EXHIBIT 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
AMONG
MICROTEL INTERNATIONAL INC.
AND
THE SHAREHOLDERS OF
LARUS CORPORATION
JULY 13, 2004
TABLE OF CONTENTS
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PAGE
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1. Definitions...........................................................1
2. Purchase and Sale of Company Shares...................................6
2.1 Basic Transaction............................................6
2.2 Purchase Price...............................................6
2.3 The Closing..................................................6
2.4 Deliveries at the Closing....................................6
3. Representations and Warranties Concerning the Transaction.............7
3.1 Representations and Warranties of the Sellers................7
3.2 Representations and Warranties of the Buyer..................9
4. Representations and Warranties Concerning the Company and the
Subsidiary...........................................................10
4.1 Organization, Qualification, and Corporate Power............10
4.2 Capitalization..............................................10
4.3 Noncontravention............................................11
4.4 Brokers' Fees...............................................11
4.5 Title to Assets.............................................11
4.6 Subsidiary..................................................11
4.7 Financial Statements........................................12
4.8 Events Subsequent to Most Recent Fiscal Year End............12
4.9 Undisclosed Liabilities.....................................14
4.10 Legal Compliance............................................14
4.11 Tax Matters.................................................14
4.12 Real Property...............................................16
4.13 Intellectual Property.......................................17
4.14 Tangible Assets.............................................19
4.15 Inventory...................................................19
4.16 Contracts...................................................19
4.17 Notes and Accounts Receivable...............................20
4.18 Powers of Attorney..........................................20
4.19 Insurance...................................................20
4.20 Litigation..................................................21
4.21 Product Warranty............................................21
4.22 Product Liability...........................................22
4.23 Employees...................................................22
4.24 Employee Benefits...........................................22
4.25 Guaranties..................................................24
4.26 Environmental, Health, and Safety Matters...................24
4.27 Certain Business Relationships with the Company and the
Subsidiary..................................................25
4.28 Stock Repurchases...........................................25
4.29 Disclosure..................................................26
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PAGE
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5. Post-Closing Covenants...............................................26
5.1 General.....................................................26
5.2 Litigation Support..........................................26
5.3 Transition..................................................26
5.4 Confidentiality.............................................26
5.5 Non-Competition.............................................27
5.6 Preparation and Delivery of Closing Balance Sheets..........29
5.7 Certain Tax Payments........................................29
6. Conditions to Obligation to Close....................................29
6.1 Conditions to Obligation of the Buyer.......................29
6.2 Conditions to Obligation of the Sellers, McDermott
and Yost....................................................31
7. Remedies for Breaches of This Agreement..............................32
7.1 Survival of Representations and Warranties..................32
7.2 Indemnification Provisions for Benefit of the Buyer.........32
7.3 Indemnification Provisions for Benefit of the Sellers.......33
7.4 Matters Involving Third Parties.............................33
7.5 Determination of Adverse Consequences.......................34
7.6 Set Off.....................................................34
7.7 Limitations on Indemnification Matters......................34
8. Tax Matters..........................................................35
8.1 Tax Periods Beginning Before and Ending After the
Closing Date................................................35
8.2 Cooperation on Tax Matters..................................35
8.3 Tax Sharing Agreements......................................36
9. Miscellaneous........................................................36
9.1 Press Releases and Public Announcements.....................36
9.2 No Third-Party Beneficiaries................................36
9.3 Entire Agreement............................................36
9.4 Succession and Assignment...................................37
9.5 Counterparts................................................37
9.6 Headings....................................................37
9.7 Notices.....................................................37
9.8 Governing Law...............................................38
9.9 Amendments and Waivers......................................38
9.10 Severability................................................38
9.11 Expenses....................................................38
9.12 Construction................................................38
9.13 Incorporation of Exhibits and Schedules.....................39
9.14 Specific Performance........................................39
9.15 Submission to Jurisdiction..................................39
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Exhibit A - Form of Short Term Note
Exhibit B - Form of Long Term Note
Exhibit C - List of Buyer's Banks and Lending Institutions
Exhibit D - Form of Warrant Agreement
Exhibit E - Financial Statements
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Form of Lock-Up Agreement
Exhibit H - Form of Facility Lease Agreement
Exhibit I - Form of Consulting Agreement - McDermott
Exhibit J - Form of Consulting Agreement - Yost
Exhibit K - Form of Opinion of Counsel to the Sellers
Exhibit L - Form of Opinion of Counsel to the Buyer
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into on July
13, 2004, by and among MICROTEL INTERNATIONAL INC., a Delaware corporation (the
"BUYER"), NOEL C. McDERMOTT, an individual ("MCDERMOTT"), WARREN P. YOST, an
individual ("YOST"), and the holders of the common stock of LARUS CORPORATION, a
California corporation (the "COMPANY"), identified in the signature block at the
end of this Agreement (each individually a "SELLER" and collectively the
"SELLERS"). The Buyer, McDermott, Yost, and the Sellers are each referred to
herein as a "PARTY" and collectively referred to herein as the "PARTIES."
