Exhibit 10.63
ASSET PURCHASE AGREEMENT
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dated as of March 15, 2000
by and among
CAIS INTERNET, INC., a Delaware corporation
CAIS SOFTWARE SOLUTIONS, INC., a California corporation
and
QUICKATM, LLC, a California limited liability company
ASSET PURCHASE AGREEMENT
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This Asset Purchase Agreement (this "Agreement") is made as of March __,
2000, by and among QuickATM, LLC, a California limited liability company
("Seller"), CAIS Software Solutions, Inc., a California corporation ("Buyer")
and CAIS Internet, Inc., a Delaware corporation ("CAIS").
R E C I T A L S
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A. Seller conducts the business of, among other things, the
development, manufacture, lease, sale and operation of multi-media information
and Internet kiosks (the "Business"). The Business is conducted by Seller
primarily at its facility at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
(the "Facility").
B. Buyer is a wholly owned subsidiary of CAIS.
C. Subject to the terms and conditions of this Agreement, Buyer
desires to purchase, and Seller desires to sell, certain of the assets, rights
and tangible and intangible properties of the Business as currently conducted.
Buyer is willing to assume certain of the liabilities and obligations of Seller
specified herein related to the Business, upon the terms and conditions set
forth in this Agreement.
TERMS, COVENANTS AND CONDITIONS
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1. DEFINITIONS.
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For the purposes of this Agreement, in addition to any other terms
defined in this Agreement, the definitions cross-referenced below shall be
applicable:
1.1 Accounts Receivable: shall be as defined in Section 2.2(b).
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1.2 Acquired Intellectual Property: shall be as defined in
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Section 2.1(d).
1.3 Agreement: shall be as defined in the preamble.
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1.4 Approval: shall be as defined in Section 2.4.1
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1.5 Assets: shall be as defined in Section 2.1.
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1.6 Assumed Liabilities: shall be as defined in Section 2.5.1.
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1.7 Books and Records: shall be as defined in Section 2.2(h).
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1.8 Broker: shall be as defined in Section 3.13.
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1.9 Business: shall be as defined in the recitals.
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1.10 Buyer: shall be as defined in the preamble.
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1.11 Buyer/CAIS Closing Documents: shall be as defined in
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Section 2.6.3.
1.12 Buyer's Damages: shall be as defined in Section 9.2.
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1.13 CAIS: shall be as defined in the preamble.
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1.14 CAIS Common Stock: shall be as defined in Section 2.3.2.
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1.15 CAIS SEC Reports: shall be as defined in Section 4.6.
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1.16 Cash Consideration: shall be as defined in Section 2.3.2.
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1.17 Closing: shall be as defined in Section 2.6.1.
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1.18 Closing Date: shall be as defined in Section 2.6.1
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1.19 Confidential Information: shall be as defined in Sections 6.5
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and 7.4.
1.20 Confidentiality Agreement: shall be as defined in Sections 6.5
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and 7.4.
1.21 Closing Date: shall be as defined in Section 2.6.1.
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1.22 Consideration Shares: shall be as defined in Section 2.3.2.
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1.23 Contracts: shall be as defined in Section 2.1(f).
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1.24 Corporate Documents: shall be as defined in Section 2.2(c)
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1.25 Damages: shall be as defined in Section 9.3.
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1.26 Employee Plan: shall be as defined in Section 8.2.
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1.27 ERISA: shall be as defined in Section 8.2.
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1.28 Escrow Agreement: shall be as defined in Section 2.3.3.
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1.29 Escrow Amount: shall be as defined in Section 2.3.3.
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1.30 Excluded Assets: shall be as defined in Section 2.2.
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1.31 Facility: shall be as defined in the recitals.
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1.32 Facility Improvements: shall be as defined in Section 2.1(c).
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1.33 Financial Statements: shall be as defined in Section 4.6.
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1.34 First Anniversary Date: shall be as defined in Section 2.3.3.
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1.35 Full Integration Date: shall be as defined in Section 6.1.
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1.36 GAAP: shall be as defined in Section 4.6.
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1.37 Incentive Compensation: shall be as defined in Section 2.3.2
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1.38 Incentive Date: shall be as defined in Section 2.3.2.
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1.39 Intangible Personal Property: shall be as defined in
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Section 2.1(e).
1.40 Intellectual Property: shall be as defined in Section 2.1(d).
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1.41 Inventory: shall be as defined in Section 2.1(a).
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1.42 IRC: shall be as defined in Section 8.2.
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1.43 Lease: shall be as defined in Section 2.1(g).
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1.44 Liens: shall be as defined in Section 3.3.
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1.45 Machinery and Equipment: shall be as defined in Section 2.1(b).
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1.46 Material Adverse Effect: shall be as defined in Section 3.
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1.47 Permitted Liens: shall be as defined in Section 3.3.
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1.48 Purchase Price: shall be as defined in Section 2.3.1
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1.49 Registration Rights Agreement: shall be as defined in
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Section 2.3.5.
1.50 Seller: shall be as defined in the preamble.
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1.51 Seller's Closing Documents: shall be as defined in Section 2.6.2.
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1.52 Seller's Damages: shall be as defined in Section 9.3.
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1.53 Seller's Key Officer: shall be as defined in Section 3.
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1.54 Seller Names: shall be as defined in Section 7.3.1.
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1.55 Subsidiary: shall be as defined in Section 2.1.
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1.56 Taxes: shall be as defined in Section 2.2(f).
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1.57 Used in the Business: shall be as defined in Section 2.1
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1.58 Warranty Obligations: shall be as defined in Section 2.5.1(b).
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2. SALE AND PURCHASE OF ASSETS.
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2.1 Sale of Assets.
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Subject to the terms and conditions of this Agreement and for the
consideration set forth herein, Seller shall, at the Closing, sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from
Seller, all of the right, title and interest of Seller in and to the assets,
rights and tangible and intangible property Used in the Business (other than the
Excluded Assets), including, without limitation, the assets, rights, tangible
and intangible property specifically described in Sections 2.1(a)-(h) below, as
the same may exist at the Closing (the "Assets"). As used in this Agreement,
the term "Used in the Business" with respect to any asset, right, tangible and
intangible property, liability or obligation, shall mean (1) the use or accrual
of such item primarily relates to or primarily derives from the Business, and
(2) the item is reasonably necessary for the operation of the Business as
presently conducted and as conducted on the Closing Date. As used herein,
"Subsidiary" shall mean, with respect to a specified company, an entity
controlled, directly or indirectly by such company, including, without
limitation, by such company's beneficial ownership of fifty percent (50%) or
more of such entity's outstanding voting stock or other equity interests.
Without limiting the generality of the foregoing, the Assets shall include,
without duplication, the right, title and interest of Seller in and to the
following as the same may exist at the Closing:
(a) Inventory. All inventories of raw materials, work-in-process,
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finished goods (including installation tooling), supplies and repair materials
owned by Seller Used in the Business existing as of the Closing Date, whether on
or within the Facility, en route thereto or elsewhere (the "Inventory").
(b) Fixed Assets and Tangible Personal Property. All fixed assets and
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tangible personal property owned or leased by Seller Used in the Business,
including, without limitation, all machinery (including replacement parts),
computers, computer auxiliary equipment and supplies, equipment (including demo
equipment and replacement parts), supplies, tools, tooling, furniture, fixtures,
hardware, dies and spare parts Used in the Business ("Machinery and Equipment"),
including, but not limited to, the Machinery and Equipment set forth in Schedule
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2.1(b) of Exhibit A hereto.
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(c) Facility Improvements. All leasehold improvements and fixtures
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located at the Facility (the "Facility Improvements").
(d) Intellectual Property. All patents, trademarks and trademark
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applications listed on Schedule 2.1(d) of Exhibit A attached hereto, all patent
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applications and invention disclosures set forth in such schedule, and all
service marks, service ▇▇▇▇ applications, trade and other names (either
registered, common law or registration applied for), copyrights, copyright
applications, trade secrets, know-how, processes, proprietary computer software,
manufacturing or marketing procedures, recipes, formulae, drawings, schematics
and patterns (collectively, "Intellectual Property") owned by Seller that are
Used in the Business, including, but not limited to, the Intellectual Property
listed on Schedule 2.1(d) of Exhibit A hereto (all such Intellectual Property,
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collectively, the "Acquired Intellectual Property"). Without limitation of the
foregoing, the Acquired Intellectual Property shall be deemed to further include
any drawings,
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documentation, schematics, manuals or other materials, whether in written or
magnetic form to the extent that the same describe, disclose or otherwise set
forth any of the Acquired Intellectual Property.
(e) Intangible Personal Property. All warranties, guaranties, vendor
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lists, customer lists, customer files, customer records, trade and other
association memberships and rights, licenses and permits susceptible of transfer
under regulatory agency or other applicable rules, and which are Used in the
Business (the "Intangible Personal Property").
(f) Contracts. All contracts of Seller Used in the Business,
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including, without limitation, all patent, technology, software and other
Intellectual Property license agreements, assignment agreements, purchase
contracts, purchase orders, sales contracts, sales orders, rights to discounts,
maintenance agreements, installation agreements, sales representative
agreements, Internet service agreements, distribution agreements, joint
development contracts and agreements related to equipment leased from Seller or
third parties Used in the Business (collectively, the "Contracts"), including,
but not limited to, those Contracts listed on Schedule 2.1(f) of Schedule A
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hereto.
(g) Facility. All of Seller's right, title and interest as tenant in
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and to the lease for the Facility ("Lease"). Buyer and CAIS acknowledge that
the Facility lease is a month-to-month tenancy. Further, Buyer may assume the
Seller's insurance policies relating to the Facility or the Business listed on
Schedule 2.1(g) of Schedule A hereto, provided that the insurer, in each case,
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consents to such assignment and assumption and Buyer (or CAIS) agrees to
reimburse Seller for prepaid policy premiums, deductible and other amounts.
(h) Books and Records. All books, records, logs, plans,
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specifications, blueprints, data, operating manuals, drawings, sketches,
diagrams, marketing materials, and other reports or documents Used in the
Business but excluding any Corporate Documents, or any documents or records
pertaining to Excluded Assets or to any liabilities other than the Assumed
Liabilities (collectively, "Books and Records").
2.2 Assets Not Purchased.
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Notwithstanding Section 2.1, Seller shall not sell, and Buyer shall
not acquire any interest in, any of the following (collectively, the "Excluded
Assets"):
(a) Cash. Any cash, cash deposits, securities, other cash
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equivalents, cash refunds, insurance policies (including, but not limited to,
any pre-payments and any rights thereunder), security bonds or deposits, or bank
accounts.
(b) Accounts Receivable. All accounts receivable or notes receivable
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of Seller accrued in the Business and outstanding as of the Closing Date (the
"Accounts Receivable").
