SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 29, 1998
World Access, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State 0-19998 65-0044209
or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
945 E. Paces Ferry Road,
Suite 2240, Atlanta, Georgia 30326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 231-2025
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 29, 1998, World Access, Inc. ("World Access"), a Delaware
corporation, consummated the merger (the "Merger") of Advanced TechCom, Inc.
("ATI"), a Delaware corporation, with and into Cellular Infrastructure Supply,
Inc., a Delaware corporation and a wholly-owned subsidiary of World Access
("CIS"), pursuant to that certain Agreement and Plan of Merger dated as of
December 24, 1997 by and between World Access, ATI, CIS and Ernest H. Lin (the
"Merger Agreement").
Pursuant to the Merger Agreement, (i) the issued and outstanding shares
of ATI's Series A Convertible Preferred Stock, $.10 par value per share (the
"Preferred Stock"), were converted into the right to receive (the "Merger Stock
Consideration") an aggregate of 418,100 restricted shares of the common stock,
$.01 par value per share, of World Access (the "World Access Common Stock");
(ii) holders of the issued and outstanding shares of common stock, $.10 par
value per share, of ATI (the "ATI Common Stock") were given a choice to (a)
convert their ATI Common Stock into Preferred Stock on a one-for-one basis and
thereupon receive the Merger Stock Consideration to the same extent as holders
of the Preferred Stock or (b) receive $.01 in cash for each share of ATI Common
Stock not converted (the "Common Stock Consideration"); and (iii), except for
Dr. Lin, who will receive cash and shares of World Access Common Stock in
exchange for his options to purchase ATI Common Stock ("ATI Options"), each
holder of ATI Options that were vested as of December 31, 1997 will be paid in
cash the difference, if any, between $1.00 and the exercise price of such ATI
Option multiplied by the number of shares of ATI Common Stock subject to such
ATI Option (the "Option Consideration," and together with the Merger Stock
Consideration and the Common Stock Consideration, the "Merger Consideration").
In connection with the Merger, Dr. Lin entered into an employment agreement with
CIS, a copy of which is filed herewith as Exhibit 10.1.
In addition, the persons entitled to receive the Merger Stock
Consideration will be entitled to receive up to an aggregate of 209,050
additional restricted shares of World Access Common Stock payable in
installments upon the achievement by the ATI Division of CIS of certain
profitability levels during 1998 and 1999(the "Contingent Stock Consideration").
Pursuant to the Merger Agreement and that certain Escrow Agreement (the "Escrow
Agreement") entered into at the closing of the Merger, the Contingent Stock
Consideration will be issued and held in escrow pending its release.
The description contained herein of the Merger Agreement and the Escrow
Agreement is qualified in its entirety by reference to the Merger Agreement and
the Escrow Agreement, which are filed herewith as Exhibits 2.1 and 10.2.
The Merger Consideration and the Contingent Stock Consideration were
determined as a result of negotiations between World Access and ATI and the
Merger was approved by the boards of directors of World Access, CIS and ATI and
the stockholders of ATI. Prior to the Merger, neither World Access nor any of
its affiliates, directors or officers, nor any associate of any such director or
officer, had any relationship with ATI or Dr. Lin, except that World Access
purchased approximately $150,000 of equipment from ATI in 1997 in the ordinary
course of business.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired. Included in this Report
are the consolidated financial statements of ATI for the years ended December
31, 1996 and 1995. Such financial statements have been audited by the
independent accounting firm of Deloitte & Touche, LLP, whose opinion thereon is
also included herein.
<PAGE>
Advanced TechCom,Inc. and Subsidiary
Consolidated Financial Statements for the
Years Ended December 31, 1996 and 1995
and Independent Auditors' Report
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Advanced TechCom, Inc.
Wilmington, Massachusetts
We have audited the accompanying consolidated balance sheets of Advanced
TechCom, Inc. and Subsidiary (the "Company") as of December 31, 1996 and 1995,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Advanced TechCom, Inc. and
Subsidiary as of December 31, 1996 and 1995, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, subsequent to
year end the Company entered into an agreement to subcontract certain of its
manufacturing, raised additional equity, and received a commitment for
additional financing.
/s/ Deloitte & Touche LLP
February 26, 1997
(October 15, 1997 as to Notes 2 and 13,
and the last paragraph of Note 5)
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
------------ ------------
CURRENT ASSETS
Cash $ 306,443 $ 271,458
Accounts Receivable 3,588,097 2,777,070
Inventory 5,843,716 7,203,140
Prepaid expenses and other 147,605 141,886
Deferred income taxes --- 104,456
------------ ------------
Total current assets 9,885,861 10,498,010
PROPERTY AND EQUIPMENT-Net 1,006,124 1,020,113
------------ ------------
TOTAL ASSETS $ 10,891,985 $ 11,518,123
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Notes Payable $ 1,690,000 $ 4,023,000
Current portion of long-term debt 356,598 316,290
Accounts Payable 2,630,770 1,681,619
Accrued Salaries and commissions 545,252 662,387
Accrued Expenses 734,101 517,393
Customer deposits 389,439 685,885
------------ ------------
Total current liabilities 6,346,160 7,886,574
------------ ------------
LONG TERM DEBT-Net of current portion 421,503 650,509
------------ ------------
STOCKHOLDERS EQUITY:
Preferred stock, $.10 per share par
value-20,000,000 shares authorized;
issued and outstanding-10,097,103
shares in 1996 1,009,710 ---
Common stock, $.10 per share par value
-25,000,000 shares authorized; issued
and outstanding-343,989 and 8,032,248
shares in 1996 and 1995, respectively 34,399 803,223
Additional paid-in capital 10,107,727 3,167,580
Accumulated deficit (6,730,514) (572,763)
------------ ------------
Less:
Stock subscription value (273,000) (357,000)
Deferred compensation (24,000) (60,000)
------------ ------------
Total stockholders' equity 4,124,322 2,981,040
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,891,985 $ 11,518,123
============ ============
See notes to consolidated financial statements.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1996 AND 1995
1996 1995
------------ ------------
NET SALES $ 15,713,507 $ 18,297,699
COST OF GOODS SOLD 11,993,587 10,698,605
------------ ------------
GROSS PROFIT 3,719,920 7,599,094
OPERATING EXPENSES:
Research and development 4,785,393 3,350,540
Selling, general and administrative 4,606,697 3,866,043
------------ ------------
Total operating expenses 9,392,090 7,216,583
------------ ------------
(LOSS) INCOME FROM OPERATIONS (5,672,170) 382,511
OTHER INCOME (EXPENSE)
Interest, net (339,527) (324,175)
Other (98,598) (12,946)
------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES (6,110,295) 45,390
PROVISION FOR INCOME TAXES 47,456 ---
NET (LOSS) INCOME $ (6,157,751) $ 45,390
============ ============
See notes to consolidated financial statements.
<PAGE>
<TABLE>
ADVANCED TECHCOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DECEMBER 31, 1996 AND 1995
<CAPTION>
$.10 Par Value
No Par $.10 Par Value Preferred Additional Stock
Common Stock Common Stock Stock Paid-in Accumulated Subscription Deferred
------------------ ----------------- ------------------ Capital Deficit Receivable Comp. Total
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY
1, 1995 6,706,479 $2,045,803 --- $ --- --- $ --- $ --- $ (404,542) $ --- $ --- $1,641,261
Exercise of
stock
options 525,000 350,000 --- --- --- --- --- --- (350,000) --- ---
Issuance of
stock 3,750 --- --- --- --- --- --- --- --- --- ---
Exchange of no
par common
stock for
$.10 par
value
common
stock (7,235,229)(2,395,803)7,235,229 723,522 --- --- 1,672,281 --- --- --- ---
Sale of common
stock --- --- 750,000 75,000 --- --- 1,425,000 --- --- --- 1,500,000
Stock issued
for services --- --- 47,019 4,701 --- --- 70,299 --- --- (60,000) 15,000
Accrued interest
on stock
subscription --- --- --- --- --- --- --- --- (7,000) --- (7,000)
Dividends
paid --- --- --- --- --- --- --- (213,611) --- --- (213,611)
Net income --- --- --- --- --- --- --- 45,390 --- --- 45,390
---------- ---------- ------- -------- ----------- ---------- ----------- ----------- --------- -------- ----------
BALANCE DECEMBER 8,032,248 803,223 --- --- 3,167,580 (572,763) (357,000) (60,000) 2,981,040
31, 1995
Exercise of
stock
options --- --- 262,500 26,250 --- --- 148,750 --- --- --- 175,000
Sale of common
stock --- --- 953,430 95,344 --- --- 3,082,756 --- --- --- 3,178,100
Stock issued for
services --- --- 73,014 7,302 --- --- 87,631 --- --- 36,000 130,933
Exchange of $.10
par value common
stock for $.10
par value Series
A preferred
stock --- --- (8,977,203)(897,720) 8,977,203 897,720 --- --- --- --- ---
Sale of Series
A preferred
stock --- --- --- --- 1,119,900 111,990 3,621,010 --- --- --- 3,733,000
Receipt of
stock
subscription --- --- --- --- --- --- --- --- 77,000 --- 77,000
Accrued interest
on stock
subscription --- --- --- --- --- --- --- --- (24,582) --- (24,582)
Forgiveness of
interest on
stock
subscription
loan --- --- --- --- --- --- --- --- 31,582 --- 31,582
Net loss --- --- --- --- --- --- --- (6,157,751) --- --- (6,157,751)
---------- ---------- ------- -------- ----------- ---------- ----------- ----------- --------- -------- ----------
BALANCE DECEMBER
31, 1996 --- --- 343,989 $ 34,399 $10,097,103 $1,009,710 $10,107,727 $(6,730,514) $(273,000) $(24,000) $4,124,322
========== ========== ======= ======== =========== ========== =========== =========== ========= ======== ==========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1996 AND 1995
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
-------------- --------------
Net (loss) income $ (6,157,751) $ 45,390
Adjustments to reconcile net (loss)
income to net cash used in
operating activities:
Depreciation and amortization 600,413 424,334
Deferred income taxes 104,456 (104,456)
Other 137,933 20,946
Change in assets and liabilities:
Accounts receivable (811,027) 498,280
Inventory 1,359,424 (3,975,477)
Prepaid expenses and other (5,719) (94,815)
Accounts payable 949,151 50,059
Accrued expenses 99,573 578,183
Customer deposits (296,446) 209,289
-------------- --------------
Net cash used in operating activities (4,019,993) (2,348,267)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES-
Purchases of property and equipment (418,379) (920,358)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) under
line of credit (2,528,000) 1,809,000
Proceeds from notes payable 195,000 750,000
Principal payments on long-term
notes payable (281,659) (269,036)
Principal payments on capital leases (75,084) (38,039)
Proceeds from exercise of stock
option plans 175,000 ---
Proceeds from sale of stock 6,911,100 1,500,000
Proceeds from payment of stock
subscription receivable 77,000 ---
Dividends paid --- (213,611)
-------------- --------------
Net cash provided by financing activities 4,473,357 3,538,314
NET INCREASE IN CASH 34,985 269,689
CASH, BEGINNING OF YEAR 271,458 1,769
-------------- --------------
CASH, END OF YEAR $ 306,443 $ 271,458
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 336,906 $ 324,316
============== ==============
Cash paid (refunded) for income taxes $ (90,116) $ 174,456
============== ==============
SUPPLEMENTAL NONCASH FINANCING
AND INVESTING ACTIVITY:
Capital lease obligations $ 168,045 $ ---
============== ==============
Stock issued for notes receivable $ --- $ 350,000
============== ==============
Increase in notes receivable
for accrued interest $ 24,582 $ 7,000
============== ==============
See notes to consolidated financial statements.
<PAGE>
ADVANCED TECHCOM, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - Advanced TechCom, Inc. and Subsidiary (the "Company") designs,
develops and manufactures a series of high-performance digital
microwave/millimeter wave radio equipment, operating in frequencies of 1.5
GHZ to 38 GHZ utilized in the telecommunications industry.
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
foreign sales corporation, Advanced TechCom (Barbados), Inc. All material
intercompany transactions and balances have been eliminated.
Stock Split - In November 1996, the Board of Directors declared a
three-for-one split of the Company's common and preferred stock effected
in the form of stock dividends. Shares will be distributed to all
stockholders of record. All share and per share data have been adjusted to
reflect the split.
Revenue Recognition - The Company recognizes revenue from the sales of
products when the products are shipped. Sales to overseas customers
generally require letters of credit before the products are shipped.
Allowance for Doubtful Accounts - An allowance for doubtful accounts is
provided when accounts are considered uncollectible. No such allowances
were considered necessary at December 31, 1996 and 1995.
Inventory - Inventory is stated at the lower of cost (first-in, first-out
method) or market.
Property and Equipment - Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives of the assets.
Estimated useful lives of assets are as follows:
Machinery and equipment and other 3-5 years
Furniture and fixtures 3-7 years
Leasehold improvements Shorter of lease term
or useful life
Financial Instruments - The carrying values of cash, accounts receivable,
accounts payable, borrowings under the Company's credit line and debt
approximate fair value due to the short-term nature of these instruments.
Income Taxes - The Company is taxed as a C Corporation. Deferred tax
assets and liabilities are recognized for the expected future tax
consequences of events that have been included in the financial statements
or tax returns. Deferred income taxes are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to be
realized.
Research and Development - Research and development costs are expensed
when incurred.
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Warranty Reserve - The Company sells the majority of its products with a
two-year repair or replacement warranty. The accompanying consolidated
financial statements for 1996 and 1995 include an accrual of approximately
$403,000 and $150,000, respectively, for estimated warranty claims based
on the Company's experience of actual claims and anticipated future
claims.
Employee Stock-Based Compensation - The Company uses the intrinsic value-
based method of Accounting Principles Board Opinion ("APB") No. 25. as
allowed under Statement of Financial Accounting Standards ("SFAS") No. 123
"Accounting for Stock-Based Compensation," to account for all of its
employee stock-based compensation plans.
Customers and Concentration of Credit Risk - The Company's products are
sold both directly to customers and through distributors. The Company's
customers consist of domestic and international wireless and cellular
companies, telephone companies, utilities and government and educational
institutions. Approximately 93% of the Company's net sales are derived
from international customers. A major international systems integrator,
who resells worldwide, accounted for approximately 20% of the Company's
1996 net sales and approximately 54% of the accounts receivable balance at
December 31, 1996. A second customer accounted for approximately 14% of
the accounts receivable balance at December 31, 1996.
Use of Estimates - The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts and disclosure of certain assets and liabilities at the
balance sheet date. Actual results may differ from such estimates.
Reclassifications - Certain amounts in the 1995 financial statements have
been reclassified to conform with the 1996 presentation.
Adoption of New Accounting Pronouncements - Effective January 1, 1996, the
Company adopted, prospectively, SFAS No. 121, "Accounting for Impairment
of Long-lived Assets and for Long-lived Assets to Be Disposed Of." SFAS
No. 121 requires that long-lived assets be reviewed for impairment
whenever circumstances indicate that the carrying value of an asset may
not be recoverable. The adoption of SFAS No. 121 did not have a
significant effect on the Company's consolidated financial position or
results of operations for the year ended December 31, 1996.
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation." As permitted by SFAS No. 123 the Company
has continued to account for its stock-based transactions to employees in
accordance with APB No. 25, "Accounting for Stock Issued to Employees." As
required by SFAS No. 123 for stock option grants to nonemployees, the
Company follows the provisions of SFAS No. 123, calculates compensation
expense using a fair value based method and amortizes compensation expense
over the vesting period. During the year ended December 31, 1996, the
Company did not grant any options to purchase shares of common stock to
nonemployees.
2. FUNDING OF OPERATIONS
As shown in the consolidated financial statements, for the year ended
December 31, 1996, the Company incurred a net loss of $6,157,751 and had
negative cash flow from operations of $4,019,993. The Company's 1996 loss
and working capital needs were principally funded by proceeds from various
private placement equity offerings completed throughout the year.
<PAGE>
2. FUNDING OF OPERATIONS (CONTINUED)
Since December 31, 1996, the Company has continued to incur losses.
However, it has negotiated a line of credit for borrowings of up to $2.5
million and raised approximately $3.0 million through the issuance of
preferred stock. Moreover, the Company has entered into a joint venture
agreement to subcontract the manufacturing of certain of its products and,
upon the successful refinancing of the Company's existing bank line of
credit or financing with a new bank, the agreement will also provide up to
$2.0 million of additional financing. On October 15, 1997, the Company
received a commitment letter for bank financing of $750,000. The Company
is also now selling its compact product line in the 38 GHZ and 23 GHZ
frequencies, thus improving its existing product line offerings and plans
to raise additional equity financing in 1997. Management believes these
factors will provide sufficient working capital for the remainder of 1997
and into 1998.
3. INVENTORY
Inventory consisted of the following at December 31:
1996 1995
---------- ----------
Raw materials $4,685,490 $5,841,531
Work in process 845,613 1,170,597
Finished goods 312,613 191,012
---------- ----------
Total $5,843,716 $7,203,140
========== ==========
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31:
1996 1995
---------- ----------
Machinery and equipment
and other $1,322,067 $ 927,700
Office furniture and
equipment 836,117 644,060
---------- ----------
2,158,184 1,571,760
Less Accumulated
Depreciation (1,152,060) (551,647)
---------- ----------
Property and equipment,net $1,006,124 $1,020,113
========== ==========
At December 31, 1996, the capitalized cost of property and equipment under
capital leases was $251,416 and related accumulated depreciation was
$104,831.
Property and equipment under capital leases and related accumulated
depreciation for the year ended December 31, 1995 was not material.
<PAGE>
5. NOTES PAYABLE
Notes payable consisted of the following at December 31:
1996 1995
---------- ----------
Revolving bank line of credit $1,245,000 $3,773,000
Note payable-stockholder, due on
demand, interest payable monthly
at 12% 195,000 ---
Note payable-to a community
development finance corporation
with interest payable monthly at
a rate of 10%, collateralized by
a second lien on substantially
all of the Company's assets, and
personally guaranteed by the
principal stockholder of the
Company 125,000 125,000
Note payable-to a community
development organization
with interest payable monthly at
a rate of 10%, collateralized by
a second lien on substantially
all of the Company's assets, and
personally guaranteed by the
principal stockholder of the
Company 125,000 125,000
---------- ----------
$1,690,000 $4,023,000
========== ==========
The Company had a revolving bank line-of-credit agreement which expired in
May 1996. Since the expiration of the agreement, borrowings under the line
were based on eligible accounts receivable and inventory up to a maximum
of $1,245,000. At December 31, 1996, the Company had outstanding bank
letters of credit totaling $172,657, of which $32,657 reduces borrowing
availability under the line of credit. The line is payable on demand and
bears interest at the bank's prime rate plus 1/2% (8.75% at December 31,
1996). The line is collateralized by substantially all of the Company's
assets and is personally guaranteed by the principal stockholder of the
Company. The agreement contains certain covenants which, among other
things, require minimum levels of consolidated tangible net worth, the
maintenance of certain financial ratios, and a minimum collateral base of
inventory and accounts receivable. At December 31, 1996, the Company was
not in compliance with certain provisions of the loan agreement related to
the minimum debt coverage ratio requirement.
On March 13, 1997, the Company's bank line-of-credit agreement was
amended. The amended agreement provides for available borrowings under the
line based on eligible accounts receivable up to a maximum of $2,500,000,
reduced by outstanding letters of credit issued by the Company. The line
is payable on demand and bears interest at the bank's prime lending rate
plus 1/2%. The line is collateralized by substantially all of the
Company's assets and is personally guaranteed by the principal stockholder
of the Company. The agreement contains certain covenants which, among
other things, require minimum levels of consolidated tangible net worth,
the maintenance of certain financial ratios, and a minimum collateral base
of inventory and accounts receivable. As of October 15, 1997,
approximately $2,200,000 was outstanding under the line and the Company
was in default on certain covenant requirements. The Company is currently
discussing refinancing of the line (see Note 2).
<PAGE>
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
1996 1995
---------- ----------
Note payable-bank-payable in monthly
installments through January 1998 with
interest at prime plus 1/2% (8.75% at
December 31, 1996) the note is
collateralized by a second lien on
substantially all Company assets $ 106,528 $ 204,855
Note payable-finance company-payable
in monthly installments through July
1997 with interest computed at rates
ranging from 10.24%-10.37%;
collateralized by certain equipment 143,795 50,834
Note payable-bank-payable in
installments through October 1998
with interest computed at prime plus
1/2% (8.75% at December 31, 1996);
collateralized by a second lien on
substantially all Company assets 152,778 236,111
Note payable-to a business development
corporation-payable in installments
through August 2000 with interest
computed at prime plus 2 1/4% (10.5%
at December 31, 1996); collateralized
by a second lien on substantially all
Company assets and personally
guaranteed by the principal stockholder 375,000 474,999
---------- ----------
778,101 966,799
Less current portion (356,598) (316,290)
---------- ----------
Long-term debt $ 421,503 $ 650,509
========== ==========
<PAGE>
6. LONG-TERM DEBT (CONTINUED)
Maturities on long-term debt as of December 31, 1996 are as follows:
Year Ending December 31
1997 $356,598
1998 227,082
1999 119,421
2000 75,000
--------
$778,101
========
7. INCOME TAXES
The components of the Company's provision for income taxes as are as
follows:
1996 1995
---------- ----------
Currently payable taxes before application
of credits and benefit of Foreign Sales
Corporation
Federal $ --- $ 151,460
State 18,746 65,320
State Manufacturing investment and
research and development credits (18,746) (65,320)
Federal research and development
credits --- (42,004)
Benefit of Foreign Sales Corporation --- (5,000)
Federal benefit of net operating
loss carryback (57,000) ---
----------- ----------
Net currently payable (refundable) tax (57,000) 104,456
Deferred tax expense 104,456 (104,456)
----------- ----------
Total $ 47,456 $ ---
=========== ==========
A reconciliation between reported income tax expense and the amount
computed by applying the statutory federal income tax rate of 34%
to income before income taxes is as follows:
1996 1995
----------- -----------
Taxes at statutory federal rates $(2,066,762) $ 15,433
1996 taxable loss for which no tax
asset was recorded 2,066,762 ---
State taxes, net of federal tax benefit (299,858) ---
Federal and state tax credit carryforwards (368,090) (129,081)
Federal tax credit utilized --- (42,004)
Valuation allowance for deferred tax assets 596,236 ---
Change in valuation allowance 104,456 175,447
Other 14,712 (19,795)
----------- -----------
Net tax expense $ 47,456 $ ---
=========== ===========
<PAGE>
7. INCOME TAXES (CONTINUED)
The Company's deferred taxes at December 31 were as follows:
1996 1995
----------- -----------
State research and development credits $ 387,981 $ 203,127
Federal research and development credits 202,104 40,705
State investment tax credits 21,837 ---
Inventory 247,661 70,285
Warranty 162,229 60,405
Accruals 156,303 133,024
Other --- 1,991
Depreciation 45,595 ---
Tax benefit from exercise of stock options 120,810 ---
Operating loss carryforwards 1,925,881 ---
----------- -----------
3,270,401 509,537
Valuation Allowance (3,270,401) (405,081)
----------- -----------
Net deferred taxes $ --- $ 104,456
=========== ===========
Deferred income taxes arise from temporary differences resulting from
income and expense items reported for financial accounting and tax
purposes in different periods and future tax benefits of federal and state
tax credits. At December 31, 1995, deferred tax assets totaling $509,537,
with a related valuation allowance of $405,081, or net deferred tax assets
of $104,456, were recorded based upon management's assessment at that time
that taxable income would more likely than not be sufficient to utilize
fully the net deferred tax asset. At December 31, 1996, based on operating
results and management's reassessment of future taxable income, the
Company established a valuation allowance to reduce the carrying value of
net deferred tax assets to zero.
At December 31, 1996, the Company had available unused federal research
and development credits of approximately $202,000 which expire in the
years 2010 and 2011, state research and development credits of
approximately $388,000, of which approximately $7,300 are unlimited and
the remainder expire at various dates beginning in 2006 through 2011 and
an investment tax credit of $21,837. Net operating loss carryforwards
totaled approximately $5,080,000 at December 31, 1996.
8. STOCKHOLDERS' EQUITY
On November 7, 1996, the Company amended the Company's Certificate of
Incorporation to increase the authorized preferred stock to 20,000,000
shares with par value of $.10 per share; 15,000,000 shares designated as
Series A convertible preferred stock ("Series A preferred stock") and
5,000,000 shares as undesignated preferred stock (see "Stock Split" in
Note 1).
<PAGE>
8. STOCKHOLDERS' EQUITY (CONTINUED)
The preferred stock has voting rights similar to common stock and equal to
the number of whole shares of common into which the preferred is
convertible. The preferred stock also has preference on liquidation over
common stock and on the payment of dividends. The Series A preferred stock
shall be convertible, without the payment of any additional consideration
by the holder, at any time at the option of the holder, at a conversion
rate, subject to adjustment, of one share of common for each share of
preferred. Each share of Series A preferred stock shall automatically be
converted into common stock at the then effective applicable conversion
rate upon the closing of a public offering with gross proceeds of not less
than $15 million or upon the affirmative vote of the majority of the
preferred stockholders.
Concurrent with the increase in the number of authorized shares of
preferred stock, common stockholders were granted the option of converting
their shares into Series A preferred stock on a one-for-one basis.
In addition, additional shares of Series A convertible preferred stock
totaling 965,430 were issued for no additional consideration to those
persons who purchased common stock in April and May 1996 at a price of $20
per share in order that their purchase price, after taking into account
the stock split, be adjusted to $31/3 per share.
9. STOCK PLANS
Performance Share Plan - The Company had a performance share plan which
was intended as an incentive to certain key employees and directors who
contribute to the success of the Company's business. Under the terms of
the plan, performance shares were granted to individuals at the discretion
of the Company's Board of Directors (the "Board"), subject to various
vesting schedules. Performance shares exercised during 1995 totaled 6,980.