R E C I T A L S
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A. The Sellers in the aggregate own all of the outstanding common stock
of the Company, which common stock comprises all of the capital stock of the
Company.
B. This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding common stock of the Company in return for cash and other
consideration described in SECTION 2.2.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCREDITED INVESTOR" has the meaning set forth in Regulation
D promulgated under the Securities Act.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Section 1504(a) or any similar group defined under a similar
provision of state, local or foreign law.
"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"BUSINESS" means the manufacturing and sale of
telecommunications products.
"BUYER" has the meaning set forth in the preface above.
"BUYER NOTES" means the Short Term Notes and the Long Term
Notes.
"BUYER SECURITIES" means, collectively, the Buyer Shares, the
Buyer Notes, the Warrants and the Warrant Shares.
"BUYER SHARES" has the meaning set forth in SECTION 2.2(d).
"CLOSING" has the meaning set forth in SECTION 2.3.
"CLOSING BALANCE SHEETS" has the meaning set forth in SECTION
5.6.
"CLOSING DATE" has the meaning set forth in SECTION 2.3.
"COBRA" means the requirements of Part 6 of Subtitle B of
Title I of ERISA and Code Section 4980B and of any similar state law.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY SHARE" means any share of the common stock, no par
value per share, of the Company.
"CONFIDENTIAL INFORMATION" means any information concerning
the businesses and affairs of the Company or the Subsidiary that is not already
generally available to the public.
"CONSULTING AGREEMENTS" has the meaning set forth in SECTION
6.1(k).
"CONTROLLED GROUP" has the meaning set forth in Code Section
1563.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth
in Reg. Section 1.1502-13 under the Code.
"DISCLOSURE SCHEDULE" has the meaning set forth in SECTION 4.
"EMPLOYEE BENEFIT PLAN" means any "EMPLOYEE BENEFIT PLAN" (as
such term is defined in ERISA Section 3(3)) and any other employee benefit plan,
program or arrangement of any kind.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Section 3(1).
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"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means each entity which is treated as a
single employer with the Company for purposes of Code Section 414.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Reg.
Section 1.1502-19 under the Code.
"FACILITY LEASE AGREEMENT" has the meaning set forth in
SECTION 6.1(j).
"FCC" means the Federal Communications Commission.
"FIDUCIARY" has the meaning set forth in ERISA Section 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION
4.7.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 7.4.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 7.4.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
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"KNOWLEDGE" means actual knowledge.
"LIABILITY" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LOCK-UP AGREEMENTS" has the meaning set forth in SECTION
6.1(i).
"LONG TERM NOTES" has the meaning set forth in SECTION 2.2(c).
"MCDERMOTT" shall mean Noel C. McDermott, an individual.
"MOST RECENT BALANCE SHEET" means the balance sheet of the
Company or the Subsidiary contained within the Most Recent Financial Statements
of the Company or the Subsidiary, as the case may be.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in SECTION 4.7.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in
SECTION 4.7.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in
SECTION 4.7.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA
Section 3(37).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PRODUCTS" means the products manufactured by the Company.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.2.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in
SECTION 6.1(h).
"REPORTABLE EVENT" has the meaning set forth in ERISA Section
4043.
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"RESTRICTED PERIOD" has the meaning set forth in SECTION
5.5(a).
"RESTRICTED TERRITORY" means all states, territories,
districts, provinces and commonwealths of the United States and Canada in which
the Company has conducted any aspect of the Business, and all states,
territories, districts and commonwealths of the United States in which the Buyer
conducts its business (including, without limitation, the Business of the
Company) hereafter.
"SEC" means the United States Securities and Exchange
Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface above.
"SHORT TERM NOTES" has the meaning set forth in SECTION
2.2(b).
"STOCK REPURCHASES" means (i) the repurchase by Vista of an
aggregate of 3,000 shares of common stock of Vista held by shareholders of Vista
other than Larus, and (ii) the repurchase by Larus of and aggregate of 18,750 of
common stock of Larus held by shareholders of Larus other than McDermott or
Yost, which repurchases were made effective immediately prior to the Closing.
"SUBSIDIARY" means Vista Labs Incorporated, a California
corporation, a wholly-owned subsidiary of the Company.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in SECTION 7.4.
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"WARRANTS" has the meaning set forth in SECTION 2.2(e).
"WARRANT AGREEMENT" has the meaning set forth in SECTION
2.2(e).
"WARRANT SHARES" has the meaning set forth in SECTION 2.2(e).
