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Exhibit 10.39
AGREEMENT OF SETTLEMENT AND MUTUAL RELEASE
THIS AGREEMENT OF SETTLEMENT AND MUTUAL RELEASE ("Agreement") is made
by and between Francis John Gorry ("Mr. Gorry") on the one hand, and MicroTel
International, Inc. ("MicroTel") on the other.
SECTION I
RECITALS
1.1 A dispute has arisen between the parties regarding a Letter
Agreement dated April 18, 1995 relating to, inter alia, the issuance, tender and
registration by the Securities and Exchange Commission of one hundred thirty
thousand (130,000) shares of unrestricted, freely tradable MicroTel common stock
(the "Stock") for the benefit of Mr. Gorry. As a result of MicroTel's failure to
issue, register or tender the Stock to Mr. Gorry, Mr. Gorry filed an action in
the Santa Clara County Superior Court, title Francis John Gorry v. MicroTel
International, Inc., et al., SCSC Case No. CV758208 (the "Action").
1.2 It is the desire of the above named parties to the action to fully
and finally settle and resolve, for valuable consideration, any and all claims
and disputes whatsoever between them, except as otherwise provided in this
Agreement, and to terminate all relationships, controversies and other matters
whatsoever presently existing between them, subject only to the terms,
conditions and exceptions set forth in this Agreement. The parties have reached
this agreed compromise after considering the substantial expense and uncertainty
of litigation, trial and appeals, with the desire to resolve all pending or
potential disputes, administrative matters and litigation between them in their
entirety and without admitting liability. Liability by any party to any other
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party for any right, remedy, benefit or cause of action for any reason or upon
any theory is expressly denied.
THEREFORE, without admitting the validity of or any liability for the
claims and defenses held by Mr. Gorry, on the one hand, and MicroTel, on the
other, against one another, and to resolve all the disputes amongst themselves,
in consideration of the following terms, conditions, covenants and promises as
set forth in this Agreement, the parties agree as follows:
SECTION II
SETTLEMENT AND PAYMENT
2.1 Payments by MicroTel.
2.1.1 Interest Payments. MicroTel shall, as part of this
Agreement, pay to Mr. Gorry, the sum of One Thousand Seven Hundred Dollars
($1,700) (the "Interest Payment") on the first working day of each month, with
said sum representing one percent monthly interest on the agreed upon value of
the Stock ($170,000) (the "Agreed Value"). Such Interest Payments shall be made
one month in arrears commencing on June 1, 1996 (with the June 1 payment
covering the period of May 1-31, 1996) and continuing until the sooner of
December 1, 1996, or the lifting of the restrictions on the Stock pursuant to
section 2.3 below. Should MicroTel miss any Interest Payment as required under
this section, all Interest Payments due through December 1, 1996 shall become
immediately due and payable, and this Agreement shall be enforceable pursuant to
the default provisions of section 2.4 below. MicroTel shall be entitled to a pro
rata reduction in interest if the restrictions on the Stock are lifted prior to
November 30, 1996.
2.1.2 Attorneys' Fees. MicroTel also shall pay Mr. Gorry's
reasonable attorney's fees incurred in this action, which currently totals Five
Thousand Eight Hundred Twenty-
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Seven Dollars ($5,827). Accordingly, concurrent with the execution of this
Agreement, MicroTel shall deliver to Mr. Gorry a check in the amount of Seven
Thousand Five Hundred Twenty-Seven Dollars ($7,527.00) made payable to "Gorry &
Meyer L.L.P. Attorney-Client Trust Account," which amount includes the June 1,
1996 payment under this Agreement and the attorneys' fees incurred to date (the
"Initial Payment"). After the Initial Payment, all Interest Payments shall be
sent to Mr. Gorry at the following address:
F. Jack Gorry
P.O. Box 5032
Carmel, CA 93921
Any additional reasonable attorneys' fees incurred by Mr. Gorry in entry of the
Structured Settlement or enforcing the Agreement shall be paid to Gorry & Meyer
L.L.P. by MicroTel upon presentation to MicroTel of invoices therefor by Mr.
Gorry's counsel.
2.2 Issuance of Stock by MicroTel. To secure its obligations
hereunder, when authorized by the American Stock Exchange and as soon as
practicable following the execution of this Agreement, MicroTel shall cause its
transfer agent to deliver the certificate(s) representing the Stock standing in
the name of "F. Jack Gorry" to Mr. Gorry.
2.3 Lifting of Restrictions. Following the delivery of the
certificate(s) representing the Stock, MicroTel shall cause all restrictions
with respect to the transferability of the Stock to be lifted so that on or
before November 30, 1996, the Stock shall be fully paid, registered and
non-assessable shares of MicroTel common stock, freely tradeable and without any
restrictions as to transferability.
2.4 Payment of Additional Consideration. MicroTel further agrees that
if the market value of the Stock on the date that its restrictions are lifted in
accordance with Section 2.3
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(the "Tender Date") to Mr. Gorry is less than the Agreed Value, MicroTel shall
pay Mr. Gorry within ten (10) days of the Tender Date, the difference between
the value of the Stock on the Tender Date and the Agreed Value.
2.5 Obligations of MicroTel upon Failure to Lift Restrictions. In the
event that MicroTel is not able to comply with the provisions of Section 2.3 on
or before November 30, 1996, then MicroTel shall pay to Mr. Gorry One Hundred
and Seventy Thousand Dollars ($170,000) as liquidated damages on or before
December 10, 1996. At the time this consideration is tendered to Mr. Gorry, Mr.
