom is required by law to make any such disclosure,
-------- -------
Atcom advises CAIS, at least five business days before making such disclosure,
of the nature and content of the intended disclosure.
5.9 Taxes.
(a) Atcom shall furnish to CAIS on or within thirty days prior to the
Closing Date certification in the form required by Treasury Regulations Section
1.1445-2(c)(3) that the stock of Atcom is not a U.S. real property interest. In
addition, simultaneously with delivery of such certification, Atcom shall have
provided CAIS, as agent for Atcom, a form of notice to the Internal Revenue
Service in accordance with the requirements of Treasury Regulations Section
1.897-2(h)(2) along with written authorization for CAIS to deliver such notice
form to the Internal Revenue Service on behalf of Atcom upon the Closing of the
Merger.
(b) The parties agree that none of the Contingent Consideration shall
be deemed interest for income tax purposes.
5.10 Atcom Shareholder's Consent.
Atcom shall use its commercially reasonable efforts to solicit from the
Shareholders such written consents in favor of the Merger and conversion of
shares of Atcom Preferred Stock into Atcom Common Stock and shall take all other
action necessary or advisable to secure the vote or consent of the Shareholders
required by California law to effect the Merger.
5.11 Tax Certificate.
Atcom shall execute and deliver a tax certificate in substantially the form
attached hereto as Exhibit D (the "Atcom Tax Certificate") on or before the date
---------
on which the consent solicitation materials are first mailed to the
Shareholders.
5.12 Tax-Free Treatment.
Atcom shall not take any actions inconsistent with the representations set
forth in the Atcom Tax Certificate.
ARTICLE VI.
COVENANTS OF CAIS
6.1 Notification.
During the Pre-Closing Period, CAIS shall promptly notify Atcom in writing
of:
34
(a) the discovery by CAIS of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a Breach of any representation or warranty made
by CAIS in this Agreement;
(b) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement (except as a result of actions taken
pursuant to the written consent of Atcom) and that would cause or constitute a
Breach of any representation or warranty made by CAIS or the Company in this
Agreement if (i) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (ii) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(c) any Breach of any covenant or obligation of CAIS or the Company;
and
(d) any event, condition, fact or circumstance that may make the
timely satisfaction of any of the conditions set forth in Article VII or Article
VIII impossible or unlikely.
6.2 Filings and Consents; Cooperation.
CAIS and the Company shall ensure that:
(a) Each filing or notice required to be made or given (pursuant to
any applicable Legal Requirement, Order or Contract, or otherwise) by CAIS in
connection with the execution and delivery of any of the Transactional
Agreements, or in connection with the consummation or performance of the Merger,
is made or given as soon as possible after the date of this Agreement;
(b) Each Consent required to be obtained (pursuant to any applicable
Legal Requirement, Order or Contract, or otherwise) by CAIS in connection with
the execution and delivery of any of the Transactional Agreements, or in
connection with the consummation or performance of the Merger, is obtained as
soon as possible after the date of this Agreement and remains in full force and
effect through the Closing Date;
(c) CAIS promptly delivers to Atcom a copy of each filing made, each
notice given and each Consent obtained by CAIS during the Pre-Closing Period;
and
(d) During the Pre-Closing Period, CAIS and its Representatives
cooperate with Atcom and Atcom's Representatives, and prepare and make available
such documents and take such other actions as Atcom may request in good faith,
in connection with any filing, notice or Consent that Atcom is required or
elects to make, give or obtain.
6.3 Commercially Reasonable Efforts.
During the Pre-Closing Period, CAIS shall use its commercially reasonable
efforts to cause the conditions set forth in Article VII and Article VIII to be
satisfied on a timely basis and so that the Closing can take place on or before
September 15, 1999 or as soon thereafter as is reasonably practical, in
accordance with Section 2.7, and shall not take any action or omit to take
35
any action, the taking or omission of which would or could reasonably be
expected to result in any of the representations and warranties or CAIS set
forth in this Agreement becoming untrue or in any of the conditions of closing
set forth in Article VII or Article VIII not being satisfied.
6.4 Confidentiality; Publicity.
CAIS shall use its commercially reasonable efforts to ensure that, during
the Pre-Closing Period:
(a) CAIS and its Representatives keep strictly confidential the
existence and terms of this Agreement prior to the issuance or dissemination of
any mutually agreed upon press release or other disclosure of the Merger; and
(b) neither CAIS nor any of its Representatives issues or
disseminates any press release or other publicity or otherwise makes any
disclosure of any nature (to any of Atcom's suppliers, customers, landlords,
creditors or employees or to any other Person) regarding the Merger;
except, in each case, to the extent that CAIS is required by law to make any
such disclosure regarding the Merger or as otherwise agreed by the parties;
provided, however, that if CAIS is required by law to make any disclosure
-------- -------
regarding the Merger, CAIS advises Atcom in writing, at least five business days
before making such disclosure, if reasonably practical, of the nature and
content of the intended disclosure.
Notwithstanding the foregoing, CAIS and Atcom shall cooperate to make a joint
announcement and issue a press release with respect to the execution of this
Agreement at or promptly following the execution hereof.
6.5 Cooperation.
CAIS and the Company shall each cooperate with Atcom in Atcom's preparing
solicitation materials to be sent to the Shareholders in connection with the
approval of the Merger and the transactions contemplated by the Transactional
Documents.
6.6 Disclosure of Trade Secrets.
CAIS acknowledges and agrees that certain information contained in Atcom's
Disclosure Schedule may be deemed to be trade secrets, the public disclosure of
which will harm Atcom's business. CAIS shall promptly notify Atcom if it is
required to disclosure publicly or to any Governmental Authority (including in
connection with the registration of the shares of CAIS stock issued under this
Agreement) the matters disclosed in Atcom's Disclosure Schedule and shall use
its best efforts to keep such information confidential and not publicly
disclosed. If CAIS is compelled by any Governmental Authority to disclose such
information, CAIS shall promptly notify Atcom so that Atcom can, if it so
elects, seek a protective order from such disclosure.
36
6.7 Indemnification and Insurance.
(a) CAIS and the Company agree that all rights to indemnification for
acts or omissions occurring prior to the Effective Time of the Merger now
existing in favor of the current directors and officers of Atcom as provided in
the Articles of Incorporation, Bylaws of Atcom, written agreements with Atcom or
insurance policies of Atcom shall survive the merger and continue in full force
and effect in accordance with their terms for a period of six years from the
Effective Time, and CAIS shall guarantee the performance of Atcom, its
successors and assigns under the indemnification provisions of such Articles of
Incorporation, Bylaws, written agreements and insurance policies.