Shares forfeited under the plan totaled 17,809 for 1995.
In August 1995, the Board voted to terminate the performance share plan
and authorized the Company's president, in consultation with the
Compensation Committee, to offer stock options in exchange for performance
shares held by the holders thereof.
Stock Options - During 1995, the Company adopted the 1995 Stock Option
Plan (the "1995 Plan"). The 1995 Plan initially permitted the grant of
options to purchase up to 1,200,000 shares of the Company's common stock
at a price at least equal to the fair market value of the stock,
determined by the Board, on the date of grant for incentive stock options
and at prices determined by the Board in its sole discretion for
nonqualified options. On September 6, 1996, the Board and stockholders
approved an increase in the shares available for grants to 1,650,000.
During the fourth quarter of 1996, the Company repriced all options to
reflect the then fair market value of the Company's common stock. The
repricing provided each option holder the right to exchange their existing
stock options for new incentive stock options (the "new options") to
purchase an identical number of shares of common stock at an exercise
price of $.26 per share. The new options vest according to the original
vesting schedule but with a six-month delay, or in 16 equal quarterly
installments beginning three months before the original vesting date. The
options are exercisable for 10 years from the original date of grant.
At December 31, 1996, there were 828,137 options available for grant under
the 1995 Plan. Prior to the adoption of the 1995 Plan, the Company issued
stock options to certain individuals which were exercisable on varying
dates at prices ranging from $.67 to $2.57 per share.
<PAGE>
9. STOCK PLANS (CONTINUED)
Stock Exchanged for Services - During 1995, the Company issued 47,019
shares of common stock in exchange for current and future services. Of the
47,019 shares issued, 36,000 were issued to a director for services to be
provided through 1997. The right to the 36,000 shares is subject to a
two-year vesting schedule through 1997. The value of the services provided
amounting to $15,000 and $36,000 for 1996 and 1995, respectively, has been
charged to operations. During 1996, an additional 73,014 shares of common
stock were issued in exchange for current services. The value of the
shares totaling $94,933 was expensed in 1996.
A summary of all stock option activity for the years ended December 31,
1996 and 1995 is as follows:
Exercise
Price
Shares Per Share
----------- -----------
Outstanding at January 1, 1995 943,500 $0.67-$2.57
Options granted in exchange for
performance shares 175,476 $2.00
Options granted 454,458 $.33-$2.20
Options terminated (159,000) $2.00-$2.57
Options exercised (525,000) $0.67
-----------
Outstanding at December 31, 1995 889,434 $0.33-$2.20
Options granted 298,803 $0.26-$2.20
Options terminated (103,876) $0.33-$2.20
Options exercised (262,500) $0.67
Options cancelled upon exchange (865,161) $0.67-$2.57
Options issued upon exchange 865,161 $0.26
-----------
Outstanding at December 31, 1996 821,861 $0.26
=========== ===========
Options exercisable at December 31, 1995 650,568 $0.33-$2.20
=========== ===========
Options exercisable at December 31, 1996 448,377 $0.26
=========== ===========
The weighted average grant date fair value
for options granted in 1996 and 1995 was
$.31 and $.67, respectively.
<PAGE>
9. STOCK PLANS (CONTINUED)
Stock Exchanged for Services (Continued) - During 1995, the Company's
principal stockholder exercised options to purchase 525,000 shares of
common stock by issuing a note to the Company in the amount of $350,000
(the "Note"). The Note is due on August 24, 2000 and bears interest,
payable annually, at 8% per annum commencing August 24, 1996. Accrued
interest on the Note as of December 31, 1996 totaling $31,582 has been
forgiven.
The following table sets forth information regarding stock options
outstanding at December 31, 1996 under the Stock Option Plans as described
above:
Weighted
Average
Weighted Weighted Exercise
Number of Average Average Number Price for
Options Range of Exercise Remaining Currently Currently
Outstanding Exercise Price Price Life Exercisable Exercisable
----------- -------------- -------- --------- ----------- -----------
821,861 $0.26 $0.26 7.6 years 448,377 $0.26
Pro Forma Disclosures - As described in Note 1, the Company applies the
intrinsic value method of APB No. 25 and related Interpretations in
accounting for its stock option plans. Accordingly, no compensation cost
has been recognized for its stock option plans. Had compensation cost been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, the Company's net
loss for the years ended December 31, 1996 and 1995 would have been
$6,260,157 and $25,215, respectively.
For purposes of the pro forma disclosures, the fair value of the options
granted under the Company's stock option plans during 1996 and 1995 was
estimated on the date of grant using the Black-Scholes option pricing
model. Key assumptions used to apply this pricing model are as follows:
1996 1995
-------- ---------
Risk-free interest rate 6.50% 6.50%
Expected life of option grants 5 years 4.9 years
The pro forma disclosures, as required by SFAS No. 123, only include the
effects of options granted in 1996 and 1995.
10. EMPLOYEE BENEFIT PLAN
In 1994,the Company established a 401(k) retirement plan for substantially
all employees. Employees eligible to participate in the plan must be age
21. The Company does not contribute to the plan.
<PAGE>
11. LEASES
The Company leases its present facilities in Wilmington, Massachusetts,
under a five-year lease expiring in November 2000. Future minimum lease
payments under noncancelable operating leases with initial or remaining
terms of one year or more consist of the following at December 31, 1996:
Year Ending Amount
----------
1997 $ 320,000
1998 351,996
1999 368,000
2000 384,000
----------
Total $1,423,996
==========
The Company is also responsible for real estate taxes and other operating
expenses associated with the property lease. Rent expense under all
operating leases for the years ended December 31, 1996 and 1995 was
approximately $586,000 and $246,000, respectively.
12. RELATED-PARTY TRANSACTIONS
The Company purchases computers and other networking equipment from a
computer distributor whose principal shareholder is a director of the
Company. Purchases of equipment totaled $77,758 and $186,163 for 1996 and
1995, respectively. As of December 31, 1996, there are no amounts payable
to the distributor.
Interest expense on the note payable to stockholder (see Note 5) was
$8,112 for the year ended December 31, 1996.
13. SUBSEQUENT EVENT
Subsequent to year end, the Company was named as a defendant in a suit
filed by a successor to a former vendor. The vendor claims it is owed
$1,000,000 from the Company and has asserted breach of contract and other
claims. The Company's recorded liability at December 31, 1996 was
approximately $450,000. The Company and the vendor have agreed to stay the
litigation while they engage in settlement negotiations. The ultimate
outcome of this claim cannot be predicted, however, management estimates
that the Company's possible loss that may be incurred will not exceed the
amounts recorded.
14. EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
AUDITORS' REPORT
As discussed in notes 2 and 5, as of October 15, 1997 the Company had
approximately $2,200,000 outstanding and was in default on certain
covenant requirements under its bank line of credit. Moreover, the Company
was discussing the refinancing of this line in connection with a joint
venture agreement entered into to subcontract the manufacturing of certain
of its products and had received a commitment letter for bank financing of
$750,000. The commitment letter expired on December 15, 1997 and on
December 29, 1997 the Company signed a definitive agreement to be acquired
by World Access, Inc. In connection with the aquisition the Company also
entered into an agreement to terminate the joint venture agreement
referred to above. In December 1997, World Access paid the Company's
outstanding bank debt and began funding its operations. The acquisition of
the Company, by World Access, was consummated on January 29, 1998.
<PAGE>
(b) Pro Forma Financial Information. The acquisition of ATI has been
accounted for using the purchase method of accounting. In connection with such
acquisition, World Access recorded a charge of approximately $4.0 million,
representing the portion of the purchase price for ATI allocated to in-process
research and development. The following unaudited pro forma consolidated
balance sheet as of September 30, 1997 reflects the acquisition of ATI as
if it had been completed on September 30, 1997. The following unaudited
pro forma consolidated statement of operations for the year ended December 31,
1996 and the nine months ended September 30, 1997 reflect the acquisition of ATI
as if it had been completed as of January 1, 1996.
The pro forma data does not purport to be indicative of the results
which would actually have been reported if the acquisition had occurred on such
dates or which may be reported in the future. The pro forma data should be read
in conjunction with the historical consolidated financial statements of the
Company, the historical consolidated financial statements of ATI and the
related notes thereto.
<PAGE>
<TABLE>
World Access, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
September 30, 1997
<CAPTION>
----------Historical---------- Pro Forma Pro Forma
World Access ATI Adjustments Combined
(In thousands)
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 15,807 $ 187 $ (298)(A) $ 15,696
Accounts receivable 22,446 1,887 (75)(A) 24,258
Inventories 18,899 7,057 (2,050)(A) 23,906
Other current assets 7,050 82 --- 7,132
---------- ---------- ---------- -----------
Total Current Assets 64,202 9,213 (2,423) 70,992
Property and equipment 4,287 1,066 --- 5,353
Intangible assets 29,370 --- 1,320 (A) 30,690
Technology licenses 904 --- --- 904
Debt issuance costs 641 --- --- 641
Other assets 2,035 10 3,325 (A) 5,370
---------- ---------- ---------- -----------
Total Assets $ 101,439 $ 10,289 $ 2,222 $ 113,950
========== ========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 66 $ 3,097 $ --- $ 3,163
Accounts payable 6,902 2,931 --- 9,833
Accrued payroll and benefits 3,073 --- --- 3,073
CIS purchase price payable 3,500 --- --- 3,500
Other accrued liabilities 1,550 2,175 200 (A) 3,925
---------- ---------- ---------- -----------
Total Current Liabilities 15,091 8,203 200 23,494
Long-term debt 301 340 --- 641
---------- ---------- ---------- -----------
Total Liabilities 15,392 8,543 200 24,135
---------- ---------- ---------- -----------
Stockholders' Equity
Common and preferred stock 192 2,558 (2,558)(B) 196
4 (A)
Capital in excess of par value 81,178 11,340 (11,340)(B) 88,892
7,714 (A)
Retained earnings (deficit) 4,677 (12,152) 12,152 (B) 727
(3,950)(C)
---------- ---------- ---------- -----------
Total Stockholders' Equity 86,047 1,746 2,022 89,815
---------- ---------- ---------- -----------
Total Liabilities and
Stockholders' Equity $ 101,439 $ 10,289 $ 2,222 $ 113,950
========== ========== ========== ===========
<PAGE>
<FN>
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(A) The Merger will be accounted for under the purchase method of accounting.
In addition, in accordance with generally accepted accounting principles, the
portion of the purchase price allocable to research and development projects of
ATI was expensed at the consumation of the Merger on January 29, 1998. The
amount of this one-time non-recurring charge was approximately $4.0 million.
Since this charge was directly related to the acquisition and will not recurr,
the pro forma financial statements have been prepared excluding the change. The
Company has not yet determined the final allocation of the purchase price, and
accordingly, the amounts shown below may differ from the amounts ultimately
recorded.
The unallocated excess of purchase price over net assets acquired is determined
as follows (amounts in thousands):
Purchase price:
Cash purchase of ATI shares 32
Cash in lieu of fractional shares 1
Cash paid for options 265
-------
Total cash 298
Restricted stock issued in
exchange for ATI shares 7,593
Restricted stock issued in
exchange for options 125
-------
Total restricted stock 7,718
Fees and expenses related to the Merger 200
-------
Total purchase price 8,216
-------
Less:
Historical stockholders' equity (1,746)
Adjust assets and liabilities:
Inventories 2,050
Accounts receivable 75
In process R&D costs (3,950)
Deferred income taxes (3,325)
-------
(6,896)
-------
Unallocated excess of purchase
price over net assets acquired 1,320
=======
(B) Eliminate existing stockholders' equity.
(C) Represents retained earnings adjustment for non-recurring charge related to
write-off of in-process R&D expenses acquired in the merger.
</FN>
</TABLE>
<PAGE>
<TABLE>
World Access, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Operations
For the Nine Months Ended September 30, 1997
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
World Access ATI Adjustments Combined
(In thousands except per share data)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales of products $ 56,099 $ 10,975 $ (150)(A) $ 66,924
Service revenues 15,622 --- --- 15,622
---------- ---------- ---------- ----------
Total Sales 71,721 10,975 (150) 82,546
Cost of products sold 33,811 8,396 (70)(A) 42,137
Cost of services 12,832 --- --- 12,832
---------- ---------- ---------- ----------
Total Cost of Sales 46,643 8,396 (70) 54,969
---------- ---------- ---------- ----------
Gross Profit 25,078 2,579 (80) 27,577
Engineering and development 1,350 3,346 --- 4,696
Selling, general and administrative 6,860 4,421 --- 11,281
Amortization of goodwill 1,210 --- 66 (B) 1,276
---------- ---------- ---------- ----------
Operating Income 15,658 (5,188) (146) 10,324
Interest and other income 835 --- --- 835
Interest and other expense (95) (233) --- (328)
---------- ---------- ---------- ----------
Income Before Income Taxes 16,398 (5,421) (146) 10,831
Income taxes 5,986 --- (1,870)(C) 4,116
---------- ---------- ---------- ----------
Net Income $ 10,412 $ (5,421) $ 1,724 $ 6,715
========== ========== ========== ==========
Net Income Per Common Share: $ .55 $ .34 (D)
========== ==========
Weighted Average Shares Outstanding: 19,076 19,501 (D)
========== ==========
<FN>
Notes to Pro forma Consolidated Statements of Operations for the Nine Months
Ended September 30, 1997
(A) Eliminate intercompany sales and related cost of sales.
(B) Amortization of unallocated excess purchase price over net assets acquired
over 15 years.
(C) Adjust tax provision for the benefit of the loss incurred by ATI and pro
forma adjustments.
(D) Represents fully diluted earnings per share, including shares of Company
common stock issued to the shareholders of ATI.
</FN>
</TABLE>
<PAGE>
<TABLE>
World Access, Inc. and Subsidiaries
Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
World Access ATI Adjustments Combined
(In thousands except per share data)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales of products $ 34,411 $ 15,713 $ (66)(A) $ 50,058
Service revenues 16,589 --- --- 16,589
---------- ---------- ---------- ----------
Total Sales 51,000 15,713 (66) 66,647
Cost of products sold 21,485 11,994 (35)(A) 33,444
Cost of services 14,520 --- --- 14,520
---------- ---------- ---------- ----------
Total Cost of Sales 36,005 11,994 (35) 47,964
---------- ---------- ---------- ----------
Gross Profit 14,995 3,719 (31) 18,683
Engineering and development 892 4,785 --- 5,677
Selling, general and administrative 6,211 4,607 --- 10,818
Amortization of goodwill 534 --- 88 (B) 622
---------- ---------- ---------- ----------
Operating Income 7,358 (5,673) (119) 1,566
Interest and other income 485 --- --- 485
Interest and other expense (319) (438) --- (757)
---------- ---------- ---------- ----------
Income Before Income Taxes 7,524 (6,111) (199) 1,294
Income taxes 745 47 (642)(C) 150
---------- ---------- ---------- ----------
Net Income $ 6,779 $ (6,158) $ 523 $ 1,444
========== ========== ========== ==========
Net Income Per Common Share: $ .46 $ .10 (D)
========== ==========
Weighted Average Shares Outstanding: 14,424 14,849 (D)
========== ==========
<FN>
Notes to Pro Forma Consolidated Statements of Operations for the Year Ended
December 31, 1996
(A) Eliminate intercompany sales and related cost of sales.
(B) Amortization of unallocated excess purchase price over net assets acquired
over 15 years.
(C) Adjust tax provision for the benefit of the loss incurred by ATI and pro
forma adjustments.
(D) Represents fully diluted earnings per share, including shares of Company
common stock issued to the shareholders of ATI.
</FN>
</TABLE>
<PAGE>
(c) Exhibits. The following exhibits are filed herewith by direct
transmission via "edgar."
2.1 Agreement and Plan of Merger by and among World Access, Inc.,
Cellular Infrastructure Supply, Inc., Advanced TechCom, Inc.
and Ernest H. Lin dated as of December 24, 1997.
10.1 Employment Agreement dated as of January 29, 1998 by and
among World Access, Inc., Cellular Infrastructure Supply, Inc.
and Ernest H. Lin.
10.2 Escrow Agreement dated as of January 29, 1998 by and among
World Access, Inc., Cellular Infrastructure Supply, Inc.,
Ernest H. Lin, individually and as attorney-in-fact for the
former ATI stockholders, and Cauthen & Feldman, P.A.
10.3 Registration Rights Agreement dated as of January 29, 1998 by
and among World Access, Inc. and Ernest H. Lin, individually
and as attorney-in-fact for the former ATI stockholders.
10.4 Non-Competition and Non-Disclosure Agreement dated as of
January 29, 1998 by and among World Access, Inc., Cellular
Infrastructure Supply, Inc. and Ernest H. Lin.
23.1 Consent of Deloitte & Touche LLP
99.1 Press Release issued on January 30, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD ACCESS, INC.
By: /S/ Martin D. Kidder
---------------------------------
Martin D. Kidder
Its Vice President and Controller
Dated as of February 13, 1998
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
WORLD ACCESS, INC. and
CELLULAR INFRASTRUCTURE SUPPLY, INC.
and
ERNEST H. LIN
and
ADVANCED TECHCOM, INC.
As of December 24, 1997
<PAGE>
iii
TABLE OF CONTENTS
Page
ARTICLE 1. THE MERGER................................................. 1
SECTION 1.1. Surviving Corporation............................ 1
SECTION 1.2. Certificate of Incorporation..................... 1
SECTION 1.3. Bylaws........................................... 1
SECTION 1.4. Directors........................................ 2
SECTION 1.5. Officers......................................... 2
SECTION 1.6. Effective Time................................... 2
ARTICLE 2. CONVERSION OF SHARES....................................... 2
SECTION 2.1. ATI Capital Stock................................ 2
SECTION 2.2. Fractional Shares................................ 3
SECTION 2.3. Exchange of ATI Stock............................ 4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF ATI...................... 5
SECTION 3.1. Organization..................................... 5
SECTION 3.2. Authorization.................................... 5
SECTION 3.3. Absence of Restrictions and Conflicts............ 6
SECTION 3.4. Capitalization; Ownership of ATI Capital Stock... 6
SECTION 3.5. Financial Statements............................. 7
SECTION 3.6. Absence of Certain Changes....................... 7
SECTION 3.7. Legal Proceedings................................ 8
SECTION 3.8. Compliance with Law.............................. 9
SECTION 3.9. ATI Material Contracts........................... 9
SECTION 3.10. ATI Customer Contract............................ 10
SECTION 3.11. Tax Returns; Taxes............................... 10
SECTION 3.12. Officers, Directors and Employees................ 11
SECTION 3.13. ATI Employee Benefit Plans....................... 11
SECTION 3.14. Labor Relations.................................. 15
SECTION 3.15. Insurance........................................ 15
SECTION 3.16. Title to Properties and Related Matters.......... 15
SECTION 3.17. Environmental Matters............................ 16
SECTION 3.18. Patents, Trademarks, Trade Names................. 16
SECTION 3.19. Transactions with Affiliates..................... 17
SECTION 3.20. Brokers, Finders and Investment Bankers.......... 17
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PARENT................... 17
SECTION 4.1. Organization..................................... 17
SECTION 4.2. Authorization.................................... 18
SECTION 4.3. Absence of Restrictions and Conflicts............ 18
SECTION 4.4. Capitalization of Parent and Ownership
of Merger Sub.................................. 19
SECTION 4.5. Financial Statements............................. 19
SECTION 4.6. Absence of Certain Changes....................... 19
SECTION 4.7. Legal Proceedings................................ 20
SECTION 4.8. Compliance with Law.............................. 20
SECTION 4.9. Tax Returns; Taxes............................... 21
SECTION 4.10. Parent SEC Reports............................... 21
SECTION 4.11. Transactions with Affiliates..................... 21
ARTICLE 5. CERTAIN COVENANTS AND AGREEMENTS........................... 22
SECTION 5.1. Conduct of Business by ATI....................... 22
SECTION 5.2. Inspection and Access to Information............. 24
SECTION 5.3. No Solicitation; Acquisition Proposals........... 24
SECTION 5.4. Reasonable Efforts; Further
Assurances; Cooperation........................ 25
SECTION 5.5. Public Announcements............................. 26
SECTION 5.6. Supplements to Disclosure Letters................ 26
SECTION 5.7. Continuation of Business......................... 27
SECTION 5.8. Stockholder Matters.............................. 27
SECTION 5.9. Indemnification Against Certain Liabilities...... 27
ARTICLE 6. OTHER MATTERS.............................................. 27
SECTION 6.1. Conditions to Each Party's Obligations........... 27
SECTION 6.2. Conditions to Obligations of Parent
and Merger Sub................................. 27
SECTION 6.3. Conditions to Obligations of ATI................. 30
ARTICLE 7. CLOSING.................................................... 32
ARTICLE 8. TERMINATION................................................ 32
SECTION 8.1. Termination and Abandonment...................... 32
SECTION 8.2. Specific Performance and Other Remedies.......... 33
SECTION 8.3. Effect of Termination............................ 33
ARTICLE 9. INDEMNIFICATION............................................ 34
SECTION 9.1. Definitions...................................... 34
SECTION 9.2. Agreement of ATI Indemnitors to Indemnify........ 35
SECTION 9.3. Agreement of Parent Indemnitors to Indemnify..... 35
SECTION 9.4. Procedures for Indemnification................... 36
SECTION 9.5. Third Party Claims............................... 37
SECTION 9.6. Rights and Remedies Exclusive.................... 38
SECTION 9.7. Survival......................................... 38
SECTION 9.8. Time Limitations................................. 39
SECTION 9.9. Limitations as to Amount Payable
by ATI Indemnitors............................. 39
SECTION 9.10. Limitations as to Amount Payable by Parent
and Surviving Corporation...................... 40
SECTION 9.11. Subrogation...................................... 40
SECTION 9.12. Appointment of ATI Indemnitors Representative.... 40
SECTION 9.13. Payment.......................................... 41
ARTICLE 10. MISCELLANEOUS PROVISIONS.............................. 41
SECTION 10.1. Notices.......................................... 41
SECTION 10.2. Disclosure Letters and Exhibits.................. 42
SECTION 10.3. Assignment; Successors in Interest............... 42
SECTION 10.4. Number; Gender................................... 42
SECTION 10.5. Captions......................................... 42
SECTION 10.6. Controlling Law; Jurisdiction;
Integration; Amendment......................... 43
SECTION 10.7. Knowledge........................................ 43
SECTION 10.8. Severability..................................... 43
SECTION 10.9. Counterparts..................................... 43
SECTION 10.10. Enforcement of Certain Rights.................... 43
SECTION 10.11. Waiver........................................... 43
SECTION 10.12. Fees and Expenses................................ 44
EXHIBITS
Exhibit 2.1(b) Escrow Agreement
Exhibit 6.2(h) Employment Agreement
Exhibit 6.2(i) Non-Competition Agreement
Exhibit 6.2(o) Registration Rights Agreement
Exhibit 6.2(m) List of Certain Stockholders
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 24, 1997 (the
"Agreement"), by and among WORLD ACCESS, INC., a Delaware corporation
("Parent"), CELLULAR INFRASTRUCTURE SUPPLY, INC., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), ADVANCED TECHCOM, INC., a
Delaware corporation ("ATI"), and ERNEST H. LIN, an individual resident of the
Commonwealth of Massachusetts (the "Signing Stockholder").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
ATI each have approved this Agreement and the merger (the "Merger") of ATI with
and into Merger Sub upon the terms and conditions contained herein and in
accordance with the General Corporation Law of the State of Delaware ("DGCL");
and
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to set forth certain
conditions thereto.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE 1.
THE MERGER
SECTION 1.1.Surviving Corporation. Subject to the provisions of this
Agreement and the DGCL, at the Effective Time (as hereinafter defined), ATI
shall be merged with and into Merger Sub and the separate corporate existence of
ATI shall cease. Merger Sub shall be the surviving corporation in the Merger
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of Delaware. The Merger
shall have the effect set forth in Section 259 of the DGCL, which, among other
things, shall result in the Surviving Corporation assuming the liabilities of
ATI by operation of merger.
SECTION 1.2.Certificate of Incorporation. The Certificate of Incorporation
of Merger Sub shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter duly amended in accordance with its terms and the
DGCL.
SECTION 1.3. Bylaws. The Bylaws of Merger Sub shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with their
terms and the DGCL.
SECTION 1.4. Directors. The directors of the Surviving Corporation shall
consist of the directors of Merger Sub immediately prior to the Effective Time
and the Signing Stockholder shall be elected as a director of the Surviving
Corporation at the Effective Time, and all such directors shall hold office from
the Effective Time until their respective successors are duly elected and
qualified.
SECTION 1.5. Officers. The officers of the Surviving Corporation shall
consist of the officers of Merger Sub immediately prior to the Effective Time,
such officers to hold office from the Effective Time until their respective
successors are duly elected and qualified.
SECTION 1.6. Effective Time. The parties hereto shall cause a Certificate
of Merger meeting the requirements of the DGCL (the "Certificate of Merger") to
be properly executed and filed on the Closing Date (as hereinafter defined) with
the Secretary of State of the State of Delaware. The Merger shall become
effective as of the date of the filing of the properly executed Certificate of
Merger. The date and time when the Merger becomes effective is herein referred
to as the effective time (the "Effective Time").
ARTICLE 2.