(c) Corporate Documents. All organizational documents, financial or
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tax information, minute books, stock ledgers, or similar corporate documents and
records pertaining to Seller and its affiliates, including, but not limited to,
Seller's name and identity ("Corporate Documents").
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(d) Royalty Bearing Licenses. Any agreements by Seller to license or
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assign patent, technology, software or other Intellectual Property license
agreements to other parties where royalties (or claims with respect thereto)
accrue to the licensor.
(e) Other Real Property. Real property or real property interests
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other than the Lease.
(f) Tax Refunds. Any refund of the following: any federal, state,
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local, or foreign income, gross receipts, license, payroll, parking, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including, without limitation, taxes under IRC Code Sec. 59A), customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, documentary, value added, alternative or add-on minimum,
estimated tax or other tax of any kind whatsoever (collectively, "Taxes"), or
any claim for a refund of Taxes for periods before the Closing. Notwithstanding
the foregoing, or anything else to the contrary set forth in this Agreement,
neither Buyer nor Seller shall have any obligation to apply for, pursue or
otherwise seek to obtain any refund for Taxes for periods prior to or after the
Closing.
(g) Contingent Benefits. Any claims or rights against third parties
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arising from the ownership of the Assets or the conduct of the Business before
the Closing Date, other than rights described in clause (f) of Section 2.1 with
respect to Contracts that remain executory.
(h) Intercompany Agreements. Any distributor, representative or
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service agreements, contracts or commitments exclusively between Seller and any
affiliate of Seller.
(i) Property Not Specifically Included. Any assets, property, rights,
title or other interests not specifically included in the definition of "Assets"
and set forth in Section 2.1. Such assets shall remain the property of Seller
and Buyer shall have no liability or other responsibility with respect thereto.
2.3 Purchase Price.
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2.3.1 Total Consideration. Subject to the terms and conditions of
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this Agreement (including, without limitations, Section 11.3 below), as
consideration for Buyer's purchase of the Business and the Assets: (a) Buyer and
CAIS shall pay total consideration equal to $1,750,000 as set forth in Section
2.3.2 below (the "Purchase Price") and (b) Buyer (but not CAIS) shall assume the
Assumed Liabilities.
2.3.2 Payment of Consideration. The Purchase Price shall consist of:
(i) a number of shares of CAIS Common Stock, par value $.01 per share ("CAIS
Common Stock"), equal to (x) One Million Two Hundred and Fifty Thousand Dollars
($1,250,000) divided by (y) the average closing price of the CAIS Common Stock
on the Nasdaq Stock Market for the ten (10) trading days immediately preceding
the Closing Date (the "Consideration Shares"), (ii) cash in an aggregate amount
of Five Hundred Thousand dollars ($500,000) (the "Cash Consideration"), and
(iii) at the "Incentive Date," cash incentive compensation equal to (x) One
Thousand Five Hundred Dollars ($1,500) for each information-only kiosk acquired
by Buyer that Buyer agrees to convert to an Internet access kiosk, and (y) Two
Thousand Five Hundred Dollars ($2,500) for each new Internet kiosk location that
Buyer agrees to establish upon a referral from
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively, the "Incentive Compensation"). The Incentive
Compensation shall be paid on the Incentive Date, which shall be the date which
is the later of ten weeks after August 29, 2000 or ten weeks after the
termination of the Consulting Agreement dated as of the date hereof by and
between ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Buyer, and the Incentive Compensation shall be
paid with respect only to kiosks converted or established prior to or on the
Incentive Date. Without limiting the generality of the foregoing, Buyer shall
have no obligations with respect to Incentive Compensation for kiosks converted
or established after the Incentive Date.
2.3.3 Escrow. Prior to the Closing, shares of CAIS Common Stock
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equal to ten percent (10%) of the Consideration Shares shall be delivered to and
held in escrow (the "Escrow Amount") until the first anniversary date of the
Closing Date (the "First Anniversary Date") (subject to any pending claims for
indemnification which exist on such date) pursuant to an Escrow Agreement in the
form attached hereto as Exhibit 2.6.2(e) (the "Escrow Agreement") to secure
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claims by indemnified parties for indemnification pursuant to Section 9 of this
Agreement. As set forth in Section 9.7, Seller's liability arising out of, or in
connection with, this Agreement shall be limited to the Escrow Amount; provided,
however, that none of the provisions of this Agreement, the Escrow Agreement, or
any other agreements entered into by the parties in furtherance of this
Agreement shall in any manner limit the liability of Seller, or any person who
is or was an officer, employee, member or agent of Seller, with respect to (i)
fraud; (ii) intentional misrepresentation; or (iii) criminal conduct.
2.3.4 No Fractional Shares. No fraction of a share of CAIS Common
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Stock shall be issued pursuant to this Agreement. In lieu of fractional shares,
the Seller shall be paid an amount in cash, without interest, rounded to the
nearest cent, determined by multiplying the fractional interest to which Seller
would otherwise be entitled by the average closing price of CAIS Common Stock
computed pursuant to clause (i) of Section 2.3.2.
2.3.5 Restricted Stock. The shares of CAIS Common Stock issued
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pursuant to this Agreement will not be registered under the Securities Act of
1933, as amended ("Securities Act"), except as provided in the Registration
Rights Agreement attached hereto as Exhibit 2.6.2(d) (the "Registration Rights
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Agreement"). Such shares may not be transferred or resold thereafter, except in
compliance with the terms of this Agreement and the Registration Rights
Agreement and following registration under the Securities Act or in reliance on
an exemption from registration under the Securities Act. Notwithstanding the
foregoing, the parties each acknowledge and agree that it is the intention of
the members of Seller to dissolve Seller and to distribute the assets of Seller,
including the shares of CAIS Common Stock purchased hereunder, to the members of
Seller as well as to a certain non-employee director, to certain employees and
to the Broker (as defined herein) as compensation for Broker's services in
connection with this Agreement. Accordingly, the parties will take all
necessary steps to enable the transfer of CAIS Common Stock to the above
mentioned parties, provided that the recipients of CAIS Common Stock cooperate
fully with the parties and otherwise abide by all applicable state and federal
securities laws.
2.4 No Assignment in Certain Circumstances.
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2.4.1 Consents. Notwithstanding anything else contained in this
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Agreement to the contrary, this Agreement shall not constitute an agreement to
sell, convey, assign, transfer or
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deliver any interest in any instrument, commitment, contract, lease, permit or
other agreement or arrangement or any claim, right or benefit arising thereunder
or resulting therefrom if such a transfer or an attempt to make such a transfer
without the authorization, approval, consent or waiver (collectively,
"Approval") of a third party would constitute a breach or violation thereof, or
affect adversely the rights of Buyer, CAIS or Seller thereunder, or constitute a
Material Adverse Effect; and any such transfer to Buyer that requires the
Approval of a third party shall be made subject only to such Approval being
obtained. Prior to the Closing Date, Seller and Buyer shall reasonably
cooperate, at Seller's cost, and shall use commercially reasonable efforts to
obtain all Approvals required hereunder. In the event that any such Approval is
not obtained on or prior to the Closing Date, Seller shall continue to use
commercially reasonably efforts to obtain any such Approval and cooperate with
Buyer and CAIS in any reasonable and lawful arrangement to provide that Buyer
shall receive all of Seller's right, title and interest in any Asset with
respect to which such Approval is required, including, without limitation,
performance by Seller, as agent; provided, however, that, in connection with the
foregoing, Seller shall not be obligated to commence or prosecute any proceeding
of any nature before any governmental entity or pay any amount to any third
party other than at the sole expense of Buyer; provided further, however, that
any and all consent and assignment costs or charges expressly set forth in the
Contracts, including, without limitation, payments stated to be due in
connection with the sale, transfer, or other disposition of the Business by
Seller, shall be paid by Seller. Except as provided in Section 2.4.2 below, no
such Approval shall be a condition to Closing.
2.4.2 Required Consents. Seller shall obtain, at or prior to the
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Closing, the consent of ▇▇▇▇ ▇▇▇▇▇ to the assignment, to Buyer, of the contracts
listed on Exhibit 2.4.2, in substantially the form of consent set forth in
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Exhibit 2.4.2. Seller shall also obtain, at or prior to Closing, from the
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landlord to the Lease, such landlord's consent to assign the Lease to either
Buyer or CAIS.
2.5 Assumed Liabilities. __
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2.5.1 Assumption of Liabilities. In connection with the purchase and
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sale of the Assets pursuant to this Agreement, Buyer shall assume in writing at
the Closing pursuant to the ▇▇▇▇ of Sale, Assignment and Assumption Agreement
attached hereto as Exhibit 2.6.2(a) (the "Transfer Agreement") only those
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liabilities and obligations of Seller set forth below (collectively, the
"Assumed Liabilities"):
(a) Contract Obligations. Any obligation remaining to be
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performed under the Contracts, including, without limitation, installation and
maintenance obligations.
(b) Warranty Obligations. Any continuing obligation of Seller
with respect to the performance of warranty and/or service obligations with
respect to the products and/or services related to the Assets ("Warranty
Obligations").
(c) Assets. Any obligations or liabilities relating to the
Assets for which the event giving rise to each such obligation or liability, or
the claim relating to each such obligation or liability, arose after the Closing
Date.
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Except as provided in this Section 2.5, no other liabilities or
obligations of any nature, whether known or unknown, foreseen or unforeseen,
fixed or contingent, liquidated or unliquidated, accrued or unaccrued, shall be
assumed by Buyer in connection with the purchase and sale of the Assets
hereunder, and any such liabilities and obligations of any nature of Seller not
expressly assumed by Buyer pursuant to this Section 2.5 shall remain the sole
and absolute responsibility of Seller (collectively, the "Retained
Liabilities").
2.6 Closing.
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2.6.1 Closing Date. Subject to Sections 5 and 6, the closing of the
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purchase and sale of the Assets and the assumption of the Assumed Liabilities
(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇, at 10:00 a.m. on March 10, 2000, or
at such other place, date or time as Buyer, CAIS and Seller may agree in
writing. The date of the Closing shall constitute the "Closing Date."
2.6.2 Seller's Deliveries at Closing. At the Closing, Seller shall
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deliver or cause to be delivered to Buyer:
(a) An executed counterpart of the ▇▇▇▇ of Sale, Assignment and
Assumption Agreement in the form of Exhibit 2.6.2(a);
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(b) Secretary's Certificates certifying the resolutions of the
members or managers, as the case may be, of Seller authorizing consummation of
the transactions contemplated by this Agreement substantially in the form of
Exhibit 2.6.2(b);
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(c) Compliance Certificates substantially in the form of
Exhibit 2.6.2(c);
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(d) An executed counterpart of the Registration Rights
Agreement in the form of Exhibit 2.6.2(d);
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(e) An executed counterpart of the Escrow Agreement in the form
of Exhibit 2.6.2(e); and
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(f) An executed counterpart of the Consulting Agreement in the
form of Exhibit 2.6.2(f).