(b) For a period of five years after the Effective Time, CAIS and the
Surviving Corporation shall cause to be maintained directors and officers
liability insurance in an amount equal to or greater than the current policy
limits covering such indemnified parties; provided, however, that CAIS shall not
be obligated to make annual premium insurance payments for such insurance to the
extent such premiums exceed 150% of said premiums paid for 1999 by Atcom for
such insurance (which premium Atcom represents and warrants to be $23,000 per
annum). In the event that the annual premiums for such insurance exceeds 150% of
such premiums, then CAIS and the Surviving Corporation shall maintain the
maximum amount of insurance obtainable for annual premiums that equal 150% of
the premiums paid by Atcom for 1999.
6.8 Tax Certificate.
CAIS and the Company shall each execute and deliver a tax certificate in
substantially the form attached hereto as Exhibit H (the "CAIS Tax Certificate")
---------
on or before the date on which the consent solicitation materials are first
mailed to the Shareholders.
6.9 Tax-Free Treatment
Neither CAIS nor the Company shall take any actions inconsistent with the
representations set forth in the CAIS Tax Certificate.
ARTICLE VII.
CLOSING CONDITIONS OF CAIS AND THE COMPANY
CAIS and the Company's obligations to effect the Closing and consummate the
Merger are subject to the satisfaction of each of the following conditions:
7.1 Accuracy of Representations and Warranties.
The representations and warranties of Atcom in this Agreement shall have
been true and correct as of the date of this Agreement and shall be true and
correct on and as of the Closing Atcom shall have performed all obligations in
this Agreement required to be performed or observed by them on or prior to the
Closing.
37
7.2 Additional Conditions to Closing.
(a) All necessary approvals under federal and state securities laws
and other authorizations relating to the issuance of the CAIS Common Stock to be
issued to the Shareholders in connection with the Merger shall have been
received.
(b) This Agreement and the Merger shall have been approved and
adopted by the favorable vote of a majority of the shares of the outstanding
capital stock of Atcom entitled to vote thereon by written consent.
(c) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the Merger shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Merger. Other than the filing of the Agreement of Merger with the Secretary of
State of California, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods imposed by,
any Governmental Body which are necessary for the consummation of the Merger,
other than those the failure to obtain which would not materially adversely
affect the consummation of the Merger or in the aggregate have a material
adverse effect on the Surviving Corporation and its subsidiaries, taken as a
whole, shall have been filed, occurred or been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting periods being
referred to as the "Requisite Regulatory Approvals") and all such Requisite
Regulatory Approvals shall be in full force and effect.
(d) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, by any federal or state Governmental Body which, in connection with the
grant of a Requisite Regulatory Approval, imposes any material condition or
material restriction upon the Surviving Corporation or its subsidiaries (or, in
the case of any disposition of assets required in connection with such Requisite
Regulatory Approval, upon CAIS or its subsidiaries or Atcom), including, without
limitation, requirements relating to the disposition of assets, which in any
such case would so materially adversely impact the economic or business benefits
of the Merger as to render inadvisable the consummation of the Merger.
7.3 Performance of Agreements.
Atcom or the Shareholders, as the case may be, shall have executed and
delivered each of the agreements, instruments and documents required to be
executed and delivered, and performed all actions required by Atcom or any of
the Shareholders, as the case may be, pursuant to this Agreement, except as CAIS
has otherwise consented in writing.
7.4 Consents.
Each of the Consents identified or required to have been identified in Part
----
3.5 of the Atcom Disclosure Schedule shall have been obtained and shall be in
---
full force and effect, other
38
than those Consents the absence of which shall not have a material adverse
effect on the Company or CAIS.
7.5 No Material Adverse Change.
There shall not have been any material adverse change in Atcom's business,
condition, assets, liabilities, operations or financial performance since the
date of this Agreement.
7.6 Atcom Closing Certificates.
In addition to the documents required to be received under this Agreement,
CAIS and the Company shall also have received the following documents:
(a) a certificate (the "Atcom Closing Certificate"), dated the
Closing Date, duly executed by Atcom, certifying that (A) each of the
representations and warranties made by Atcom in this Agreement and in the other
Transactional Agreements was accurate in all material respects as of the date of
the applicable Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date, (B) each of the covenants and
obligations that Atcom is required to have complied with or performed pursuant
to this Agreement or any of the other Transactional Agreements at or prior to
the Closing has been duly complied with and performed in all material respects,
and (C) each of the conditions set forth in Article VII has been satisfied in
all material respects;
(b) copies of resolutions of Atcom, certified by a Secretary,
Assistant Secretary or other appropriate officer of Atcom, authorizing the
execution, delivery and performance of this Agreement and other Transactional
Agreements and the Merger, and copies of written consents of the Shareholders,
certified by a Secretary, Assistant Secretary or other appropriate officer of
Atcom, authorizing the execution, delivery and performance of the Transactional
Agreements and the Merger;
(c) good standing certificate for the State of California; and
(d) such other documents as CAIS may request in good faith for the
purpose of (i) evidencing the accuracy of any representation or warranty made by
Atcom, (ii) evidencing the compliance by Atcom, or the performance by Atcom of,
any covenant or obligation set forth in this Agreement or any of the other
Transactional Agreements, (iii) evidencing the satisfaction of any condition set
forth in Article VIII or this Article VII, or (iv) otherwise facilitating the
consummation or performance of the Merger.
7.7 Transactional Agreements.
Each Person (other than CAIS and the Company) shall have executed and
delivered prior to or on the Closing Date all Transactional Agreements to which
it is to be a party.
39
7.8 Dissenting Shares.
There shall not be Dissenting Shares constituting more than five percent
(5%) of the capital stock of Atcom calculated on a fully-diluted basis.
7.9 Employment Agreements.
Each Key Employee of Atcom shall have entered into an employment agreement
with the Surviving Corporation or CAIS on terms satisfactory to CAIS in
substantially the form attached hereto as Exhibit C.
---------
7.10 Noncompetition Agreement.
Each of (i) the Key Employees who are Shareholders and (ii) Xxxx Xxxxxxxx
shall have entered into a Noncompetition Agreement with CAIS.
7.11 Certificate relating to "Tax-Free" treatment.
Atcom shall have executed and delivered the Atcom Tax Certificate.
7.12 Conversion of Preferred Stock and Exercise of Certain Atcom Warrants.
All of the shares of each Series of Atcom Preferred Stock shall have been
converted into Atcom Common Stock on the terms described in Section 3.3(b)
immediately prior to the Effective Time. All of the warrants to purchase shares
of Atcom Series C Preferred Stock shall have been exercised prior to such
conversion.
ARTICLE VIII.