CONVERSION OF SHARES
SECTION 2.1. ATI Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) Subject to Section 2.2, (i) all of the shares of the Series A
Convertible Preferred Stock, $.10 par value per share, of ATI ("ATI Stock")
issued and outstanding immediately prior to the Effective Time (other than
shares of ATI Stock held in treasury or shares of ATI Stock held by Parent)
shall be converted into the right to receive the following (the "Merger
Consideration"): (A) a number of shares of Parent common stock, $.01 par value
per share (the "Parent Common Stock"), equal to (x) $10,000,000 less the
expenses of the ATI Stockholders (as hereinafter defined) incurred in connection
with the Merger in excess of $50,000 divided by (y) the Average Closing Price
(as hereinafter defined) (the "Parent Shares"), which Parent Shares will be
issued to the holders of ATI Stock (each a "Stockholder" and, collectively, the
"Stockholders") in the manner contemplated by Section 2.3; and (B) a number of
shares of Parent Common Stock equal to $5,000,000 divided by the Average Closing
Price, which shares of Parent Common Stock will be deposited and held in escrow
pursuant to Section 2.1(b) below (the "Escrow Shares"); and (ii) all of the
shares of the Common Stock, $.10 par value per share, of ATI (the "ATI Common
Stock") issued and outstanding immediately prior to the Effective Time (other
than shares of ATI Common Stock held in treasury or shares of ATI Common Stock
held by Parent) shall be converted into the right to receive $.01 per share. At
the Closing, each Stockholder shall be entitled to that portion of the aggregate
Merger Consideration as it relates to the proportion of the aggregate
liquidation preference of such Stockholder's ATI Stock relative to the aggregate
liquidation preference of the ATI Stock, and each holder of ATI Common Stock
(each an "ATI Common Stockholder" and, collectively, the "ATI Common
Stockholders" and, together with the Stockholders, the "ATI Stockholders") shall
be entitled to a cash payment equal to the aggregate number of shares of ATI
Common Stock held by him multiplied by $.01. For purposes hereof, "Average
Closing Price" shall mean the arithmetic average of the daily closing price per
share, rounded to four decimal places, of the Parent Common Stock as reported on
the Nasdaq National Market for each of the trading days in the period commencing
on (and including) October 27, 1997 and ending on the trading day that occurs
two trading days prior to (and not including) the Closing Date (as hereinafter
defined).
(b) The Escrow Shares shall be deposited with the Escrow Agent (as
hereinafter defined) within five (5) business days of the Closing to be held and
distributed pursuant to the terms of an Escrow Agreement by and between Parent,
Merger Sub, the Stockholders and Cauthen & Feldman, as the escrow agent (the
"Escrow Agent"), substantially in the form attached hereto as Exhibit 2.1(b)
(the "Escrow Agreement").
(c) Each share of common stock, par value $.01 per share, of Merger Sub
that is issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall be unchanged after the Merger, all of which shares
have been issued to Parent and constitute the only outstanding shares of capital
stock of the Surviving Corporation.
(d) Each share of the ATI Stock or ATI Common Stock issued and outstanding
immediately prior to the Effective Time that is then held in the treasury of ATI
shall be canceled and retired and all rights in respect thereof shall cease to
exist, without any conversion thereof or payment of any consideration therefor.
(e) Each warrant, stock option or other right, if any, to purchase shares
of ATI Stock or ATI Common Stock issued and outstanding immediately prior to the
Effective Time shall be canceled (whether or not such warrant, option or other
right is then exercisable), and the holder of each stock option issued under
ATI's 1995 Stock Option Plan, as amended, shall be entitled to a cash payment
from the Parent in an amount equal to the product of (i) $1.00 less the exercise
price for the option held by such holder, multiplied by (ii) the maximum number
of shares of ATI Common Stock such Holder would be entitled to receive upon
exercise of such option if so exercised on December 31, 1997; provided, however,
that any payment to be made to the Signing Stockholder as a result of this
Section 2.1(e) shall be made by Parent by delivering cash in the amount of
one-half of such payment and shares of Parent Common Stock having an aggregate
value (valued at the Average Closing Price) equal to one-half of such payment.
SECTION 2.2. Fractional Shares. No scrip or fractional shares of Parent
Common Stock shall be issued in the Merger. In lieu thereof, if a Stockholder
would otherwise have been entitled to a fractional share of Parent Common Stock
hereunder, then such Stockholder shall be entitled, after the later of (a) the
Effective Time or (b) the surrender of his certificate(s) that represent such
shares of ATI Stock, to receive from Parent an amount in cash in lieu of such
fractional share, based on a value per share of Parent Common Stock equal to the
Average Closing Price.
SECTION 2.3. Exchange of ATI Stock
(a) Exchange. From and after the Effective Time, upon exchange of a
certificate or certificates which immediately prior thereto represents
outstanding shares of ATI Stock, a Stockholder shall be entitled to receive,
upon surrender to Parent of such certificate or certificates duly endorsed in
blank, one or more certificates as requested by such Stockholder (properly
issued, executed and countersigned, as appropriate) representing that number of
whole shares of Parent Common Stock to which such Stockholder shall have become
entitled pursuant to the provisions of Section 2.1(a)(i)(A) and a check
representing the aggregate cash consideration to which such Stockholder shall
have become entitled as to any fractional share, and upon exchange of a
certificate or certificates which immediately prior thereto represents shares of
ATI Common Stock, an ATI Common Stockholder shall be entitled to receive, upon
surrender to Parent of such certificate or certificates duly endorsed in blank,
a check representing the aggregate cash consideration to which such ATI Common
Stockholder shall have become entitled pursuant to Section 2.1(a)(ii) above, and
all of the certificate or certificates so surrendered shall forthwith be
canceled. No interest will be paid or accrued on the cash payable upon the
surrender of any certificate. No portion of the consideration to be received
pursuant to Sections 2.1 and 2.2 upon exchange of a certificate (whether a
certificate representing shares of Parent Common Stock or by check representing
any cash payable hereunder) may be issued or paid to a person other than the
person in whose name the certificate surrendered in exchange therefor is
registered. From the Effective Time until surrender in accordance with the
provisions of this Section 2.3, each certificate shall represent for all
purposes only the right to receive the consideration provided in Sections 2.1
and 2.2. All payments in respect of shares of ATI Stock or ATI Common Stock that
are made in accordance with the terms hereof shall be deemed to have been made
in full satisfaction of all rights pertaining to such securities.
(b) Lost Certificates. In the case of any lost, mislaid, stolen or
destroyed certificate, the ATI Stockholder may be required, as a condition
precedent to delivery to the Stockholder of the consideration described in
Sections 2.1 and 2.2, to deliver to Parent a satisfactory indemnity agreement as
Parent may direct as indemnity against any claim that may be made against Parent
or the Surviving Corporation with respect to the certificate alleged to have
been lost, mislaid, stolen or destroyed.
(c) No Transfers After Effective Time. After the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of the shares of ATI Stock or ATI Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
representing the ATI Stock or the ATI Common Stock are presented to the
Surviving Corporation for transfer, they shall be canceled and exchanged for the
consideration described in Sections 2.1 and 2.2.
(d) Unclaimed Shares or Cash. Any shares of Parent Common Stock or cash due
former stockholders of ATI pursuant to Sections 2.1 and 2.2 hereof that remains
unclaimed by such former stockholders for six months after the Effective Time
shall be held by Parent, and any former holder of ATI Stock or ATI Common Stock
who has not theretofore complied with Section 2.3 (a) and (b) shall thereafter
look only to Parent for issuance of the number of shares of Parent Common Stock
and other consideration to which such holder has become entitled pursuant to the
provisions of Sections 2.1 and 2.2; provided, however, that neither Parent nor
any party hereto shall be liable to a former holder of shares of ATI Stock or
ATI Common Stock for any amount required to be paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF ATI
With such exceptions, if any, as may be set forth in a letter (the "ATI
Disclosure Letter") to be delivered by ATI to Parent on or before December 31,
1997, ATI hereby represents and warrants to Parent as follows:
SECTION 3.1. Organization. Each of ATI and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its respective properties and to carry on
its business as now being conducted. Each of ATI and its subsidiaries is duly
qualified to transact business, and is in good standing, as a foreign
corporation or branch of a foreign corporation in each jurisdiction where the
character of its activities requires such qualification, except where the
failure to so qualify would not have a material adverse effect on its assets,
liabilities, results of operations, financial condition or business of ATI and
its subsidiaries taken as a whole. Each of ATI and its subsidiaries has
heretofore made available to Parent accurate and complete copies of its
Certificate of Incorporation and Bylaws, as currently in effect, and has made
available to Parent its respective minute books and stock records. The ATI
Disclosure Letter contains a true and correct list of the jurisdictions in which
ATI and its subsidiaries are qualified to do business as a foreign corporation
or branch of a foreign corporation.
SECTION 3.2. Authorization. ATI and the Signing Stockholder each have full
power and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby. Subject to the approval of the ATI
Stockholders, the execution and delivery of this Agreement by ATI and the
performance by ATI of its obligations hereunder and the consummation of the
Merger and the other transactions provided for herein have been duly and validly
authorized by all necessary corporate action on its part. The Board of Directors
of ATI has approved the execution, delivery and performance of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby. Subject to the receipt of the approval of the ATI Stockholders, this
Agreement has been duly executed and delivered by ATI and the Signing
Stockholder, and constitutes the valid and binding agreement of ATI and the
Signing Stockholder, enforceable against each of them in accordance with its
terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
SECTION 3.3. Absence of Restrictions and Conflicts. The execution, delivery
and performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Certificate of Incorporation or Bylaws of ATI or
its subsidiaries, (ii) to the best knowledge of ATI, any ATI Material Contract
(as hereinafter defined), (iii) to the best knowledge of ATI, any judgment,
decree or order of any court or governmental authority or agency to which ATI,
its subsidiaries or the Signing Stockholder is a party or by which ATI, its
subsidiaries or such person or any of their respective properties is bound, or
(iv) to the best knowledge of ATI, any statute, law, regulation or rule
applicable to ATI, so as to have in the case of subsections (ii) through (iv)
above, a material adverse effect on the assets, liabilities, results of
operations, financial condition, business of ATI and its subsidiaries taken as a
whole. Except for the filing and recordation of the Certificate of Merger, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority with respect to ATI, its subsidiaries or the Signing Stockholder is
required in connection with the execution, delivery or performance of this
Agreement by ATI or such person or the consummation of the transactions
contemplated by this Agreement by ATI, the failure to obtain which would have a
material adverse effect upon the assets, liabilities, results of operations,
financial condition, business of ATI and its subsidiaries taken as a whole.
SECTION 3.4. Capitalization; Ownership of ATI Capital Stock
(a) Capitalization. The authorized capital stock of ATI consists of (i)
25,000,000 shares of ATI Common Stock, of which, as of the date hereof, 354,766
shares are issued and outstanding and 1,200,000 shares are reserved for
issuance, upon exercise of outstanding options to purchase such stock, and (ii)
20,000,000 shares of preferred stock, par value $.10 per share, of which
15,000,000 shares have been designated as the ATI Stock, of which, as of the
date hereof, 11,243,219.03 shares are issued and outstanding. Each share of
capital stock of ATI which is outstanding as of the date hereof is duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights. Except as indicated in Section 3.4(a) or except as set forth in the
Disclosure Letter, there are no shares of capital stock of ATI outstanding, and
there are no subscriptions, options, convertible securities, calls, rights,
warrants or other agreements, claims or commitments of any nature whatsoever
obligating ATI or any of its subsidiaries to issue, transfer, deliver or sell,
or cause to be issued, transferred, delivered or sold, additional shares of the
capital stock or other securities of ATI or obligating ATI or any of its
subsidiaries to grant, extend or enter into any such agreement or commitment.
(b) Ownership. The ATI Stockholders are the record and beneficial owners of
all shares of ATI Stock or ATI Common Stock to be exchanged pursuant to Section
2.3 and their relative share ownership is set forth in the Disclosure Letter,
and, at the Closing, the ATI Stockholders will own all such shares free and
clear of any liens, claims, options, charges, encumbrances or rights of others.
(c) Capital Stock of ATI Subsidiaries. The ATI Disclosure Letter sets forth
a true, correct and complete list of all its subsidiaries, the jurisdiction in
which each is incorporated or organized, and all shares of capital stock or
other ownership interests authorized, issued and outstanding of each such
subsidiary. The outstanding shares of capital stock or other equity interests of
each such subsidiary have been duly authorized and are validly issued, fully
paid and nonassessable. All shares of capital stock or other equity interests of
each such subsidiary owned by ATI or any of its subsidiaries are set forth in
the ATI Disclosure Letter and are owned by ATI, either directly or indirectly,
free and clear of all liens, claims, options, charges, encumbrances or rights of
others.
SECTION 3.5. Financial Statements. ATI has made available to Parent the
audited consolidated balance sheets of ATI and its subsidiaries as of December
31, 1994, 1995 and 1996, and the related statements of operations, stockholders'
equity and cash flows for the fiscal years then ended, including the notes
thereto, and the unaudited consolidated balance sheet of ATI and its
subsidiaries as of November 30, 1997 and the related statement of operations,
stockholders' equity and cash flow for the eleven-month period then ended,
including the notes thereto. All of the foregoing financial statements are
hereinafter collectively referred to as the "ATI Financial Statements", and the
balance sheet as of November 30, 1997 is hereinafter referred to as the "1997
Balance Sheet". The ATI Financial Statements are complete and correct, have been
prepared from, and are in accordance with, the books and records of ATI and
present fairly the financial position and results of operations of ATI and its
subsidiaries as of the dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles, consistently applied.
As of the Closing Date, ATI shall have no liability or obligation of any nature
whatsoever, whether accrued, absolute, contingent or otherwise, other than (x)
current liabilities and obligations which are recurring in nature, (y)
liabilities and obligations reflected and adequately provided for on the 1997
Balance Sheet and (z) liabilities and obligations arising in the ordinary course
of business of ATI and its subsidiaries, or in connection with the transactions
contemplated hereby, since the date of the 1997 Balance Sheet. The ATI
Disclosure Letter sets forth a true and complete list of all loss contingencies
(within the meaning of Statement of Financial Accounting Standards No. 5) of ATI
exceeding $30,000 in the case of any single loss contingency or $100,000 in the
case of all loss contingencies.
SECTION 3.6. Absence of Certain Changes
(a) Certain Financial Matters;Property;Dividends. Since the date of the
1997 Balance Sheet, there has not been (i) any material adverse change in the
assets, liabilities, results of operations, financial condition or business of
ATI and its subsidiaries taken as a whole, (ii) any damage, destruction, loss or
casualty to property or assets of ATI or its subsidiaries, whether or not
covered by insurance, which property or assets are material to its operations or
business, (iii) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of the capital
stock of ATI, or any redemption or other acquisition by ATI of any of the
capital stock of ATI or any split, combination or reclassification of shares of
capital stock declared or made by ATI, or (iv) any agreement to do any of the
foregoing.
(b) Other Changes. Since the date of the 1997 Balance Sheet, there have not
been (i) any material losses suffered other than in the ordinary course of
business, (ii) any material assets mortgaged, pledged or made subject to any
lien, charge or other encumbrance, (iii) any material liability or obligation
(absolute, accrued or contingent) incurred or any material bad debt, contingency
or other reserve increase suffered, except, in each such case, in the ordinary
course of business and consistent with past practice, (iv) any material claims,
liabilities or obligations (absolute, accrued or contingent) paid, discharged or
satisfied, other than the payment, discharge or satisfaction, in the ordinary
course of business and consistent with past practice, of claims, liabilities and
obligations reflected or reserved against in the ATI Financial Statements or
incurred in the ordinary course of business and consistent with past practice
since the date of the ATI Financial Statements, (v) any material guarantees,
checks, notes or accounts receivable written off as uncollectible, except
write-offs in the ordinary course of business and consistent with past practice,
(vi) any write down of the value of any asset or investment on ATI's books or
records, except for depreciation and amortization taken in the ordinary course
of business and consistent with past practice, (vii) any cancellation of any
material debts or waiver of any material claims or rights of substantial value,
or sale, transfer or other disposition of any material properties or assets
(real, personal or mixed, tangible or intangible) of substantial value, except,
in each such case, in transactions in the ordinary course of business and
consistent with past practice and which in any event do not exceed $10,000 in
the aggregate, (viii) any single capital expenditure or commitment in excess of
$10,000 for additions to property or equipment, or aggregate capital
expenditures and commitments in excess of $20,000 for additions to property or
equipment, (ix) any material transactions entered into other than in the
ordinary course of business, (x) any agreements to do any of the foregoing, or
(xi) any other events, developments or conditions of any character that have had
or are reasonably likely to have a material adverse effect on the assets,
liabilities, results of operations, financial condition or business of ATI and
its subsidiaries taken as a whole.
SECTION 3.7. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending or, to the best knowledge of ATI,
threatened against, relating to or involving ATI or any of its subsidiaries (or
any of their respective officers or directors) before any court, arbitrator or
administrative or governmental body, which, if finally determined adversely, are
reasonably likely, individually or in the aggregate, to have a material adverse
effect on the assets, liabilities, results of operations, financial condition,
business of ATI and its subsidiaries taken as a whole. All pending or threatened
suits, actions, claims, proceedings or investigations relating to or involving
ATI or any of its subsidiaries (or any of their respective officers or
directors) before any court, arbitrator or administrative or governmental body
are adequately provided for in the 1997 Balance Sheet in accordance with
generally accepted accounting principles. Neither ATI nor any of its
subsidiaries is subject to any judgment, decree, injunction, rule or order of
any court nor is either ATI or any of its subsidiaries subject to any
governmental restriction applicable to it, which is reasonably likely (a) to
have a material adverse effect on the assets, liabilities, results of
operations, financial condition or business of ATI and its subsidiaries taken as
a whole, or (b) to cause a material limitation on the ability of Parent to
operate the business of ATI after the Closing.
SECTION 3.8. Compliance with Law. Each of ATI and its subsidiaries has all
material authorizations, approvals, licenses and orders of and from all
governmental and regulatory officers and bodies necessary to carry on its
business as it is currently being conducted, to own or hold under lease the
properties and assets it owns or holds under lease and to perform all of its
obligations under the agreements to which it is a party, and each of ATI and its
subsidiaries has been and is in compliance with all applicable laws, regulations
and administrative orders of any country, state or municipality or of any
subdivision thereof to which its business or its employment of labor or its use
or occupancy of properties or any part thereof are subject, the failure to
obtain or the violation of which would have a material adverse effect upon its
assets, liabilities, results of operations, financial condition or business of
ATI and its subsidiaries taken as a whole.
SECTION 3.9. ATI Material Contracts. The ATI Disclosure Letter contains a
correct and complete list of the following (hereinafter referred to as the "ATI
Material Contracts"):
(a) all bonds, debentures, notes, mortgages, indentures or guarantees to
which ATI or any of its subsidiaries is a party or by which any of its
properties or assets (real, personal or mixed, tangible or intangible) is bound;
(b) all material leases to which ATI or any of its subsidiaries is a party
or by which any of their respective properties or assets (real, personal or
mixed, tangible or intangible) is bound;
(c) all loans and credit commitments to ATI or any of its subsidiaries
which are outstanding, together with a brief description of such commitments and
the name of each financial institution granting the same;
(d) all contracts or agreements which limit or restrict ATI or any of its
subsidiaries from engaging in any business in any jurisdiction or limit or
restrict others from competing with ATI or any of its subsidiaries in any
jurisdiction;
(e) all agreements and documentation evidencing currently outstanding loans
or advances made by ATI or any of its subsidiaries to or on behalf of its
customers; and
(f) all existing contracts and commitments (other than those described in
subparagraphs (a), (b), (c), (d) or (e) of this Section 3.9, the ATI Customer
Contracts (as hereinafter defined)), and the ATI Benefit Plans (as hereinafter
defined) to which ATI or any of its subsidiaries is a party or by which their
respective properties or assets may be bound involving an annual commitment or
annual payment by any party thereto of more than $25,000 individually, or which
have a fixed term extending more than twelve (12) months from the date hereof
and which involve a total commitment or payment by any party thereto of more
than $50,000.
To the best knowledge of ATI, true and complete copies of all ATI
Material Contracts, including all amendments thereto, have been made available
to Parent. The ATI Material Contracts are valid and enforceable in accordance
with their respective terms with respect to ATI and valid and enforceable in
accordance with their respective terms with respect to any other party thereto,
in each case to the extent material to the business and operations of ATI, and
subject to applicable bankruptcy, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies. Except for events
or occurrences, the consequences of which, individually or in the aggregate,
would not have a material adverse effect on the assets, liabilities, results of
operations, financial condition or business of ATI and its subsidiaries taken as
a whole, there is not under any of the ATI Material Contracts any existing
breach, default or event of default by ATI or event that with notice or lapse of
time or both would constitute a breach, default or event of default by ATI, nor
does ATI know of, and ATI has not received notice of, or made a claim with
respect to, any breach or default by any other party thereto.
SECTION 3.10. ATI Customer Contract. The ATI Disclosure Letter sets forth a
true and complete list of all agreements or contracts pursuant to which ATI or
any of its subsidiaries provides goods or services to their respective customers
(the "ATI Customer Contracts"). Neither ATI nor any of its subsidiaries provides
goods or services to their respective customers pursuant to verbal or oral
agreements or contracts. The ATI Disclosure Letter sets forth a true and
complete list of all customers of ATI which the management of ATI reasonably
believes in good faith may terminate their contracts with ATI or may assert a
claim for damages against ATI as a result of a default by ATI of its obligations
under such contract or for any other reason, other than customer terminations
arising in the ordinary course of business consistent with past practices and
which do not in any event in the aggregate involve annual revenues of $50,000 or
more. The execution, delivery and performance of this Agreement by ATI and the
Signing Stockholder and the consummation of the transactions contemplated hereby
by ATI and the Signing Stockholder will not, with the passing of time or giving
of notice or both, violate or conflict with or constitute a default under or
give rise to a termination right under any ATI Customer Contract except such
violations, conflicts and defaults which in the aggregate would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition or business of ATI and its subsidiaries taken as a whole.
SECTION 3.11. Tax Returns; Taxes. Each of ATI and its subsidiaries has duly
filed all federal, state, local and foreign tax returns required to be filed by
it and has duly paid or made adequate provision for the payment of all taxes
which are due and payable pursuant to such returns or pursuant to any assessment
with respect to taxes in such jurisdictions, whether or not in connection with
such returns, except for incidental interest and penalties which may be due and
payable, but which are not material in amount. The liability for taxes reflected
in the 1997 Balance Sheet is sufficient for the payment of all unpaid taxes,
whether or not disputed, that are accrued or applicable for the period ended
November 30, 1997, and for all years and periods ended prior thereto. All
deficiencies asserted as a result of any examinations by the Internal Revenue
Service ("IRS") or any other taxing authority have been paid, fully settled or
adequately provided for in the 1997 Balance Sheet. There are no pending claims
asserted for taxes of ATI or any of its subsidiaries or outstanding agreements
or waivers extending the statutory period of limitation applicable to any tax
return of ATI or any of its subsidiaries for any period. Each of ATI and its
subsidiaries has made all estimated income tax deposits and all other required
tax payments or deposits and has complied for all prior periods in all material
respects with the tax withholding provisions of all applicable federal, state,
local, foreign and other laws. ATI has made available to Parent true, complete
and correct copies of federal income tax returns of ATI and its subsidiaries for
the last three (3) taxable years and made available such other tax returns
requested by Parent.
SECTION 3.12. Officers, Directors, and Employees. The ATI Disclosure Letter
contains a true and complete list of all of the officers and directors of ATI
and each of its subsidiaries, specifying their office and annual rate of
compensation, and a true and complete list of all of the employees of ATI as of
the date hereof with whom ATI has a written employment agreement or to whom ATI
has made verbal or oral commitments which are binding on ATI or who have an
annual rate of compensation in excess of $50,000.
SECTION 3.13. ATI Employee Benefit Plans
(a) Definition of Benefit Plans. For purposes of this Section 3.13, the
term "ATI Benefit Plan" means any plan, program, arrangement, fund, policy,
practice or contract which, through which or under which ATI or an ATI ERISA
Affiliate (as hereinafter defined) provides benefits or compensation to or on
behalf of employees or former employees of ATI or an ATI ERISA Affiliate (as
hereinafter defined), whether formal or informal, whether or not written,
including but not limited to the following:
(1) Arrangements -- any bonus, incentive compensation, stock option,
deferred compensation, commission, severance pay, golden parachute or other
compensation plan or rabbi trust;
(2) ERISA Plans -- any "employee benefit plan" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
including, but not limited to, any multi-employer plan (as defined in Section
3(37) and Section 4001(a)(3) of ERISA), defined benefit plan, profit sharing
plan, money purchase pension plan, 401(k) plan, savings or thrift plan, stock
bonus plan, employee stock ownership plan, or any plan, fund, program,
arrangement or practice providing for medical (including post-retirement
medical), hospitalization, accident, sickness, disability, or life insurance
benefits; and
(3) Other Employee Fringe Benefits -- any stock purchase, vacation,
scholarship, day care, prepaid legal services, dependent care, telephone,
automobile, dependent travel or other fringe benefit plans, programs,
arrangements, contracts or practices.
(b) ATI ERISA Affiliate. For purposes of this Section 3.13, the term "ATI
ERISA Affiliate" means each trade or business (whether or not incorporated)
which together with ATI is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code").
(c) Identification of Benefit Plans. Except as described in the ATI
Disclosure Letter, ATI does not maintain, nor has it at any time established or
maintained, nor has it at any time been obligated to make, or otherwise made,
contributions to or under or otherwise participated in any ATI Benefit Plan.
(d) MEPPA Liability/Post-Retirement Medical Benefits. Except as described
in the ATI Disclosure Letter, neither ATI nor any ATI ERISA Affiliate maintains,
nor has at any time established or maintained, nor has at any time been
obligated to make, or made, contributions to or under any multi-employer plan.
Except as described in the ATI Disclosure Letter, ATI does not maintain, nor has
it at any time established or maintained, nor has it at any time been obligated
to make, or made, contributions to or under (i) any plan which provides
post-retirement medical or health benefits with respect to employees of ATI;
(ii) any organization described in Sections 501(c)(9) or 501(c)(20) of the Code;
(iii) any defined benefit pension plan or money purchase pension plan subject to
Title IV of ERISA; or (iv) any plan which provides retirement benefits in excess
of the limitations in Sections 401(a)(17), 401(k), 401(m), 402(g) or 415 of the
Code. There is no lien upon any property of ATI or any ATI ERISA Affiliate
outstanding pursuant to Section 412(n) of the Code in favor of any ATI Benefit
Plan. No assets of ATI or any ATI ERISA Affiliate have been provided as security
for any ATI Benefit Plan pursuant to Section 401(a)(29) of the Code.