"YOST" shall mean Warren P. Yost, an individual.
2. PURCHASE AND SALE OF COMPANY SHARES.
2.1 BASIC TRANSACTION. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from each of the
Sellers, and each of the Sellers agrees to sell to the Buyer, all of his or its
Company Shares for the consideration specified below in SECTION 2.2. The
consideration set forth in Section 2(b) below shall be the aggregate
consideration delivered by the Buyer to the Sellers. Such aggregate
consideration shall be divided pro-rata among the Sellers based upon their
respective percentage ownership of the Company Shares on the Closing Date in
relation to all of the Company Shares.
2.2 PURCHASE PRICE. The Buyer agrees to pay to the Sellers at
the Closing an aggregate purchase price (the "PURCHASE PRICE") comprised of the
following elements:
(a) $1,000,000 cash;
(b) zero interest promissory notes ("SHORT TERM
NOTES"), in form and substance as set forth in EXHIBIT A, issued by the Buyer in
the aggregate principal amount equal to $887,500;
(c) subordinated secured promissory notes (the "LONG
TERM NOTES"), in form and substance as set forth in EXHIBIT B, issued by the
Buyer in the aggregate principal amount of $3,000,000;
(d) 1,213,592 shares of the Buyer's common stock (the
"BUYER SHARES"); and
(e) warrants (the "WARRANTS") to purchase up to an
aggregate of 150,000 shares of the Buyer's common stock (the "WARRANT SHARES")
pursuant to the terms of the Warrant Agreements (the "WARRANT AGREEMENTS") in
form and substance as set forth in EXHIBIT D.
2.3 THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "CLOSING") shall take place at the offices of Rutan &
Tucker, LLP, located at 611 Anton Boulevard, 14th Floor, Costa Mesa, California
92626, commencing at 9:00 a.m. local time on such date as the Buyer and the
Sellers may mutually determine (the "CLOSING DATE"); PROVIDED, HOWEVER, that the
Closing Date shall be no later than July 9, 2004.
2.4 DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers
will deliver to the Buyer the various certificates, instruments, and documents
referred to in SECTION 6.1, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in SECTION 6.2
below, (iii) each of the Sellers will deliver to the Buyer by facsimile (with
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hard copy to follow within five business days after the Closing) stock
certificates representing all of his or its Company Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to each of the Sellers their respective portion of the aggregate
consideration specified in SECTION 2.2 (except for certificates representing
Buyers Shares, which certificates shall be delivered to the Sellers within five
business days after the Closing).
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each
Seller, severally and not jointly, represents and warrants to the Buyer as
follows:
(a) AUTHORIZATION OF TRANSACTION. Such Seller has
full power and authority to execute and deliver this Agreement and to perform
his or its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of such Seller, enforceable in accordance with its
terms and conditions. Such Seller need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
(b) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which such Seller is
subject, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
such Seller is a party or by which he is bound or to which any of his assets is
subject.
(C) BROKERS' FEES. Such Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement other than the fees
payable by the Sellers to Trudeau and Trudeau Associates, Inc. and such fees
payable by the Sellers to Trudeau and Trudeau Associates, Inc. shall be paid in
full by the Sellers.
(d) SECURITIES LAW COMPLIANCE.
(i) such Seller has a net worth sufficient
to bear the economic risk (including the entire loss) of his or its
investment made in the Buyer Securities;
(ii) such Seller is an "accredited
investor," as such term is defined in Rule 501 of Regulation D
promulgated under the rules and regulations of the Securities Act;
(iii) such Seller has adequate means of
providing for his or its current cash needs and personal contingencies
and has no need for liquidity in this investment in the Buyer
Securities and has no reason to anticipate any change in his or its
personal circumstances, financial or otherwise, which may cause or
require any sale or distribution by such Seller of all or any part of
the Buyer Securities acquired by him or it herein;
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(iv) by reason of such Seller's business or
financial experience or the business or financial experience of such
Seller's professional advisor(s) who are unaffiliated with and who are
not compensated by the Buyer or any Affiliate of the Buyer, directly or
indirectly, such Seller has the capacity to protect his or its own
interests in connection with an investment in the Buyer Securities;
(v) such Seller understands that the he or
it is acquiring the Buyer Securities without being furnished any
prospectus or offering circular, other than a copy of this Agreement, a
copy of the Buyer's annual report on Form 10-K for the year ended
December 31, 2003 and a copy of the Buyer's quarterly report on Form
10-Q for the quarterly period ended March 31, 2004;
(vi) no representations or warranties have
been made to such Seller by the Buyer or any employee or agent of the
Buyer regarding the Buyer and in entering into this Agreement, such
Seller is not relying on any information, other than as a result of the
independent investigation of the Buyer by such Seller, and no guarantee
of any profit or return on his or its investment made in the Buyer
Securities has been made to such Seller;
(vii) in evaluating the merits and risk of
this investment, such Seller has relied on the advice of his or its
personal tax advisor, investment advisor and/or legal counsel;
(viii) such Seller is aware that the Buyer
Securities have not been registered or qualified, nor is registration
or qualification contemplated (except where such Seller is a party to
the Registration Rights Agreement, to the extent provided for therein),
with the SEC under the Securities Act or any state securities law.