CLOSING CONDITIONS OF ATCOM
Atcom's obligations to effect the Closing and consummate the Merger are
subject to the satisfaction of each of the following conditions:
8.1 Employment Agreements.
Each Key Employee of Atcom shall have entered into an employment agreement
with the Company on terms satisfactory to the Company in substantially the form
attached hereto as Exhibit C.
---------
8.2 Accuracy of Representations and Warranties.
The representations and warranties of the Company and CAIS in this
Agreement shall have been true and correct as of the Closing and each of the
Company and CAIS shall have performed all obligations in this Agreement required
to be performed or observed by them on or prior to the Closing.
40
8.3 Additional Conditions to Closing.
(a) This Agreement and the Merger shall have been approved and
adopted by the favorable vote of the sole shareholder of the Company.
(b) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the Merger shall have been issued and remain in effect. No
statute, rule, regulation, executive order, stay, decree, or judgment shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority which prohibits or restricts the consummation of the
Merger. Other than the filing of the Agreement of Merger with the Secretary of
State of California, all Requisite Regulatory Approvals shall have been filed,
occurred or been obtained and all such Requisite Regulatory Approvals shall be
in full force and effect.
(c) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, by any federal or state Governmental Body which, in connection with the
grant of a Requisite Regulatory Approval, imposes any condition or restriction
upon the Surviving Corporation or its subsidiaries (or, in the case of any
disposition of assets required in connection with such Requisite Regulatory
Approval, upon CAIS or its subsidiaries or Atcom), including, without
limitation, requirements relating to the disposition of assets, which in any
such case would so materially adversely impact the economic or business benefits
of the Merger as to render inadvisable the consummation of the Merger.
8.4 CAIS Closing Certificates.
Atcom and the Shareholders shall have received the following documents:
(a) a certificate (the "CAIS Closing Certificate"), dated the Closing
Date, duly executed by CAIS and the Company, certifying that (A) each of the
representations and warranties made by CAIS and the Company in this Agreement
and in the other Transactional Agreements was accurate in all material respects
as of the date of the applicable Agreement and is accurate in all material
respects as of the Closing Date as if made on the Closing Date, (B) each of the
covenants and obligations that CAIS or the Company is required to have complied
with or performed pursuant to this Agreement or any of the other Transactional
Agreements at or prior to the Closing has been duly complied with and performed
in all material respects, and (C) each of the conditions set forth in Article
VIII has been satisfied in all respects;
(b) copies of resolutions of CAIS and the Company, certified by a
Secretary, Assistant Secretary or other appropriate officer of CAIS and the
Company, respectively, authorizing the execution, delivery and performance of
the Transactional Agreements and the Merger, and copies of resolutions of the
meeting of shareholders of the Company (or written consent in lieu thereof),
certified by a Secretary, Assistant Secretary or other appropriate officer of
the Company, authorizing the execution, delivery and performance of the
Transactional Agreements and the Merger;
41
(c) with respect to CAIS, good standing certificates for the State of
Delaware and the District of Columbia, and with respect to the Company, a good
standing certificate for the States of Delaware and California; and
(d) such other documents as Atcom may request in good faith for the
purpose of (i) evidencing the accuracy of any representation or warranty made by
CAIS and the Company, (ii) evidencing the compliance by CAIS and the Company
with, or the performance by CAIS and the Company of, any covenant or obligation
set forth in this Agreement or any of the other Transactional Agreements, (iii)
evidencing the satisfaction of any condition set forth in Article VII or this
Article VIII, or (iv) otherwise facilitating the consummation or performance of
the Merger.
8.5 No Material Adverse Change.
There shall not have been any material adverse change in CAIS's business,
condition, assets, liabilities, operations or financial performance since the
date of this Agreement; provided, however, that a decrease in the trading price
-------- -------
of CAIS Common Stock shall not of itself be considered a material adverse
change.
8.6 Performance of Agreements.
CAIS or the Company, as the case may be, shall have executed and delivered
each of the agreements, instruments and documents required to be executed and
delivered, and performed all actions required by CAIS or the Company, as the
case may be, pursuant to this Agreement, except as Atcom has otherwise consented
in writing.
8.7 Consents.
Each of the Consents identified or required to have been identified in Part
----
4.4 of the CAIS Disclosure Schedule shall have been obtained and shall be in
---
full force and effect, other than those Consents the absence of which shall not
have a material adverse effect on the Company or CAIS.
8.8 Registration Rights Agreement.
CAIS shall have entered into a Registration Rights Agreement with all of
the Shareholders, which shall provide, among other things, that (i) CAIS shall
use its best efforts to file with the SEC and have declared effective on or
before November 21, 1999 a registration statement on Form S-1 registering for
resale all of the shares of CAIS Common Stock to be issued in the Merger
(including shares of CAIS Common Stock issuable upon exercise of warrants to
purchase Atcom Common Stock assumed hereunder), (ii) the Shareholders shall be
granted piggyback registration rights, subject to customary underwriter's
cutbacks and other limitations (iii) the Shareholders shall make customary
investor representations to CAIS, (iv) the Shareholders shall agree to the
matters set forth in Article XI and (v) CAIS and the Shareholders shall
indemnify each other for such events as are customary.
42
8.9 CAIS Stock.
On the Closing Date, the CAIS Common Stock to be issued to the Shareholders
in connection with the Merger shall be listed for trading on the Nasdaq National
Market.
8.10 Consulting Agreement.
CAIS shall have entered into a consulting agreement in the form attached
hereto as Exhibit G with Xx. Xxxx Xxxxxxxx.
---------
8.11 Certificate relating to "Tax-Free" treatment.
CAIS and the Company shall have executed and delivered the CAIS Tax
Certificate.
8.12 Conversion of Preferred Stock and Exercise of Certain Atcom Warrants.
All of the shares of each Series of Atcom Preferred Stock shall have been
converted into Atcom Common Stock on the terms described in Section 3.3(b)
immediately prior to the Effective Time. All of the warrants to purchase shares
of Atcom Series C Preferred Stock shall have been exercised prior to such
conversion.
8.13 Payment of Costs and Expenses.
CAIS shall have paid all documented costs and expenses incurred by Atcom in
connection with the Merger up to a maximum amount of $1,500,000. Any such costs
and fees in excess of such maximum amount shall be solely the obligation of the
Shareholders.
ARTICLE IX.
FURTHER ASSURANCES
Each of the parties hereto agrees that it will, from time to time after the
date of the Agreement, execute and deliver such other certificates, documents
and instruments and take such other action as may be reasonably requested by the
other party to carry out the actions and transactions contemplated by this
Agreement, including the closing conditions described in Articles VII and VIII.
ARTICLE X.