(e) Documentation. ATI has made available to Parent a true and complete
copy of the following documents, if applicable, with respect to each ATI Benefit
Plan identified in the ATI Disclosure Letter: (i) all documents, including any
insurance contracts and trust agreements, setting forth the terms of the ATI
Benefit Plan, or if there are no such documents evidencing the ATI Benefit Plan,
a full description of the ATI Benefit Plan; (ii) the ERISA summary plan
description and any other summary of plan provisions provided to participants or
beneficiaries for each such ATI Benefit Plan; (iii) the annual reports filed for
the most recent three (3) plan years and most recent financial statements or
periodic accounting of related plan assets with respect to each ATI Benefit
Plan; (iv) the most recent favorable determination letter, opinion or ruling
from the IRS for each ATI Benefit Plan, the assets of which are held in trust,
to the effect that such trust is exempt from federal income tax; and (v) each
opinion or ruling from the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC") with respect to such ATI Benefit Plans.
(f) Qualified Status. Except as described in the ATI Disclosure Letter,
each ATI Benefit Plan that is funded through a trust or insurance contract has
at all times satisfied in all respects, by its terms and in its operation, all
applicable requirements for an exemption from federal income taxation under
Section 501(a) of the Code. Neither ATI nor any ATI ERISA Affiliate maintains an
ATI Benefit Plan which meets the requirements of Section 401(a) of the Code
(each a "401 Plan"). Any determination letter issued by the IRS to the effect
that any such 401 Plan qualifies under Section 401(a) of the Code and that the
related trust is exempt from taxation under Section 501(a) of the Code remains
in effect and has not been revoked. Each such 401 Plan, if any, currently
complies in form with the requirements under Section 401(a) of the Code, other
than changes required by statutes, regulations and rulings for which amendments
are not yet required. Each such 401 Plan, if any, has been administered
according to its terms (except for those terms which are inconsistent with the
changes required by statutes, regulations and ruling for which changes are not
yet required to be made, in which case any such 401 Plan has been administered
in accordance with the provisions of those statutes, regulations and rulings)
and in accordance with the requirements of Section 401(a) of the Code. Each such
401 Plan, if any, has been tested for compliance with, and has satisfied the
requirements of, Section 401(k)(3) and 401(m)(2) of the Code for each plan year
ending prior to the Effective Date.
(g) Compliance. Except as described in the ATI Disclosure Letter, each ATI
Benefit Plan maintained by ATI or an ATI ERISA Affiliate has at all times been
maintained, by its terms and in operation, in accordance with all applicable
laws in all material respects, including (to the extent applicable) Code Section
4980B. There has been no failure to comply with applicable ERISA or other
requirements concerning the filing of reports, documents and notices with the
Secretary of Labor and Secretary of Treasury or the furnishing of such documents
to participants or beneficiaries that could subject any ATI Benefit Plan, ATI,
any ATI ERISA Affiliate, Parent or any of its affiliates to any material civil
or any criminal sanction.
(h) Legal Actions. There are no actions, audits, suits or claims known to
the Signing Stockholder which are pending or threatened against any ATI Benefit
Plan, any fiduciary of any of ATI Benefit Plans with respect to the ATI Benefit
Plans or against the assets of any of the ATI Benefit Plans, except claims for
benefits made in the ordinary course of the operation of such plans.
(i) Funding. ATI and each ATI ERISA Affiliate has made full and timely
payment of all amounts required to be contributed under the terms of each ATI
Benefit Plan and applicable law or required to be paid as expenses under such
ATI Benefit Plan, and no excise taxes are assessable as a result of any
nondeductible or other contributions made or not made to an ATI Benefit Plan. No
event or condition exists with respect to any ATI Benefit Plan subject to Title
IV of ERISA which could be deemed a "Reportable Event" (as defined in Title IV
of ERISA) with respect to which the thirty (30) day notice requirement has not
been waived which could result in a material liability to ATI, and no condition
exists which would subject ATI to a material fine under Section 4071 of ERISA.
The assets of all ATI Benefit Plans which are required under applicable laws to
be held in trust are in fact held in trust, and the assets of each such ATI
Benefit Plan equal or exceed the liabilities of each such plan. The liabilities
of each other plan are properly and accurately reported on the financial
statements and records of ATI. The assets of each ATI Benefit Plan are reported
at their fair market value on the books and records of each plan.
(j) Liabilities. Neither ATI nor any ATI ERISA Affiliate is subject to any
material liability, tax or penalty whatsoever to any person whomsoever as a
result of ATI's or any ATI ERISA Affiliate's engaging in a prohibited
transaction under ERISA or the Code, and the Stockholder has no knowledge of any
circumstances which reasonably might result in any such material liability, tax
or penalty as a result of a breach of fiduciary duty under ERISA. The
termination of or withdrawal from any ATI Benefit Plan maintained by ATI or an
ATI ERISA Affiliate which is subject to Title IV of ERISA or any other ATI
Benefit Plan immediately after the Effective Time will not subject Parent, the
Surviving Corporation, Merger Sub or any ATI ERISA Affiliate to any additional
contribution requirement or to any other liability, tax or penalty whatsoever
(excluding any liability, tax or penalty attributable solely to the fact that
such termination or withdrawal would violate the permanency requirement of
Section 401 (a) of the Code or an excise tax under Code Section 4980). Neither
the execution nor the performance of the transactions contemplated by this
Agreement will create, accelerate or increase any obligations under any ATI
Benefit Plan. Neither ATI nor any ATI ERISA Affiliate has any obligation to any
retired or former employee, or any current employee upon retirement, under any
ATI Benefit Plan.
(k) Amendment/New Plans. From the date of this Agreement to the Effective
Time, no amendment shall be made to any ATI Benefit Plan, no commitment shall be
made to amend any ATI Benefit Plan and no commitment shall be made to continue
any ATI Benefit Plan or to adopt any new ATI Benefit Plan for the benefit of any
employees of ATI or any ATI ERISA Affiliate absent the express written consent
of Parent.
(l) Excess Parachute Payments. No payment required to be made to any
employee associated with ATI as a result of the transactions contemplated hereby
under any contract or otherwise will, if made, constitute an "excess parachute
payment" within the meaning of Section 280G of the Code or be nondeductible
under Section 162(m) of the Code.
(m) No Acceleration of Liability Under Benefit Plans. The consummation of
the transactions contemplated hereby will not accelerate or increase any
liability under any ATI Benefit Plan because of an acceleration or increase of
any of the rights or benefits to which employees of ATI or any ATI ERISA
Affiliate may be entitled thereunder.
(n) Statutory Benefits. Except as described in the ATI Disclosure Letter,
ATI has, on a timely basis, made all payments, withholdings and filings of any
kind required of it by, and has otherwise complied in all material respects
with, any applicable law, regulation or administrative order concerning pension,
health, welfare, unemployment, workers' compensation or similar benefits
administered by any governmental, regulatory or public body.
SECTION 3.14. Labor Relations. To the best knowledge of ATI, each of ATI
and its subsidiaries is in compliance in all material respects with all federal,
state and foreign laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, and is not engaged in any unfair
labor or unlawful employment practice. There is no unlawful employment practice
discrimination charge involving ATI pending before the Equal Employment
Opportunity Commission ("EEOC"), EEOC-recognized state "referral agency" or any
other governmental agency. There is no unfair labor practice charge or complaint
against ATI or any of its subsidiaries pending before the National Labor
Relations Board ("NLRB"). There is no labor strike, dispute, slowdown or
stoppage actually pending or, to the best knowledge of ATI, threatened against
or involving or affecting ATI or any of its subsidiaries, and no NLRB
representation question exists respecting any of its employees. No grievance or
arbitration proceeding is pending against ATI and no written claim therefor
exists. There is no collective bargaining agreement that is binding on ATI or
any of its subsidiaries.
SECTION 3.15. Insurance. ATI has heretofore provided to Parent a true and
complete list of its current insurance coverages for ATI and its subsidiaries,
including names of carriers, amounts of coverage and premiums therefor. Each of
ATI and its subsidiaries has been and is insured with respect to its properties
and the conduct of its business in such amounts and against such risks as are
reasonable in relation to its business and will use its reasonable efforts to
maintain such insurance at least through the Effective Time. ATI has made
available to Parent true and complete copies of all insurance policies covering
ATI and its subsidiaries, its properties, assets, employees and/or operations.
SECTION 3.16. Title to Properties and Related Matters. Each of ATI and its
subsidiaries has good and valid title to or valid leasehold interests in its
properties reflected in the 1997 Balance Sheet or acquired after the date
thereof (other than properties sold or otherwise disposed of in the ordinary
course of business), and all of such properties are held free and clear of all
title defects, liens, encumbrances and restrictions, except, with respect to all
such properties, (a) mortgages and liens securing debt reflected as liabilities
on the 1997 Balance Sheet and (b)(i) liens for current taxes and assessments not
in default, (ii) mechanics', carriers', workmen's, materialmen's, repairmen's,
statutory or common law liens either not delinquent or being contested in good
faith, and (iii) encumbrances, covenants, rights of way, building or use
restrictions, easements, exceptions, variances, reservations and other similar
matters or limitations, if any, which do not have a material adverse effect on
ATI's use of the property affected. Notwithstanding the immediately preceding
sentence, ATI makes no representation or warranty in this Section 3.16 or
otherwise regarding the validity of title to any such properties in which ATI
has only a leasehold interest.
SECTION 3.17. Environmental Matters. Neither ATI nor any of its
subsidiaries owns, nor has at any time owned, any real property. To the best
knowledge of ATI, there has been no material release of a hazardous substance,
as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601(14), or any petroleum
product by ATI or any of its subsidiaries into the environment at any property
ever owned, leased or used by ATI or any of its subsidiaries (the "Premises"),
including, without limitation, any such release in the soil or groundwater
underlying the Premises and, to the best knowledge of ATI, there has been no
such release by any other party at any of the Premises. To the best knowledge of
ATI, neither ATI nor any of its subsidiaries has disposed of any hazardous
substances (as defined below). ATI has not received notice of any violation of
any Environmental Law (as defined below) nor has it been advised of any claim or
liability pursuant to any Environmental Law brought by any domestic or foreign
governmental agency or private party. There are no Environmental Liabilities (as
defined below) of ATI that, individually or in the aggregate, have had or would
reasonably be expected to have a material adverse effect on the assets,
liabilities, results of operations, financial condition or business of ATI and
its subsidiaries taken as a whole. As used in this Agreement, "Environmental
Laws" means any and all federal, state, local and foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, decrees,
codes, plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions, whether now or hereafter in effect,
relating to human health, the environment or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Substances or wastes into the
environment, including without limitation ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof. "Environmental Liabilities" with respect to any
person means any and all liabilities of or relating to such person or any of its
subsidiaries (including any entity which is, in whole or in part, a predecessor
of such Person or any of its subsidiaries), whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which (i) arise
under or relate to matters covered by Environmental Laws and (ii) relate to
actions occurring or conditions existing on or prior to the Closing Date.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, including, without limitation, any substance
regulated under Environmental Laws.
SECTION 3.18. Patents, Trademarks, trade Names. The ATI Disclosure Letter
sets forth a true and complete list of: (a) all material patents, trademarks and
trade names (including all federal, state and foreign registrations pertaining
thereto) and all material copyright registrations owned by ATI or any of its
subsidiaries (collectively, the "Proprietary Intellectual Property"); and (b)
all patents, trademarks, trade names, copyrights and all technology and
processes used by ATI in its business which are material to its business and are
used pursuant to a license or other right granted by a third party
(collectively, the "Licensed Intellectual Property" and, together with the
Proprietary Intellectual Property, herein referred to as "Intellectual
Property"). A true and complete list of all such licenses with respect to
Licensed Intellectual Property is set forth in the ATI Disclosure Letter. Each
of the federal, state and foreign registrations pertaining to the Proprietary
Intellectual Property is valid and in full force and effect. All required
filings in association with such registrations have been properly made and all
required fees have been paid. ATI owns, or has the right to use pursuant to
valid and effective agreements, all Intellectual Property, and the consummation
of the transactions contemplated hereby will not alter or impair any such
rights, except for such defects in title or other matters which in the aggregate
would not have a material adverse effect on the assets, liabilities, results of
operations, financial condition or business of ATI and its subsidiaries taken as
a whole. No claims are pending against ATI by any person with respect to the use
of any Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to the same, and, to the best
knowledge of ATI, the current use by ATI or any of its subsidiaries of the
Intellectual Property does not infringe on the rights of any third party. The
ATI Disclosure Letter sets forth a list of all jurisdictions in which ATI is
operating under a trade name, and each jurisdiction in which any such trade name
is registered.
SECTION 3.19. Transactions with Affiliates. No stockholder or director of
ATI, or any person with whom any such stockholder or director has any direct or
indirect relation by blood, marriage or adoption, or any entity in which any
such person owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by all such persons) has any interest in (i) any contract, arrangement or
understanding with, or relating to, the business or operations of ATI or any of
its subsidiaries, (ii) any loan, arrangement, understanding, agreement or
contract for or relating to indebtedness of ATI or any of its subsidiaries, or
(iii) any property (real, personal or mixed, tangible or intangible) used, or
currently intended to be used, in the business or operations of ATI.
SECTION 3.20. Brokers, Finders,and Investment Bankers. Neither ATI nor any
of its officers, directors or employees has employed any broker, finder or
investment banker or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated herein.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PARENT
With such exceptions, if any, as may be set forth in a letter (the
"Parent Disclosure Letter") to be delivered by Parent to ATI on or before
December 31, 1997 Parent hereby represents and warrants to ATI as follows:
SECTION 4.1. Organization. Each of Parent and Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of Parent and Merger Sub is duly qualified to
transact business, and is in good standing, as a foreign corporation in each
jurisdiction where the character of its activities requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the assets, liabilities, results of operations, financial condition or
business of Parent and its subsidiaries taken as a whole.
SECTION 4.2. Authorization. Each of Parent and Merger Sub has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations under this Agreement and to consummate the Merger and
the other transactions contemplated hereby. The execution and delivery of this
Agreement by Parent and Merger Sub, subject only to the performance by Parent
and Merger Sub of their respective obligations hereunder and the consummation of
the Merger and the other transactions provided for herein, have been duly and
validly authorized by all necessary corporate action on the part of each of
Parent and Merger Sub. The Boards of Directors of each of Parent and Merger Sub
have approved the execution, delivery and performance of this Agreement and the
consummation of the Merger and the other transactions provided for herein. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub
and constitutes the valid and binding agreement of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable principles
and the discretion of courts in granting equitable remedies.
SECTION 4.3. Absence of Restrictions and Conflicts. The execution, delivery
and performance of this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement, and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, result in the loss of any
material benefit under, or permit the acceleration of any obligation under, (i)
any term or provision of the Certificate of Incorporation or Bylaws of Parent or
Merger Sub, (ii) any contract material to the business and operations of Parent
or Merger Sub, (iii) any judgment, decree or order of any court or governmental
authority or agency to which Parent or Merger Sub is a party or by which Parent
or Merger Sub or any of their respective properties is bound, or (iv) any
statute, law, regulation or rule applicable to Parent or Merger Sub, so as to
have, in the case of subsections (ii) through (iv) above, a material adverse
effect on the assets, liabilities, results of operations, financial condition or
business of Parent and its subsidiaries taken as a whole. Except for filing and
recordation of the Certificate of Merger, no consent, approval, order or
authorization of, or registration, declaration or filing with, any government
agency or public or regulatory unit, agency, body or authority with respect to
Parent or Merger Sub is required in connection with the execution, delivery or
performance of this Agreement by Parent or Merger Sub or the consummation of the
transactions contemplated by this Agreement by Parent or Merger Sub, the failure
to obtain which would have a material adverse effect upon the assets,
liabilities, results of operations, financial condition, business of ATI and its
subsidiaries taken as a whole of Parent.
SECTION 4.4. Capitalization of Parent and Ownership of Merger Sub. The
authorized capital stock of Parent consists of 40,000,000 shares of common
stock, $.01 par value per share, of which 19,289,077 shares were issued and
outstanding as of December 22, 1997, and 10,000,000 shares of preferred stock,
$.01 par value per share, of which no shares were issued and outstanding as of
December 1, 1997. All shares of Parent Common Stock outstanding as of the date
hereof are duly authorized, validly issued, fully paid, nonassessable and free
of preemptive rights. The shares of Parent Common Stock to be issued in the
Merger will be validly issued, fully paid, nonassessable and free of preemptive
rights. All of the outstanding capital stock of Merger Sub is held by Parent.
SECTION 4.5. Financial Statements. Parent has made available to ATI the
audited consolidated balance sheets of Parent and its subsidiaries as of
December 31, 1994, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the fiscal years then ended,
including the notes thereto, and the unaudited consolidated balance sheet of
Parent and its subsidiaries as of September 30, 1997 and the related
consolidated statements of operations for the nine months then ended. All of the
foregoing financial statements are hereinafter collectively referred to as the
"Parent Financial Statements" and the balance sheet as of September 30, 1997 is
hereinafter referred to as the "1997 Parent Balance Sheet." The Parent Financial
Statements have been prepared from, and are in accordance with, the books and
records of Parent and present fairly the financial position and results of
operations of Parent as of the dates and for the periods indicated, in each
case, in conformity with generally accepted accounting principles, consistently
applied. As of the Closing Date, Parent shall have no liability or obligation of
any nature whatsoever, whether accrued, absolute, contingent or otherwise, other
than (x) current liabilities and obligations which are recurring in nature and
not overdue on their terms, (y) liabilities and obligations reflected and
adequately provided for on the 1997 Parent Balance Sheet and (z) liabilities and
obligations arising in the ordinary course of business of Parent, or in
connection with the transactions contemplated hereby, since the date of the 1997
Parent Balance Sheet.
SECTION 4.6. Absence of Certain Changes
(a) Certain Financial Matters;Property; Dividends. Since the date of the
1997 Parent Balance Sheet, there has not been (i) any material adverse change in
the assets, liabilities, results of operations, financial condition or business
of Parent and its subsidiaries taken as a whole, (ii) any damage, destruction,
loss or casualty to property or assets of Parent, whether or not covered by
insurance, which property or assets are material to its operations or business,
(iii) any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the capital stock of Parent,
or any redemption or other acquisition by Parent of any of the capital stock of
Parent or any split, combination or reclassification of shares of capital stock
declared or made by Parent, or (iv) any agreement to do any of the foregoing.
(b) Other Changes . Since the date of the 1997 Parent Balance Sheet, there
have not been (i) any losses suffered, (ii) any material assets mortgaged,
pledged or made subject to any lien, charge or other encumbrance, (iii) any
material liability or obligation (absolute, accrued or contingent) incurred or
any material bad debt, contingency or other reserve increase suffered, except,
in each such case, in the ordinary course of business and consistent with past
practice, (iv) any material claims, liabilities or obligations (absolute,
accrued or contingent) paid, discharged or satisfied, other than the payment,
discharge or satisfaction, in the ordinary course of business and consistent
with past practice, of claims, liabilities and obligations reflected or reserved
against in the Parent Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the Parent
Financial Statements, (v) any material guarantees, checks, notes or accounts
receivable written off as uncollectible, except write-offs in the ordinary
course of business and consistent with past practice, (vi) any write down of the
value of any asset or investment on Parent's books or records, except for
depreciation and amortization taken in the ordinary course of business and
consistent with past practice, (vii) any cancellation of any material debts or
waiver of any material claims or rights of substantial value, or sale, transfer
or other disposition of any material properties or assets (real, personal or
mixed, tangible or intangible) of substantial value, except, in each such case,
in transactions in the ordinary course of business and consistent with past
practice ,(viii) any material transactions entered into other than in the
ordinary course of business, (ix) any agreements to do any of the foregoing, or
(x) any other events, developments or conditions of any character that have had
or are reasonably likely to have a material adverse effect on the assets,
liabilities, results of operations, financial condition or business of Parent
and its subsidiaries taken as a whole.
SECTION 4.7. Legal Proceedings. There are no suits, actions, claims,
proceedings or investigations pending or, to the best knowledge of Parent,
threatened against, relating to or involving Parent (or any of its officers or
directors) before any court, arbitrator or administrative or governmental body,
which, if finally determined adversely, are reasonably likely, individually or
in the aggregate, to have a material adverse effect on the assets, liabilities,
results of operations, financial condition or business of Parent and its
subsidiaries taken as a whole. All pending or threatened suits, actions, claims,
proceedings or investigations relating to or involving Parent (or any of its
officers or directors) before any court, arbitrator or administrative or
governmental body are adequately provided for in the 1997 Parent Balance Sheet
in accordance with generally accepted accounting principles. Parent is not
subject to any judgment, decree, injunction, rule or order of any court nor is
Parent subject to any governmental restriction applicable to it, which is
reasonably likely to have a material adverse effect on the assets, liabilities,
results of operations, financial condition or business of Parent and its
subsidiaries taken as a whole.
SECTION 4.8. Compliance with Law. Parent has all material authorizations,
approvals, licenses and orders of and from all governmental and regulatory
officers and bodies necessary to carry on its business as it is currently being
conducted, to own or hold under lease the properties and assets it owns or holds
under lease and to perform all of its obligations under the agreements to which
it is a party, and Parent has been and is in compliance with all applicable
laws, regulations and administrative orders of any country, state or
municipality or of any subdivision thereof to which its business or its
employment of labor or its use or occupancy of properties or any part thereof
are subject, the failure to obtain or the violation of which would have a
material adverse effect upon its assets, liabilities, results of operations,
financial condition or business of Parent and its subsidiaries taken as a whole.
SECTION 4.9. Tax Returns; Taxes. Parent has duly filed all federal, state,
local and foreign tax returns required to be filed by it and has duly paid or
made adequate provision for the payment of all taxes which are due and payable
pursuant to such returns or pursuant to any assessment with respect to taxes in
such jurisdictions, whether or not in connection with such returns. The
liability for taxes reflected in the 1997 Parent Balance Sheet is sufficient for
the payment of all unpaid taxes, whether or not disputed, that are accrued or
applicable for the period ended September 30, 1997, and for all years and
periods ended prior thereto. All deficiencies asserted as a result of any
examinations by the IRS or any other taxing authority have been paid, fully
settled or adequately provided for in the 1997 Parent Balance Sheet. There are
no pending claims asserted for taxes of Parent or outstanding agreements or
waivers extending the statutory period of limitation applicable to any tax
return of Parent for any period. Parent has made all estimated income tax
deposits and all other required tax payments or deposits and has complied for
all prior periods in all material respects with the tax withholding provisions
of all applicable federal, state, local, foreign and other laws.
SECTION 4.10. Parent SEC Reports. Parent has heretofore made available to
ATI Parent's Annual Reports on Form 10-K for the years ended December 31, 1994,
1995 and 1996 (the "Parent SEC Reports"). As of their respective dates, the
Parent SEC Reports did not contain any untrue statement of a material fact or
omit to state any 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. Since January 1, 1994, Parent has filed all forms, reports
and documents with the Securities and Exchange Commission required to be filed
by it pursuant to the Securities Act of 1933, as amended (the "Securities Act"),
and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the rules and regulations promulgated thereunder, each of which complied as to
form, at the time such form, document or report was filed, in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act and the applicable rules and regulations promulgated thereunder.
SECTION 4.11. Transactions with Affiliates. Except as disclosed in the
Parent SEC Reports, no executive officer or director of Parent, or any person
with whom any such executive officer or director has any direct or indirect
relation by blood, marriage or adoption, or any entity in which any such person
owns any beneficial interest (other than a publicly held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than 1% of the stock of which is beneficially owned by all such
persons) has any interest in (i) any contract, arrangement or understanding
with, or relating to, the business or operations of Parent, (ii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness of Parent, or (iii) any property (real, personal or mixed, tangible
or intangible) used, or currently intended to be used, in the business or
operations of Parent.
ARTICLE 5.
CERTAIN COVENANTS AND AGREEMENTS
SECTION 5.1. Conduct of Business by ATI. From the date hereof to the
Effective Time, ATI will, except as required in connection with the Merger and
the other transactions contemplated by this Agreement and except as otherwise
disclosed in the ATI Disclosure Letter or consented to in writing by Parent:
(i) Carry on its businesses in the ordinary course in substantially the
same manner as heretofore conducted and not engage in any new line of business
or enter into any agreement, transaction or activity or make any commitment
except those in the ordinary course of business and not otherwise prohibited
under this Section 5.1;
(ii)Neither change nor amend its Certificate of Incorporation or Bylaws;
(iii) Not sell or grant options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of any of its capital stock of ATI or rights or obligations
convertible into or exchangeable for any shares of its capital stock and not
alter the terms of any of its presently outstanding options, warrants or other
equity securities or make any changes (by split-up, combination, reorganization
or otherwise) in its capital structure;
(iv)Not declare, pay or set aside for payment any dividend or other
distribution in respect of its capital stock or other equity securities, except
for distributions of dividends to its shareholders in the ordinary course of
business consistent with past practice, and not redeem, purchase or otherwise
acquire any shares of its capital stock or other securities or rights or
obligations convertible into or exchangeable for any shares of its capital stock
or other securities or obligations convertible into such, or any options,
warrants or other rights to purchase or subscribe to any of the foregoing;
(v) Not acquire or enter into an agreement to acquire, by merger,
consolidation or purchase of stock or assets, any business or entity;
(vi)Use its reasonable efforts to preserve intact its corporate existence,
goodwill and business organizations, to keep its officers and employees
available to Parent and to preserve its relationships with customers, suppliers
and others having business relations with it;
(vii) Not (A) create, incur or assume any long-term debt (including
obligations in respect of capital leases) or any short-term debt for borrowed
money, (B) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business and consistent with past
practice, (C) make any loans or advances to any other person, except in the
ordinary course of business and consistent with past practice, (D) make any
capital contributions to, or investments in, any person, except in the ordinary
course of business and consistent with past practices with respect to
investments, (E) make any capital expenditure involving in excess of $10,000 in
the case of any single expenditure or $20,000 in the case of all capital
expenditures, or (F) purchase or commit to purchase more than $100,000 of
inventory in the aggregate;
(viii) Not enter into, modify or extend in any manner the terms of any
employment, severance or similar agreements with officers and directors nor pay
or become obligated to pay any bonuses to, or grant any increase in the
compensation of, officers, directors or employees, whether now or hereafter
payable, including any such payment or increase pursuant to any option, bonus,
stock purchase, pension, profit-sharing, deferred compensation, retirement or
other plan, arrangement, contract or commitment; provided, however, that it
shall be permitted hereunder to grant increases in the compensation payable to
employees (but not executives or directors) in the ordinary course of business
consistent with its 1997 budget and which do not in the case of any specific
employee involve an increase in compensation in excess of ten percent (10%) of
such employee's 1996 compensation and which in the aggregate do not involve an
annualized compensation expense increase of $10,000 or more;
(ix)Perform in all material respects all of its obligations under all ATI
Material Contracts (except those being contested in good faith) and not enter
into, assume or amend any contract or commitment that would be an ATI Material
Contract other than contracts to provide services entered into in the ordinary
course of business;
(x) Use its reasonable efforts to maintain in full force and effect and in
the same amounts policies of insurance comparable in amount and scope of
coverage to that now maintained by it;
(xi)Use its reasonable efforts to continue to collect its accounts
receivable and pay its accounts payable in the ordinary course of business and
consistent with past practices; and
(xii) Prepare and file all federal, state, local and foreign returns for
taxes and other tax reports, filings and amendments thereto required to be filed
by it, and allow Parent, at its request, to review all such returns, reports,
filings and amendments at ATI's offices prior to the filing thereof, which
review shall not interfere with the timely filing of such returns.