Accordingly, the Buyer Securities may not be sold or otherwise
transferred or hypothecated unless they are subsequently registered or
qualified under the Securities Act or applicable laws or if, in the
opinion of counsel, an exemption from registration or qualification
thereunder is available and the transaction will not jeopardize the
availability of the exemptions under applicable federal and state
securities laws relied upon by the Buyer in connection with the
offering in which such Seller acquired his or its Buyer Securities;
(ix) such Seller acknowledges that the Buyer
Securities were not offered by means of any general solicitation or
advertising;
(x) such Seller is acquiring his or its
Buyer Securities solely for his or its own account, for investment
purposes only, and not with an intent to sell, or for resale in
connection with any distribution of all or any portion of the Buyer
Securities within the meaning of the Securities Act;
(xi) the address of such Seller set forth on
the signature pages hereto is the principal residence of such Seller,
if such Seller is an individual, or the principal business address of
such Seller, if such Seller is a business or other entity, and that all
offers to such Seller have been made only in the state specified in
such address; and
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(xii) such Seller acknowledges and agrees
that the Buyer Notes, Warrant Agreement, certificates representing the
Buyer Shares and, when issued, the certificates representing the
Warrant Shares shall each contain such restrictive legends as may be
required under applicable state and federal securities laws with
respect to the transferability of such securities.
(e) COMPANY SHARES. Such Seller holds of record and
owns beneficially the number of Company Shares set forth next to his or
its name in SECTION 4.2 of the Disclosure Schedule, free and clear of
any restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require such
Seller to sell, transfer, or otherwise dispose of any capital stock of
the Company (other than this Agreement). Such Seller is not a party to
any voting trust, proxy, or other agreement or understanding with
respect to the voting of any capital stock of the Company.
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Sellers as follows:
(a) ORGANIZATION OF THE BUYER. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions. The Buyer need not give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
(c) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is subject
or any provision of its charter or bylaws or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer is a party or by which it is bound or to which
any of its assets is subject.
(d) BROKERS' FEES. The Buyer has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement other than the fees
payable by the Buyer to OEM Capital Corp.
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(e) INVESTMENT. The Buyer is not acquiring the
Company Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
(f) SEC FILINGS. As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the documents filed by
the Buyer with the SEC complied in all material respects with the applicable
requirements of the Securities Act or the Securities Exchange Act (as the case
may be); and (ii) none of such documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The Buyer has filed
with the SEC all documents required to be filed with the SEC as set forth in the
Securities Act or the Securities Exchange Act (as the case may be).
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND THE
SUBSIDIARY.
The Sellers, McDermott and Yost, jointly and severally,
represent and warrant to the Buyer that the statements contained in this SECTION
4 are correct and complete as of the date of this Agreement, except as set forth
in the disclosure schedule delivered by the Sellers, McDermott and Yost to the
Buyer on the date hereof and initialed by the Sellers, McDermott and Yost (the
"DISCLOSURE SCHEDULE").
4.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Each of
the Company and the Subsidiary is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company and the Subsidiary is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. Each of the Company and the Subsidiary has
full corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used by
it. Section 4.1 of the Disclosure Schedule lists the directors and officers of
each of the Company and the Subsidiary. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of each of the Company and
the Subsidiary (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each of the Company and the Subsidiary are correct and complete. Neither the
Company nor the Subsidiary is in default under or in violation of any provision
of its charter or bylaws.
4.2 CAPITALIZATION. The entire authorized capital stock of the
Company consists of 1,000,000 Company Shares, of which 910,000 Company Shares
are issued and outstanding (after taking into account the Stock Repurchases).
All of the issued and outstanding Company Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth in Section 4.2 of the Disclosure Schedule. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
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commitments that could require the Company to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Company. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
4.3 NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either the Company or the Subsidiary is
subject or any provision of the charter or bylaws of either the Company or the
Subsidiary or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
either the Company or the Subsidiary is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Neither the Company nor the Subsidiary needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
4.4 BROKERS' FEES. Neither the Company nor the Subsidiary has
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement. All fees payable to Trudeau and Trudeau Associates, Inc. shall be
paid by the Sellers.