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The documents referred to in Sections 2.6.2(a) through (f) above are hereinafter
referred to, collectively, as the "Seller's Closing Documents."
2.6.3 Buyer's and CAIS' Deliveries at Closing. At the Closing, Buyer
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and/or CAIS, as the case may be, shall deliver or cause to be delivered to
Seller the following instruments and documents against delivery of the items
specified in Section 2.6.2:
(a) (1) From Buyer, the Cash Consideration, subject to any
adjustment thereto pursuant to Section 11.3 below, by
wire transfer of immediately available funds to an
account, and in accordance with instructions,
designated by Seller; and (2) from CAIS, the
Consideration Shares;
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(b) Secretary's Certificates certifying the resolutions of the
Boards of Directors of Buyer and of CAIS authorizing
consummation of the transactions contemplated by this
Agreement substantially in the form of Exhibit 2.6.3(b);
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(c) Compliance Certificates substantially in the form of
Exhibit 2.6.3(c);
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(d) An executed counterpart of the ▇▇▇▇ of Sale, Assignment and
Assumption Agreement;
(e) An executed counterpart of the Registration Rights
Agreement;
(f) An executed counterpart of the Escrow Agreement; and
(g) An executed counterpart of the Consulting Agreement.
The documents referred to in Section 2.6.3(b) through (g) above, are hereinafter
referred to collectively, as the "Buyer/CAIS Closing Documents." The Incentive
Compensation shall not be due at Closing, but rather, shall be payable, if at
all, from Buyer to Seller on the Incentive Date.
2.7 Consent of Third Parties. At the Closing, Seller shall provide
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Buyer with copies of such third party consents and Approvals as may have been
actually obtained by Seller through the Closing Date.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
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Seller hereby represents and warrants to Buyer and CAIS that, except
as otherwise disclosed in the Disclosure Schedule attached hereto as Schedule 3
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of Exhibit A, the following statements set forth in this Section 3 are true and
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correct, as of the Closing Date. Whenever the term "to Seller's knowledge" or
"to the best of Seller's knowledge" or similar expression appears in any
representation or warranty in this Section 3, it means to the actual knowledge
(after reasonable investigation or inquiry) of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Seller's
President and Chief Executive Officer ("Seller's Key Officer"). Whenever the
term "Seller has received no notice" or like expression appears in any
representation or warranty in this Section 3, it means that Seller's Key Officer
has not received actual oral or written notice of the matter to which such term
is applied. Whenever the term "Material Adverse Effect" or similar expression
appears in this Agreement, it means, an effect, on the Assets or the Business,
which is or is reasonably likely to be materially adverse to (a) the results of
operations or financial condition of the Business, taken as a whole, or (b)
Buyer's ability to operate the Business, after the Closing Date, substantially
in the form as it was conducted immediately prior to the Closing Date.
3.1 Organization and Authority. Seller: (i) is a duly organized and
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validly existing limited liability company and is in good standing under the
laws of the State of California; (ii) has all necessary power and authority to
own and lease its properties and to carry
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on its business as and where it is now being conducted and to enter into and
perform this Agreement; and (iii) is qualified to do business in all
jurisdictions in which the failure to so qualify would have a Material Adverse
Effect.
3.2 Authority Relating to this Agreement and Other Agreements;
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No Violation of Other Instruments.
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3.2.1 The execution and delivery of this Agreement and the Seller's
Closing Documents and the performance by Seller of its obligations hereunder and
thereunder have been duly authorized by all necessary limited liability company
action on the part of Seller and, assuming execution of this Agreement by Buyer
and CAIS, this Agreement and each of the Seller's Closing Documents will
constitute legal, valid and binding obligations of Seller, enforceable against
Seller in accordance with their respective terms, subject as to enforcement
only: (i) to bankruptcy, insolvency, reorganization, arrangement, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights generally; and (ii) to general principles of equity.
3.2.2 Neither execution of this Agreement nor any of the Seller's
Closing Documents, nor the performance hereof or thereof by Seller, will to
Seller's knowledge: (i) conflict with or result in any breach or violation of
the terms of any decree, judgment, order, law or regulation of any court or
other governmental body now in effect applicable to Seller; (ii) conflict with,
or result in, with or without the passage of time or the giving of notice (or
both), any breach of any of the terms, conditions and provisions of, or
constitute a default under, or result in the creation of, any Lien (as defined
herein) upon any of the Assets pursuant to, any indenture, mortgage, lease,
agreement or other instrument to which Seller is a party or by which it or any
of the Assets are bound; or (iii) violate or conflict with any provision of
Seller's organizational instruments.
3.2.3 To Seller's knowledge, and except as provided in Section 2.4.2,
no consent from any third party and no consent, approval or authorization of, or
declaration, filing or registration with, any government or regulatory authority
is required to be made or obtained by Seller in order to (i) assign and transfer
the Acquired Intellectual Property to Buyer, except for such consents which the
failure to obtain would not have, in the aggregate, a Material Adverse Effect;
or (ii) permit the execution, delivery or performance of this Agreement or any
of the Seller's Closing Documents by Seller, or the consummation by Seller of
any of the other transactions contemplated by this Agreement.
3.3 Ownership and Delivery of Assets. Except with respect to Assets
--------------------------------
which are leased by or licensed to Seller, Seller has, or immediately prior to
the Closing will have, good and marketable title to all of the Assets consisting
of personal property and Seller has all necessary power and authority to
transfer such Assets to Buyer, free and clear of all liens, charges, security
interests, easements, covenants, mortgages, restrictions or other encumbrances,
rights of others or limitations (collectively, "Liens") other than any (a)
mechanics', carriers', workers' and other similar Liens arising in the ordinary
course of business; (b) Liens for real property Taxes and assessments not yet
due and payable; (c) non-monetary real property encumbrances that do not
materially interfere with the operation of that portion of the Business
conducted on such property; (d) Liens securing purchase money obligations or
obligations under
11
equipment leases which, in the aggregate, are not material in amount and have
not arisen other than in the ordinary course of business; and (e) with respect
to patents, patent applications, trademarks, trademark applications, software
and other Intellectual Property, any licenses which may have been granted by
Seller to third parties (collectively, "Permitted Liens").
3.4 Compliance with Law. To Seller's knowledge, Seller holds all
-------------------
licenses, permits, authorizations and other Approvals necessary for the lawful
conduct of the Business whenever and wherever conducted pursuant to all
applicable statutes, laws, ordinances, rules and regulations of all foreign and
domestic governmental and quasi-governmental bodies, agencies and subdivisions
having, asserting or claiming jurisdiction over Seller, the Assets or any part
of Seller's operations, and to Seller's knowledge, there is no violation thereof
or default thereunder. To Seller's knowledge, Seller is not in violation of any
decree, judgment, order, law or regulation of any court or other foreign or
domestic governmental and quasi-governmental body (including, without
limitation, applicable equal employment and civil rights regulations, wages,
hours and the payment of social security taxes and occupational health and
safety legislation).
3.5 Absence of Certain Changes or Events.
------------------------------------
(a) Since December 31, 1999, to Seller's knowledge, there have been
no material changes in the condition, financial or otherwise, of any of the
assets, liabilities, business, or operations of the Business, other than changes
in the ordinary course of business which in the aggregate would not have a
Material Adverse Effect.
(b) Without limiting the foregoing, since December 31, 1999, (i)
Seller has not entered into any transaction other than in the ordinary course of
business relating to or affecting the Assets or the Business, other than this
Agreement; (ii) to Seller's knowledge, there have been no losses or damage to
any of the Assets due to fire or other casualty, whether or not insured,
amounting to more than Five Thousand Dollars ($5,000) in the aggregate; (iii) to
Seller's knowledge, Seller has not executed, created, amended or terminated any
Contract except in the ordinary course of business; (iv) there has been no
waiver or compromise by Seller of a material right or of a material debt owed to
it; (v) there has been no revaluation by Seller of any of the Assets; and (vi)
there has been no revocation of any license, permit, Approval or right to do
business granted to Seller relating to or affecting the Business.
3.6 Inventory. All of the Inventory is of the type used in the
---------
ordinary course of the business, and, except for excess, defective, obsolete and
slow-moving items, is in good operating condition, reasonable wear and tear
excepted. Except as set forth herein and subject to any other disclaimers of
warranties and limitations on liability expressly set forth in this Agreement,
the Inventory is being sold to Buyer on an "as is" basis without warranty of any
kind.
3.7 Personal Property. To Seller's knowledge, the Machinery and
-----------------
Equipment is in good operating condition, reasonable wear and tear excepted, and
the leases to personal property utilized in the Business are valid and
enforceable and are not, with or without the passage of time, the delivery of
notice (or both), in material default by any party thereto.
12
3.8 Lease. To Seller's knowledge, the Lease is a valid and binding
-----
obligation of Seller and the landlord thereunder, and is enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity) and is not, with or without the passage of time or the
delivery of notice (or both), in material default by any party thereto.
3.9 Intellectual Property. To Seller's knowledge, all of the Acquired
---------------------
Intellectual Property is owned by Seller free and clear of all Liens (other than
Permitted Liens) and the use of any of the Acquired Intellectual Property in the
conduct of the Business does not violate any license agreement between Seller
and any third party with respect to any of the Acquired Intellectual Property.
Seller has received no written notice of any alleged infringement on the rights
of any third party. Seller has the right to transfer and assign the Acquired
Intellectual Property to Buyer hereunder. Seller has received no written notice
of any action or proceeding pending or threatened, contesting the validity,
ownership or right to use, sell, license or dispose of the Acquired Intellectual
Property. To Seller's knowledge, there has been no infringement or unauthorized
use by any other person or entity of any of the Acquired Intellectual Property.
1.10 Product Warranties and Returns. Seller has not made any
------------------------------
warranties or guarantees relating to its products or services that will be in
effect as of the Closing Date, except for warranties and guarantees given in the
ordinary course of business, including, without limitation, (i) warranties and
guarantees made in connection with Seller's established "Satisfaction
Guaranteed -- No Questions Asked" policy; and (ii) any warranties and guarantees
made in any of the Contracts.
1.11 Litigation. None of Seller nor any officer, director, employee or
----------
agent of Seller is a party to any pending or, to Seller's knowledge, threatened
action, suit, proceeding or investigation, at law or in equity or otherwise in,
for or by any court or other governmental or quasi-governmental body which would
have a Material Adverse Effect. Seller is not subject to any pending or, to
Seller's knowledge, threatened product liability claim relating to the Assets or
the Business. Seller is not subject to any decree, judgment, order, law or
regulation of any court or other governmental or quasi-governmental body which
would have a Material Adverse Effect.