In connection with the continued operation of ATI's business between
the date of this Agreement and the Effective Time, ATI shall confer in good
faith on a regular and frequent basis with one or more representatives of Parent
designated in writing to report on operational matters of materiality and the
general status of ongoing operations. ATI acknowledges that Parent does not and
will not waive any rights it may have under this Agreement as a result of such
consultations.
SECTION 5.2. Inspection and Access to Information; Confidentiality.
(a) Inspection and Access. Between the date of this Agreement and the
Effective Time, ATI will provide Parent and its accountants, investment bankers,
counsel and other authorized representatives full access, during reasonable
business hours and under reasonable circumstances to any and all of its
premises, properties, contracts, commitments, books, records and other
information (including tax returns filed and those in preparation) and will
cause its respective officers to furnish to the other party and its authorized
representatives any and all financial, technical and operating data and other
information pertaining to its business, as each other party shall from time to
time reasonably request.
(b) Confidentiality. Parent shall, and shall use its best efforts to cause
its authorized representatives to, hold in strict confidence, and not disclose
to any person without the prior written consent of ATI, or use in any manner
except in connection with the transactions contemplated hereby, all information
obtained from ATI in connection with the transactions completed hereby, except
that such information may be disclosed (i) where necessary to any regulatory
authorities or governmental agencies, (ii) if required by court order or decree,
(iii) if it is ascertainable or obtained from public or published information,
(iv) if it is or becomes known to the public other than through disclosure by
such party, (vi) if the recipient can demonstrate it was in its possession prior
to disclosure thereof in connection with the Agreement, (vii) if the recipient
can demonstrate it was independently developed by it, or (viii) if the
disclosing party is advised in writing by counsel that it is legally required to
make such disclosure.
SECTION 5.3. No Solicitation; Acquisition Proposals
(a) No Solicitation. From the date hereof until the Effective Time or until
this Agreement is terminated or abandoned as provided in Article 8, ATI shall
not, nor shall it authorize or permit any officer, director or employee of, or
any attorney or other advisor or representative of ATI to, (i) solicit or
initiate, or encourage the submission of, any Acquisition Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
For purposes hereof, "Acquisition Proposal" means an inquiry, proposal or
acquisition or purchase of a substantial amount of assets of ATI (other than
investors in the ordinary course of business) or of over 10% of any class of
equity securities of ATI, or any merger, consolidation, business combination,
sale of substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving ATI other than the transactions contemplated
hereby, or any other transaction the consummation of which would reasonably be
expected to impede, interfere with, prevent or materially delay the Merger or
which would reasonably be expected to dilute materially the benefits to Parent
of the Merger. ATI will notify Parent promptly in writing if ATI becomes aware
that any inquiries or proposals are received by, any information is requested
from, or any negotiations or discussions are sought to be initiated with ATI
with respect to an Acquisition Proposal. ATI shall immediately cease any
existing activities, discussions or negotiations with any third parties which
may have been conducted on or prior to the date hereof with respect to an
Acquisition Proposal and shall direct and use reasonable efforts to cause its
officers, advisors and representatives not to engage in any such activities,
discussions or negotiations.
(b) Action by Board. Except as set forth herein and subject to its
fiduciary duties, the Board of Directors of ATI shall not (i) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (ii)
enter into any type of agreement or letter of intent with respect to any
Acquisition Proposal.
(c) Liquidated Damages. If, (i) prior to the termination of this Agreement,
ATI proposes to enter into an agreement or letter of intent with respect to any
Acquisition Proposal, it shall concurrently with entering into such agreement or
letter of intent pay, or cause to be paid, in same day funds to Parent up to
$100,000 of the costs and expenses incurred by Parent in connection with the
Merger, including fees and expenses of its accountants and counsel (the
"Expenses"), plus the sum of $250,000 (the "Termination Fee"), or (ii) an
Acquisition Proposal shall have been made prior to the termination of this
Agreement and within one year of such termination ATI enters into an agreement
or letter of intent with respect to, or approves or recommends or takes any
action to facilitate such Acquisition Proposal, ATI shall pay, or cause to be
paid to Parent, in same day funds upon demand, the Expenses and the Termination
Fee, provided that, so long as ATI is not then in breach of any of its
obligations herein, no payment shall be due to Parent under subpart (ii) above
if, at the time of the termination of this Agreement, ATI shall desire in good
faith to proceed with the Merger, and Parent shall elect not to do so. The
parties acknowledge that damages in the event of a breach of this Section 5.3
will be difficult to ascertain, and that the Expenses and the Termination Fee
are intended to be full liquidated damages and such damages represent the
parties' best estimate of their damages. The parties expressly acknowledge that
the foregoing liquidated damages are intended not as a penalty, but as full
liquidated damages, in the event of a breach of this Section 5, and Parent
acknowledges the Expenses and the Termination Fee are its sole and exclusive
remedy for a breach of this Section 5.3.
SECTION 5.4. Reasonable Efforts; Further Assurances; Cooperation. Subject
to the other provisions of this Agreement, the parties hereto shall each use
their reasonable, good faith efforts to perform their obligations herein and to
take, or cause to be taken, or do, or cause to be done, all things necessary,
proper or advisable under applicable law to obtain all regulatory approvals and
satisfy all conditions to the obligations of the parties under this Agreement
and to cause the Merger and the other transactions contemplated herein to be
effected on or prior to January 30, 1998 in accordance with the terms hereof and
shall cooperate fully with each other and their respective officers, directors,
employees, agents, counsel, accountants and other designees in connection with
any steps required to be taken as a part of their respective obligations under
this Agreement, including, without limitation:
(i) ATI and Parent shall promptly make their respective filings and
submissions and shall take, or cause to be taken, all actions and do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to obtain any required approval of any federal, state or local
governmental agency or regulatory body with jurisdiction over the transactions
contemplated by this Agreement.
(ii)In the event any claim, action, suit, investigation or other proceeding
by any governmental body or regulatory authority is commenced which questions
the validity or legality of the Merger or any of the other transactions
contemplated hereby or seeks damages in connection therewith, the parties agree
to cooperate and use all reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use all
reasonable efforts to have such injunction or other order lifted, and to
cooperate reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
(iii) Each party shall give prompt written notice to the other of (A) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty of ATI or Parent, as the case
may be, contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time or that will or
may result in the failure to satisfy any of the conditions specified in Article
6 hereof and (B) any failure of ATI or Parent, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by any of them hereunder.
(iv)Without the prior written consent of Parent, ATI will not terminate any
employee if such termination would result in the payment of any amounts pursuant
to "change in control" provisions of any employment agreement or arrangement.
SECTION 5.5. Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon in advance (unless Parent or ATI are advised by counsel
that any such announcement or other disclosure not mutually agreed upon in
advance is required to be made by law and then only after making a reasonable
attempt to comply with the provisions of this Section 5.5).
SECTION 5.6. Supplements to Disclosure Letters. From time to time prior to
the Effective Time, ATI and Parent will each promptly supplement or amend the
respective disclosure letters which will be delivered pursuant to this Agreement
with respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in any such disclosure letter or which is necessary to correct any
information in any such disclosure letter which has been rendered inaccurate
thereby. No supplement or amendment to any such disclosure letter shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Sections 6.2 or 6.3 of this Agreement.
SECTION 5.7. Continuation of Business. Parent and Surviving Corporation
each agree to continue the historic business of ATI or use a significant portion
of ATI's historic business assets to the extent necessary to fulfill the
continuity requirements for reorganizations under Section 368 of the Code as
described in Treas. Reg. ss. 1.368-1(d).
SECTION 5.8. Stockholder Matters. ATI shall call a special meeting of its
stockholders to be held as soon as practicable after the date hereof for the
purpose of voting upon this Agreement and the Merger and, through its Board of
Directors, recommend to its stockholders approval of this Agreement and the
Merger at such meeting.
SECTION 5.9. Indemnification Against Certain Liabilities. Parent agrees
that all rights to indemnification and all limitations of liability existing in
favor of the officers and directors of ATI ("Indemnified Parties") as provided
in its certificate of incorporation and bylaws as of the date hereof with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in full force and effect, without any amendment
thereto, for a period of not less than six (6) years from the Effective Time;
provided, however, that all rights to any indemnification in respect of any
claim asserted or made within such period shall continue until the final
disposition of such claim.
ARTICLE 6.
OTHER MATTERS
SECTION 6.1. Conditions to Each Party's Obligations. None of the parties
hereto shall be obligated to effect the Merger if, at the Effective Time, (i)
any injunction, writ or preliminary restraining order or any order of any nature
shall have been issued by a court or governmental agency of competent
jurisdiction to the effect that the Merger may not be consummated as herein
provided, (ii) any proceeding or lawsuit shall have been commenced by any
governmental or regulatory agency for the purpose of obtaining any such
injunction, writ or preliminary restraining order, or (iii) written notice shall
have been received from any such agency indicating an intent to restrain,
prevent, materially delay or restructure the transactions contemplated by this
Agreement.
SECTION 6.2. Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of each of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties of
ATI set forth in Article 3 of this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Time as though made on and as of
the Effective Time.
(b) Performance of Obligations of ATI. ATI shall have performed in all
material respects all covenants and agreements required to be performed by it
under this Agreement.
(c) Opinion of Counsel. Parent shall have received an opinion from counsel
for ATI, dated the Closing Date, in form and substance reasonably satisfactory
to Parent, substantially to the effect that:
(i)_) ATI is validly organized, existing, in good standing and authorized
to do business in the state of its incorporation and has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as currently conducted and, to the best of such counsel's knowledge, is
duly qualified to do business in each other state in which the failure to so
qualify would have a material adverse effect on its operations in such state.
(ii)_) The Signing Stockholder and ATI have full power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.
(iii)_) The officers of ATI who have executed this Agreement have the
authority to so execute this Agreement on behalf of ATI.
(iv)_) The Signing Stockholder and ATI have taken all requisite action to
authorize, approve and carry out this Agreement and the transactions on the part
of the Signing Stockholder contemplated hereby.
(v)_) The execution, delivery and performance of this Agreement by the
Signing Stockholder and ATI and the consummation of the transactions on the part
of the Signing Stockholder and ATI contemplated by this Agreement will not
result in any breach, violation, default or acceleration of the obligations of
the Stockholders or ATI under any judgment, decree, order, lease, license,
contract or other agreement which is applicable to the ATI Stockholders or ATI
and of which such counsel has actual knowledge.
(_)vi) Except as may be required by applicable federal and state securities
laws, as to which no opinion need be expressed, the consummation of the
transactions on the part of the Signing Stockholder or ATI contemplated by this
Agreement does not require the consent, approval, authorization or order, giving
of notice to, or the registration with, any court or any Federal, state, or
other governmental authority, agency or instrumentality or any other person of
which such counsel has actual knowledge.
(vii)_) To such counsel's actual knowledge and except with respect to the
pending litigation in the matter of Inverness Corp., et al v. ATI, Inc., et al.
(the "Inverness Matter"), (A) no action or proceeding against the Signing
Stockholder or ATI is pending before any court, or before or by any governmental
body, to restrain, prohibit, invalidate or obtain damages with respect to or
otherwise question or attack the transactions contemplated by this Agreement,
and (B) the Signing Stockholder is not involved in any litigation which might
have an adverse effect on ATI.
(d) Authorization of Merger. All corporate action necessary by ATI to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken.
(e) Consents. All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filing of the Certificate of Merger and any other documents required to be filed
after the Effective Time and except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or registration would
not have a material adverse effect on the business of ATI or Parent, following
the Effective Time.
(f) Certificates. ATI shall furnish Parent with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
6.2(a), (b) and (d).
(g) Material Contracts. Parent shall have received consents to assignment
of all ATI Material Contracts and ATI Customer Contracts or written waivers of
the provisions of any ATI Material Contracts or ATI Customer Contracts requiring
the consents or waivers of third parties as set forth in the ATI Disclosure
Letter, except such required consents and waivers the failure of which to obtain
would not in the aggregate have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business of ATI and its
subsidiaries taken as a whole of ATI following the Effective Time.
(h) Employment Agreement. Mr. Lin shall have executed and delivered an
employment agreement in the form attached hereto as Exhibit 6.2(h) (the
"Employment Agreement").
(i) Non-Competition and Non-Disclosure Agreement. Mr. Lin shall have
executed and delivered a non-competition and non-disclosure agreement in the
form attached hereto as Exhibit 6.2(i) (the "Non-Competition Agreement").
(j) Resignation Letters. Each of the officers and directors of ATI shall
have tendered to Parent resignation letters in form and substance reasonably
acceptable to Parent on or prior to the Closing Date, such resignations to be
effective immediately following the Closing Date.
(k) Repayment of Stockholder Loans. All loans from (or any other amounts
advanced by) ATI to the ATI Stockholders shall have been repaid in full.
(l) Escrow Agreement. Each of the Stockholders and the Escrow Agent shall
have duly executed and delivered the Escrow Agreement.
(m) Stock Purchase Transactions. Parent shall have entered into Stock
Purchase Agreements with at least 16 of the ATI Stockholders listed on Exhibit
6.2(m) hereto, which agreements shall be satisfactory to Parent and such ATI
Stockholders.
(n) Dissenting Stockholders. Holders of not more than five percent (5%) of
the outstanding shares of ATI Stock and ATI Common Stock (in the aggregate)
shall have filed written notice with ATI that they intend to demand payment for
their shares.
(o) Registration Rights Agreement. Each of the Stockholders shall have
executed and delivered a registration rights agreement in the form attached
hereto as Exhibit 6.2(o) (the "Registration Rights Agreement").
(p) Charter Amendment. ATI shall have amended its Certificate of
Incorporation such that the holders of the ATI Stock may receive property other
than cash in the event of a liquidation or deemed liquidation of ATI.
SECTION 6.3. Conditions to Obligations of ATI. The obligations of ATI to
effect the Merger shall be subject to the fulfillment at or prior to the Closing
of each of the following additional conditions:
(a) Representations and Warranties. The representations and warranties of
Parent set forth in Article 4 of this Agreement shall be true and correct as of
the date of this Agreement and as of the Effective Time as though made on and as
of the Effective Time.
(b) Performance of Obligations by Parent. Parent shall have performed in
all material respects all covenants and agreements required to be performed by
it under this Agreement.
(c) Authorization of Merger. All corporate action necessary by Parent and
Merger Sub to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby shall
have been duly and validly taken.
(d) Consents. All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filing of the Certificate of Merger, and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or registration
would not have a material adverse effect on the business of ATI following the
Effective Time.
(e) Certificates. Parent shall furnish ATI with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
6.3(a), (b) and (c).
(f) Employment Agreement. Surviving Corporation and Parent shall have
executed and delivered the Employment Agreement.
(g) Escrow Agreement. Parent and the Escrow Agent shall have duly executed
and delivered the Escrow Agreement.
(h) Non-Competition Agreement. Surviving Corporation and Parent shall have
duly executed and delivered the Non-Competition Agreement.
(i) Registration Rights Agreement. Parent shall have duly executed and
delivered the Registration Rights Agreement.
(j) Opinion of Counsel. ATI shall have received an opinion from counsel for
Parent and Merger Sub, dated the Closing Date, in form and substance
satisfactory to ATI, substantially to the effect that:
(i) The Parent is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, operate and lease its property
and to carry on its business as it is now being conducted and, to such counsel's
knowledge, is duly qualified to do business in each other state in which the
failure to so qualify would have a material adverse effect on its operations in
such state.
(ii) Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, operate and lease its property
and to carry on its business as it is now being conducted and, to such counsel's
knowledge, is duly qualified to do business in each other state in which the
failure to so qualify would have a material adverse effect on its operations in
such state.
(iii)The Parent has the requisite power and authority to enter into the
Agreement and to consummate the transactions contemplated hereby. All corporate
action necessary to authorize the execution, delivery and performance of the
Agreement and the consummation by the Company of the Merger has been duly and
validly taken.
(iv) Merger Sub has the requisite power and authority to enter into the
Agreement and to consummate the transactions contemplated hereby. All corporate
action necessary to authorize the execution, delivery and performance of the
Agreement and the consummation by Merger Sub of the Merger has been duly and
validly taken.
(v) The Agreement has been duly and validly authorized, executed and
delivered by the Company and Merger Sub.
(vi) The Parent Common Stock to be issued by the Parent pursuant to the
terms of the Agreement has been duly authorized and, when issued and delivered,
will be validly issued and fully paid and non-assessable.
(k) Release of Guaranty. The Parent shall have released Mr. Lin from his
personal guaranty made in favor of the Parent, as assignee of BankBoston, N.A.,
relating to certain indebtedness of ATI owing to the Parent.
(l) Certified Resolutions. The Parent shall have delivered to ATI a copy of
the resolutions adopted by the Parent's Board of Directors with respect to the
determination of the "acquisition price" being less than $15 million for
purposes of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, which resolutions shall have been certified by the Secretary or
Assistant Secretary of Parent.
ARTICLE 7.
CLOSING
The consummation of the transactions contemplated by this Agreement are
herein referred to as the "Closing." The "Closing Date" shall be the date on
which the Closing occurs. The Closing shall occur on the first business day
following the day on which the last of the conditions (other than those
conditions which by their terms are to occur only at the Closing) shall have
been satisfied or, if permissible, waived, or such later date as the parties may
agree. The Closing shall take place at the offices of Goodwin, Procter & Hoar
LLP, Boston, Massachusetts or at such other place as ATI and Parent shall agree
in writing.
ARTICLE 8.
TERMINATION
SECTION 8.1. Termination and Abandonment. This Agreement may be terminated
at any time prior to the Closing Date:
(i) by mutual agreement of the Boards of Directors of ATI, Merger Sub and
Parent;
(ii) by ATI, if (A) the conditions set forth in Sections 6.1 and 6.3 hereof
shall not have been complied with or performed and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature cannot
be cured or eliminated) by Parent on or before January 30, 1998, or (B) ATI
determines, in its sole good faith judgment, within five (5) days of the date of
the delivery of the Parent Disclosure Letter, that the exceptions set forth
therein are materially adversely different from the representations and
warranties of Parent in Article 4 hereof, provided that ATI shall inform Parent
upon such termination as to the reasons for its determination; and
(iii) by Parent or Merger Sub, if (A) the conditions set forth in Sections
6.1 and 6.2 hereof shall not have been complied with or performed and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by ATI on or before January 30, 1998,
or (B) Parent determines, in its sole good faith judgment, within five (5) days
of the date of the delivery of the ATI Disclosure Letter, that the exceptions
set forth therein are materially adversely different from the representations
and warranties of ATI in Article 3 hereof, provided that Parent shall inform ATI
upon such termination as to the reasons for its determination, or (C) Parent
determines, in its sole good faith judgment, within five (5) days of the date of
the delivery of the 1997 Balance Sheet, that the financial condition or results
of operations of ATI as of and for the eleven-month period ended November 30,
1997 are materially adversely different from the financial condition or results
of operations of ATI as of and for the fiscal year ended December 31, 1996.
SECTION 8.2. Specific Performance and Other Remedies. The parties hereto
each acknowledge that the rights of each party to consummate the transactions
contemplated hereby are special, unique and of extraordinary character, and
that, in the event that any party violates or fails or refuses to perform any
covenant or agreement made by it herein. the non-breaching party may be without
an adequate remedy at law. Except as otherwise provided by Section 5.3 hereof,
the parties each agree, therefore, that in the event that either party violates
or fails or refuses to perform any covenant or agreement made by such party
herein, the non-breaching party or parties may, subject to the terms of this
Agreement and in addition to any remedies at law for damages or other relief,
institute and prosecute an action in any court of competent jurisdiction to
enforce specific performance of such covenant or agreement or seek any other
equitable relief.
SECTION 8.3. Effect of Termination. In the event of termination of this
Agreement pursuant to this Article 8, this Agreement shall forthwith become void
and there shall be no liability on the part of any party or its respective
officers, directors or stockholders, except for obligations under Section 5.3
and this Section 8.3, all of which shall survive the termination.
Notwithstanding the foregoing, nothing contained herein shall relieve any party
from liability for any breach of any covenant or agreement in this Agreement.
ARTICLE 9.
INDEMNIFICATION
SECTION 9.1. Definitions. For the purposes of this Article 9:
(i) "ATI Indemnitors" shall mean the Signing Stockholder and the
Stockholders (other than any Stockholders who perfect their right to dissent in
accordance with the DGCL).
(ii) "ATI Indemnitors Representative" shall mean Ernest H. Lin.
(iii) "ATI Indemnitees" shall mean the stockholders of ATI, of record and
beneficially, as of the date hereof, and their respective agents,
representatives, employees, heirs, devisees, legatees, successors and assigns.
(iv) "Indemnification Claim" shall mean a claim for indemnification
hereunder.
(v) "Indemnitee" or "Indemnitees" shall mean one or more, as the case may
be, of the Parent Indemnitees and the ATI Indemnitees, without distinction.
(vi) "Indemnitor" or "Indemnitors" shall mean one or more, as the case may
be, of the Parent Indemnitors and the ATI Indemnitors, without distinction.
(vii) "Indemnitors Representative" shall mean Parent or Mr. Lin, without
distinction, as the case may be.
(viii) "Losses" shall mean any and all demands, claims, actions or causes
of action, assessments, losses, damages (including special and consequential
damages), liabilities, costs and expenses, including, without limitation,
interest, penalties, cost of investigation and defense, and reasonable
attorneys' and other professional fees and expenses, provided that Losses shall
be determined net of any insurance proceeds received by the Indemnitee in
respect of the subject matter of an Indemnification Claim.
(ix) "Parent Indemnitees" shall mean Parent, the Surviving Corporation, and
their respective agents, representatives, employees, officers, directors,
shareholders, controlling persons and affiliates (other than the ATI
Stockholders).
(x) "Parent Indemnitors" shall mean Parent and the Surviving Corporation,
jointly and severally.
(xi) "Parent Indemnitors Representative" shall mean Parent.
(xii) "Third Party Claim" shall mean any claim, suit or proceeding
(including, without limitation, a binding arbitration or an audit by any taxing
authority) that is instituted against an Indemnitee by a person or entity other
than an Indemnitor and which, if prosecuted successfully, would result in a Loss
for which such Indemnitee is entitled to indemnification hereunder.
SECTION 9.2. Agreement of ATI Indemnitors to Indemnify. Subject to the
terms and conditions of this Article 9, the ATI Indemnitors, who shall be
jointly liable proportionately on the basis on which their respective Escrow
Shares (assuming the full release thereof to such persons) bears to the total
number of Escrow Shares, and not jointly and severally, such that each
individual ATI Indemnitor's liability under this Section 9.2 shall never exceed
such proportionate amount of the respective Indemnitor's Losses for which
indemnity is sought hereunder (other than with respect to Mr. Lin whose
liability under this Section 9.2 shall not exceed the sum of (a) his
proportionate amount of the Losses determined in accordance with the foregoing
manner and (b) the value of the Signing Stockholder Parent Shares (as
hereinafter defined)), agree to indemnify, defend and hold harmless Parent
Indemnitees, and each of them, from, against, for and in respect of any and all
Losses asserted against, or paid, suffered or incurred by, a Parent Indemnitee
and resulting from, based upon or arising out of:
(i) the inaccuracy, untruth or incompleteness of any representation or
warranty of ATI contained in or made pursuant to this Agreement or the ATI
Disclosure Letter, in each case as supplemented or amended by the ATI Disclosure
Letter, as amended from time to time prior to the Effective Time, or in or made
pursuant to any Exhibit furnished by ATI or the ATI Indemnitors in connection
herewith regardless of whether the same was deliberate, reckless, negligent,
innocent or unintentional;
(ii)a breach of or failure to perform any covenant, undertaking, condition
or agreement of ATI or the ATI Indemnitors made in this Agreement regardless of
whether the same was deliberate, reckless, negligent, innocent or unintentional;
(iii) the business or operations of ATI prior to the Effective Time or the
actions or omissions of ATI's officers, directors, stockholders, employees or
agents prior to the Effective Time, irrespective of the date that any claim,
suit or other course of action related thereto is filed or otherwise instituted,
provided that the foregoing shall not apply to any liability of ATI disclosed in
the ATI Disclosure Letter or reflected in the ATI Financial Statements or the
1997 Balance Sheet;
(iv)any claim by any former stockholder of ATI, or any predecessor thereto,
involving the transactions contemplated hereby or any prior transaction
involving any shares of capital stock of ATI; or
(v) the Inverness Matter to the extent such Losses exceed $300,000.