4.5 TITLE TO ASSETS. The Company and the Subsidiary have good
and marketable title to, or a valid leasehold interest in, the properties and
assets used by them, located on their premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
4.6 SUBSIDIARY. Section 4.6 of the Disclosure Schedule sets
forth for the Subsidiary (a) its name and jurisdiction of incorporation, (b) the
number of shares of authorized capital stock of each class of its capital stock,
and (c) the number of issued and outstanding shares of each class of its capital
stock and that all such shares of capital stock are held by the Company. All of
the issued and outstanding shares of capital stock of the Subsidiary have been
duly authorized and are validly issued, fully paid, and nonassessable. The
Company holds of record and owns beneficially all of the outstanding shares of
capital stock of the Subsidiary, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
Taxes, Security Interests, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
either the Company or the Subsidiary to sell, transfer, or otherwise dispose of
any capital stock of the Subsidiary or that could require the Subsidiary to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Subsidiary. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of the Subsidiary. Neither the Company nor the
Subsidiary controls directly or indirectly or has any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association.
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4.7 FINANCIAL STATEMENTS. Attached hereto as EXHIBIT E are the
following financial statements of the Company and the Subsidiary for the periods
described below, all of which are subject to audit adjustments by the Buyer
(collectively the "FINANCIAL STATEMENTS"): (i) unaudited balance sheets and
statements of income as of and for the fiscal years ended November 30, 2003 and
October 31, 2003 (in each case, the "MOST RECENT FISCAL YEAR END") for the
Company and the Subsidiary, respectively; and (ii) unaudited balance sheets and
statements of income (in each case, the "MOST RECENT FINANCIAL STATEMENTS") as
of and for the six months and seven months ended May 31, 2004 (in each case, the
"MOST RECENT FISCAL MONTH END") for the Company and the Subsidiary,
respectively. The Financial Statements, all of which are subject to audit
adjustments by the Buyer, present fairly the financial condition of the Company
and the Subsidiary as of such dates and the results of operations of the Company
and the Subsidiary for such periods, are correct and complete, and are
consistent with the books and records of the Company and the Subsidiary (which
books and records are correct and complete).
4.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since
the Most Recent Fiscal Year End, there has not been any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of either the Company or the Subsidiary. Without limiting the
generality of the foregoing, since those dates:
(a) neither the Company nor the Subsidiary has sold,
leased, transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
(b) neither the Company nor the Subsidiary has
entered into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than $25,000
or outside the Ordinary Course of Business;
(c) no party (including the Company and the
Subsidiary) has accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $25,000 to which either the Company or the
Subsidiary is a party or by which either of them is bound;
(d) neither the Company nor the Subsidiary has
imposed any Security Interest upon any of its assets, tangible or intangible;
(e) neither the Company nor the Subsidiary has made
any capital expenditure (or series of related capital expenditures) either
involving more than $25,000 or outside the Ordinary Course of Business;
(f) neither the Company nor the Subsidiary has made
any capital investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments, loans,
and acquisitions) either involving more than $25,000 or outside the Ordinary
Course of Business;
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(g) neither the Company nor the Subsidiary has issued
any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation
either involving more than $25,000 in the aggregate;
(h) neither the Company nor the Subsidiary has
delayed or postponed the payment of accounts payable and other Liabilities
outside the Ordinary Course of Business;
(i) neither the Company nor the Subsidiary has
cancelled, compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than $5,000 or outside the
Ordinary Course of Business;
(j) neither the Company nor the Subsidiary has
granted any license or sublicense of any rights under or with respect to any
Intellectual Property;
(k) there has been no change made or authorized in
the charter or bylaws of either the Company or the Subsidiary;
(l) neither the Company nor the Subsidiary has
issued, sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(m) neither the Company nor the Subsidiary has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock, other than the Stock Repurchases;
(n) neither the Company nor the Subsidiary has
experienced any material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(o) neither the Company nor the Subsidiary has made
any loan to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(p) neither the Company nor the Subsidiary has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement;
(q) neither the Company nor the Subsidiary has
granted any increase in the base compensation of any of its directors, officers,
and employees outside the Ordinary Course of Business;
(r) neither the Company nor the Subsidiary has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
-13-
(s) neither the Company nor the Subsidiary has made
any other change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;
(t) neither the Company nor the Subsidiary has made
or pledged to make any charitable or other capital contribution outside the
Ordinary Course of Business;
(u) there has not been any other occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving either the Company or the Subsidiary; and
(v) neither the Company nor the Subsidiary has
committed to any of the foregoing.
4.9 UNDISCLOSED LIABILITIES. Neither the Company nor the
Subsidiary has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability), except for (a)
Liabilities set forth on the face of the Most Recent Balance Sheet for the
Company and the Subsidiary and (b) Liabilities which have arisen after the Most
Recent Fiscal Month End for the Company and the Subsidiary in the Ordinary
Course of Business (none of which results from, arises out of, relates to, is in
the nature of, or was caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law).