Gorry shall surrender the certificate(s) representing the Stock that he is
holding as security for performance. The parties specifically agree that the
liquidated damages paid under this section shall be allocated as follows:
twenty-five percent (25%) of the damages shall consist of compensatory damages
under the April 18, 1995 Letter Agreement, and the remaining seventy-five
percent (75%) shall constitute punitive damages.
2.6 Dismissal of Action. Mr. Gorry shall, within two days of his
receipt of the initial payment, execute and file with the Superior Court for the
County of Santa Clara a Notice of Structured Settlement which incorporates this
settlement agreement, and sets forth the conditions under which an executed
Request for Dismissal with Prejudice of SCSC Case No. CV758208 would be filed,
along with any and all other documents needed to promptly execute and file the
Dismissal with the Superior Court, immediately notify MicroTel that the
Dismissal has been filed, and provide MicroTel with conformed copies of the
fully executed Dismissal, upon lifting of restrictions on the Stock or, in the
alternative, payment under section 2.5 above.
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2.7 Default by MicroTel. Should MicroTel default under any of the
terms of this Agreement, the parties agree that Mr. Gorry may seek enforcement
of the terms of this Agreement through the provisions of California Code of
Civil Procedure Section 664.6. In addition, should MicroTel fail to make any
payment required hereunder when due, Mr. Gorry shall be entitled to recover
interest on such unpaid obligation at the rate of one and one-half percent
interest per month (the "Default Rate").
SECTION III
MUTUAL RELEASE
3.1 Mutual Releases. In consideration of the mutual promises and
releases contained herein, and except as expressly provided herein, Mr. Gorry
and MicroTel, on behalf of themselves and their respective past, present and
future assignee, heirs, executors, attorneys, agents, administrators and
successors (collectively the "successors") hereby forever release and discharge
each other and each other's successors, agents, servants, employees, officers,
directors, shareholders, partners and attorneys from any and all actions, causes
of action, suits, debts, damages, accounts, claims, demands, obligations, and
liabilities of any type or description whatsoever, known or unknown, foreseen or
unforeseen, arising out of the Action with the sole exception that the parties
do not intend to release any rights or remedies arising out of the respective
rights and obligations of the parties pursuant to this Agreement.
SECTION IV
WARRANTIES
4.1 Capacity of the Parties. Each of the parties hereby represents and
warrants to the other that it has the full power, capacity and authority to
enter into this Agreement, and that
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no portion of any claim, right, demand, action or cause of action that it has or
might have arising out of the acts, events, transactions and occurrences
referred to herein has been assigned, transferred or conveyed to any person not
a party to this Agreement ("nonparty"), by way of subrogation, operation of law
or otherwise, and that no releases or settlements are necessary for any nonparty
to release and discharge completely any of the parties to this Agreement from
the claims released in this Agreement. MicroTel further warrants that all
requisite corporate action has been taken with respect to the execution and
delivery of this Agreement and, upon execution hereof, this Agreement shall be
binding and enforceable against MicroTel in accordance with its terms.
4.2 Full and Final Release. Each of the parties hereby severally
represents and warrants to the others that they understand and agree that this
Agreement shall act as a full and final release of all claims arising out of the
Action including those of every nature or kind that have arisen or could have
arisen between the parties hereto prior to the date of execution of this
Agreement, whether such claims are currently known or unknown, and whether they
were foreseeable, known or unknown. The parties hereto hereby assume full and
sole responsibility for any claims, injury, loss, damage or liability that may
hereafter be learned of or incurred by reason of or related to the matters
alleged and raised (or potentially alleged or raised) in the Action and all
related pleadings in this litigation.
4.3 Binding on all Parties. Each of the parties hereby severally
represents and warrants to the others that they understand that if the facts
upon which this Agreement are based are found hereafter to be different from the
facts now believed to be true, this Agreement will remain binding and effective
and the parties expressly accept and assume the risk of such possible
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differences and agree that this Agreement shall remain binding and effective,
notwithstanding such potential differences.
4.4 Denial of Liability. Each of the parties hereby severally
represents and warrants to the others that it is understood and agreed that this
Agreement is a compromise of disputed claims, and that the exchange of
consideration hereunder or any other acts, omissions or statements by the
parties are not to be construed as an admission of liability of any party for
any claims or defenses, with liability being expressly denied, and neither this
Agreement nor anything contained in this Agreement shall be interpreted or
construed as an admission of liability by MicroTel or by Mr. Gorry, with
liability being expressly denied.
SECTION V
GENERAL PROVISIONS
5.1 Entire Agreement. This Agreement is the entire agreement between
the parties hereto and memorializes the agreement entered into between the
parties. All parties represent and acknowledge that they have conferred with and
have been represented by counsel of their own selection with respect to the
terms, conditions and execution of this Agreement and all matters covered by it
and related to it.
5.2 Governing Law. This Agreement shall be interpreted and governed
according to the law of the State of California.
5.3 Binding on Successors. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the successors, assigns, heirs,
executors, administrators, etc., of the respective parties.
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5.4 Acknowledge Understanding. All parties state that they have
carefully read and understood the foregoing Agreement and know the contents
thereof, that they have consulted with their attorneys about its purpose and
legal effect, and that they are signing same as their own free act with advice
of counsel.
FRANCIS JOHN GORRY
Dated: June 28, 1996 /s/ Francis John Gorry
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Francis John Gorry
MICROTEL INTERNATIONAL, INC.
Dated: June 27, 1996 By: /s/ Barry Reifler
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Barry Reifler, Secretary and Chief
Financial Officer
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