SECTION 9.3. Agreement of Parent Indemnitors to Indemnify. Subject to the
terms and conditions of this Article 9, the Parent Indemnitors, jointly and
severally, agree to indemnify, defend and hold harmless the ATI Indemnitees, and
each of them, from, against, for and in respect of any and all Losses asserted
against, or paid, suffered or incurred by, each ATI Indemnitee and resulting
from, based upon, arising out of or in connection with:
(i) the inaccuracy, untruth, or incompleteness of any representation or
warranty of any Parent Indemnitor, contained in or made pursuant to this
Agreement or the Parent Disclosure Letter, in each case as supplemented or
amended by the Parent Disclosure Letter, as amended from time to time prior to
the Effective Time, or in or made pursuant to any Exhibit furnished by the
Parent Indemnitors, or either of them, in connection herewith regardless of
whether the same was deliberate, reckless, negligent, innocent or unintentional;
or
(ii)a breach of or failure to perform any covenant, undertaking, condition
or agreement of the Parent Indemnitors, or either of them, made in this
Agreement or in any Exhibit to this Agreement regardless of whether the same was
deliberate, reckless, negligent, innocent or unintentional.
SECTION 9.4. Procedures for Indemnification. The obligations and
liabilities of the parties with respect to an Indemnification Claim shall be
subject to the following terms and conditions:
(i) An Indemnification Claim shall be made by a Parent Indemnitee by
delivery of a written notice to the ATI Indemnitors Representative requesting
indemnification from the ATI Indemnitors and specifying the basis on which
indemnification is sought and the amount of asserted Losses and, in the case of
a Third Party Claim, containing (by attachment or otherwise) such other
information as such Indemnitee shall have concerning such Third Party Claim.
(ii)An Indemnification Claim shall be made by an ATI Indemnitee by delivery
of a written notice to the Parent Indemnitors Representative requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim,
containing (by attachment or otherwise) such other information as such
Indemnitee shall have concerning such Third Party Claim.
(iii) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 9.5 hereof shall also be observed by the
Indemnitee and the Indemnitors Representative.
(iv)If the Indemnification Claim involves a matter other than a Third Party
Claim, the Indemnitors Representative shall have thirty (30) days to object to
such Indemnification Claim by delivery of a written notice of such objection to
such Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the Indemnification Claim by the Indemnitors Representative on behalf of all the
subject Indemnitors, and the Indemnification Claim shall be paid in accordance
with subsection (v) hereof.
(v) Upon determination of the amount of an Indemnification Claim, whether
by agreement between the Indemnitors Representative and the Indemnitee or
otherwise, the Indemnitors shall pay the amount of such Indemnification Claim
within ten (10) days of the date such amount is determined.
SECTION 9.5. Third Party Claims. The obligations and liabilities of the
parties hereunder with respect to a Third Party Claim shall be subject to the
following terms and conditions:
(i) The Indemnitee shall give the applicable Indemnitors Representative
written notice of a Third Party Claim promptly after receipt by the Indemnitee
of notice thereof, and the Indemnitors Representative, on behalf of the
Indemnitors, may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to the Indemnitee. The
failure of the Indemnitee to notify the Indemnitors Representative of such claim
shall not relieve the Indemnitors of any liability that they may have with
respect to such claim except to the extent the Indemnitors Representative
demonstrates that the defense of such claim is prejudiced by such failure. The
assumption of the defense, compromise and settlement of any such Third Party
Claim by the Indemnitors Representative shall be an acknowledgment of the
obligation of the Indemnitors to indemnify the Indemnitee with respect to such
claim hereunder. If the Indemnitee desires to participate in, but not control,
any such defense, compromise and settlement, it may do so at its sole cost and
expense. If, however, the Indemnitors Representative fails or refuses to
undertake the defense of such Third Party Claim within ten (10) days after
written notice of such claim has been given to the Indemnitors Representative by
the Indemnitee, the Indemnitee shall have the right to undertake the defense,
compromise and settlement of such claim with counsel of its own choosing, which
counsel shall be reasonably satisfactory to the Indemnitors Representative and
which settlement, if any, is reasonably satisfactory to the Indemnitor
Representative. In the circumstances described in the immediately preceding
sentence, the Indemnitee shall, promptly upon its assumption of the defense of
such claim, make an Indemnification Claim as specified in Section 9.3 which
shall be deemed an Indemnification Claim that is not a Third Party Claim for the
purposes of the procedures set forth herein.
(ii) If, in the reasonable opinion of the Indemnitee, any Third Party Claim
or the litigation or resolution thereof involves an issue or matter which could
have a material adverse effect on the business, operations, assets, properties
or prospects of the Indemnitee (including, without limitation, the
administration of the tax returns and responsibilities under the tax laws of the
Indemnitee), the Indemnitee shall have the right to control the defense,
compromise and settlement of such Third Party Claim undertaken by the
Indemnitors Representative, and the reasonable costs and expenses of the
Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the Indemnitors hereunder. If the Indemnitee
shall elect to exercise such right, the Indemnitors Representative shall have
the right to participate in, but not control, the defense, compromise and
settlement of such Third Party Claim at its sole cost and expense.
(iii) No settlement of a Third Party Claim involving the asserted liability
of the Indemnitors under this Article 9 shall be made without the prior written
consent by or on behalf of the Indemnitors Representative, which consent shall
not be unreasonably withheld or delayed. Consent shall be presumed in the case
of settlements of $20,000 or less where the Indemnitors Representative has not
responded within five (5) business days of notice of a proposed settlement. If
the Indemnitors Representative assumes the defense of such a Third Party Claim,
(A) no compromise or settlement thereof may be effected by the Indemnitors
Representative without the Indemnitee's 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 claim that may be made against the Indemnitee,
(ii) the sole relief provided is monetary damages that are paid in full by the
Indemnitors, and (iii) the compromise or settlement includes, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnitee of a release, in form and substance satisfactory to the Indemnitee,
from all liability in respect of such Third Party Claim, and (B) the Indemnitee
shall have no liability with respect to any compromise or settlement thereof
effected without its consent.
(iv) In connection with the defense, compromise or settlement of any Third
Party Claim, the parties to this Agreement shall execute such powers of attorney
as may reasonably be necessary or appropriate to permit participation of counsel
selected by any party hereto and, as may reasonably be related to any such claim
or action, shall provide access to the counsel, accountants and other
representatives of each party during normal business hours to all properties,
personnel, books, tax records, contracts, commitments and all other business
records of such other party and will furnish to such other party copies of all
such documents as may reasonably be requested (certified, if requested),
provided that the receiving party agrees to maintain the confidential nature of
the information provided to the receiving party to the reasonable satisfaction
of the party providing such information.
SECTION 9.6. Rights and Remedies Exclusive. Except as expressly provided in
Section 5.3 hereof and except to the extent the same shall have been the result
of common-law fraud, intentional omission or deliberate concealment by or on
behalf of an Indemnitor, the rights of the Indemnitees under this Article 9
shall be the exclusive rights and remedies of the Indemnitees for any breach of
the representations and warranties on the part of any Indemnitor; provided,
however, that this Section 9.6 does not limit the rights of any party under any
of the Exhibits hereto.
SECTION 9.7. Survival. Subject to Section 9.8 hereof, all representations,
warranties and agreements contained in this Agreement or in any certificate,
schedule or exhibit delivered pursuant to this Agreement, in each case as
supplemented or amended by the respective ATI's or the Parent's Disclosure
Letter, as amended from time to time prior to the Effective Time, shall survive
the Closing notwithstanding any investigation conducted with respect thereto or
any knowledge acquired as to the accuracy or inaccuracy of any such
representation or warranty.
SECTION 9.8. Time Limitations
(i) If the Closing occurs, the ATI Indemnitors shall have no liability
under Section 9.2, unless on or before the 18th month anniversary of the Closing
Date the ATI Indemnitors Representative is given notice asserting an
Indemnification Claim with respect thereto; provided, however, that an
Indemnification Claim based upon a breach of the representations and warranties
of ATI contained in (a) Sections 3.1, 3.2, 3.3, 3.4(b) and 3.16 may be made at
any time except as limited by law, (b) Section 3.11 may be made at any time
prior to the expiration of the applicable statutes of limitations relative to
the liability relating thereto; and (c) Section 3.17 may be made at any time
prior to the fifth anniversary of the Closing Date.
(ii) If the Closing occurs, the Parent Indemnitors shall have no liability
under Section 9.3, unless on or before the 18th month anniversary of the Closing
Date the Parent Indemnitors are given notice asserting an Indemnification Claim
with respect thereto; provided, however, that an Indemnification Claim based
upon a breach of the representations and warranties of the Parent Indemnitors
contained in (a) Sections 4.1, 4.2, 4.3 and 4.4 may be made at any time except
as limited by law and (b) Section 4.9 may be made at any time prior to the
expiration of the applicable statutes of limitations relative to the liability
relating thereto.
SECTION 9.9. Limitations as to Amount Payable by ATI Indemnitors. The ATI
Indemnitors shall have no liability with respect to the matters described in
Section 9.2 until the total of all Losses with respect thereto (other than
Losses described in Section 9.2(v)) exceeds $100,000, in which event the ATI
Indemnitors shall be obligated to indemnify the Indemnitees as provided in this
Article 9 for all such Losses. Except as provided below in this Section 9.9, the
maximum amount of any claim against the ATI Indemnitors shall not exceed the sum
of (i) $5,000,000 and (ii) the value of the Parent Shares to be issued to the
Signing Stockholder (the "Signing Stockholder Parent Shares") where such shares
are valued at the Average Closing Price. Notwithstanding anything herein to the
contrary, satisfaction of any claim by the Parent Indemnitees under this Article
9 shall be limited to and made by a redemption of the Parent Shares and Escrow
Shares (with each such share having a value equal to the Average Closing Price)
as follows: first by a redemption of the Signing Stockholder Parent Shares and
second by a redemption of the Escrow Shares which have become releasable under
the terms of the Escrow Agreement to the ATI Stockholders; provided, however,
that if the conditions precedent to the release of all or any portion of the
Escrow Shares have been satisfied, then the satisfaction of any claim by the
Parent Indemnitees under this Article 9 shall be made first by a redemption of
Escrow Shares to the extent released and second by a redemption of the Signing
Stockholder Parent Shares. The limitations set forth above in this Section 9.9
with respect to the aggregate amount of claims made against the ATI Indemnitors
(but not the method of satisfying such claims pursuant to the immediately
preceding sentence hereof) shall not apply to any intentional misrepresentation
or breach of warranty by or on behalf of ATI or any intentional failure to
perform or comply with any covenant or agreement of ATI, and ATI shall be liable
for all Losses with respect thereto.
SECTION 9.10. Limitations as to Amount Payable by Parent and Surviving
Corporation. The Parent Indemnitors shall have no liability with respect to the
matters described in Section 9.2 until the total of all Losses with respect
thereto exceeds $50,000, in which event the Parent Indemnitors shall be
obligated to indemnify the ATI Indemnitees as provided in this Article 9 for all
such Losses up to an aggregate of $2,000,000.
SECTION 9.11. Subrogation. Upon payment in full of any Indemnification
Claim, whether such payment is effected by set-off or otherwise, or the payment
of any judgment or settlement with respect to a Third Party Claim, the
Indemnitors shall be subrogated to the extent of such payment to the rights of
the Indemnitee against any person or entity with respect to the subject matter
of such Indemnification Claim or Third Party Claim.
SECTION 9.12. Appointment of ATI Indemnitors Representative. Each ATI
Indemnitor constitutes and appoints the ATI Indemnitors Representative as his
true and lawful attorney-in-fact to act for and on behalf of such ATI Indemnitor
in all matters relating to or arising out of this Article 9 and the liability or
asserted liability of such ATI Indemnitor hereunder, including specifically, but
without limitation, accepting and agreeing to the liability of such ATI
Indemnitor with respect to any Indemnification Claim, objecting to any
Indemnification Claim, disputing the liability of such ATI Indemnitor, or the
amount of such liability, with respect to any Indemnification Claim and
prosecuting and resolving such dispute as herein provided, accepting the
defense, compromise and settlement of any Third Party Claim on behalf of such
ATI Indemnitor or refusing to accept the same, settling and compromising the
liability of such ATI Indemnitor hereunder, instituting and prosecuting such
actions (including arbitration proceedings) as the ATI Indemnitors
Representative shall deem appropriate in connection with any of the foregoing
and retaining counsel, accountants, appraisers and other advisers in connection
with any of the foregoing, all for the account of the ATI Indemnitor, such ATI
Indemnitor agreeing to be fully bound by the acts, decisions and agreements of
the ATI Indemnitor Representative taken and done pursuant to the authority
herein granted. Each ATI Indemnitor hereby agrees to indemnify and to save and
hold harmless the ATI Indemnitors Representative from any liability incurred by
the ATI Indemnitors Representative based upon or arising out of any act, whether
of omission or commission, of the ATI Indemnitors Representative pursuant to the
authority herein granted, other than acts, whether of omission or commission, of
the ATI Indemnitors Representative that constitute gross negligence or willful
misconduct in the exercise by the ATI Indemnitors Representative of the
authority herein granted. The death or incapacity of any ATI Indemnitor shall
not terminate the authority and agency of the ATI Indemnitors Representative. In
the event of the resignation of an ATI Indemnitors Representative, the resigning
ATI Indemnitors Representative shall appoint a successor either from among the
ATI Indemnitors or who shall otherwise be acceptable to Parent and who shall
agree in writing to accept such appointment, and the resigning ATI Indemnitors
Representative's resignation shall not be effective until such a successor shall
exist. If an ATI Indemnitors Representative should die or become incapacitated,
his successor shall be appointed within thirty (30) days of his death or
incapacity by a majority of the ATI Indemnitors, and such successor either shall
be a Stockholder or shall otherwise be acceptable to Parent. The choice of a
successor ATI Indemnitors Representative appointed in any manner permitted above
shall be final and binding upon all of the ATI Indemnitors. The decisions and
actions of any successor ATI Indemnitors Representative shall be, for all
purposes, those of an ATI Indemnitors Representative as if originally named
herein.
SECTION 9.13. Payment. In the event that any Indemnitor is required to make
any payment under this Article 9, such party shall promptly pay the Indemnitee
the amount so determined. If there should be a dispute as to the amount or
manner of determination of any indemnity obligation owed under this Article 9,
the Indemnitor shall nevertheless pay when due such portion, if any, of the
obligation as shall not be subject to dispute. The difference, if any, between
the amount of the obligation ultimately determined as properly payable under
this Article 9 and the portion, if any, theretofore paid shall bear interest as
provided below. If all or part of any indemnification obligation under this
Agreement is not paid when due, then the Indemnitor shall pay the Indemnitee
interest on the unpaid amount of the obligation for each day from the date the
amount became due until payment in full, payable on demand, at the fluctuating
rate per annum which at all times shall be the lowest rate of interest generally
charged from time to time by Morgan Guaranty Trust Company of New York and
publicly announced by such bank as its so-called "prime rate."
ARTICLE 10.
MISCELLANEOUS PROVISIONS
SECTION 10.1. Notices. All notices, communications and deliveries hereunder
shall be made in writing signed by the party making the same, shall specify the
Section hereunder pursuant to which it is given or being made, and shall be
deemed given or made on the date delivered if delivered in person or on the
third (3rd) business day after it is mailed if mailed by registered or certified
mail (return receipt requested) (with postage and other fees prepaid) as
follows:
To Parent, Merger Sub or the Surviving Corporation:
World Access, Inc.
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326
Attn: Mr. Mark A. Gergel
with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Steven E. Fox, Esq.
To ATI or the Signing Stockholder:
Advanced TechCom, Inc.
181 Ballardvale Street
Wilmington, Massachusetts 01887
Attn: Mr. Ernest H. Lin
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 021909-2881
Attn: Paul W. Lee, Esq.
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing.
SECTION 10.2. Disclosure Letters and Exhibits. The ATI Disclosure Letter
and the Parent Disclosure Letter and all Exhibits hereto are hereby incorporated
into this Agreement and are hereby made a part hereof as if set out in full in
this Agreement.
SECTION 10.3. Assignment; Successors in Interest. No assignment or transfer
by Parent, Merger Sub or ATI of their respective rights and obligations
hereunder prior to the Closing shall be made except with the prior written
consent of the other parties hereto. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their permitted successors
and assigns, and any reference to a party hereto shall also be a reference to a
permitted successor or assign.
SECTION 10.4. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
SECTION 10.5. Captions. The titles, captions and table of contents
contained in this Agreement are inserted herein only as a matter of convenience
and for reference and in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. Unless otherwise specified
to the contrary, all references to Articles and Sections are references to
Articles and Sections of this Agreement and all references to Exhibits are
references to Exhibits to this Agreement and the ATI Disclosure Letter and the
Parent Disclosure Letter.
SECTION 10.6. Controlling Law; Jurisdiction; Integration; Amendment. This
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Georgia without reference to Georgia's choice of
law rules and each of the parties hereto hereby consents to personal
jurisdiction in any federal or state court in the State of Georgia. This
Agreement and the documents executed pursuant hereto supersede all negotiations,
agreements and understandings among the parties with respect to the subject
matter hereof and constitutes the entire agreement among the parties hereto,
this Agreement may not be amended, modified or supplemented except by written
agreement of the parties hereto.
SECTION 10.7. Knowledge. As used in this Agreement, (i) the terms "the best
knowledge of ATI," "known to ATI" or words of similar import used herein with
respect to ATI shall mean the actual knowledge of any senior executive officer
of ATI, together with the knowledge a reasonable business person would have
obtained after making reasonable inquiry and after exercising reasonable
diligence with respect to the matters at hand; and (ii) the terms "the best
knowledge of Parent," "known to Parent" or words of similar import used herein
with respect to Parent shall mean the actual knowledge of any senior executive
officer of Parent, together with the knowledge a reasonable business person
would have obtained after making reasonable inquiry and after exercising
reasonable diligence with respect to the matters at hand.
SECTION 10.8. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect.
SECTION 10.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
SECTION 10.10. Enforcement of Certain Rights. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto, and their successors
or assigns, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, or result in such person, firm or corporation being deemed a
third party beneficiary of this Agreement.
SECTION 10.11. Waiver. At any time prior to the Effective Time, the parties
hereto, by or pursuant to action taken by their respective Boards of Directors
in the case of Parent, Merger Sub and ATI, may, to the extent legally permitted:
(a) extend the time for the performance of any of the obligations or other acts
of any other party; (b) waive any inaccuracies in the representations or
warranties of any other party contained in this Agreement or in any document or
certificate delivered pursuant hereto; (c) waive compliance or performance by
any other party with any of the covenants, agreements or obligations of such
party contained herein; and (d) waive the satisfaction of any condition that is
precedent to the performance by the party so waiving of any of its obligations
hereunder. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. A waiver by one party of the performance of any covenant,
agreement, obligation, condition, representation or warranty shall not be
construed as a waiver of any other covenant, agreement, obligation, condition,
representation or warranty. A waiver by any party of the performance of any act
shall not constitute a waiver of the performance of any other act or an
identical act required to be performed at a later time.
SECTION 10.12. Fees and Expenses. Each party hereto shall pay its own fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including, but not limited to, the fees, costs
and expenses of its financial advisors, accountants and counsel; provided,
however, that the ATI Stockholders shall pay all of such fees, costs and
expenses incurred by ATI in excess of Fifty Thousand Dollars ($50,000).
[Signatures on next pages]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed
this Agreement or have caused this Agreement to be duly executed under seal on
its behalf by an officer or representative thereto duly authorized, all as of
the date first above written.
_____________________________(SEAL)
ERNEST H. LIN
ADVANCED TECHCOM, INC.
By:________________________________
Its:_______________________________
Attest:____________________________
Its:_______________________________
[CORPORATE SEAL]
WORLD ACCESS, INC.
By:________________________________
Its:_______________________________
Attest:____________________________
Its:_______________________________
[CORPORATE SEAL]
CELLULAR INFRASTRUCTURE SUPPLY, INC.
By:_______________________________
Its:______________________________
Attest:___________________________
Its:______________________________
[CORPORATE SEAL]
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into this
29th day of January, 1998, by and between ERNEST H. LIN, a resident of the
Commonwealth of Massachusetts ("Employee"), CELLULAR INFRASTRUCTURE SUPPLY,
INC., a Delaware corporation ("Company"), and WORLD ACCESS, INC., a Delaware
corporation and the parent of the Company (the "Parent").
W I T N E S S E T H:
WHEREAS, the Company and Employee each desire to enter into this
Agreement, pursuant to which the Company will employ the Employee on the terms
and conditions hereinafter set forth and to make certain other agreements;
NOW, THEREFORE, in consideration of the premises and of the promises
and agreement hereinafter set forth, the parties hereto, intending to be legally
bound, do hereby agree as follows:
SECTION 1. Employment.
1.1. General Employment. Subject to the terms hereof, the Company
hereby employs Employee, and Employee hereby accepts such employment. Employee
will devote his full business time and best efforts to rendering services on
behalf of the Company.
SECTION 2. Position.
2.1. Title and Duties. Employee will serve as the President of the
Advanced TechCom Division of the Company (the "ATI Division") and, as such,
Employee will report to the President of the Transport and Access Group of the
Parent. If, at any time after December 31, 1998, the ATI Division is not
performing in accordance with its business plan, then the Parent may remove the
Employee as President, and, if so removed, Employee shall serve as a senior
officer of the ATI Division with such title and having such duties as Employee
and Parent shall mutually agree and the successor President of the ATI Division
to be appointed by Parent shall be reasonably satisfactory to Employee. Employee
shall exercise such authority and perform such duties relating to Company as are
considered standard and typical for an officer in his position. Subject to such
travel requirements as may be reasonably necessary to the performance of
Employee's duties hereunder, Employee will be required to perform the services
and duties provided for in this Agreement only at the location of the offices of
the Company in the Boston, Massachusetts metropolitan area, or at such other
location of the Company as the Employee and the Company may mutually agree.
SECTION 3. Term.
3.1. Initial Term. The employment of Employee hereunder will commence
on the date hereof (the "Effective Date") and will continue until the earlier
of:
(a) December 31, 1999 (the "Initial Term"); or
(b) the occurrence of any of the following events:
(i) the death or total disability of Employee (total
disability meaning the failure of Employee to perform his
normal required services hereunder at his office for a period
of three (3) consecutive months, by reason of Employee's
mental or physical disability as so determined by a licensed
physician selected by the Company satisfactory to Employee);
(ii) the mutual written agreement of the parties
hereto to terminate Employee's employment hereunder; or
(iii) the Company's termination of Employee's
employment hereunder, upon thirty (30) days' prior written
notice to Employee, for "good cause".
(c) For purposes of this Section, "good cause" for termination of
Employee's employment will exist:
(i) if Employee is convicted of (from which no
appeal may be taken), or pleads guilty to, any act of fraud,
misappropriation or embezzlement, or any felony;
(ii) if, in the sole determination of the Board of
Directors of the Company ("Board"), and as set forth in a
written statement executed by the Board (not including
Employee, if he is a Director), Employee has engaged in
conduct or activities materially damaging to the business of
the Company (it being understood, however, that neither
conduct nor activities pursuant to Employee's exercise of his
good faith business judgment nor unintentional physical damage
to any property of the Company by Employee will be a ground
for such a determination by the Board); or
(iii) if Employee has failed without reasonable cause
to devote his full business time and reasonable efforts to the
business of the Company and, after written notice from the
Company of such failure, Employee at any time thereafter again
so fails, provided that the Company gives Employee notice of
such failure prior to or together with any such notice of
termination.
3.2. Renewal. The term of this Agreement will automatically renew after
the expiration of the Initial Term for one or more additional one (1) year terms
unless either party gives notice of non-renewal to the other party at least
sixty (60) days prior to the expiration of the then-existing term, in which
event this Agreement will terminate upon the expiration of the then-existing
term.
SECTION 4. Compensation and Benefits.
4.1. Salary.
(a) The Company will pay Employee a salary at the annual rate
of One Hundred Fifty Thousand Dollars ($150,000) payable bi-weekly in accordance
with the payroll payment practices adopted from time to time by the Company.
Employee shall also be entitled to receive an annual bonus as described in
Section 4.3 hereof.
(b) The Company agrees to consider and, if it deems
appropriate, to declare, from time to time (although no more than once during
each 12 month period commencing each January 1) increases in the salary it pays
Employee based upon inflation, adjustments to the salaries of other senior
management personnel, the past performance of Employee and the contribution
Employee makes to the business and profits of the Company during the term hereof
4.2. Compensation Upon Termination or During Disability.
(a) Should Employee's employment be terminated upon the
expiration of the term of this Agreement, as set forth in Section 3.1(a) or
(b)(ii), the Company shall pay Employee his full salary through the date of such
termination at the rate in effect at that time, and Employee shall have the
right to exercise any and all vested stock options granted to him, pursuant to
the terms and conditions of Parent's stock option plan.
(b) Should Employee's employment be terminated by reason of
his death, as set forth in Section 3.1(b)(i), the Company shall pay to such
person as he shall designate in a notice filed with the Company, or, if no such
person shall be designated, to his estate as a lump sum death benefit, his full
salary to the date of his death, in addition to any payments Employee's spouse,
beneficiaries or estate may be entitled to receive pursuant to any pension or
employee benefit plan or life insurance policy maintained by the Company.
Employee's designee, estate or spouse, as the case may be, shall have the right
to exercise any and all vested stock options granted to Employee prior to his
date of death, pursuant to the terms and conditions of Parent's stock option
plan.