1.12 Personnel. Seller has no union contracts or collective bargaining
---------
agreements with, or any other obligations to, employee organizations or groups
relating to the Business, nor is Seller currently engaged in any labor
negotiations, except in minor grievances not involving any employee organization
or group, nor, to the knowledge of Seller, is Seller the subject of any union
organization affecting its Business. There is no pending or, to Seller's
knowledge, threatened labor dispute, strike or work stoppage affecting the
Business. No employees of the Business are parties to any employment agreement
or other arrangement with Seller providing for such employees to receive any
bonus or other payment (in cash or otherwise) upon such employees' termination
of employment, other than ordinary accrued but unpaid salary, vacation pay
and/or severance pay under Seller's policies or law.
13
1.13 Brokers and Finders. Except as set forth herein, neither Seller
-------------------
nor any member, manager, officer, employee or agent of Seller has retained any
broker or finder in connection with the transactions contemplated by this
Agreement. Notwithstanding the foregoing, Seller has retained ▇▇▇▇▇▇ Capital,
LLC ("Broker") to represent Seller in connection with this Agreement and the
transactions contemplated thereby and Seller agrees, as between Seller and
Buyer, to pay and have full responsibility for Broker's fees and charges.
1.14 Contracts. Neither Seller nor, to Seller's knowledge, any other
---------
party to any Contract is, with or without the passage of time or the giving of
notice (or both), in default in the performance of, or not in compliance with,
any provisions of such Contract, other than any such default or non-compliance
which would not have a Material Adverse Effect. Seller has no knowledge of any
intent by any other party not to perform its obligations under any Contract.
1.15 Major Customers. Seller has not received any notice or other
---------------
communication (in writing or otherwise), and has not received any other
information, indicating that any recipient of any products or services under any
Contracts listed in Schedule 2.1(f) may terminate any Contract or cease dealing
---------------
with Seller, or may otherwise reduce the volume of business transacted by such
Contract party in any significant respect below historical levels.
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND CAIS .
------------------------------------------------
Buyer hereby represents and warrants to Seller that the following
statements (Sections 4.1 through 4.3) are true and correct as of the Closing
Date.
4.1 Organization and Authority. Buyer (i) is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
California; (ii) has all necessary corporate power to own and lease its
properties, to carry on its business as now being conducted and to enter into
and perform this Agreement; and (iii) is qualified to do business in all
jurisdictions in which the failure to so qualify would have a material adverse
effect on the business, results of operations or financial condition of Buyer
taken as a whole.
4.2 Authority Relating to this Agreement; No Violation of Other
-----------------------------------------------------------
Instruments.
-----------
4.2.1 The execution and delivery of this Agreement and the Buyer/CAIS
Closing Documents and the performance hereunder and thereunder by Buyer have
been duly authorized by all necessary corporate action on the part of Buyer and,
assuming execution of this Agreement by Seller, this Agreement and each of the
Buyer/CAIS Closing Documents will constitute a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with their
respective terms, subject as to enforcement only: (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally; and (ii) to
general principles of equity.
4.2.2 To Buyer's knowledge, neither the execution of this Agreement
or any of the Buyer/CAIS Closing Documents, nor the performance hereof or
thereof by Buyer will: (i) conflict with or result in the breach or violation of
the terms of any decree, judgment, order, law or regulation of any court or
other governmental body now in effect applicable to Buyer; (ii) conflict with,
or result in, with or without the passage of time or the giving of notice, any
14
breach of any of the terms, conditions and provisions of, or constitute a
default under, any indenture, mortgage, lease, agreement or other instrument to
which Buyer is a party or by which it is bound; or (iii) violate or conflict
with any provisions of Buyer's Articles of Incorporation, Bylaws, or similar
organizational instruments.
4.2.3 No consent from any third party and no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required to be made or obtained by Buyer in order to
permit the execution, delivery or performance of this Agreement by Buyer, or the
consummation by Buyer of its obligations contemplated by this Agreement, except
for such consents (i) where the failure to obtain the same would not have a
material adverse effect on the business, results of operations or financial
condition of Buyer taken as a whole, or (ii) which have not been received by
Buyer and may be necessary for Buyer to execute, deliver and perform this
Agreement and to consummate the transactions set forth herein, and all of which
shall be obtained by Buyer on or prior to the Closing Date.
4.3 Sufficient Funds. Buyer will have on the Closing Date sufficient
----------------
funds available to pay the Cash Consideration.
CAIS hereby represents and warrants to Seller that the following
statements (Sections 4.4 through 4.7) are true and correct as of the Closing
Date.
4.4 Organization and Authority. CAIS (i) is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware; (ii) has all necessary corporate power to own and lease its
properties, to carry on its business as now being conducted and to enter into
and perform this Agreement; and (iii) is qualified to do business in all
jurisdictions in which the failure to so qualify would have a material adverse
effect on the business, results of operations or financial condition of CAIS and
its Subsidiaries taken as a whole.
4.5 Authority Relating to this Agreement; No Violation of Other
-----------------------------------------------------------
Instruments.
-----------
4.5.1 The execution and delivery of this Agreement and the Buyer/CAIS
Closing Documents and the performance hereunder and thereunder by CAIS have been
duly authorized by all necessary corporate action on the part of CAIS and,
assuming execution of this Agreement by Sellers, this Agreement and each of the
Buyer/CAIS Closing Documents will constitute a legal, valid and binding
obligation of CAIS, enforceable against CAIS in accordance with their respective
terms, subject as to enforcement only: (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally; and (ii) to
general principles of equity.
4.5.2 To CAIS' knowledge, neither the execution of this Agreement or
any of the Buyer/CAIS Closing Documents, nor the performance hereof or thereof
by CAIS will: (i) conflict with or result in the breach or violation of the
terms of any decree, judgment, order, law or regulation of any court or other
governmental body now in effect applicable to CAIS; (ii) conflict with, or
result in, with or without the passage of time or the giving of notice, any
breach of any of the terms, conditions and provisions of, or constitute a
default under, any
15
material indenture, mortgage, lease, agreement or other instrument to which CAIS
is a party or by which it is bound; or (iii) violate or conflict with any
provisions of CAIS' Certificate of Incorporation or Bylaws.
4.5.3 No consent from any third party and no consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority is required to be made or obtained by CAIS in order to
permit the execution, delivery or performance of this Agreement by CAIS, or the
consummation by CAIS of its obligations contemplated by this Agreement, except
for such consents (i) where the failure to obtain the same would not have a
material adverse effect on the business, results of operations or financial
condition of CAIS and its Subsidiaries taken as a whole, or (ii) which have not
been received by CAIS and may be necessary for CAIS to execute, deliver and
perform this Agreement and to consummate the transactions set forth herein, and
all of which shall be obtained by CAIS on or prior to the Closing Date.
4.6 Reports and Financial Statements. CAIS has filed all reports
--------------------------------
required to be filed with the U.S. Securities Exchange Commission ("SEC")
pursuant to the Securities Act and the Securities Exchange Act of 1934, as
amended ("Exchange Act"), since its initial public offering on May 20, 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 the Company's initial public offering, are collectively referred
to as the "CAIS SEC Reports"). 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 any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statements ("Financial Statements") included in the SEC Filings are complete and
correct in all material respects and present fairly the financial position and
results of operations as of and for the dates indicated in conformance with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
except that the unaudited financial statements do not contain footnotes and are
subject to normal year-end audit adjustments. To the extent applicable, if any,
Buyer shall have made all required reports, disclosures or other filings as may
be required of it with respect to applicable state and federal laws. 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 Closing Date.
4.7 Capitalization. The authorized capital stock of CAIS on the
--------------
Closing Date will consist of: (i) 100,000,000 shares of CAIS Common Stock (as
defined herein); and (ii) 25,000,000 shares of preferred stock ("Preferred
Stock"), of which 125,000 shares are designated as Series C Preferred Stock
("Series C Stock") and which 9,620,393 shares are designated as Series D
Participating Preferred Stock ("Series D Stock"). As of the Closing Date,
22,498,161 shares of CAIS Common Stock, 125,000 shares of Series C Stock and
5,276,622 shares of Series D Stock are issued and outstanding. Prior to the
Closing, CAIS will have reserved sufficient shares of CAIS Common Stock for
issuance hereunder as the Consideration Shares. The Consideration Shares, when
issued in accordance with this Agreement, will be duly authorized, validly
issued, fully paid, and nonassessable, and will have the rights, preferences,
privileges,
16
and restrictions as set forth in CAIS' Certificate of Incorporation. The
Consideration Shares, when issued, will be free of any liens or encumbrances
created by CAIS; provided, however, that the Consideration Shares will be
subject to restrictions on transfer under federal and state securities laws and
as set forth herein, and ten percent (10%) of the Consideration Shares shall be
subject to the Escrow Agreement.
Each of Buyer and CAIS hereby jointly and severally represent and
warrant to Seller that the following statements (Sections 4.8 through 4.12) are
true and correct as of the Closing Date.
4.8 Brokers and Finders. Except as set forth herein, neither Buyer,
-------------------
CAIS nor any shareholder, director, officer, employee or agent of either Buyer
or CAIS has retained any broker or finder in connection with the transactions
contemplated by this Agreement.
4.9 Changes. Since December 31, 1999, there have not been any changes
-------
in the assets, liabilities, financial condition, or operations of either Buyer
or CAIS, which would be required under GAAP to be reflected in financial
statements, except changes in the ordinary course of business which have not
had, individually or in the aggregate, a Materially Adverse Effect.
4.10 Compliance. Neither CAIS nor Buyer is in violation in any
----------
material respect of any provision of: (i) such party's certificate or articles
of incorporation, bylaws or similar organizational document; (ii) any mortgage,
indenture, contract, agreement, or instrument to which such party is subject; or
(iii) any judgment, decree, or order issued against such party. To the best of
each party's knowledge, neither CAIS nor Buyer is in violation in any material
respect of any law, rule, or regulation applicable to such party. The execution,
delivery and performance of and compliance with this Agreement, and the issuance
of the Consideration Shares, have not resulted and will not result: (i) in any
violation of or constitute a default under any such provision; or (ii) in the
creation of any mortgage, pledge, lien, encumbrance, or charge upon any of the
properties or assets of either CAIS or Buyer, in either case, which would result
in a Material Adverse Effect. There is no such undisclosed provision which would
have, or be likely to have, a Material Adverse Effect on the business of either
CAIS or Buyer.
4.11 Litigation. There are no actions, suits, proceedings, or
----------
investigations pending against either CAIS or Buyer, or its properties, before
any court or governmental agency (nor, to the best of each party's knowledge, is
there any threat thereof nor any factual or legal basis therefor), which, if
decided or resolved against CAIS or Buyer would result in a Material Adverse
Effect with respect to CAIS or Buyer.