4.10 LEGAL COMPLIANCE. Each of the Company and the Subsidiary
has complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof)
(including without limitation all applicable rules and regulations of the FCC
with respect to the Company's Products including Part 15 of Title 47 of the Code
of Federal Regulations), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.
4.11 TAX MATTERS.
(a) Each of the Company and the Subsidiary has filed
all Tax Returns that it was required to file. All such Tax Returns were correct
and complete in all respects. All Taxes owed by the Company and the Subsidiary
(whether or not shown on any Tax Return) have been paid. Neither the Company nor
the Subsidiary currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where either the Company or the Subsidiary does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Security Interests on any of the assets of either the Company or the
Subsidiary that arose in connection with any failure (or alleged failure) to pay
any Tax.
(b) Each of the Company and the Subsidiary has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
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(c) No Seller or director or officer (or employee
responsible for Tax matters) of the Company or the Subsidiary expects any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax Liability of
the Company or the Subsidiary either (i) claimed or raised by any authority in
writing or (ii) as to which any of the Sellers and the directors and officers
(and employees responsible for Tax matters) of the Company and the Subsidiary
has Knowledge based upon personal contact with any agent of such authority.
Section 4.11 of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Company and the Subsidiary
for taxable periods ended on or after November 30, 2000, and October 31, 2000,
respectively, indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The Sellers have
delivered to the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by the Company or the Subsidiary since November 30, 1999 and October
31, 1999, respectively.
(d) Neither the Company nor the Subsidiary has waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(e) Neither the Company nor the Subsidiary has filed
a consent under Code Section 341(f) concerning collapsible corporations. Neither
the Company nor the Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code Section
280G. Neither the Company nor the Subsidiary has been a United States real
property holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of the
Company and the Subsidiary has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662. Neither the Company
nor the Subsidiary is a party to any Tax allocation or sharing agreement.
Neither the Company nor the Subsidiary (i) has been a member of an Affiliated
Group filing a consolidated federal income Tax Return (other than a group the
common parent of which was the Company) or (ii) has any Liability for the Taxes
of any Person (other than the Company or the Subsidiary) under Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(f) Section 4.11 of the Disclosure Schedule sets
forth the following information with respect to each of the Company and the
Subsidiary (or, in the case of clause (ii) below, with respect to the
Subsidiary) as of the most recent practicable date (as well as on an estimated
pro forma basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (i) the basis of the Company or Subsidiary in
its assets; (ii) the basis of the stockholder(s) of the Subsidiary in its stock
(or the amount of any Excess Loss Account); (iii) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Company or the
Subsidiary; and (iv) the amount of any deferred gain or loss allocable to the
Company or the Subsidiary arising out of any Deferred Intercompany Transaction.
-15-
4.12 REAL PROPERTY.
(a) Neither the Company nor the Subsidiary owns any
real property.
(b) Section 4.12(b) of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Company or
the Subsidiary. McDermott and Yost have delivered to the Buyer correct and
complete copies of the leases and subleases listed in Section 4.12(b) of the
Disclosure Schedule (as amended to date). With respect to each lease and
sublease listed in Section 4.12(b) of the Disclosure Schedule, to the Knowledge
of the Sellers, McDermott or Yost:
(i) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iii) no party to the lease or sublease has
repudiated any provision thereof;
(iv) there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or sublease;
(v) with respect to each sublease, the
representations and warranties set forth in subsections (i) through (v)
above are true and correct with respect to the underlying lease;
(vi) neither the Company nor the Subsidiary
has assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
(vii) all facilities leased or subleased
thereunder have received all approvals of governmental authorities
(including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance
with applicable laws, rules, and regulations;
(viii) all facilities leased or subleased
thereunder are supplied with utilities and other services necessary for
the operation of said facilities; and
(ix) the owner of the facility leased or
subleased has good and marketable title to the parcel of real property,
free and clear of any Security Interest, easement, covenant, or other
restriction, except for installments of special easements not yet
delinquent and recorded easements, covenants, and other restrictions
which do not impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto.
-16-
4.13 INTELLECTUAL PROPERTY.
(a) To the Knowledge of the Sellers, McDermott or
Yost, the Company and the Subsidiary own or have the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the businesses of the Company and
the Subsidiary as presently conducted and as presently proposed to be conducted.
Each item of Intellectual Property owned or used by any of the Company or the
Subsidiary immediately prior to the Closing hereunder will be owned or available
for use by the Company or the Subsidiary on identical terms and conditions
immediately subsequent to the Closing hereunder. To the Knowledge of the
Sellers, McDermott or Yost, each of the Company and the Subsidiary has taken all
necessary and desirable action to maintain and protect each item of Intellectual
Property that it owns or uses.