(c) During any period that Employee fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
Employee shall continue to receive his full salary and bonus payments until
Employee's employment is terminated for total disability pursuant to Section
3.1(b)(i). Upon termination of his employment for total disability, Employee or
his representative, as the case may be, shall have the right to exercise any and
all vested stock options granted to Employee prior to the date of his
termination for total disability, pursuant to the terms and conditions of
Parent's stock option plan.
(d) Should Employee's employment be terminated for "good
cause," as set forth in Section 3.1(b)(iii), the Company shall pay his full
salary through the date of such termination at a rate in effect at the time of
his termination.
(e) Employee shall not be required to mitigate the amount of
any payment provided for in Section 4 of this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Section 4 of this Agreement be reduced by any compensation earned by Employee as
the result of employment by another employer after Employee's employment with
the Company terminates.
4.3. Bonus; Benefits. From and after January 1, 1998, Employee shall be
entitled to participate in the incentive and bonus programs of the Company and
Parent to the same extent as others who hold positions and responsibilities
comparable to that of Employee, and the terms of such programs shall provide
that Employee shall be eligible to earn an annual bonus in an amount equal to at
least thirty percent (30%) of Employee's annual salary. Employee shall be
entitled during the term of his employment to receive such employee benefits
consistent with the policies of the Company as applied to employees generally.
4.4. Grant of Stock Options to Employee. During the term of this
Agreement, the Employee shall be eligible to participate in the 1991 Stock
Option Plan of Parent (the "Option Plan"), on the terms and subject to the
conditions under which participation in such plan is made available to eligible
employees of the Parent or its affiliates. On the Effective Date hereof, the
Parent shall grant to Employee non-qualified stock options to purchase 50,000
shares of the common stock of Parent, for a purchase price equal to the fair
market value of such shares on the date of grant, vesting at a rate of
twenty-five percent (25%) on each of the first four (4) anniversaries of the
date of the grant.
4.5. Designation of Employees to Receive Stock Options. Upon execution
of this Agreement, the Company shall grant Employee the right to designate
employees of the ATI Division, other than Employee, as grantees of non-qualified
stock options to purchase 200,000 shares of the common stock of Parent for a
purchase price equal to the fair market value of such shares on the date of
grant pursuant to the Option Plan, vesting at the rate of twenty-five percent
(25%) on each of the first four (4) anniversaries of the date of the grant.
4.6. Insurance.
(a) Life and Other Insurance. The Company will, at its
expense, provide or arrange for and keep in effect, during the term of
Employee's employment hereunder, so long as he is insurable, such group term
life insurance, accidental death and dismemberment insurance and long term
disability insurance, or their equivalents, as is provided from time to time for
executives of Parent and its subsidiaries holding positions and responsibilities
comparable to those of Employee.
(b) Medical Insurance. During the term of Employee's
employment hereunder, the Company will, at its expense, provide or arrange for
and keep in effect, hospitalization, major medical and similar medical and
health insurance for Employee and his family, to the same extent as is provided
from time to time for executives of Parent and its subsidiaries holding
positions and responsibilities comparable to those of Employee.
4.7. Vacation; Leave. Employee will be entitled to the same number of
days of paid vacation during each year of his employment hereunder as is allowed
to other executives of Parent and its subsidiaries holding positions and
responsibilities comparable to those of Employee. Employee shall be entitled to
leave of absence and leave for illness or temporary disability in accordance
with policies in effect for executives of Parent and its subsidiaries holding
positions and responsibilities comparable to those of Employee, and any leave on
account of illness or temporary disability which is short of total disability
(as set forth in Section 3.1 hereof) shall not constitute a breach by the
Employee of his agreements hereunder.
4.8. Retirement Benefits. During the term of his employment hereunder,
Employee shall have the same right as other executives of Parent and its
subsidiaries holding positions and responsibilities comparable to those of
Employee to participate in all profit-sharing, pension and other retirement
plans as are now, or as may hereafter be, established by Parent.
4.9. Out-of-Pocket Expenses. The Company will reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee in connection with
the performance of his duties hereunder upon presentation of appropriate
vouchers therefor.
SECTION 5. Miscellaneous.
5.1. Successors; Binding Effect. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance reasonably satisfactory to Employee,
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Employee to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if his
employment were terminated without "good cause." The date on which any such
succession becomes effective shall be deemed to be the date of Employee's
termination. This Agreement will inure to the benefit of and will be binding
upon Employee, his executor, administrator, personal representatives and
assigns, and upon the Company and its successors and assigns; provided, however,
that the obligation and duties of Employee may not be assigned or delegated.
5.2. Governing Law. This Agreement will be deemed to be made in, and in
all respects interpreted, construed and governed by and in accordance with, the
laws of the Commonwealth of Massachusetts, without giving effect to principles
of conflict of laws.
5.3. Invalid Provisions. The parties herein hereby agree that the
agreements, provisions and covenants contained in this Agreement are severable
and divisible, that none of such agreements, provisions or covenants depends
upon any other provision, agreement or covenant for its enforceability, and that
such agreement, provision and covenant constitutes an enforceable obligation
between the Company and Employee. Consequently, the parties hereto agree that
neither the invalidity nor the enforceability of any agreement, provision or
covenant of this Agreement will affect the other agreements, provisions or
covenants hereof, and this Agreement will remain in full force and effect and be
construed in all respects as if such invalid or unenforceable agreement,
provision or covenant were omitted.
5.4. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
5.5. Notices. All communications provided for hereunder will be in
writing and will be deemed to given when delivered in person or deposited in the
United States mail, first class, registered mail, return receipt requested, with
proper postage prepaid, and
(a) If to Employee, addressed to:
Ernest H. Lin
======================
(b) If to the Company, addressed to:
Cellular Infrastructure Supply, Inc.
c/o World Access, Inc.
945 E. Paces Ferry Road, Suite 2240
Atlanta, Georgia 30326
Attn: Chief Executive Officer
or at such other place or places or to such other person or persons as will be
designated in writing by the parties hereto in the manner provided above for
notices.
5.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same instrument.
5.7. Waiver of Breach. The waiver by the Company of a breach of any
provision, agreement or covenant of this Agreement by Employee will not operate
or be construed as a waiver of any prior or subsequent breach of the same or any
other provision, agreement or covenant by Employee.
5.8. Entire Agreement. This Agreement is intended by the parties hereto
to be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement thereof notwithstanding any
representation or statements to the contrary heretofore made. This Agreement may
be modified only by written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, Employee has extended and delivered this Agreement,
and each of the Company and the Parent has caused this Agreement to be duly
executed and delivered by its duly authorized officers, all on the day and year
first written above.
-------------------------------
ERNEST H. LIN
CELLULAR INFRASTRUCTURE SUPPLY, INC.
By:____________________________
Its:___________________________
WORLD ACCESS, INC.
By:____________________________
Its:___________________________
<PAGE>
EXHIBIT 10.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
the 29th day of January, 1998, by and among WORLD ACCESS, INC., a Delaware
corporation ("Parent"), CELLULAR INFRASTRUCTURE SUPPLY, INC., a Delaware
corporation (the "Surviving Corporation"), CAUTHEN & FELDMAN, P.A., a Florida
professional association (the "Escrow Agent"), and each of the stockholders of
Advanced TechCom, Inc., a Delaware corporation ("ATI"), listed on Schedule 1
hereto (each such person a "Stockholder" and, collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders are all of the holders of the Series A
Convertible Preferred Stock, $.10 par value per share, of ATI;
WHEREAS, certain of the parties hereto, among others, have entered into
an Agreement and Plan of Merger dated as of December 24, 1997, a copy of which
is attached hereto as Exhibit A and incorporated herein by reference (the
"Merger Agreement"), pursuant to which, among other things, ATI will be merged
with and into the Surviving Corporation, a wholly-owned subsidiary of Parent,
with the separate corporate existence of ATI then terminating (the "Merger");
and
WHEREAS, Section 2.1(a)(i)(B) of the Merger Agreement requires Parent
to deliver 209,050 shares (the "Escrow Shares") of its common stock, $.01 par
value per share, to the Escrow Agent, to hold and distribute such shares
pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Escrow Deposit. Within ten (10) business days of the execution
hereof, Parent shall cause to be delivered to the Escrow Agent, to be held and
distributed as hereinafter provided, a stock certificate issued in the names of
the Stockholders representing the Escrow Shares, and each of the Stockholders
shall deliver to the Escrow Agent a stock power duly endorsed in blank with
signature guarantee with respect to the Escrow Shares.
2. Property Distributed in Respect of Escrow Shares. During the term
hereof, the Escrow Agent shall receive all of the money, securities, rights or
property distributed in respect of the Escrow Shares, including any such
property distributed as dividends, such property to be held and administered as
herein provided (the "Share Proceeds").
3. Voting and Transfer of Escrow Shares. For so long as the Escrow
Shares are held by the Escrow Agent, the Stockholders shall be entitled to
exercise any and all voting or consensual rights and powers relating to or
pertaining to the Escrow Shares so held by the Escrow Agent. No Stockholder
shall transfer the Escrow Shares, or any interest therein, during the term of
this Agreement, except under the laws of descent and distribution.
4. Fees of Escrow Agent. The Escrow Agent shall be entitled to a fee
(the "Escrow Fee") based upon its normal hourly billing rate as compensation for
its services hereunder. The Escrow Fee shall be payable by Parent upon demand
therefor from the Escrow Agent. The Parent upon demand therefor shall reimburse
the Escrow Agent for all costs and expenses incurred by the Escrow Agent in
connection with the performance of its duties hereunder.
5. Distribution of Escrow Shares.
(a) Upon receipt of the certificates provided in Section 7 below, the
Escrow Agent shall distribute the Escrow Shares held by it under this Agreement
in the aggregate amounts (each a "Release Amount") (together with the pro rata
portion of the Share Proceeds, if any, allocable thereto) based upon the Pre-Tax
Net Income (as hereinafter defined) of the ATI Division of the Surviving
Corporation (the "ATI Division") on the release dates set forth below (each a
"Release Date") for the performance period set forth below (each a "Performance
Period") which corresponds with such Release Date. Notwithstanding the
foregoing, any Share Proceeds that consist solely of cash shall be distributed
to the Stockholders promptly upon receipt thereof, and a Stockholder shall be
entitled to receive such cash in an amount equal to the aggregate of all such
cash to be distributed multiplied by the Proportionate Interest (as set forth in
Column C of Schedule 1 hereto) of each such Stockholder. No fractional Escrow
Shares will be released. In lieu thereof, if a Stockholder would otherwise have
been entitled to a fractional share hereunder, then such Stockholder shall be
entitled to receive an amount in cash in lieu of such fractional share, based on
a value per share of the Escrow Shares equal to the Average Closing Price (as
hereinafter defined) and the Parent shall promptly deposit with Escrow Agent an
amount sufficient to fund all such cash amounts prior to each Release Date.
Notwithstanding anything herein to the contrary, in the event the Signing
Stockholder Parent Shares (as defined in the Merger Agreement) have been
redeemed to satisfy a claim by the Parent Indemnities (as defined in the Merger
Agreement) pursuant to Article 9 of the Merger Agreement and subsequently a
Release Amount becomes releasable hereunder, the Escrow Shares, to the extent
possible, shall be released to the Signing Stockholder (as defined in the Merger
Agreement) instead of the Stockholders so that the Signing Stockholder receives
a number of shares equal to the number of Signing Stockholder Parent Shares used
to satisfy any claims by the Parent Indemnities, with each Stockholder
contributing a pro rata portion of the Escrow Shares (together with a pro rata
portion of the Share Proceeds, if any, since the date the Signing Stockholder
Parent Shares were redeemed) on the basis of each Stockholder's Proportionate
Interest.
Performance Period Release Date
- ---------------------------------- -------------------
December 15, 1997 to and including
December 31, 1998 (the
"First Performance Period") February 15, 1999
January 1, 1999 to and including
December 31, 1999 (the
"Second Performance Period") February 15, 2000
The aggregate amount of the Release Amount releasable hereunder to the
Stockholders on the Release Date which corresponds to the First Performance
Period will be determined based on the Pre-Tax Net Income as set forth in
Release Table No. 1 below. If the Pre-Tax Net Income is between the "less than"
and "greater than" amounts, the aggregate amount of the Release Amount
releasable shall be determined on a pro rata basis.
Release Table No. 1
Aggregate Release
Amount (Value of
Pre-Tax Net Income During Performance Period Escrow Shares Valued
at the Average
Closing Price)
Less than $2,000,000.................................... None
Greater than $3,000,000................................. $2,000,000
The aggregate amount of the Release Amount releasable to the
Stockholders on the Release Date which corresponds to the Second Performance
Period will be determined based on the Pre-Tax Net Income as set forth in
Release Table No. 2 below. If the Pre-Tax Net Income is between the "less than"
and "greater than" amounts, the aggregate amount of the Release Amount
releasable shall be determined on a pro rata basis.
Release Table No. 2
Aggregate Release
Amount (Value of
Pre-Tax Net Income During Performance Period Escrow Shares Valued
at the Average
Closing Price)
Less than $3,000,000................................. None
Greater than $4,000,000.............................. $3,000,000
Notwithstanding the foregoing, if the Pre-Tax Net Income of the ATI
Division is (i) greater than $2,500,000, but less than $3,000,000, with respect
to the First Performance Period and (ii) greater than $4,000,000 with respect to
the Second Performance Period, then Parent will instruct the Escrow Agent to
release to the Stockholders on the Release Date which corresponds to the Second
Performance Period in lieu of the Release Amount otherwise releasable pursuant
hereto Escrow Shares having an aggregate value equal to (i) $3,000,000, plus
(ii) the amount equal to (A) (x) $3,000,000 less (y) the Pre-Tax Net Income for
the First Performance Period, to the extent that such amount does not exceed the
amount by which the Pre-Tax Net Income for the Second Performance exceeds
$4,000,000, multiplied by (B) 2.0. For purposes hereof, the "Average Closing
Price" shall equal $23.9177 per share.
(b) Parent will determine whether to instruct the Escrow Agent to
release the Release Amount to the Stockholders based upon the books and records
of the ATI Division (which will be maintained in accordance with generally
accepted accounting principles) as soon as practicable after the end of each
Performance Period, and Parent will promptly deliver to Ernest H. Lin as a
representative of the Stockholders (the "ATI Representative"), appointed
pursuant to Section 6 hereof, a letter setting out in reasonable detail the
computations made and expressing its opinion that the conditions for the release
of the Release Amount have been satisfied in accordance with the requirements
hereof. The computations set forth in such letter from Parent will be final and
binding on all parties unless the ATI Representative shall have notified Parent
in writing within ten (10) days after receipt of such letter that he disagrees
with such computations. In such event, if the parties cannot agree on the
computations within thirty (30) days after their receipt of such letter, then
the Stockholders may retain, at their own expense, an independent public
accounting firm (the "Accountants"), which shall have thirty (30) days in which
to make its own calculation of Pre-Tax Net Income for the applicable Performance
Period. If the calculations of the Accountants differ from that of Parent, then
the parties shall negotiate in good faith for a period of ten (10) days to
resolve any differences. If the parties are unable to resolve the dispute within
such 10 day period, then the matter shall be submitted to an independent public
accounting firm selected jointly by Parent and the Accountants within five days
after the end of such ten day period. Such independent accounting firm shall
then have thirty (30) days in which to make its own calculation of Pre-Tax Net
Income for the applicable Performance Period. The cost of any such calculations
by such independent accounting firm and the Accountants shall be paid by the
Stockholders if its computations result in the Release Amount being the same as
or less than that set forth in the letter from Parent or by Parent if such
computations result in the Release Amount being greater than that set forth in
such letter. Parent and the ATI Representative will instruct the Escrow Agent by
delivering to it a Certificate of Instruction as set forth in Section 7 to
release to the Stockholders the amount of Release Amount set forth in Parent's
letter to the ATI Representative, and any additional amount thereafter agreed
upon by the parties or computed by such independent accounting firm (if such
computations are made) will be released to Stockholders promptly after delivery
of the accountants' report and supplemental Certificates of Instruction. The
Stockholders will promptly return to Parent any amount of the Release Amount
released to them that is in excess of the Release Amount computed by such
independent accounting firm if its computation is less than that set forth in
the letter from Parent.
(c) For purposes hereof, "Pre-Tax Net Income" means the income of the
ATI Division before (i) income and deductions not related to primary operations
(i.e., gains or losses on disposal of fixed assets and other miscellaneous
unrelated items), (ii) taxes based on income, (iii) cumulative effects of
accounting changes, (iv) extraordinary items and (v) allocations or charges of
expenses to the ATI Division from Parent or any of its subsidiaries or
affiliates unless the expense is for funds loaned (other than with respect to
the first $5.0 million of intercompany loans which shall not bear interest for
purposes of determining Pre-Tax Net Income), services rendered or goods provided
in direct relation to the ATI Division's business at a negotiated fair market
value price. In addition, for purposes of determining the Pre-Tax Net Income of
the ATI Division, one-half (1/2) of the pre-tax net income of Parent or any of
its subsidiaries (in each case as customarily determined by Parent) relating
directly to the sales of products of Parent or any of its subsidiaries (other
than products of the ATI Division) made directly by Mr. Lin or any sales person
within the ATI Division shall be included in determining the Pre-Tax Net Income
of the ATI Division.
6. Appointment of ATI Representative. Each Stockholder constitutes and
appoints the ATI Representative as his or her true and lawful attorney-in-fact
to act for and on behalf of such Stockholder in all matters relating to or
arising out of this Agreement, such Stockholder agreeing to be fully bound by
the acts, decisions and agreements of the ATI Representative taken and done
pursuant to the authority herein granted. Each Stockholder hereby agrees to
indemnify and to save and hold harmless the ATI Representative from any
liability incurred by the ATI Representative based upon or arising out of any
act, whether of omission or commission, of the ATI Representative pursuant to
the authority herein granted, other than acts, whether of omission or
commission, of the ATI Representative that constitute gross negligence or
willful misconduct in the exercise by the ATI Representative of the authority
herein granted. The death or incapacity of any Stockholder shall not terminate
the authority and agency of the ATI Representative. In the event of the
resignation of the ATI Representative, the resigning ATI Representative shall
appoint a successor either from among the Stockholders or who shall otherwise be
acceptable to Parent, the Surviving Corporation and the Escrow Agent, and who
shall agree in writing to accept such appointment, and the resigning ATI
Representative's resignation shall not be effective until such a successor shall
exist. If the ATI Representative should die or become incapacitated, his
successor shall be appointed within thirty (30) days of his death or incapacity
by a majority of the Stockholders, and such successor either shall be a
Stockholder or shall otherwise be acceptable to Parent, the Surviving
Corporation and the Escrow Agent. The choice of a successor ATI Representative
appointed in any manner permitted above shall be final and binding upon all of
the Stockholders. The decisions and actions of any successor ATI Representative
shall be, for all purposes, those of the ATI Representative as if originally
named herein.
7. Certificates of Instruction.
(a) Within forty (40) days of the end of each Performance Period, Parent
and the ATI Representative shall deliver to the Escrow Agent a Certificate of
Instruction setting forth the Pre-Tax Net Income of the ATI Division for each
such Performance Period and, in the event that Pre-Tax Net Income equals an
amount for such Performance Period which permits the release of Escrow Shares in
accordance with Section 5 above, directing the Escrow Agent to release to the
Stockholders the number of Escrow Shares (together with the pro rata portion of
the Share Proceeds, if any) determined in accordance with Section 5 above. In
the event there is a disagreement or dispute with respect to the determination
of "Pre-Tax Net Income," Parent and the ATI Representative may provide Escrow
Agent with one or more supplemental Certificates of Instruction with respect to
any resolution of such disagreement or dispute.
(b) Upon receipt of the Certificate of Instruction, the Escrow Agent shall
cause promptly the certificate representing the Escrow Shares to be broken down
into ___________ (___) certificates, one of which will represent the Escrow
Shares to remain subject to the terms of this escrow and one of each of the
other _________ (___) certificates will be issued to each Stockholder for that
number of the Escrow Shares to be released multiplied by the Proportionate
Interest (as set forth in Column C of Schedule 1 hereto) of each such
Stockholder, and thereafter on the Release Date the Escrow Agent shall deliver
to the Stockholders the certificates representing the Escrow Shares (together
with the pro rata portion of the Share Proceeds, if any) to be released to the
Stockholders as provided herein.
(c) If, on 5:00 p.m. Eastern Standard Time on March 31, 2000, or on such
later date which is ten (10) days following the date on which a final
determination shall have been made pursuant to sub-subsection 5(b) hereof with
respect to the Pre-Tax Net Income and Parent and the ATI Representative shall
have provided Escrow Agent with a Certificate of Instruction in respect of such
final determination, the Escrow Agent continues to hold any of the Escrow
Shares, then the Escrow Agent shall deliver any such shares (together with any
Share Proceeds in the Escrow Agent's possession) to Parent, and this Agreement
shall thereupon be terminated.
8. Duties of the Escrow Agent. The acceptance by the Escrow Agent of
its duties under this Agreement is subject to the following terms and
conditions, which the parties to this Agreement hereby agree shall fully govern
and control with respect to the Escrow Agent's rights, duties, liabilities and
immunities:
(a) The Escrow Agent shall be protected in acting upon
any written notice, request, waiver, consent, receipt
or other paper or document which the Escrow Agent
believes in good faith emanates from both Parent and
the ATI Representative of the parties hereto, not
only as to its due execution and the validity and
effectiveness of its provisions, but also as to the
truth and accuracy of any information contained
therein. The Escrow Agent is also relieved from the
necessity of satisfying itself as to the authority of
the persons executing this Agreement in a
representative capacity.
(b) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or
omitted by it in good faith, or for any mistake of
fact or law, or for anything that it may do or
refrain from doing in connection herewith, except for
its own gross negligence or willful misconduct.
(c) The Escrow Agent may consult with, and obtain advice
from, independent legal counsel selected by the
Escrow Agent in the event of any question as to any
of the provisions hereof or its duties hereunder (the
cost of obtaining such advice being borne by Parent
and the Surviving Corporation), and it shall incur no
liability and shall be fully protected in acting in
accordance with the opinion and instructions of such
counsel.
(d) The Escrow Agent shall have no duties except those
set forth herein, and the Escrow
Agent shall not be subject to, or obliged to
recognize, any other agreement between,
or direction or instruction of, any of the parties
hereto unless signed by Parent and
the ATI Representative. The Escrow Agent shall not
be bound by any notice of a claim,
demand or objection with respect to the Escrow
Shares or any waiver, modification,
termination or rescission of this Agreement, unless
received by it in writing signed
by Parent and the ATI Representative, and, if its
duties herein are materially increased, unless it
shall have given its consent thereto.
(e) If any dispute arises over disbursement of, or
conflicting claims to, the Escrow Shares, then the
Escrow Agent may interplead such contested Escrow
Shares into a court of proper jurisdiction of its
choosing, and thereupon the Escrow Agent shall be
fully and completely discharged of its duties as
escrow agent with respect to such contested Escrow
Shares and Share Proceeds.
9. Indemnification of the Escrow Agent. Except as otherwise expressly
provided by Section 4 hereof, Parent, the Surviving Corporation and the
Stockholders jointly and severally agree to indemnify, defend and hold harmless
the Escrow Agent from any and all costs, expenses, damages or liability of any
kind whatsoever (including reasonable legal fees) arising by virtue of its
services as escrow agent hereunder, except for liabilities due to the Escrow
Agent's gross negligence or willful misconduct; provided, however, that the
Stockholders shall have no obligation to indemnify the Escrow Agent for any
costs, expenses, damages or liability arising out of any claims made by the
Stockholders.
10. Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered by hand, (b) mailed by
registered or certified mail (return receipt requested) or (c) telecommunicated
and immediately confirmed both orally and in writing, to the parties at the
following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which so
hand-delivered or so telecommunicated or on the third business day following the
date on which so mailed, if deposited in a regularly-maintained receptacle for
United States mail:
<PAGE>
If to Escrow Agent:
Cauthen & Feldman, P.A.
215 North Joanna Avenue
Tavares, Florida 32778-3200
Attn: William H. Cauthen, Esq.
Telecopier: 352-343-7759
Telephone: 352-343-2225
If to the Stockholders:
In c/o Mr. Ernest H. Lin
Advanced TechCom, Inc.
181 Ballardvale Street
Wilmington, Massachusetts 01887
Telecopier: 978-694-4801
Telephone: 978-694-3001
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 021909-2881
Attn: Paul W. Lee, P.C.
Telecopier: 617-523-1231
Telephone: 617-570-1000
If to Parent or the Surviving Corporation:
Name of Addressee
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326
Attn: Mr. Mark A. Gergel
Telecopier: 404-365-9847
Telephone: 404-231-2025
With a copy to:
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Steven E. Fox, Esq.
Telecopier: 404-525-2224
Telephone: 404-522-4700
11. Execution in Counterparts. This Agreement may be executed by
facsimile, and may be executed in several counterparts, each of which shall be
an original, and all of which shall constitute one and the same instrument.
12. Applicable Law. This Agreement shall be construed and governed
exclusively by the laws of the State of Delaware, without giving effect to its
principles of conflicts of laws.
13. Amendment. This Agreement may be amended or modified only in a
writing signed by all parties hereto; provided, however, that Schedule 1 hereto
shall be amended upon Parent's receipt and acceptance of each fully executed
Letter of Transmittal which includes a Power of Attorney appointing Ernest H.
Lin as Attorney-in-Fact to execute this Agreement on behalf of the ATI
Stockholder delivering such Letter of Transmittal, and, upon the receipt and
acceptance of such Letter of Transmittal, Parent shall promptly deliver to the
Escrow Agent and the ATI Representative such amended Schedule 1 which shall
thereupon become a part of this Agreement as though originally included
herewith.
[Signatures on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed
this Agreement or have caused this Agreement to be duly executed under seal on
its behalf by an officer or representative thereto duly authorized, all as of
the date first above written.
CAUTHEN & FELDMAN, P.A.
By:_____________________________
Its:____________________________
WORLD ACCESS, INC.