4.12 Governmental Consent. No consent, approval, or authorization of,
--------------------
or designation, declaration, or filing with, any governmental authority on the
part of either CAIS or Buyer is required in connection with the valid execution
and delivery of this Agreement, the Buyer/CAIS Closing Documents, and any other
documents executed by each party pursuant to this Agreement, or the offer, sale,
or issuance of the Consideration Shares, or the consummation of any other
transaction contemplated hereby, except for the filing and qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) of the offer and sale of the Consideration Shares
under applicable state and federal securities laws,
17
which filing and qualification, if required, will be accomplished in a timely
manner prior to or promptly after the Closing Date.
5. CONDITIONS TO THE OBLIGATIONS OF SELLER, BUYER AND CAIS .
-------------------------------------------------------
Except as otherwise specifically set forth herein or as contemplated by
this Agreement, all obligations of Seller, Buyer and CAIS under this Agreement
are subject to the fulfillment, satisfaction or waiver in writing, prior to or
at the Closing Date, of each of the following conditions:
5.1 Required Consents. Buyer and CAIS shall have received the consents
-----------------
required by Section 2.4.2.
5.2 No Orders. There shall not have been issued any preliminary or
---------
permanent court order enjoining or restraining the transactions contemplated by
this Agreement; provided that, in the event of any such preliminary order, the
Closing shall be delayed pending the lifting of such order, subject to Seller's,
Buyer's and CAIS' rights pursuant to Sections 10.3 and 10.4 below.
5.3 Delivery of Closing Documents. Seller shall have delivered to
-----------------------------
Buyer and CAIS the Seller's Closing Documents, and Buyer and CAIS shall have
delivered to Seller the Buyer/CAIS Closing Documents.
6. COVENANTS OF SELLER
-------------------
Seller and, to the extent obligations of Buyer and CAIS are set forth in
this Section 6, Buyer and CAIS, as applicable, covenant as follows:
6.1 Access to Properties and Records. Throughout the period between
--------------------------------
the Closing Date and the latter of: (i) the integration of the Business into the
Buyer after Closing to the reasonable satisfaction of Buyer or (ii) the receipt
by Buyer of all consents necessary for the transfer and assignment of all of the
Assets to Buyer (the "Full Integration Date"), Seller shall give to Buyer and
CAIS and their authorized representatives reasonable access, during reasonable
business hours, in such a manner as to not unduly disrupt the normal business
activities of Seller, to any and all documents, records, correspondence or other
relevant information relating to any unassigned Contracts which arise after the
Closing Date; provided that, notwithstanding anything herein to the contrary,
Seller shall not be required to disclose any documents or information subject to
any confidentiality obligation that would by the terms of such confidentiality
obligation prohibit such disclosure. Any unintentionally disclosed confidential
or privileged documents shall be kept confidential and returned immediately upon
request by Seller without further disclosure. Without limiting the foregoing,
Buyer and CAIS shall be permitted to interview during regular business hours all
employees of Seller reasonably determined by Buyer and CAIS to be important to
the Business. A representative of Seller shall have the right to be present at
all such interviews. Notwithstanding the foregoing, under no circumstances shall
the Full Integration Date be later than the earlier of (A) the termination by
CAIS or Buyer of the Lease, or (B) six (6) months after the Closing Date.
18
6.2 Conduct of the Business Prior to the Closing Date. Until the
-------------------------------------------------
Closing Date, and except as otherwise consented to or approved by an officer of
Buyer and CAIS in writing or as required by this Agreement:
(i) The Business shall be operated in the ordinary course consistent
with past practices and in a normal businesslike fashion (including, without
limitation, its normal accounts receivable practice), Seller shall use
commercially reasonable efforts to preserve and maintain its goodwill, including
relationships with employees, suppliers and customers. Seller shall maintain
quantities of Inventories in a manner consistent with prior practice. In
addition, Seller shall maintain records and books of account for the Business
consistent with past practice, and shall continue to carry all of the insurance
for the Business consistent with past practice.
(ii) Seller shall not, without the prior written approval of Buyer,
take any action which would cause any material change in any of the items and
matters covered by the representations and warranties set forth in Section 3,
including, without limitation:
(a) incurring or becoming subject to, or agreeing to incur or
become subject to, any obligation or liability (absolute or contingent)
primarily related to the Business, except current liabilities incurred, and
obligations under contracts entered into, in the ordinary course of business
consistent with past practices;
(b) mortgaging, pledging or assuming any Lien (other than any
Permitted Lien), or agreeing to do so, in respect to any of the Assets, except
in each case in the ordinary course of business consistent with past practices;
(c) waiving or compromising any material rights or any material
debt owed to Seller with respect to the Business;
(d) entering into any transactions primarily related to the
Business, other than in the ordinary course of business consistent with past
practices;
(e) increasing the rate of compensation payable or to become
payable to any employees working primarily in the Business, other than in the
ordinary course of the business consistent with past practices, or in connection
with the Closing hereunder;
(f) terminating or amending any material Contract, unless
terminated or amended in the ordinary course of business consistent with past
practices;
(g) introducing any new method of accounting with respect to
the Business or any of the Assets or liabilities of the Business (assumed or not
assumed) (including, without limitation, any change in depreciation or
amortization policies or rates);
(h) making any capital expenditures or entering into
commitments for capital expenditures for the Business exceeding, in the
aggregate, Ten Thousand Dollars ($10,000);
(i) hire or terminate employees engaged in and primarily
dedicated to the Business;
19
(j) alter its practice for creating or accounting for
Inventory; or
(k) commencing any litigation relating to the Business, except
those related to insured claims or arising in the ordinary course of business
consistent with past practices.
6.3 Acquisition, Merger or Similar Negotiations With Other Parties.
--------------------------------------------------------------
From the date hereof until the earlier of termination of this Agreement or the
Closing Date, none of Seller or any of its members, managers, officers,
employees, representatives, agents or affiliates shall directly or indirectly
encourage, solicit, initiate or conduct discussions or negotiations with,
provide any information to, or enter into any agreement with, any corporation,
partnership, limited liability company, person or other entity or group
concerning any merger, combination, consolidation, sale of assets (other than in
the ordinary course of business) or other similar transaction involving the
Business or the Assets, but excluding the Excluded Assets.
6.4 Non-Compete.
-----------
(i) Provided that nothing herein shall prevent Seller from owning, in
the aggregate, not more than two percent (2%) of the outstanding stock or other
equity interests in any company with shares or other equity interests registered
pursuant to Sections 12(b) or 12(g) of the Exchange Act, Seller agrees that, for
a period of two (2) years the Full Integration Date, Seller will not (1) make,
sell or service (whether directly, indirectly or through any Subsidiary or
affiliate), or (2) directly or indirectly engage or invest in, own, manage,
operate, finance, control, or participate in the ownership, management,
operation or control of, any business that makes, sells or services products and
services that compete with any products or services included in the Business.
(ii) Seller and Buyer each further agrees that, for a period of two
(2) years following the Full Integration Date, neither will, directly or
indirectly, either for itself, or any other person or entity, induce or attempt
to induce any employee of the other (including all employees of the Business) or
any entity under common control with the other to leave the employ of such other
(other than pursuant to advertisements of general circulation).
6.5 Confidentiality.
---------------
(a) Seller acknowledges and agrees that it shall treat and hold as
confidential any information concerning the business and affairs of Buyer, CAIS
or any of their respective affiliates that is not already generally available to
the public (the "Confidential Information"), refrain from using any of the
Confidential Information except in connection with compliance with this
Agreement, and deliver promptly to CAIS or destroy, at the request and option of
CAIS, all tangible embodiments (and all copies) of the Confidential Information
which are in Seller's possession or under its control. In the event that Seller
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, Seller
shall notify CAIS promptly of the request or requirement so that CAIS may seek
an appropriate protective order or waive compliance with the provisions of this
Section. If, in the absence of a protective order or the receipt of a waiver
hereunder, Seller is, on the advice
20
of counsel, compelled to disclose any Confidential Information to any tribunal,
Seller may disclose the Confidential Information to the tribunal; provided that
Seller shall use its reasonable best efforts to obtain, at the request of CAIS,
an order or other assurance that confidential treatment shall be accorded to
such portion of the Confidential Information required to be disclosed as CAIS
shall designate. All provisions relating to confidentiality in this Agreement
are in addition to and shall not supersede or in any way nullify the effect of
the Confidentiality Agreement (the "Confidentiality Agreement"), dated
________________, executed and delivered by Buyer and Seller in connection with
the preliminary discussions relating to this transaction. Notwithstanding the
foregoing, Seller shall not be in violation of the confidentiality obligations
of this Section for (i) attempting to secure any Approval, consents or other
third party agreements required or necessary under this Agreement, (ii) making
any disclosure, filing or other statement required or reasonably advisable under
applicable law, regulation or order, or (iii) publicizing the general fact that
Seller (or any of its members, employees, officers, directors, managers, agents
or affiliates) has engaged in the transactions contemplated by this Agreement,
provided that doing so does not publish or disclose any trade secrets or other
proprietary information belonging to CAIS or Buyer.
(b) Without in any way limiting the rights and remedies that CAIS,
Buyer, or any of their respective affiliates may have at law, in equity or
otherwise, Seller acknowledges and agrees that CAIS, Buyer or any of their
respective affiliates may proceed against Seller for indemnification of all or
any Losses suffered by CAIS, Buyer or any of their respective affiliates in
connection with the breach or other violation of Seller's confidentiality
obligations hereunder. Further, Seller acknowledges and agrees that the injury
CAIS, Buyer or any of their respective affiliates would suffer in the event of a
breach by Seller of the confidentiality obligations of this Section would be
irreparable injury, not adequately compensated by monetary damages alone. Thus,
in the event of a breach or threatened or intended breach of the confidentiality
obligations of this Section by Seller, CAIS, Buyer or any of their respective
affiliates shall be entitled to injunctions, both temporary and final, enjoining
and restraining such breach or threatened or intended breach, and Seller hereby
consents to the issuance thereof by any court of competent jurisdiction without
bond. CAIS, Buyer or any of their respective affiliates may further assert such
claims as any or all might have against Seller for actual, incidental,
consequential, and punitive damages resulting from the breach of this Section.
If CAIS, Buyer or any of their respective affiliates prevails in whole or in
part in any such action, Seller shall be liable to the prevailing party or
parties for all reasonable costs, expert witness fees, and actual reasonable
attorney fees the prevailing party or parties incur in connection with seeking
such legal or equitable relief.
6.6 Satisfaction of Conditions. From the date hereof until the earlier
--------------------------
of termination of this Agreement or the Full Integration Date, Seller shall in
good faith proceed to take or cause to be taken all actions within its power
necessary to satisfy all conditions to its obligations to close and consummate
the transactions contemplated by this Agreement, including, but not limited to,
assisting Buyer in obtaining all consents necessary to transfer and assign all
of the Assets to Buyer; provided that, Seller shall not be obligated to pay any
amount to any third party in connection with obtaining any such consents other
than at the sole expense of Buyer or CAIS.