SURVIVAL; INDEMNIFICATION
10.1 Survival
Subject to Section 10.8, the covenants, agreements, representations and
warranties of each of Atcom, the Company and CAIS contained in this Agreement
shall survive the Closing until April 15, 2000, after which time claims for
indemnity pursuant to this Article X may no longer be made. Notwithstanding the
preceding sentence, any claim for indemnification
43
regarding any covenant, agreement, representation or warranty sought under
Section 10.2 shall survive the time at which such covenant, agreement,
representation or warranty shall terminate pursuant to the preceding sentence,
if notice of such claim for indemnification shall have been given to the party
against whom such indemnity is sought prior to such time. The covenants,
agreements, representations and warranties of each of Atcom, the Company and
CAIS and the rights and remedies that may be exercised by any Indemnitee or
Shareholder shall not be limited, diminished or otherwise affected by or as a
result of any information that may have been provided, any investigation or
examination that may have or be made by, or any Knowledge of, any Indemnitee or
any other party on behalf of any Indemnitee, or any Shareholder or any other
party on behalf of any Shareholder, except as otherwise contemplated herein.
10.2 Indemnification by Shareholders
The Shareholders severally and not jointly agree that the Escrow Amount
shall be available to the extent provided in this Article X and in the Escrow
Agreement to compensate each of CAIS and, effective at and as of the Effective
Time, without duplication, the Surviving Corporation and each of their
respective subsidiaries and affiliates and each of their respective officers,
directors and shareholders (other than the Shareholders) (each in its capacity
as an indemnified party, an "Indemnitee") for any and all losses, liabilities,
damages, judgments, rulings, assessments and any and all amounts paid in
settlement of or related to any claim or litigation or amounts mutually agreed
to by CAIS and the Shareholder Representative (collectively, "Actual Damages"),
and any and all costs and expenses, interest, penalties, reasonable attorneys'
fees and any and all other expenses incurred in investigating, preparing, and
defending against any litigation, commenced or threatened, and any claim
whatsoever (collectively "Litigation Damages," together with "Actual Damages,"
"Damages") (Damages in each case shall be net of the amount of any insurance
proceeds, indemnity or contribution actually recovered by such Indemnitee and
such Indemnitee shall use commercially reasonable efforts to recover such
amounts), incurred by such Indemnitee as a result of, arising out of or incident
to any of the following with respect to which a claim for indemnification is
brought by an Indemnitee within the applicable survival period described in
Section 10.1: (i) any breach of any representation or warranty of Atcom set
forth herein or in any other Transactional Document, or in any certificate or
other document delivered in connection herewith or therewith, or (ii) any breach
by Atcom of any covenant, agreement, or obligation contained herein or in the
Escrow Agreement, or in any certificate or other document delivered in
connection herewith or therewith except to the extent waived in writing by CAIS.
10.3 Indemnification by CAIS and the Company
Subject to Section 10.8, CAIS and the Company jointly and severally agree
to compensate the Shareholders for any and all Damages (Damages in each case
shall be net of the amount of any insurance proceeds, indemnity or contribution
actually recovered by such Shareholder and such the Shareholder Representative
shall use commercially reasonable efforts to recover such amounts), incurred by
the Shareholders as a result of, arising out of or incident to any of the
following with respect to which a claim for indemnification is brought by the
Shareholder Representative within the applicable survival period described in
Section 10.1 for:
44
(i) any breach of any representation or warranty of CAIS or the Company set
forth herein or in any other Transactional Agreement to which they are a party,
or in any certificate or other document delivered in connection herewith or
therewith, or (ii) any breach by CAIS or the Company of any covenant, agreement,
or obligation contained herein or in any other Transactional Agreement to which
they are a party, or in any certificate or other document delivered in
connection herewith in each case, except to the extent waived in writing by the
Shareholder Representative; provided, however, that the obligations of CAIS and
the Company under this Article X shall in no event exceed in the aggregate an
amount equal to the Escrow Amount.
10.4 Third Person Claims
Promptly after an Indemnitee or a Shareholder (an "Indemnified Party") has
received notice of or has knowledge of any claim by a person not a party to this
Agreement ("Third Person") or the commencement of any action or proceeding by a
Third Person, the Indemnified Party shall, as a condition precedent to the claim
with respect thereto being made under this Article X, give the Shareholder
Representative or CAIS, as applicable, written notice of such claim or the
commencement of such action or proceeding; provided, however that the failure to
give such notice will not affect the Indemnified Parties' right to
indemnification hereunder with respect to such claim, action or proceeding,
except to the extent that the Shareholder, CAIS or the Company (each, an
"Indemnifying Party") has been actually prejudiced as a result of such failure.
If the Indemnifying Party notifies the Indemnified Party within 30 days from the
receipt of the foregoing notice that it wishes to defend against the claim by
the Third Person and if the estimated amount of the claim, together with all
other claims made hereunder that have not been settled, is less than the
remaining balance of the Escrow Amount, then the Indemnifying Party shall have
the right to assume and control the defense of the claim by appropriate
proceedings with counsel reasonably acceptable to the Indemnified Party. In the
event that the Shareholders are the Indemnified Parties, the Shareholder
Representative shall be entitled to reimbursement out of the Escrow Amount for
such defense. The Indemnified Party may participate in the defense, at its sole
expense, of any such claim for which the Indemnifying Party shall have assumed
the defense pursuant to the preceding sentence, provided that counsel for the
Indemnifying Party shall act as lead counsel in all matters pertaining to the
defense or settlement of such claims, suit or proceedings. The Indemnified
Party shall be entitled to indemnification under Sections 10.2 or 10.3 (subject
to the limitations set forth in Section 10.6) for the reasonable fees and
expenses of its counsel for any periods during which the Indemnifying Party has
not assumed the defense of any claim. Whether or not the Indemnifying Party
shall have assumed the defense of any claim, neither the Indemnified Party nor
the Indemnifying Party shall make any settlement with respect to any such claim,
suit or proceeding without the prior consent of the other, which consent shall
not be unreasonably withheld or delayed. It is understood and agreed that in
situations where failure to settle a claim expeditiously could have an adverse
effect on the party wishing to settle, the failure of the party controlling the
defense to act upon a request for consent to such settlement within ten business
days of receipt of notice thereof shall be deemed to constitute consent to such
settlement for purposes of this Article X.
45
10.5 Method of Payment
Subject to Section 10.8, the Indemnitees shall be entitled to satisfy
claims for indemnification pursuant to this Article X only from the Escrow
Amount. To the extent that any Indemnitee is entitled to indemnification
hereunder, the Escrow Amount shall be valued as provided in the Escrow
Agreement.