By:_____________________________
Its:____________________________
CELLULAR INFRASTRUCTURE SUPPLY, INC.
By:_____________________________
Its:____________________________
(SEAL)
ERNEST H. LIN, Individually
and as Attorney in Fact for the
Stockholders listed on Schedule 1 hereto
<PAGE>
SCHEDULE 1
Column A Column B Column C
Name and Address of Liquidation Preference Proportionate Interest
Stockholder
<PAGE>
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of the 29th day of January 1998, by and among WORLD ACCESS, INC., a
Delaware corporation (the "Company"), and each of the stockholders of Advanced
TechCom, Inc., a Delaware corporation ("ATI"), listed on Schedule 1 hereto (each
such person a "Seller" and, collectively, the "Sellers").
IN CONSIDERATION of the mutual promises and covenants set forth herein,
and intending to be legally bound, the parties hereto hereby agree as follows:
<PAGE>
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1 Certain Definitions. Any capitalized terms used herein without
definition shall have the meaning ascribed to such terms in the Agreement and
Plan of Merger dated as of December 24, 1997 to which the Company and certain
other persons are parties relating to the merger of Advanced TechCom, Inc., a
Delaware corporation, with and into Cellular Infrastructure Supply, Inc., a
wholly-owned subsidiary of the Company (the "Merger Agreement"). In addition,
the following terms shall have the meanings set forth below:
(a) "Holder" shall mean any Seller who holds Registrable
Securities and any holder of Registrable Securities to whom the rights conferred
by this Agreement have been transferred in compliance with Section 1.2 hereof.
(b) "Other Stockholders" shall mean persons who, by virtue of
agreements with the Company other than this Agreement, are entitled to include
their securities in certain registrations hereunder.
(c) "Registrable Securities" shall mean shares of Parent
Common Stock issued to the Sellers pursuant to Section 2.1(a)(i)(A) of the
Merger Agreement, provided that Registrable Securities shall not include (i) any
shares of Parent Common Stock held in escrow pursuant to Section 2.1(b) of the
Merger Agreement or (ii) any shares of Parent Common Stock which have previously
been registered or which have been sold to the public or which have been sold in
a private transaction in which the transferor's rights under this Agreement are
not assigned.
(d) The terms "register," "registered" and "registration"
shall refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and applicable rules and regulations thereunder and the
declaration or ordering of the effectiveness of such registration statement.
<PAGE>
(e) "Registration Expenses" shall mean all expenses incurred
in effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company and one counsel
selected to represent the Holders, which counsel shall be reasonably
satisfactory to the Company, blue sky fees and expenses, and expenses of any
regular or special audits incident to or required by any such registration, but
shall not include (i) Selling Expenses, (ii) the compensation of regular
employees of the Company, which shall be paid in any event by the Company, and
(iii) blue sky fees and expenses incurred in connection with the registration or
qualification of any Registrable Securities in any state, province or other
jurisdiction in a registration pursuant to Section 1.3 hereof to the extent that
the Company shall otherwise be making no offers or sales in such state, province
or other jurisdiction in connection with such registration.
(f) "Restricted Securities" shall mean any Registrable
Securities required to bear the legend set forth in Section 1.2(c) hereof.
(g) "Rule 144" shall mean Rule 144 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(h) "Rule 145" shall mean Rule 145 as promulgated by the SEC
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the SEC.
(i) "SEC" shall mean the Securities and Exchange Commission.
(j) "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale of
Registrable Securities.
1.2 Restrictions on Transfer.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Registrable Securities unless and until (i) there is then in
effect a registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement, or (ii) (A) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (B) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act, it being understood that the Company will not require opinions
of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(b) Notwithstanding the provisions of subparagraphs (i) and
(ii) of paragraph (a) above, no such registration statement or opinion of
counsel shall be necessary for a transfer by a Holder which is (A) a partnership
to its partners in accordance with their partnership interests, (B) a limited
liability company to its members in accordance with their member interests or
(C) to the Holder's family member or a trust for the benefit of an individual
Holder or one or more of his family members, provided the transferee will be
subject to the terms of this Section 1.2 to the same extent as if he were an
original Holder hereunder.
(c) Each certificate representing Registrable Securities shall
(unless otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
(d) The Company shall be obligated to promptly reissue
unlegended certificates at the request of any Holder thereof if the Holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of in compliance with the
Securities Act without registration, qualification or legend.
(e) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal or if the Holder
shall request such removal and shall have obtained and delivered to the Company
an opinion of counsel reasonably acceptable to the Company to the effect that
such legend and/or stop-transfer instructions are no longer required pursuant to
applicable state securities laws.
1.3 Company Registration.
(a) Right to Piggyback. If at any time prior to the one year
anniversary of the date hereof the Company shall determine to register any of
shares of its common stock, $.01 par value per share, either for its own account
or the account of a security holder or holders exercising their respective
demand registration rights, other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Rule 145
transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice
thereof, which notice briefly describes the Holders' rights under this Section
1.3 (including notice deadlines); and
(ii) use its best efforts to include in such
registration (and any related filing
or qualification under applicable blue sky laws), except as set forth in Section
1.3(b) below, and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by any Holder and
received by the Company within ten (10) days after the written notice from the
Company described in clause (i) above is mailed or delivered by the Company,
provided that such Holders shall have requested for inclusion in such
registration at least fifty-one (51%) of the aggregate number of the Registrable
Securities which have been issued to the Holders prior to the date of such
written request. Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company.
Notwithstanding any other provision of this Section 1.3, if
the representative of the underwriters advises the Company in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the limitations set forth
below) exclude all Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration and underwriting. The
Company shall so advise all Holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
1.10. If any person does not agree to the terms of any such underwriting, he
shall be excluded therefrom by written notice from the Company or the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration and if the
number of shares of Registrable Securities to be included in such registration
was previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.10. hereof.
1.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by the Company. All Selling Expenses relating
to securities so registered shall be borne by the holders of such securities pro
rata on the basis of the number of shares of securities so registered on their
behalf.
1.5 Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 1.3 hereof, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(d) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing; provided, however, the Company shall not be obligated to prepare and
furnish any such prospectus supplements or amendments relating to any material
nonpublic information at any such time as the Board of Directors of the Company
has determined that, for good business reasons, the disclosure of such material
nonpublic information at that time is contrary to the best interests of the
Company in the circumstances and is not otherwise required under applicable law
(including applicable securities laws);
(e) cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange and/or included in any
national quotation system on which similar securities issued by the Company are
then listed or included;
(f) provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at least
twelve (12) months, but not more than eighteen months, beginning with the first
month after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
1.6 Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like) incident to any such
registration, qualification, or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company or relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
1.6(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or Other Stockholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Stockholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld) and (ii) that in no event shall any indemnity
under this Section 1.6 exceed the gross proceeds from the offering received by
such Holder.
(c) Each party entitled to indemnification under this Section
1.6 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
of a release to such Indemnified Party from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the conduct, statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into by the Indemnifying Party and the Indemnified Party in
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
1.7 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) make and keep adequate public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) so long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed as a Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing a Holder to sell any such securities without registration.
1.9 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.10 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of the Company with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and Other Stockholders requesting inclusion of
shares pro rata on the basis of the number of shares of Registrable Securities
and Other Shares held by such Holders and Other Stockholders; provided, however,
that such allocation shall not operate to reduce the aggregate number of
Registrable Securities and Other Shares to be included in such registration, if
any Holder or Other Stockholder does not request inclusion of the maximum number
of shares of Registrable Securities and Other Shares allocated to him pursuant
to the above-described procedure, the remaining portion of his allocation shall
be reallocated among those requesting Holders and Other Stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and Other Stockholders, assuming conversion, and this procedure shall be
repeated until all of the shares of Registrable Securities and Other Shares
which may be included in the registration on behalf of the Holders and Other
Stockholders have been so allocated.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLERS
2.1 Representations and Warranties of the Company. The Company represents
and warrants to the Sellers as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or Bylaws of the Company, or any
provision of any material indenture, agreement or other instrument to which it
or any of its properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such material indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles, the
discretion of courts in granting equitable remedies and public policy
considerations.
2.2 Representations and Warranties of the Sellers. The Sellers (jointly
and severally) represent and warrant to the Company as follows:
(a) The execution, delivery and performance of this Agreement
by the Sellers will not violate any provision of law, any order of any court or
any agency or government, or any provision of any material indenture or
agreement or other instrument to which they or any of their respective
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
material indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the properties or assets of the Sellers.
(b) This Agreement has been duly executed and delivered by the
Sellers and constitutes the legal, valid and binding obligation of the Sellers,
enforceable against the Sellers in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles, the
discretion of courts in granting equitable remedies and public policy
considerations.
3. MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Georgia, as if entered into by and between Georgia
residents exclusively for performance entirely within Georgia.
3.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.3 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject hereof and thereof. Neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and the Holders of at least fifty-one percent (51%) of the
Registrable Securities and any such amendment, waiver, discharge or termination
shall be binding on all the Holders, but in no event shall the obligation of any
Holder hereunder be materially increased, except upon the written consent of
such Holder; provided, however, that Schedule 1 hereto shall be amended upon the
Company's receipt and acceptance of each fully executed Letter of Transmittal
which includes a Power of Attorney appointing Ernest H. Lin as Attorney-in-Fact
to execute this Agreement on behalf of the ATI stockholder delivering such
Letter of Transmittal, and, upon the receipt and acceptance of such Letter of
Transmittal, the Company shall promptly deliver to the Mr. Lin as representative
of the Sellers such amended Schedule 1 which shall thereupon become a part of
this Agreement as though originally included herewith.
3.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated in the stock
records of the Company or at such other address as such Holder shall have
furnished to the Company in writing, or (b) if to the Company, at 945 E. Paces
Ferry Road, Suite 2240, Atlanta, Georgia 30326, or at such other address as the
Company shall have furnished to each Holder in writing, together with a copy to
Rogers & Hardin LLP, 2700 International Tower, 229 Peachtree Street, Atlanta,
Georgia 30303, Attn: Steven E. Fox, Esq. All such notices and other written
communications shall be effective on the date of mailing or delivery.
3.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.
3.6 Rights; Severability. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
3.7 Information Confidential. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
3.8 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
3.10 Jurisdiction. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Georgia
without reference to Georgia's choice of law rules and each of the parties
hereto hereby consents to personal jurisdiction in any federal or state court in
the State of Georgia.
[Signatures on following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed
this Agreement or have caused this Agreement to be duly executed under seal on
its behalf by an officer or representative thereto duly authorized, all as of
the date first above written.
----------------------------------
ERNEST H. LIN, Individually and
as Attorney in Fact for the
Stockholders Listed on Schedule
1 hereto
WORLD ACCESS, INC.
By:________________________________
Its:_______________________________
<PAGE>
EXHIBIT 10.4
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (the "Agreement") is
made and entered into as of the 29th day of January, 1998 by and among CELLULAR
INFRASTRUCTURE SUPPLY, INC., a Delaware corporation ("CIS"), WORLD ACCESS, INC.,
a Delaware corporation ("World Access"), and ERNEST H. LIN ("Lin").
WHEREAS, World Access is acquiring the entire equity interest of
Advanced TechCom, Inc. ("ATI") by means of a merger (the "Merger") of ATI with
and into CIS, a wholly-owned subsidiary of World Access, pursuant to that
certain Agreement and Plan of Merger dated as of December 24, 1997 to which this
Agreement is attached as Exhibit 6.2(i) (the "Merger Agreement"); and
WHEREAS, ATI is engaged in the business of designing, manufacturing and
marketing digital microwave and millimeter wave radio systems (the "Business");
and
WHEREAS, Lin is a significant stockholder of ATI and prior to the date
hereof Lin has served as a director and chief executive officer of ATI, has
heretofore been responsible for the management of the Business, and has
knowledge of the trade secrets, customer information and other confidential and
proprietary information of ATI; and
WHEREAS, ATI and Lin desire to have World Access acquire the entire
equity interest of ATI pursuant to the Merger; and
WHEREAS, as a result of the Merger, CIS will succeed to the Business
and all of the Confidential Information and Trade Secrets (each as hereinafter
defined) of ATI; and
WHEREAS, in order to protect the goodwill of the Business and the other
value to be acquired by World Access pursuant to the Merger Agreement for which
World Access is paying substantial consideration, World Access and Lin have
agreed that the obligation of World Access to consummate the transactions
contemplated by the Merger Agreement is subject to the condition, among others,
that Lin shall have entered into this Agreement; and
WHEREAS, World Access has separately bargained and paid additional
consideration for the covenants contained herein; and
WHEREAS, Lin acknowledges that the provisions of this Agreement are
reasonable and necessary to protect the legitimate interest of World Access and
the goodwill of the Business and other value acquired by it pursuant to the
Merger Agreement; and
WHEREAS, Lin has rendered unique, extraordinary and valuable services
to ATI, will continue to render unique, extraordinary and valuable services to
CIS by serving as the president of the ATI Division of CIS (the "ATI Division")
after the Merger, and will have knowledge of the trade secrets, customers,
business plans and other confidential and proprietary information of the ATI
Division; and
WHEREAS, World Access is engaged in the business of manufacturing,
repairing, refurbishing, selling and distributing wireline or wireless
transmission, switching, or access equipment for telecommunications, data or
video applications (the "World Access Business"); and
WHEREAS, in order to induce World Access to consummate the transactions
contemplated by the Merger Agreement, Lin is willing to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties agree as follows:
1. Definitions. As used in this Agreement, terms defined in the
preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below:
(a) "Competitive Business" shall mean any Person engaged in a business
the same or substantially similar to the Business of ATI as operated by ATI
immediately prior to the Merger.
(b) "Confidential Information" shall mean the ATI Division's and ATI's
customer and supplier lists, marketing arrangements, business plans,
projections, financial information, training manuals, pricing manuals, market
strategies, internal performance statistics and other competitively sensitive
information concerning the ATI Division or ATI which is material to the ATI
Division or ATI and not generally known by the public, other than Trade Secrets,
whether or not in written or tangible form.
(c) "Control" shall mean, with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
(d) "Key Employee" shall mean any Person who is employed in a
management, executive, supervisory, training, marketing or sales capacity for
another Person.
(e) "ATI Market" shall mean any country in which ATI does business or
sells its products.
(f) "Permitted Activities" shall mean (i) owning not more than 5% of
the outstanding shares of publicly-held corporations engaged in a Competitive
Business (except for World Access) which have shares listed for trading on a
securities exchange registered with the Securities and Exchange Commission or
through a national automatic quotation system of a registered securities
association, or (ii) serving as an officer, director or employee of CIS or the
ATI Division.
(g) "Person" shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
other syndicate or group that would be deemed to be a person under Section
13(d)(3) of the Securities and Exchange Act of 1934, as amended.
(h) "Restricted Period" shall mean the period commencing on the date of
this Agreement and ending on the date which is three (3) years after the
termination of Lin's employment by CIS or by World Access or any of its other
subsidiaries for any reason whatsoever.
(i) "Trade Secrets" shall mean the whole or any portion or phase of any
scientific or technical information, design, process, procedure, formula or
improvement that is valuable and not generally known to the competitors of CIS,
the ATI Division or ATI, whether or not in written or tangible form; provided,
however, that the parties hereto hereby expressly acknowledge and agree that
nothing in this Agreement or in the foregoing definition shall diminish,
restrict or in any way contravene any claims, rights or other protections,
whether at law or in equity, provided with respect to trade secrets by the laws
of the Commonwealth of Massachusetts or other applicable laws.
2. No Competing Business. Lin hereby agrees that, during the Restricted
Period, except as permitted by Section 5 of this Agreement, Lin will not
directly or indirectly own, manage, operate, control, invest or acquire an
interest in, or otherwise engage or participate in (whether as a proprietor,
partner, stockholder, director, officer, Key Employee, joint venturer, investor
or other participant in) any Competitive Business in any ATI Market, without
regard to (A) whether the Competitive Business has its office, manufacturing or
other business facilities within any ATI Market, (B) whether any activity of Lin
referred to above itself occurs or is performed within any ATI Market, or (C)
whether Lin resides, or reports to an office, within any ATI Market.
3. No Interference with the Business.
3.1 Lin hereby agrees that during the Restricted Period,
except as permitted by Section 5 of this Agreement, Lin will not directly or
indirectly solicit, induce or influence any customer, supplier, lender, lessor
or any other Person which had on the date of this Agreement a business
relationship with ATI in any ATI Market, to discontinue or reduce the extent of
such relationship with ATI in any ATI Market.
3.2 Lin hereby agrees that, during the Restricted Period,
except as permitted by Section 5 of this Agreement, Lin will not (i) directly or
indirectly recruit, solicit or otherwise induce or influence any Key Employee of
ATI who became a Key Employee of the ATI Division to discontinue such employment
or agency relationship with the ATI Division, or (ii) employ or seek to employ,
or cause any Competitive Business to employ or seek to employ as a Key Employee
for any Competitive Business in any ATI Market, any Person who was within six
months prior to the date hereof employed by ATI as a Key Employee.
4. No Disclosure of Proprietary Information.
4.1 Lin hereby agrees that he will not directly or indirectly
disclose to anyone, or use or otherwise exploit for his own benefit or for the
benefit of anyone other than the ATI Division or CIS, any Trade Secrets for as
long as they remain Trade Secrets, except as permitted by Section 5 of this
Agreement.
4.2 Lin hereby agrees that, during the Restricted Period, he
will not directly or indirectly disclose to anyone, or use or otherwise exploit
for Lin's own benefit or for the benefit of anyone other than the ATI Division,
any Confidential Information, except as permitted by Section 5 of this
Agreement.
5. Permitted Activities. The restrictions set forth in Sections 2, 3
and 4 of this Agreement shall not apply to Permitted Activities or to actions
taken by Lin during the time he is employed by CIS to the extent, but only to
the extent, that such actions are (i) permitted under his Employment Agreement
with CIS entered into pursuant to the Merger Agreement (the "Employment
Agreement"), or (ii) required to enforce his rights under his Employment
Agreement, or (iii) expressly approved by the Board of Directors of CIS.
6. Representations and Warranties. Lin represents and warrants that
this Agreement constitutes the legal, valid and binding obligation of Lin,
enforceable against him in accordance with its terms. Lin represents and
warrants that he has no right, title, interest or claim in, to or under any
Trade Secrets or Confidential Information.
7. Waivers. Neither World Access nor CIS will be deemed as a
consequence of any act, delay, failure, omission, forbearance or other
indulgences granted from time to time by World Access or CIS, as the case may
be, or for any other reason (i) to have waived, or to be estopped from
exercising, any of its rights or remedies under this Agreement, or (ii) to have
modified, changed, amended, terminated, rescind, or superseded any of the terms
of this Agreement.
8. Injunctive Relief. Lin acknowledges (i) that any violation of this
Agreement will result in irreparable injury to World Access and CIS, (ii) that
damages at law would not be reasonable or adequate compensation to the World
Access or CIS for violation of this Agreement, and (iii) that World Access and
CIS shall each be entitled to have the provisions of this Agreement specifically
enforced by preliminary and permanent injunctive relief without the necessity of
proving actual damages and without posting bond or other security, as well as to
an equitable accounting of all earnings, profits and other benefits arising out
of any such violation.
9. Notices. All notices and other communications under this Agreement
shall be in writing and may be given by any of the following methods: (i)
personal delivery; (ii) facsimile transmission; (iii) registered or certified
mail, postage prepaid, return receipt requested; or (iv) overnight delivery
service requiring acknowledgment of receipt. Any such notice or communication
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by notice given hereunder):
To World Access or CIS:
World Access, Inc.
945 East Paces Ferry Road, Suite 2240
Atlanta, Georgia 30326
Facsimile: (404) 262-2598
Attn: Chief Executive Officer
with a copy to:
Rogers & Hardin LLP
2700 International Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile: (404) 525-2224
Attn: Steven E. Fox, Esq.
To Lin:
Mr. Ernest H. Lin
Advanced TechCom, Inc.
181 Ballardvale Street
Wilmington, Massachusetts 01887
Facsimile: (978) 694-4801
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Attn: Paul W. Lee, P.C.
Facsimile: (617) 523-1231
All such notices and communications shall be deemed received (i) upon actual
receipt thereof by the addressee, (ii) upon actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
confirmation of receipt. In the case of notices or communications sent by
facsimile transmission, the sender shall contemporaneously mail a copy of the
notice or communication to the addressee at the address provided for above;
provided, however, such mailing shall in no way alter the time at which the
facsimile notice or communication is deemed received.
10. Successors in Interest. This Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the parties hereto and
their respective heirs, legal representatives, successors and assigns, and any
reference to a party hereto shall also be a reference to any such heir, legal
representative, successor or assign.
11. Number; Gender. Whenever the context so requires, the singular
number shall include the plural and the plural shall include the singular, and
the gender of any pronoun shall include the other genders.
12. Captions. The titles and captions contained in this Agreement are
inserted herein only as a matter of convenience and for reference and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provision hereof. Unless otherwise specified to the contrary, all references
to Sections are references to Sections of this Agreement.
13. Controlling Law; Integration; Amendment. This Agreement shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Georgia without reference to its choice of law rules. This
Agreement and the documents executed pursuant hereto or in connection herewith
supersede all negotiations, agreements and understandings among the parties with
respect to the subject matter hereof and constitutes the entire agreement among
the parties hereto. This Agreement may not be amended, modified or supplemented
except by written agreement of the parties hereto.
14. Severability. Any provision hereof which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by law, the parties hereto waive any
provision of law which renders any such provision prohibited or unenforceable in
any respect. In the event that any provision of this Agreement should ever be
deemed to exceed the time, geographic, product or any other limitations
permitted by applicable law, then such provision shall be deemed reformed to the
maximum extent permitted by applicable law.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or the terms hereof to produce or
account for more than one of such counterparts.
16. Enforcement of Certain Rights. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the parties hereto, and their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, or result in such Person being
deemed a third party beneficiary of this Agreement.
[Signatures on following page]
<PAGE>
IN WITNESS WHEREOF, Lin has duly executed and delivered this Agreement,
and World Access and CIS have each caused this Agreement to be duly executed and
delivered on its behalf by an officer thereunto duly authorized, all as of the
date first above written.
-----------------------------------
ERNEST H. LIN
WORLD ACCESS, INC.
By:________________________________
Its:_______________________________
CELLULAR INFRASTRUCTURE SUPPLY, INC.
By:________________________________
Its:_______________________________
Signature Page to
Lin Non-Competition and
Non-Disclosure Agreement
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration Statements on Form
S-8 (Nos. 33-77918, 33-47752 and 333-17741) and Form S-3 (No. 333-21079) of
World Access, Inc. of our report dated February 26, 1997 (October 15, 1997
as to Notes 2 and 13, and the last paragraph of Note 5, which express
an unqualified opinion and includes an explanatory paragraph referring to
certain subsequent events, including entering into an agreement to sub contract
certain of Advanced TechCom, Inc.'s manufacturing, raising of additional equity
and the receipt of a commitment for additional financing) with respect
to the consolidated financial statements of Advanced TechCom, Inc. and
Subsidiary (included herein), appearing as part of Item 7(a) in this Current
Report on Form 8-K of World Access, Inc.
/S/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 13, 1998
<PAGE>
EXHIBIT 99.1
News Release SUMMARY: WORLD ACCESS, INC. ACQUIRES
ADVANCED TECHCOM, INC.
CONTACT: Steven A. Odom Chairman & CEO
Hensley E. West President & COO
Mark A. Gergel Exec. VP & CFO
(404) 231-2025
FOR IMMEDIATE RELEASE
ATLANTA, GEORGIA - January 30, 1998 - WORLD ACCESS, INC. (NASDAQ: WAXS),
announced today that it has completed its acquisition of Advanced TechCom, Inc.,
("ATI"), a Wilmington, Massachusetts based designer and manufacturer of digital
microwave and millimeterwave radio systems for short and long haul voice, data
and/or video applications. Pursuant to the terms of a Merger Agreement, the
shareholders of ATI received approximately $10 million worth of World Access
common shares in exchange for their ATI shares and World Access has assumed
approximately $5 million of ATI debt. In addition, the ATI shareholders have the
right to receive additional shares of World Access common stock over the next
two years, contingent upon the achievement of certain pre-tax profitability
levels by ATI.
Steven A. Odom, Chairman and Chief Executive Officer, said "The acquisition of
ATI is in line with the Company's strategy to broaden its offering of wireless
switching, transport and access products and fully support its customers as they
build new and/or upgrade existing telecommunications networks. ATI is ISO 9001
certified and committed to developing and manufacturing a complete family of
high performance, technologically advanced digital radios for the global
telecommunications markets. ATI's product lines are offered in a wide range of
data rates and frequency bands - - from 1.5 GHz to 38 GHz and DS1/E1 to DS3/E3.
ATI has enjoyed considerable success in recent years in selling its products to
international customers and establishing relationships that represent
significant cross-selling opportunities for other World Access products and
services."
"We are pleased that Dr. Ernie Lin, President of ATI, and his staff of industry
professionals will continue to manage ATI as a division of World Access. Dr. Lin
will report directly to Hatch Graham, President of the Company's Transport and
Access Systems Group. During its latest fiscal year, ATI realized approximately
$15 million in sales. We are optimistic that World Access' financial strength,
extensive U.S. and Latin American telecommunications customer base, advanced
digital switching and wireless transmission products and broad range of wireless
engineering and electronic manufacturing services will further support ATI's
existing business and provide additional sales and profit growth opportunities
for both companies."
World Access, Inc. develops, manufactures and markets wireline and wireless
switching, transport and access products primarily for the United States,
Caribbean Basin and Latin American telecommunications markets. The Company
offers digital switches, cellular base stations, fixed wireless local loop
systems, intelligent multiplexers, digital loop carriers, microwave and
millimeterwave radio equipment and other wireless communications products. To
support and complement its product sales,the Company provides its customers with
a broad range of design, engineering, manufacturing, testing, installation,
repair and other value-added services.
<PAGE>