21
7. COVENANTS OF BUYER AND/OR CAIS .
------------------------------
Buyer and/or CAIS, as applicable, and to the extent obligations of Seller
are set forth in this Section 7, Seller, covenants as follows:
7.1 Satisfaction of Conditions. Buyer and CAIS shall in good faith
--------------------------
proceed to take or cause to be taken all actions within its power necessary to
satisfy all conditions to its obligations to close and consummate the
transactions contemplated by this Agreement.
7.2 Warranty Obligations. Buyer shall perform the Warranty Obligations
--------------------
following the Closing Date in a timely and workmanlike manner in accordance with
the obligations of Seller with respect thereto that are to be assumed by Buyer
as of the Closing pursuant to Section 2.5.1(d) hereof.
7.3 Prohibition on Use of Names, Etc.
---------------------------------
7.3.1 Seller grants to Buyer a paid up, exclusive, nontransferable
license (i) to use Seller's logos and Seller's names, marks, trade names,
trademarks and service marks (collectively, "Seller Names") affixed to products
of the Business manufactured before the Closing or manufactured by Buyer after
the Closing and meeting the same quality standards met by Seller's products
prior to the Closing, in either case for a period of time not to exceed twelve
(12) months from the Closing Date; and (ii) for a period of time not to exceed
twelve (12) months from the Closing Date, to include in a less conspicuous
manner on products of Buyer substantially similar to those which the Seller
marketed through the Business prior to the Closing Date, and in product
literature therefor, the legend "formerly made by QuickATM." Notwithstanding the
foregoing, Seller shall retain all rights not granted herein, including, without
limitation, the right to use the Seller's Names in connection with the winding
up or dissolution of its affairs or such other purposes as are necessary or
proper and in accordance with this Agreement.
7.3.2 Buyer may use existing supplies of literature, packaging and
documentation of the Business which refer to or employ the Seller's logos and
Seller's Names until such supplies are expended, but in no event beyond twelve
(12) months following the Closing Date; provided that such supplies include a
statement that the Business is no longer affiliated with Seller and, with
respect to products referenced in such supplies, the legend "formerly made by
QuickATM."
7.4 Confidentiality.
---------------
(a) Buyer and CAIS, jointly and severally, acknowledge and
agree that they shall each treat and hold as confidential any information
concerning the business and affairs of the Business and Seller that is not
already generally available to the public (the "Confidential Information"),
refrain from using any of the Confidential Information except in connection with
compliance with this Agreement, and deliver promptly to Seller or destroy, at
the request and option of the Seller, all tangible embodiments (and all copies)
of the Confidential Information which are in its possession or under its
control. In the event that either Buyer or CAIS is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose
22
any Confidential Information, such party shall notify Seller promptly of the
request or requirement so that Seller may seek an appropriate protective order
or waive compliance with the provisions of this Section. If, in the absence of a
protective order or the receipt of a waiver hereunder, Buyer or CAIS is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal, such party may disclose the Confidential Information to the tribunal;
provided that such party shall use its reasonable best efforts to obtain, at the
request of Seller, an order or other assurance that confidential treatment shall
be accorded to such portion of the Confidential Information required to be
disclosed as Seller shall designate. All provisions relating to confidentiality
in this Agreement are in addition to and shall not supersede or in any way
nullify the effect of the Confidentiality Agreement (the "Confidentiality
Agreement"), dated ________________, executed and delivered by Buyer and Seller
in connection with the preliminary discussions relating to this transaction.
(b) Without in any way limiting the rights and remedies that
Seller may have at law, in equity or otherwise, Seller may proceed against Buyer
or CAIS or both for indemnification of all or any Losses suffered by Seller in
connection with the breach or other violation of Buyer and/or CAIS'
confidentiality obligations hereunder. Further, Buyer and CAIS each acknowledges
and agrees that the injury Seller would suffer in the event of a breach by
either Buyer or CAIS of the confidentiality obligations of this Section would be
irreparable injury, not adequately compensated by monetary damages alone. Thus,
in the event of a breach or threatened or intended breach of the confidentiality
obligations of this Section by either Buyer or CAIS, Seller shall be entitled to
injunctions, both temporary and final, enjoining and restraining such breach or
threatened or intended breach, and Buyer and CAIS each hereby consents to the
issuance thereof by any court of competent jurisdiction without bond. Seller may
further assert such claims as it might have against Buyer and CAIS for actual,
incidental, consequential, and punitive damages resulting from the breach of
this Section. If Seller prevails in whole or in part in any such action, Buyer
and CAIS shall be jointly and severally liable to Seller for all reasonable
costs, expert witness fees, and actual reasonable attorney fees Seller incurs in
connection with seeking such legal or equitable relief.
7.5 Termination of Lease Guaranty. Following the Closing, Buyer shall
----------------------------- ---------
apply its best efforts to promptly assume the Lease and remove ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ as guarantor of Buyer's obligations under the Lease.
8. EMPLOYMENT MATTERS
------------------
8.1 Employees. Prior to the Closing, Buyer shall offer employment to
all of the employees primarily dedicated to the Business except for Seller's Key
Officer, effective at the Closing, at the salary levels no less than those
currently in place with Seller as of the Closing Date, and will provide employee
benefits to such employees in accordance with Buyer's current policies and
practices, except that Buyer shall (i) grant prior service credit under Buyer's
employee benefit plans, programs and policies to each such employee based on the
service date used by Seller in determining his or her service credit under
Seller's employee benefit plans, programs and policies, (ii) waive any
preexisting condition limitations under Buyer's employee benefit plans, programs
and policies which otherwise would be applicable to such employees, and (iii)
offer such employees the right to transfer accrued vacation and sick leave.
Notwithstanding the foregoing, Buyer shall have no liability for accrued wages
(including
23
salaries, bonuses and commissions), severance pay, sick leave or other benefits
under or with respect to any of Seller's Employee Plans (as defined herein) of
any type or nature on account of Seller's employment or termination of such
employees prior to the Closing Date, except under clause (iii) above.
8.2 Employee Plans. Buyer is not assuming any of the Employee Plans of
--------------
Seller. Without limiting the foregoing, Buyer shall have no liability
whatsoever to employees of Seller with respect to accrued or future benefits
under any such Employee Plans, whether or not any of such employees accept
employment by or become employees of Buyer. For the purposes of only this
Section 8.2, the term "Seller" also includes any controlled group (within the
meaning of Section 414(b) of the Internal Revenue Code of 1986, as amended
("IRC")) of which Seller or any of its Subsidiaries is a member, all trades or
businesses under common control (within the meaning of IRC Section 414(c)) of
which Seller is a member and all affiliated service groups (within the meaning
of IRC Section 414(m)) of which Seller is a member. The term "Employee Plan"
shall mean all present and prior (including terminated and transferred) plans,
programs, agreements, arrangements and methods of contributions or compensation
(including all amendments to and components of the same, such as a trust with
respect to a plan) providing any remuneration or benefits, other than current
cash compensation, to any current or former employee of Seller or to any other
person who provides services to Seller, whether or not such plan or plans,
programs, agreements, arrangements and methods of contribution or compensation
are subject to Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and whether or not such plan or plans, programs, agreements,
arrangements and methods of contribution or compensation are qualified under the
IRC, including, without limitation, pension, retirement, profit sharing,
percentage compensation, stock purchase, stock option, bonus and non-qualified
deferred compensation plans, disability plans, medical plans, dental plans,
workers compensation, health insurance, life insurance or other death benefits,
incentive, severance plans, vacation benefits and fringe benefits. The term
"Employee Plan" also includes any employee plan that is a multi-employer plan as
defined in Section 3(37) of ERISA. Notwithstanding the foregoing, the term
"Employee Plan" shall not include (and Buyer shall assume at the Closing) any
accrued vacation or sick leave transferred to Buyer pursuant to Section 8.1
above.
9. INDEMNITY.
---------
9.1 Survival of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller in Section 3 and of Buyer and CAIS in Section 4 above
shall survive for a period of one (1) year from the Closing Date or the
expiration or termination of the Escrow Agreement, whichever occurs first;
provided, however, that the representations contained in Sections 3.1, 3.2, 4.1,
4.2, 4.4 and 4.5 shall survive until any liability thereunder is barred by all
applicable statutes of limitations, including waivers and extensions thereof. If
written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by a party in whose favor such
representations and warranties have been made to the party that made such
representations and warranties, then the relevant representations and warranties
shall survive as to such claim until such claim has been finally resolved.
9.2 Seller's Indemnity. Seller shall indemnify, defend, protect and
------------------
hold harmless each of Buyer and CAIS (and their respective Subsidiaries,
officers, directors, employees and agents) from and against any and all losses,
costs, expenses, liabilities,
24
obligations, claims, demands, causes of action, suits, settlements and judgments
of every nature, including the costs and expenses associated therewith and
actual and reasonable attorneys', consultants' and witness fees incurred in
connection therewith ("Buyer's Damages"), which arise out of or relate to: (i)
the material breach of any representation or warranty made by Seller pursuant to
Section 3 of this Agreement; (ii) the material non-performance, partial or
total, of any covenant made by Seller pursuant to this Agreement or the Seller's
Closing Documents; or (iii) any Retained Liability; or (iv) Seller's hiring and
employment practices with respect to employment with Seller's of, or termination
with Seller of, all employees of the Business (except solely as provided in
Section 8.1 above).
9.3 Buyer's Indemnity. Buyer shall indemnify, defend, protect and hold
-----------------
harmless Seller (and its officers, directors, managers, members, employees and
agents) from and against any and all losses, costs, expenses, liabilities,
obligations, claims, demands, causes of action, suits, settlements and judgments
of every nature, including the costs and expenses associated therewith and
reasonable attorneys', consultants' and witness fees incurred in connection
therewith ("Seller's Damages"; and when used together with or in the alternative
to Buyer's Damages, "Damages"), which arise out of: (i) the material breach by
Buyer of any representation or warranty made by Buyer pursuant to Sections 4.1
through 4.3 and Sections 4.8 through 4.12 of this Agreement; (ii) the material
non-performance, partial or total, of any covenant made by Buyer pursuant to
this Agreement or the Buyer/CAIS Closing Documents; (iii) Buyer's hiring and
employment practices with respect to employment with Buyer of, or termination of
employment with Buyer of, the employees to be offered employment or hired by
Buyer for the Business; (iv) any Assumed Liability; and (v) any Damages incurred
by Seller or ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ under that certain personal guarantee made in
connection with the Lease.