10.6 Limitations
Notwithstanding any other provision in this Article X, Indemnitees or the
Shareholders, as applicable, shall not be entitled to indemnification until the
aggregate Damages exceed $50,000 (the "Threshold"), at which point the
Shareholders or Indemnitees, as applicable, shall be liable for the full amount
of all such claims, including the Threshold.
10.7 Maximum Liability and Remedies
Subject to Section 10.8, the rights of the Indemnitees to make claims upon
the Escrow Amount in accordance with this Article X shall be the sole and
exclusive remedy of the Indemnitees after the Effective Time for any damage,
claim, cause of action or right of any nature arising out of or relating to this
Agreement, the certificates or other documents executed or delivered in
connection herewith (except as expressly provided in the Escrow Agreement) and
no Shareholder, and no Person who is or was an optionholder, warrantholder,
director, officer, employee or agent of Atcom prior to the Effective Time shall
have any personal liability to CAIS or the Surviving Corporation after the
Closing Date in connection with the Merger.
10.8 Exceptions to Limitations
Notwithstanding anything to the contrary set forth in this Article X or in
the Escrow Agreement, none of the provisions of this Article X or the Escrow
Agreement shall in any manner limit the liability of CAIS, the Company,
Shareholders, or any Person who is or was an optionholder, warrantholder,
director, officer, employee or agent of Atcom or any of the foregoing prior to
the Effective Time, with respect to (i) claims of fraud or (ii) any criminal
matters.
10.9 Shareholder Representative
(a) Each Shareholder irrevocably authorizes, directs and appoints
Xxxx Xxxxxxxx to act as sole and exclusive agent, attorney-in-fact and
representative of such Person and such Person's heirs, representatives and
successors to (i) take any and all actions (including without limitation
executing and delivering any documents), incurring any costs and expenses for
the account of the Shareholders and making any and all determinations which may
be required or permitted to be taken by the Shareholders in connection with this
Article X or the Escrow Agreement; and (ii) exercise such rights, power and
authority as are incidental to the foregoing. Any actions, exercises of rights,
power or authority and any decisions or determinations made by the Shareholder
Representative shall be absolutely and irrevocably binding on each Shareholder
as if
46
each such Person personally had taken such action, exercised such rights, power
or authority or made such decision or determination in such Person's individual
capacity.
(b) With respect to the matters covered by or related to this Article
X and the Escrow Agreement, (i) each Shareholder irrevocably relinquishes its
right to act independently and other than through the Shareholder Representative
with respect to such subject matter (except with respect to appointment of a
successor Representative), and (ii) no Shareholder shall have any right to
institute any suit, action or proceeding against Atcom, CAIS, the Company, the
Surviving Corporation or the Escrow Agent with respect to any such matter, any
such right being irrevocably and exclusively delegated to the Shareholder
Representative. Without limiting the generality of the foregoing, any notice
hereunder delivered to CAIS or an Indemnitee by a Shareholder other than through
the Shareholder Representative shall be of no effect, and each notice delivered
by CAIS or any other Indemnitee to the Shareholder Representative shall be
effective as against each Shareholder; provided, that CAIS and the other
--------
Indemnitees may elect at their sole discretion to give effect to any notice
delivered by any Shareholder.
(c) The Shareholder Representative may resign at any time upon thirty
(30) days notice by submitting a written resignation to CAIS, with copies to all
other Shareholders at their addresses on the stock books of Atcom. In the event
of the death, physical or mental incapacity or resignation of the Shareholder
Representative, the Shareholders shall promptly (and in any event within thirty
(30) days of notice of such event) appoint a successor Shareholder
Representative.
ARTICLE XI.
RESTRICTIONS ON CAIS COMMON STOCK
11.1 Restrictive Legend.
All certificates representing the CAIS Common Stock deliverable to the
Shareholders pursuant to this Agreement and any certificates subsequently issued
with respect thereto or in substitution therefor, unless the conditions of
paragraph (k) of Rule 144 promulgated under the Securities Act shall have been
satisfied, shall bear a legend substantially as follows, in addition to any
legend CAIS determines is required pursuant to any applicable legal requirement:
"The shares represented by this certificate may not be offered,
sold, pledged, transferred or otherwise disposed of except in
accordance with the requirements of the Securities Act of 1933,
as amended, and the other conditions specified in that certain
Agreement and Plan of Merger dated as of August 4, 1999, a copy
of which Agreement and Plan of Merger CAIS, Inc. will furnish,
without charge, to the holder of this certificate upon written
request therefor."
CAIS, at its discretion, may cause a stop transfer order to be placed with
its transfer agent(s) with respect to the certificates for the CAIS Common Stock
but not as to the certificates for any part of the CAIS Common Stock as to which
said legend is no longer appropriate when
47
the conditions of paragraph (k) of Rule 144 promulgated under the Securities Act
shall have been satisfied.
11.2 Lock-Up Agreement.
(a) No Shareholder shall sell or otherwise transfer or dispose of any
CAIS Common Stock held by the Shareholder through November 21, 1999. If
requested by an underwriter of CAIS Common Stock, Shareholder will reaffirm the
agreement set forth in this Section 11.2 in a separate writing in a form
satisfactory to such underwriter. CAIS may impose stop-transfer instructions
with respect to such CAIS Common Stock subject to the foregoing restriction
until the end of said period.
(b) Notwithstanding anything in this Agreement to the contrary, in
connection with any public offering of the capital stock of CAIS (a "Follow-On
Offering"), each Shareholder agrees that, if requested by the managing
underwriter of the Follow-On Offering, such Shareholder shall not, directly or
indirectly, sell, offer, contract to sell, grant any option to purchase,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of, any CAIS Common Stock, without the prior written consent
of CAIS and the managing underwriters of the Follow-On Offering for a period of
ninety (90) days from the effective date of the registration statement under the
Securities Act relating to such Follow-On Offering and to the extent otherwise
permissible under the requirements for a tax-free Merger; provided, however,
-------- -------
that all officers and directors of CAIS enter into similar agreements; and
provided, further, that the Shareholders have been provided the opportunity to
-------- -------
participate in such Follow-On Offering, subject to any applicable cutback
arrangements. This restriction shall be binding upon any transferee of the CAIS
Common Stock and the certificates for the CAIS Common Stock shall bear a legend
to such effect. In order to enforce the foregoing covenant, CAIS may impose
stop-transfer instructions with respect to the CAIS Common Stock until the end
of such period.
ARTICLE XII.