(b) Neither the Company nor the Subsidiary has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and none of the
Sellers and the directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company and the Subsidiary has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company or the Subsidiary must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Sellers, McDermott or Yost, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of the Company or the Subsidiary.
(c) Section 4.13(c) of the Disclosure Schedule
identifies each patent or registration which has been issued to the Company or
the Subsidiary with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which the Company or
the Subsidiary has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the Company or the
Subsidiary has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Sellers have delivered
to the Buyer correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date) and
have made available to the Buyer correct and complete copies of all other
written documentation evidencing ownership and prosecution (if applicable) of
each such item. Section 4.13(c) of the Disclosure Schedule also identifies each
trade name or unregistered trademark used by the Company or the Subsidiary in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in Section 4.13(c) of the Disclosure
Schedule:
(i) the Company and the Subsidiary possess
all right, title, and interest in and to the item, free and clear of
any Security Interest, license, or other restriction;
(ii) the item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
-17-
(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, enforceability,
use, or ownership of the item; and
(iv) neither the Company nor the Subsidiary
has ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with
respect to the item.
(d) Section 4.13(d) of the Disclosure Schedule
identifies each item of Intellectual Property that any third party owns and that
the Company or the Subsidiary uses pursuant to license, sublicense, agreement,
or permission. The Sellers have delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of Intellectual Property required to
be identified in Section 4.13(d) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation
of the transactions contemplated hereby;
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration
thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(v) with respect to each sublicense, the
representations and warranties set forth in subsections (i) through
(iv) above are true and correct with respect to the underlying license;
(vi) the underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(viii) neither the Company nor the
Subsidiary has granted any sublicense or similar right with respect to
the license, sublicense, agreement, or permission.
(e) To the Knowledge of the Sellers, McDermott or
Yost, neither the Company nor the Subsidiary will interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation of its businesses
as presently conducted and as presently proposed to be conducted.
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(f) Neither the Sellers, McDermott nor Yost has any
Knowledge of any new products, inventions, procedures, or methods of
manufacturing or processing that any competitors or other third parties have
developed which reasonably could be expected to immediately replace any Product
or process of the Company or the Subsidiary.
4.14 TANGIBLE ASSETS. The Company and the Subsidiary own or
lease all buildings, machinery, equipment, and other tangible assets necessary
for the conduct of their businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
4.15 INVENTORY. The inventory of the Company and the
Subsidiary consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods.
4.16 CONTRACTS. Section 4.16 of the Disclosure Schedule lists
the following contracts and other agreements to which the Company or the
Subsidiary is a party:
(a) any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for lease
payments in excess of $5,000 per annum;
(b) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year, result in
a loss to the Company or the Subsidiary, or involve consideration in excess of
$10,000;
(c) any agreement concerning a partnership or joint
venture;
(d) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of $10,000 or
under which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(e) any agreement concerning confidentiality or
noncompetition;
(f) any agreement with any of the Sellers and their
Affiliates (other than the Company and the Subsidiary);
(g) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
-19-
(h) any collective bargaining agreement;
(i) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis providing
annual compensation in excess of $40,000 or providing severance benefits;
(j) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(k) any agreement under which the consequences of a
default or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company or the Subsidiary; or
(l) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of
$10,000.
The Sellers have delivered to the Buyer a correct and complete
copy of each written agreement listed in Section 4.16 of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 4.16 of the Disclosure
Schedule. With respect to each such agreement, to the Knowledge of the Sellers,
McDermott or Yost: (i) the agreement is legal, valid, binding, enforceable, and
in full force and effect; (ii) the agreement will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated hereby; (iii) no party is in
breach or default, and no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (iv) no party has repudiated any
provision of the agreement.
4.17 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Company and the Subsidiary are reflected properly on their
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their
terms at their recorded amounts as set forth on the face of the Most Recent
Balance Sheet of the Company and the Subsidiary, respectively.
4.18 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company or the Subsidiary.
4.19 INSURANCE. Section 4.19 of the Disclosure Schedule sets
forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Company or the
Subsidiary has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past seven (7) years:
(a) the name, address, and telephone number of the
agent;
(b) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
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(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage;
(e) any claim for coverage that has been denied
(including partially denied) or is being contested; and
(f) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy, to the Knowledge
of the Sellers, McDermott or Yost: (i) the policy is legal, valid, binding,
enforceable, and in full force and effect; (ii) the policy will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (iii)
neither the Company nor the Subsidiary nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iv) no party to the policy
has repudiated any provision thereof. Each of the Company and the Subsidiary has
been covered during the past seven (7) years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. Section 4.19 of the Disclosure Schedule describes any
self-insurance arrangements affecting the Company or the Subsidiary.