9.4 CAIS' Indemnity. CAIS shall indemnify, defend, protect and hold
---------------
harmless Seller (and its officers, directors, managers, employees and agents)
from and against any and all Seller's Damages which arise out of: (i) the
material breach by CAIS of any representation or warranty made by CAIS pursuant
to Sections 4.4 through 4.12 of this Agreement; or (ii) the material non-
performance, partial or total, of any covenant made by CAIS pursuant to this
Agreement or the CAIS/Buyer Closing Documents.
1.5 Procedure for Indemnification -- Third Party Claims. Promptly
after receipt by an indemnified party under Section 9.2, 9.3 or 9.4 of written
notice of a claim or the commencement of any proceeding against it, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such Section, give written notice to the indemnifying
party of the commencement thereof, but the failure so to notify the indemnifying
party shall not relieve it of any liability that it may have to any indemnified
party, except to the extent the indemnifying party demonstrates that the defense
of such action is or has been materially prejudiced thereby. In case any such
proceeding shall be brought against an indemnified party and it shall give
notice to the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish (unless the indemnifying party is also a party to such proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate) to assume the defense thereof with counsel which is reasonably
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any fees
25
of such counsel or any other expenses with respect to the defense of such
proceeding, in each case, subsequently incurred by such indemnified party in
connection with the defense thereof. If an indemnifying party assumes the
defense of such proceeding, (a) no compromise or settlement thereof may be
effected by the indemnifying party without the indemnified party's reasonable
consent unless (i) there is no finding or admission of any violation of law or
any violation of the rights of any person and no effect on any other claims that
may be made against the indemnified party, and (ii) the sole relief provided is
monetary damages that are paid in full by the indemnifying party; and (b) the
indemnifying party shall have no liability with respect to any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld or delayed). If notice is given to an indemnifying party of the
commencement of any proceeding and it does not, within fifteen (15) business
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party, the indemnifying party shall
be bound by any determination made in such action or any compromise or
settlement thereof effected by the indemnified party. Notwithstanding the
foregoing, if an indemnified party determines in good faith that there is a
reasonable probability that a proceeding may adversely affect it or its
affiliates, other than as a result of monetary damages, such indemnified party
may, by notice to the indemnifying party, assume the exclusive right to defend,
compromise or settle such proceeding, but the indemnifying party shall not be
bound by any determination of a proceeding so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld or delayed).
1.6 Bulk Sales Law. Buyer and CAIS each waive any claim they may have
--------------
against Seller or any of Seller's affiliates, members, managers, officers,
directors, employees or agents with respect to, or arising out of, Seller's non-
compliance with any provision of any bulk sales or bulk transfer law in
connection with this Agreement.
1.7 Limitations on Indemnification.
------------------------------
1.7.1 Any claim made against an indemnifying party for
indemnification pursuant to Section 9.2, Section 9.3 or Section 9.4, as the case
may be, shall not qualify for indemnification (either individually, or when
aggregated with other claims as set forth below) unless the Damages for such
claim exceeds One Thousand Dollars ($1,000). Any qualifying claim of greater
than One Thousand Dollars ($1,000) shall be referred to as a "Material Claim."
No claims which are not Material Claims shall give rise to any indemnification
obligation under this Agreement. Further, no Material Claim or Material Claims
may be made against an indemnifying party for indemnification pursuant to
Section 9.2, Section 9.3, or Section 9.4, as the case may be, unless the
aggregate Damages of the indemnified parties with respect to such Material
Claims shall exceed an aggregate amount equal to Twenty-Five Thousand Dollars
($25,000), in which case the indemnifying party shall be obligated to the
indemnified party for the full amount of the Damages, including, without
limitation, those Damages up to said $25,000 amount. Under no circumstances
shall Seller's liability under Section 9.2 exceed the Escrow Amount, and in no
circumstances shall Seller's liability thereunder be satisfied by any assets or
funds other than those contained in the Escrow Agreement. Upon the expiration or
termination of the Escrow Agreement, Seller's indemnification obligations under
this Agreement shall immediately cease and terminate.
26
1.7.2 The liability of any indemnifying party with respect to any
Damages shall be determined on a basis that is net of the amount of any such
Damages covered by insurance (less any deductibles).
Notwithstanding any provision in this Agreement, nothing shall limit the
rights and remedies of Buyer and CAIS, including but not limited to
indemnification in excess of the foregoing limitations, for any losses,
liabilities or claims related to (i) fraud; (ii) intentional misrepresentation;
or (iii) criminal conduct of Seller or any of its current or former officers,
directors, members or agents.
10. TERMINATION.
-----------
10.1 Mutual Agreement. This Agreement may be terminated at any time
----------------
prior to the Closing Date by the written agreement of Seller, CAIS and Buyer.
10.2 Permanent Injunction. This Agreement shall be terminated upon the
--------------------
entry of a permanent order by a governmental entity having jurisdiction over
Buyer, CAIS, Seller or any of their respective Subsidiaries, affiliates or
assets, enjoining or restraining the transactions contemplated by this
Agreement.
10.3 Termination by Buyer or CAIS. This Agreement may be terminated by
----------------------------
Buyer or CAIS if, on the Closing Date, the conditions set forth in Section 5 of
this Agreement shall not have been met by Seller or waived by Buyer and CAIS,
provided that, if on such date a preliminary injunction has been entered
preventing the Closing, such date shall automatically be extended until (i) such
injunction shall have been lifted, in which case the Closing shall thereupon
take place as soon as practicably possible, assuming that all other conditions
to Closing are satisfied, or (ii) a permanent injunction shall have been
entered, in which case this Agreement shall be terminated as provided in Section
10.2 above.
10.4 Termination by Seller. This Agreement may be terminated by Seller
if, on the Closing Date, the conditions set forth in Section 5 of this Agreement
shall not have been met by Buyer or CAIS, as applicable, or waived by Seller,
provided that, if on such date a preliminary injunction has been entered
preventing the Closing, such date shall automatically be extended until (i) such
injunction shall have been lifted, in which case the Closing shall thereupon
take place as soon as practicably possible, assuming that all other conditions
to Closing are satisfied, or (ii) a permanent injunction shall have been
entered, in which case this Agreement shall be terminated as provided in Section
10.2 above.
10.5 Confidentiality and Effect of Termination. In the event that this
-----------------------------------------
Agreement is terminated, each of the parties shall return (without retaining
copies) all documents and papers containing Confidential Information of the
other party (including, without limitation, technical information, customer
lists, financial data and any similar information developed by another party
pursuant to this Agreement or in contemplation of the transactions contemplated
by this Agreement). The confidentiality obligations set forth in Sections 6.5
and 7.4 of this Agreement shall survive termination of this Agreement for any
reason for a period of three (3) years after the date of such termination.
27
11. MISCELLANEOUS.
-------------
11.1 Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the successors and permitted assigns of the parties, except that no
party hereto may assign its rights or obligations hereunder without the prior
written consent of the other parties. Any assignment in contravention of this
Section 11.1 shall be null and void.
11.2 Allocation of Purchase Price. No later than sixty (60) days after
----------------------------
the Closing Date, Buyer and Seller shall mutually agree upon the allocation of
the Purchase Price among the various items included in the Assets and the
Business being transferred by Seller to Buyer. Buyer and Seller have agreed that
the allocation to be provided hereby shall be determined by the appraisal report
of an independent, mutually agreed upon appraiser, if the parties cannot agree
on the allocation after good faith negotiations, and that Buyer shall solely
bear all of the costs of such appraisal. Buyer and Seller shall file all Tax
returns and reports in a manner consistent with the allocation provided for in
this Section 11.2, and cooperate with each other in connection therewith.
11.3 Prorations. All state and local real and personal property Taxes
----------
relating to the Assets which apply to periods commencing prior to and ending on
or after the Closing Date shall be prorated as between Seller and Buyer as of
the Closing Date. Seller shall receive a credit, at the Closing for the security
deposit, if any, held by the landlord under the Lease. Seller shall also receive
a credit for any fees paid in advance by Seller under the Contracts, which fees
represent prepayments for periods after the Closing Date. State and local real
and personal property Taxes relating to the Assets for the Tax period in which
the Closing occurs shall be prorated between Buyer and Seller on the following
basis: Seller shall be responsible for the payment of all such Taxes for the
period up to the Closing Date; and Buyer shall be responsible for payment of all
such Taxes for the period from and after the Closing Date. All such Taxes
assessed on an annual basis shall be prorated on the assumption that an equal
amount of Tax applies to each day of the year, regardless of how installment
payments are billed or made. Any supplemental property Taxes or assessments
which arise out of a revaluation of an Asset, which revaluation would not have
occurred except for the change in ownership of the Asset, shall be borne by
Buyer. Any payments of Taxes due from one party to another pursuant to this
Section 11.3 shall be paid at the Closing Date. If such Taxes and assessments
are not available as of the Closing Date, for purposes of apportionment between
Buyer and Seller and payment pursuant to this Section 11.3, the amount thereof
shall be estimated on the basis of the prior year's Taxes and assessments, and
any incremental payment shall be adjusted after receipt of the final Tax
statements, but in any event within fifteen (15) days after such statements are
provided by one party to another. Buyer shall not be responsible for any other
Tax (including but not limited to any business, occupation, unemployment
compensation, workers' compensation, withholding or similar Tax) attributable to
the operations of the Business for any period prior to the Closing. Seller shall
not be responsible for any other Tax (including but not limited to any business,
occupation, unemployment compensation, workers' compensation, withholding or
similar Tax) attributable to the operations of the Business for any period from
and after the Closing. The total estimated prorations, as reasonably determined
by Seller, shall be paid by Buyer at the Closing, with final complete prorations
to be determined as soon as practicable after the Closing.
28
11.4 Publicity. No party shall issue a press release or otherwise
---------
publicize the transactions contemplated by this Agreement or otherwise disclose
the nature or contents of this Agreement prior to the Full Integration Date,
except as otherwise required by applicable law (and any such press release shall
be mutually acceptable to Buyer, CAIS and Seller), regulation, stock exchange or
Nasdaq requirement or by the mutual consent of each of Buyer, CAIS and Seller.
11.5 Transfer Taxes. Any Taxes arising out of or incurred in
--------------
connection with the transactions contemplated by this Agreement shall be paid by
Buyer.
11.6 Expenses. Except as otherwise expressly provided herein, each
--------
party will pay its own costs and expenses, including legal and accounting
expenses, related to the transactions provided for herein, irrespective of when
incurred.
11.7 Further Assurances. It is the intention of the parties hereto
------------------
that all assets, rights, and tangible and intangible property constituting the
Assets be sold to Buyer. Accordingly, each party will from time to time prior to
or subsequent to the Closing Date, at another party's reasonable request and
without further consideration, execute and deliver such other instruments of
conveyance, assignment and transfer and take such other actions as the other
party may reasonably request in order to cause all of the Assets to be
transferred and assigned to Buyer and otherwise to more effectively consummate
the transactions contemplated hereby; provided that, in connection with the
foregoing, Seller shall not be obligated to pay any amount to any third party
other than at the sole expense of Buyer or CAIS.