TERMINATION
12.1 Termination.
This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time, whether before or after approval by the Shareholders:
(a) by mutual written consent of CAIS and Atcom;
(b) by CAIS if (i) there is a material Breach of any covenant or
obligation of Atcom; provided however, that if such Breach or Breaches are
capable of being cured prior to the Effective Time, such Breach or Breaches
shall not have been cured within 10 days of delivery of the written notice of
such Breach, or (ii) CAIS reasonably determines that the timely satisfaction of
any condition set forth in Article VII has become impossible or impractical
(other than as a
48
result of any failure on the part of CAIS to comply with or perform its
covenants and obligations under this Agreement or any of the other Transactional
Agreements);
(c) by Atcom if (i) there is a material Breach of any covenant or
obligation of CAIS or the Company; provided however, that if such Breach or
Breaches are capable of being cured prior to the Effective Time, such Breach or
Breaches shall not have been cured within 10 days of delivery of the written
notice of such Breach, or (ii) Atcom reasonably determines that the timely
satisfaction of any condition set forth in Article VIII has become impossible or
impractical (other than as a result of any failure on the part of Atcom to
comply with or perform any covenant or obligation set forth in this Agreement or
any of the other Transactional Agreements);
(d) by CAIS if the Closing has not taken place on or before September
15, 1999 (other than as a result of any failure on the part of CAIS or the
Company to comply with or perform its covenants and obligations under this
Agreement or in any other Transactional Agreement);
(e) by Atcom if the Closing has not taken place on or before
September 15, 1999 (other than as a result of the failure on the part of Atcom
to comply with or perform any covenant or obligation set forth in this Agreement
or in any other Transactional Agreement);
(f) by either CAIS or Atcom if any court of competent jurisdiction in
the United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or any other
action shall have become final and non-appealable; provided, however, that the
-------- -------
party seeking to terminate this Agreement pursuant to this clause (f) shall have
used all commercially reasonable efforts to remove such order, decree or ruling;
or
(g) by CAIS, upon written notice to Atcom, if any approval of the
Shareholders required for the consummation of the Merger submitted for approval
shall not have been obtained by reason of the failure to obtain the required
vote.
12.2 Termination Procedures.
If CAIS wishes to terminate this Agreement pursuant to Section 12.1, CAIS
shall deliver to Atcom a written notice stating that CAIS is terminating this
Agreement and setting forth a brief description of the basis on which CAIS is
terminating this Agreement. If Atcom wishes to terminate this Agreement
pursuant to Section 12.1, Atcom shall deliver to CAIS a written notice stating
that Atcom is terminating this Agreement and setting forth a brief description
of the basis on which Atcom is terminating this Agreement.
12.3 Effect of Termination.
In the event of termination of this Agreement as provided above, this
Agreement shall forthwith become of no further effect and, except for a
termination resulting from a Breach by a party to this Agreement, there shall be
no liability or obligation on the part of any party hereto. Moreover, in the
event of termination of this Agreement, nothing herein shall prejudice the
49
ability of the non-breaching party from seeking damages from any other party for
any breach of this Agreement, including, without limitation, attorneys' fees and
the right to pursue any remedy at law or in equity. Upon request after
termination, each party will redeliver or, at the option of the party receiving
such request, destroy all reports, work papers and other material of any other
party relating to the Merger, whether obtained before or after the execution
hereof, to the party furnishing same; provided, however, that:
-------- -------
(a) Atcom shall, in all events, remain bound by and continue to be
subject to Section 5.8; and
(b) CAIS and the Company shall, in all events, remain bound by and
continue to be subject to Section 6.4.
Notwithstanding the above, both CAIS and Atcom shall be entitled to announce the
termination of this Agreement by means of a mutually acceptable press release.
ARTICLE XIII.
MISCELLANEOUS
13.1 Expenses.
Except as otherwise set forth herein, each of the parties to the Merger
shall bear its own expenses incurred in connection with the negotiation and
consummation of the transactions contemplated by this Agreement.
13.2 Entire Agreement.
This Agreement, the other Transactional Agreements and the letter agreement
with Xxxxx Xxxxx Xxxxxx & Company dated as of the date hereof contain the entire
agreement of the parties hereto, and supersede any prior written or oral
agreements between them concerning the subject matter contained herein, or
therein. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties to this Agreement, relating
to the subject matter contained in this Agreement and the other Transaction
Agreements, which are not fully expressed herein or therein. The schedules and
each exhibit attached to this Agreement or delivered pursuant to this Agreement
are incorporated herein by this reference and constitute a part of this
Agreement.
13.3 Press Releases and Public Announcements.
Prior to the Closing Date, neither of CAIS (the Company as its wholly-owned
subsidiary) nor Atcom shall issue any press release or make any public
announcement concerning the matters set forth in this Agreement (other than as
required by applicable disclosure rules or regulations) without the consent of
the other party. CAIS and Atcom will cooperate to jointly prepare and issue any
press release which may be issued to announce the closing of the transaction
contemplated by this Agreement.
50
13.4 Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
instrument.
13.5 Descriptive Headings.
The Article and Section headings in this Agreement are for convenience only
and shall not affect the meanings or construction of any provision of this
Agreement.
13.6 Notices.
Any notices required or permitted to be given under this Agreement shall be
in writing and shall be deemed sufficiently given on the date delivered
personally, or five (5) days after posting by registered or certified mail,
postage prepaid, addressed as follows:
If to the Company or CAIS: CAIS Internet, Inc.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx Xxxxx
With a copy to: Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxx X. XxXxx, Xx., Esq.
If to Atcom: Atcom, Inc.
000 X. Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: W. Xxxxxx Xxx
With a copy to: Xxxxxx Xxxxxx White & XxXxxxxxx
0000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or to such other address or addresses as a party shall have previously
designated by notice to the sender given in accordance with this section.
13.7 Choice of Law
This Agreement shall be construed in accordance with and governed by the
laws of the State of California without regard to choice of law principles.
51
13.8 Binding Effect; Benefits
This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer on any Person other than
the parties or their respective successors and permitted assigns, the
Shareholders and other Persons expressly referred to herein, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
13.9 Assignability
Neither this Agreement nor any of the parties' rights hereunder shall be
assignable by either party without the prior written consent of the other party
and any attempted assignment without such consent shall be void.
13.10 Waiver and Amendment
Any term or provision of this Agreement may be waived at any time by the
party which is entitled to the benefits thereof. The waiver by any party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. The parties may, by mutual agreement in
writing, amend this Agreement in any respect.
13.11 Attorneys' Fees.
In the event of any action or proceeding to enforce the terms and
conditions of this Agreement, the prevailing party shall be entitled to an award
of reasonable attorneys' and experts' fees and costs, in addition to such other
relief as may be granted.
52
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
as of the day and year first above written.
CAIS:
CAIS Internet, Inc.
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
---------------------------
Title: Executive Vice President
--------------------------
THE COMPANY:
CIAM Corp.