11.8 Dispute Resolution. Any dispute, controversy or claim between or
------------------
among the parties relating to, or arising out of or in connection with, this
Agreement (or any subsequent agreements or amendments thereto), including as to
its existence, enforceability, validity, interpretation, performance, breach or
damages, including claims in tort, whether arising before or after the
termination of this Agreement, shall be settled only by binding arbitration
pursuant to the Commercial Arbitration Rules, as then amended and in effect, of
the American Arbitration Association (the "Rules"), subject to the following:
11.8.1 The arbitration shall take place in Los Angeles, California,
or at some other location mutually agreed upon in writing by the parties.
11.8.2 There shall be three arbitrators, who shall be selected under
the normal procedures prescribed in the Rules, except that one such arbitrator
shall be a certified public accountant and one (1) such arbitrator (who shall
chair the arbitration panel) shall be a member of the American Board of Trial
Advocates or the American College of Trial Lawyers.
11.8.3 Subject to legal privileges, each party shall be entitled to
discovery in accordance with the Federal Rules of Civil Procedure.
11.8.4 At the arbitration hearing, each party may make written and
oral presentations to the arbitrator, present testimony and written evidence and
examine witnesses.
11.8.5 The arbitrators' decision shall be in writing, shall be
binding and final and may be entered and enforced in any court of competent
jurisdiction.
29
11.8.6 No party shall be eligible to receive, and the arbitrators
shall not have the authority to award, indirect, exemplary or punitive damages
or any other damages not directly related to compensating the damaged party for
damages directly incurred.
11.8.7 Seller shall pay one-half of the fees and expenses of the
arbitrators and the American Arbitration Association and Buyer and/or CAIS shall
pay the other half of any such fees and expenses.
11.8.8 The arbitrators shall not have the power to amend this
Agreement.
11.8.9 Notwithstanding the provisions of this Section 11.8, the
parties shall not be obligated to commence arbitration when seeking injunctive
relief for any matter for which injunctive relief is specifically authorized in
this Agreement, but rather such party may petition a court of competent
jurisdiction for such injunctive relief.
11.9 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if served personally or by facsimile, or five (5) days after the
date of mailing if mailed, by first class mail, registered or certified, postage
prepaid. Notices shall be addressed as follows:
To Seller at: QuickATM, LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: _____________________
with a copy to: Irell & ▇▇▇▇▇▇▇ LLP
1800 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To Buyer or CAIS at: CAIS Internet, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: __________________________
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
30
with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as a party has designated by notice in writing to the
other parties in the manner provided by this Section.
11.10 Entire Agreement and Modification. This Agreement constitutes and
---------------------------------
contains the entire agreement of the parties and supersedes any and all prior
negotiations, correspondence, understandings and agreements (other than the
Confidentiality Agreement) between the parties respecting the subject matter
hereof. This Agreement may only be amended by written instrument signed by the
parties.
11.11 No Other Remedies. Except with respect to Damages for (a) fraud,
-----------------
(b) intentional misrepresentation or (c) criminal matters, in respect of which
the parties hereto shall be entitled to any and all remedies available
hereunder, under law and/or otherwise, any and all remedies herein expressly
conferred upon a party hereby are deemed exclusive of any other remedy conferred
hereby or by law or equity on such party. In particular, the remedies provided
by Section 9 for Damages shall be exclusive of any other rights or remedies
available to a party against another party, either at law or in equity, in
relation to any breach, default or nonperformance of any representation,
warranty, covenant, agreement or undertaking made or entered into by such other
party pursuant to this Agreement.
11.12 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed in the State of California by California
residents, but without regard to California's conflict of laws principles.
11.13 Brokers. Each party hereby represents and warrants to the others
-------
that, except as disclosed herein, neither it nor its representatives have taken,
nor will they take any action that would cause the other parties hereto to have
any obligation or liability to any person for the payment of any finders' fees,
brokerage fees, investment banking fees, consulting fees, agents' commissions,
or like payments in connection with the transactions contemplated hereby. Each
party shall indemnify and hold harmless the others from any claim that is
asserted by any person for such fees, commissions or like payments with respect
to this Agreement arising from any act, representation or promise of the
indemnifying party or its representative.
11.14 Severability. If any provision of this Agreement is held to be
------------
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent possible.
In any event, all other provisions of this Agreement shall be deemed valid and
enforceable to the fullest extent possible.
11.15 Headings. The headings appearing at the beginning of several
--------
sections contained herein have been inserted for the convenience of the parties
and shall not be used to determine the construction or interpretation of this
Agreement.
31
11.16 Counterparts. This Agreement may be executed by facsimile and in
------------
counterparts, each of which shall be deemed an original, but both of which when
taken together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above set forth.
CAIS SOFTWARE SOLUTIONS, INC.
By: /s/ W. ▇▇▇▇▇▇▇ ▇▇▇
---------------------------
Name:
Title:
CAIS INTERNET, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
---------------------------
Name:
Title:
QUICKATM, LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Name:
Title:
32
TABLE OF CONTENTS
Page
1. DEFINITIONS......................................................................................... 1
2. SALE AND PURCHASE OF ASSETS......................................................................... 4
2.1 Sale of Assets................................................................................ 4
2.2 Assets Not Purchased.......................................................................... 5
2.3 Purchase Price................................................................................ 6
2.4 No Assignment in Certain Circumstances........................................................ 8
2.5 Assumed Liabilities........................................................................... 8
2.6 Closing....................................................................................... 9
2.7 Consent of Third Parties...................................................................... 10
3. REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 10
3.1 Organization and Authority.................................................................... 11
3.2 Authority Relating to this Agreement and Other Agreements; No Violation of Other Instruments.. 11
3.3 Ownership and Delivery of Assets.............................................................. 12
3.4 Compliance with Law........................................................................... 12
3.5 Absence of Certain Changes or Events.......................................................... 12
3.6 Inventory..................................................................................... 12
3.7 Personal Property............................................................................. 13
3.8 Lease 13
3.9 Intellectual Property......................................................................... 13
3.10 Product Warranties and Returns................................................................ 13
3.11 Litigation.................................................................................... 13
3.12 Personnel..................................................................................... 13
3.13 Brokers and Finders........................................................................... 14
3.14 Contracts..................................................................................... 14
3.15 Major Customers............................................................................... 14
4. REPRESENTATIONS AND WARRANTIES OF BUYER AND CAIS.................................................... 14
4.1 Organization and Authority.................................................................... 14
4.2 Authority Relating to this Agreement; No Violation of Other Instruments....................... 14
4.3 Sufficient Funds.............................................................................. 15
4.4 Organization and Authority.................................................................... 15
4.5 Authority Relating to this Agreement; No Violation of Other Instruments....................... 15
4.6 Reports and Financial Statements.............................................................. 16
4.8 Capitalization................................................................................ 17
4.7 Brokers and Finders........................................................................... 17
4.9 Changes....................................................................................... 17
4.10 Compliance.................................................................................... 17
i
4.11 Litigation.................................................................................... 18
4.12 Governmental Consent.......................................................................... 18
5. CONDITIONS TO THE OBLIGATIONS OF SELLER, BUYER AND CAIS............................................. 18
5.1 Required Consents............................................................................. 18
5.2 No Orders..................................................................................... 18
5.3 Delivery of Closing Documents................................................................. 18
6. COVENANTS OF SELLER................................................................................. 18
6.1 Access to Properties and Records.............................................................. 18
6.2 Conduct of the Business Prior to the Closing Date............................................. 19
6.3. Acquisition, Merger or Similar Negotiations With Other Parties................................ 20
6.4 Non-Compete................................................................................... 20
6.5 Confidentiality............................................................................... 21
6.6 Satisfaction of Conditions.................................................................... 22
7. COVENANTS OF BUYER AND/OR CAIS...................................................................... 22
7.1 Satisfaction of Conditions.................................................................... 22
7.2 Warranty Obligations.......................................................................... 22
7.3 Prohibition on Use of Names, Etc.............................................................. 22
7.4 Confidentiality............................................................................... 23
7.5 Termination of Lease Guaranty................................................................. 24
8. EMPLOYMENT MATTERS.................................................................................. 24
8.1 Employees..................................................................................... 24
8.2 Employee Plans................................................................................ 24
9. INDEMNITY........................................................................................... 25
9.1 Survival of Representations and Warranties.................................................... 25
9.2 Sellers' Indemnity............................................................................ 25
9.3 Buyer's Indemnity............................................................................. 25
9.4 CAIS' Indemnity............................................................................... 26
9.5 Procedure for Indemnification -- Third Party Claims........................................... 26
9.6 Bulk Sales Law................................................................................ 26
9.7 Limitations on Indemnification................................................................ 27
10. TERMINATION......................................................................................... 27
10.1 Mutual Agreement.............................................................................. 27
10.2 Permanent Injunction.......................................................................... 27
10.3 Termination by Buyer or CAIS.................................................................. 27
10.4 Termination by Seller......................................................................... 28
10.5 Confidentiality and Effect of Termination..................................................... 28
11. MISCELLANEOUS....................................................................................... 28
11.1 Assignment.................................................................................... 28
11.2 Allocation of Purchase Price.................................................................. 28
11.2 [Intentionally Omitted]....................................................................... 28
ii
11.3 Prorations.................................................................................... 28
11.4 Publicity..................................................................................... 29
11.5 Transfer Taxes................................................................................ 29
11.6 Expenses...................................................................................... 29
11.7 Further Assurances............................................................................ 29
11.8 Dispute Resolution............................................................................ 30
11.9 Notices....................................................................................... 30
11.10 Entire Agreement and Modification............................................................. 31
11.11 No Other Remedies............................................................................. 31
12.12 Governing Law................................................................................. 32
11.13 Brokers....................................................................................... 32
11.14 Severability.................................................................................. 32
11.15 Headings...................................................................................... 32
11.16 Counterparts.................................................................................. 32
iii
TABLE OF EXHIBITS
Exhibit A: Schedules
Exhibit 2.4.2: Consent of ▇▇▇▇ ▇▇▇▇▇
Exhibit 2.6.2(a): ▇▇▇▇ of Sale, Assignment and Assumption Agreement
Exhibit 2.6.2(b): Secretary's Certificates of Seller
Exhibit 2.6.2(c): Compliance Certificates of Seller
Exhibit 2.6.2(d): Registration Rights Agreement
Exhibit 2.6.2(e): Escrow Agreement
Exhibit 2.6.2(f): Consulting Agreement with ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit 2.6.3(b): Secretary's Certificates of Buyer and CAIS
Exhibit 2.6.3(c): Compliance Certificates of Buyer and CAIS
Exhibit 8.1 List of Seller's Employees to be Hired by Buyer After Closing
1