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
---------------------------
Title: Executive Vice President
--------------------------
ATCOM:
Atcom, Inc.
By: /s/ Xxxxxxx X. Xxx
--------------------------------
Name: Xxxxxxx X. Xxx
---------------------------
Title: President & CEO
--------------------------
53
Exhibit A
Certain Definition
For purposes of the Agreement (including this Exhibit A):
---------
Acquisition Proposal. "Acquisition Proposal" shall have the meaning
specified in Section 6.6 of the Agreement.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any substantial portion
of the Company's business or assets (other than in the Ordinary Course of
Business);
(b) the issuance, sale or other disposition of (i) any capital stock
of the Company, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock of the Company, or (iii)
any security, instrument or obligation that is or may become convertible into or
exchangeable for any capital stock of the Company; or
(c) any merger, consolidation, business combination, share exchange,
merger or similar transaction involving the Company.
Agreement. "Agreement" shall mean the Amended and Restated Agreement and
Plan of Merger to which this Exhibit A is attached (including all Disclosure
---------
Schedules and all Exhibits), as it may be amended from time to time.
Agreement of Merger. "Agreement of Merger" shall have the meaning
specified in Section 1.2 of the Agreement.
Atcom Board. "Atcom Board" shall mean the duly elected board of directors
of Atcom.
Atcom Closing Certificate. "Atcom Closing Certificate shall have the
meaning specified in Section 7.6 of the Agreement.
Atcom Common Stock. "Atcom Common Stock" shall mean the shares of common
stock of Atcom.
Atcom Contract. "Atcom Contract" shall mean any Contract:
(a) to which Atcom is a party;
(b) by which Atcom or any of its assets is or may become bound or
under which Atcom has any obligation; or
(c) under which Atcom has or may acquire any right or interest.
54
Atcom Disclosure Schedule. "Atcom Disclosure Schedule" shall have the
meaning specified in Article III of the Agreement.
Atcom Options. "Atcom Options" shall have the meaning specified in Section
2.2(b) hereof.
Atcom Returns. "Atcom Returns" shall have the meaning specified in Section
3.14 of the Agreement.
Average CAIS Stock Price. "Average CAIS Stock Price" shall refer to the
average of the closing price of the Common Stock of CAIS on the Nasdaq Stock
Market for the ten (10) trading days ending on the second to last trading day
prior to a given date.
Breach. There shall be deemed to be a "Breach" of a representation,
warranty, covenant, obligation or other provision if there is or has been any
inaccuracy in or breach of, or any failure to comply with or perform, such
representation, warranty, covenant, obligation or other provision.
CAIS. "CAIS" shall have the meaning specified in the first paragraph of
the Agreement.
CAIS Closing Certificate. "CAIS Closing Certificate" shall have the
meaning specified in Section 9.4 of the Agreement.
CAIS Common Stock. "CAIS Common Stock" shall mean the shares of common
stock of CAIS.
CAIS SEC Reports. "CAIS SEC Reports" shall have the meaning specified in
Section 4.6 of the Agreement.
Certificates. "Certificates" shall have the meaning specified in Section
2.3 of the Agreement.
CGCL. "CGCL" shall have the meaning specified in the Recitals of the
Agreement.
Closing. "Closing" shall have the meaning specified in Section 2.8 of the
Agreement.
Closing Date. "Closing Date" shall have the meaning specified in Section
2.8 of the Agreement.
Code. "Code" shall have the meaning specified in the Recitals of this
Agreement.
Company. "Company" shall mean CIAM Corp., a California corporation.
Company Board. "Company Board" shall mean the duly elected board of
directors of the Company.
55
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean, with respect to any Person, any
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance, obligation, promise or undertaking of any
nature to which such Person is a party or by which its properties or assets
maybe bound or affected or under which it or its business, properties or assets
receive benefits.
Damages. "Damages" shall mean the amount of any loss, damage, injury,
Liability, claim, fee (including any legal fee, expert fee, accounting fee or
advisory fee), demand, settlement, judgment, award, fine, penalty, Tax, charge
or cost (including any cost of investigation).
Disclosure Schedule Update. "Disclosure Schedule Update" shall have the
meaning specified in Section 5.4 of the Agreement.
Dissenting Shares. "Dissenting Shares" shall have the meaning specified in
Section 2.10 of the Agreement.
Effective Time. "Effective Time" shall have the meaning specified in
Section 1.2 of the Agreement.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, legend, defect, impediment, exception,
reservation, limitation, impairment, imperfection of title, condition or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
End-User Licenses. "End-User Licenses" shall have the meaning assigned in
Section 3.6 of the Agreement.
Entity. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
Environmental Claims. "Environmental Claims shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notice of noncompliance or violation, investigations or
proceedings relating to any law or any permit issued under any such Law
(hereafter "Claims"), including without limitation (a) any and all
56
Claims by governmental or regulatory authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or other environment from release
or disposal of Hazardous Materials.
Environmental Laws. "Environmental Laws" shall mean any federal, state or
local statute, law, rule, regulation, ordinance, code, binding policy or rule of
common law in effect and in each case as amended as of the Closing Date, and any
judicial or administrative interpretation thereof as of the Closing Date,
including any judicial or administrative order, consent decree or judgment,
relating to the protection of the environment, health, safety from the release
or disposal of Hazardous Materials, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. (S) 9601 et seq.; the Resource Conservation and Recovery
-- ----
Act, as amended, 42 U.S.C. (S) 9601 et seq.; the Federal Water Pollution Control
-- ----
Act, as amended, 33 U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act,
-- ----
15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the
-- ---- -- ----
Safe Drinking Water Act, 42 U.S.C. (S) 300f et seq.; the Oil Pollution Act of
-- ----
1990, 33 U.S.C. (S) 2701 et seq.; and their state and local counterparts and
-- ----
equivalents.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
Escrow Agreement. "Escrow Agreement" shall have the meaning specified in
Section 2.4 of the Agreement.
Escrow Amount. "Escrow Amount" shall have the meaning assigned in Section
2.4 of the Agreement.
Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Exchange Ratio. "Exchange Ratio" shall have the meaning assigned in
Section 2.1 of the Agreement.
Financial Statements. "Financial Statements" shall have the meaning
specified in Section 3.8 of the Agreement.
Follow-On Offering. "Follow-On Offering" shall have the meaning assigned
in Section 11.2 of the Agreement.
GAAP. "GAAP" shall mean Generally Accepted Accounting Principles, applied
on a basis consistent with the basis on which the Financial Statements were
prepared.
Governmental Authorization. "Governmental Authorization" shall mean any:
57
(a) permit, license, certificate, franchise, concession, approval,
consent, ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
that is issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement; or
(b) right under any Contract with any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); or
(d) individual, Entity or body exercising, or entitled to exercise,
any executive, legislative, judicial, administrative, regulatory, police,
military or taxing authority or power of any nature.
Hazardous Materials. "Hazardous Materials" shall mean any hazardous
substance, pollutant, contaminant, flammable explosives, radioactive materials
and hazardous, toxic or dangerous wastes and any other chemicals, materials or
substances which are identified, defined or regulated pursuant to any
Environmental Laws, or the release, discharge or exposure to which is
prohibited, limited or regulated by any federal, state or local government under
Environmental Law and any petroleum, waste oil and petroleum by-products,
asbestos in any form, urea formaldehyde, and transformers or other equipment
that contain levels of polychlorinated biphenyls.
Key Employees. "Key Employees" shall refer to each of Xxxxxx Xxxxxxxx,
Xxxxxxx Xxxxx, W. Xxxxxxx Xxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxxx, Xx Xxx Xxxxx and
Xxxxx Xxx Xxxxx.
Knowledge. An individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter;
or
(b) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonable investigation concerning the existence of such fact or other matter.
A corporation shall be deemed to have "Knowledge" of a particular fact or
matter only if a director or officer of such corporation has or had Knowledge of
such fact or matter.
58
Leased Premises. "Leased Premises" shall have the meaning specified in
Section 3.9 of the Agreement.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation that is or has been issued, enacted, adopted, passed, approved,
promulgated, made, implemented or otherwise put into effect by or under the
authority of any Governmental Body, and, where applicable, shall include any
rule or requirement of the Nasdaq National Market.
Liability. "Liability" shall mean any debt, obligation, duty or liability
of any nature including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability, regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles and
regardless of whether such debt, obligation, duty or liability is immediately
due and payable.
Member of the Controlled Group. "Member of the Controlled Group" shall
mean each trade or business, whether or not incorporated, which would be treated
as a single employer with Atcom under Section 4001 of ERISA or Section 414(b),
(c), (m) or (o) of the Code.
Merger. "Merger" shall have the meaning specified in the Recitals of the
Agreement.
Millennial Dates. "Millennial Dates" shall have the meaning assigned in
Section 3.24 of the Agreement.
Multiemployer Plan. "Mutiemployer Plan" shall mean a plan described in
Section 3(37) of ERISA.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is issued, made, entered, rendered or otherwise put into
effect by or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is entered into in
connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of the
Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is consistent with the Company's past practices and
taken in the ordinary course of the Company's normal operations; or
59
(b) such action is taken in accordance with such party's customary
business practices.
Pension Plan. "Pension Plan" shall mean either a plan described in Section
3(35) of ERISA.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Plans. "Plans" shall have the meaning specified in Section 3.22 of the
Agreement.
Post-Closing Period. "Post-Closing Period" shall means any taxable period
(or portion thereof) beginning after the close of business on the Closing Date.
Pre-Closing Period. "Pre-Closing Period" shall mean the period commencing
as of the date of the Agreement and ending on the Closing Date.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation,
commenced, brought, conducted or heard by or before, or otherwise has involved,
any Governmental Body or any arbitrator or arbitration panel.
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service xxxx (whether registered or unregistered), service xxxx
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know how, franchise,
system, computer software, invention, design, blueprint, proprietary product,
technology, proprietary right or other intellectual property right or intangible
asset.
Registration Rights Agreement. "Registration Rights Agreement" shall mean
an agreement substantially in the form of Exhibit F.
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Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) each individual who is a director or an officer of Atcom;
(b) each member of the family of each of the individuals referred to
in clause "(a)" above; or
(c) any other Person who is an "affiliate" of Atcom within the
meaning of the Securities Act.
Representatives. "Representatives" of a specified party shall mean
officers, directors, employees, attorneys, accountants, advisors and
representatives of such party, including, without limitation, in the case of
CAIS, all subsidiaries of CAIS, including the Company, and all such
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Persons with respect to such subsidiaries. The Related Parties shall be deemed
to be "Representatives" of Atcom.
Returns. "Returns" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Taxing Authority in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
SEC. "SEC" shall mean the Securities and Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Straddle Period. "Straddle Period" means any taxable period that includes
(but does not end on) the Closing Date.
Surviving Corporation. "Surviving Corporation" shall have the meaning
specified in Section 1.1 of the Agreement.
Takeover Statute. "Takeover Statute" shall mean any fair price,
moratorium, control share acquisition or other similar anti-takeover statute.
Taxes. "Taxes" shall mean (a) any net income, alternative or add-on
minimum tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest, penalty, addition-
to-tax or additional amount imposed by a Governmental Body, (b) any liability of
an Entity for the payment of any amount of the type described in clause (a)
above as a result of being a member of an affiliated, consolidated, combined or
unitary group, and (c) any liability of an Entity for the payment of any amount
as a result of being party to any Tax Sharing Agreement or with respect to the
payment of any amounts of the type described in clauses (a) or (b) above as a
result of any express or implied obligation to indemnify any other Entity.
Tax Sharing Agreement. "Tax Sharing Agreement" shall mean any existing Tax
sharing agreements or arrangements (whether or not written) binding Atcom and
any other agreement or arrangement (including any arrangement required or
permitted by law) which (a) requires Atcom to make any Tax payment to or for the
account of any other person, (b) affords any other person to utilize any tax
attributes of Atcom to reduce such other person's Taxes, (c) affords Atcom the
ability to utilize any tax attributes of any other person to reduce any Taxes of
Atcom, (d) requires or permits the transfer or assignment of income, revenues,
receipts, or gains, or (e) requires or permits Atcom to determine its Tax
liability by taking into account or by reference to the Tax liability, income,
revenues, receipts or gains of any other person.
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Transactional Agreements. "Transactional Agreements" shall mean:
(a) this Agreement;
(b) the Escrow Agreement;
(c) the Registration Rights Agreements; and
(d) the Agreement of Merger.
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet" shall
have the meaning specified in Section 3.8 of the Agreement.
Year 2000 Compliant. "Year 2000 Compliant" shall have the meaning assigned
in Section 3.24 of the Agreement.
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Exhibit B
Form of Escrow Agreement
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Exhibit C
Form of Key Employee Employment Agreement
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Exhibit D
Form of Atcom Tax Certificate
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Exhibit E
Form of Noncompetition Agreement
66
Exhibit F
Form of Registration Rights Agreement
67
Exhibit G
Form of Xxxxxxxx Consulting Agreement
68
Exhibit H
Form of CAIS Tax Certificate
69
Schedule 1
Atcom Securityholders
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Atcom Disclosure Schedule
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