4.20 LITIGATION. Section 4.20 of the Disclosure Schedule sets
forth each instance in which the Company or the Subsidiary (a) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (b) is a
party or, to the Knowledge of the Sellers, McDermott and Yost, is threatened to
be made a party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Section 4.20 of the Disclosure Schedule could result in any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of the Company or the Subsidiary. Neither the Sellers,
McDermott nor Yost has any reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against the
Company or the Subsidiary.
4.21 PRODUCT WARRANTY. Each Product manufactured, sold,
leased, or delivered by the Company or the Subsidiary has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and neither the Company nor the Subsidiary has any Liability (and to
the Knowledge of the Sellers, McDermott or Yost, there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith in
excess of the amounts experienced by the Company or the Subsidiary in the past.
No Product manufactured, sold, leased, or delivered by the Company or the
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Subsidiary is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Section 4.21 of the
Disclosure Schedule includes copies of the standard terms and conditions of sale
or lease for each of the Company and the Subsidiary (containing applicable
guaranty, warranty, and indemnity provisions).
4.22 PRODUCT LIABILITY. Neither the Company nor the Subsidiary
has any Liability (and to the Knowledge of the Sellers, McDermott or Yost) there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any Product manufactured, sold,
leased, or delivered by the Company or the Subsidiary.
4.23 EMPLOYEES. To the Knowledge of the Sellers, McDermott or
Yost, no executive, key employee, or group of employees has any plans to
terminate employment with the Company or the Subsidiary. Neither the Company nor
the Subsidiary is a party to or bound by any collective bargaining agreement,
nor has any of them experienced any strikes, grievances, claims of unfair labor
practices, or other collective bargaining disputes. Neither the Company nor the
Subsidiary has committed any unfair labor practice. Neither the Sellers,
McDermott nor Yost has any Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company or the Subsidiary.
4.24 EMPLOYEE BENEFITS.
(a) Section 4.24 of the Disclosure Schedule lists
each Employee Benefit Plan that the Company or the Subsidiary maintains, to
which the Company or the Subsidiary contributes or has any obligation to
contribute, or with respect to which the Company or the Subsidiary has any
Liability or potential Liability.
(i) Each such Employee Benefit Plan (and
each related trust, insurance contract, or fund) has been maintained,
funded and administered in accordance with the terms of such Employee
Benefit Plan and complies in form and in operation in all respects with
the applicable requirements of ERISA, the Code, and other applicable
laws.
(ii) All required reports and descriptions
(including annual reports (IRS Form 5500), summary annual reports, and
summary plan descriptions) have been timely filed and/or distributed in
accordance with the applicable requirements of ERISA and the Code with
respect to each such Employee Benefit Plan. The requirements of COBRA
have been met with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan subject to COBRA.
(iii) All contributions (including all
employer contributions and employee salary reduction contributions)
which are due have been made within the time period prescribed by ERISA
to each such Employee Benefit Plan which is an Employee Pension Benefit
Plan and all contributions for any period ending on or before the
Closing Date which are not yet due have been made to each such Employee
Pension Benefit Plan or accrued in accordance with the past custom and
practice of the Company and the Subsidiary. All premiums or other
payments for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
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(iv) Each such Employee Benefit Plan which
is intended to meet the requirements of a "qualified plan" under Code
Section 401(a) has received a determination from the Internal Revenue
Service that such Employee Benefit Plan is so qualified, and nothing
has occurred since the date of such determination that could adversely
affect the qualified status of any such Employee Benefit Plan.
(v) The market value of assets under each
such Employee Benefit Plan which is an Employee Pension Benefit Plan
(other than any Multiemployer Plan) equals or exceeds the present value
of all vested and nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan terminating on the date for
determination.
(vi) McDermott and Yost have delivered to
the Buyer correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter received from
the Internal Revenue Service, the most recent annual report (IRS Form
5500, with all applicable attachments), and all related trust
agreements, insurance contracts, and other funding arrangements which
implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that
any of the Company, the Subsidiary, and any ERISA Affiliate maintains, to which
any of them contributes or has any obligation to contribute, or with respect to
which any of them has any Liability or potential Liability:
(i) No such Employee Benefit Plan which is
an Employee Pension Benefit Plan (other than any Multiemployer Plan)
has been completely or partially terminated or been the subject of a
Reportable Event. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been instituted or, to the Knowledge of the Sellers, McDermott or Yost,
threatened.
(ii) There have been no Prohibited
Transactions with respect to any such Employee Benefit Plan. No
Fiduciary has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action,
suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or, to
the Knowledge of the Sellers, McDermott or Yost, threatened. Neither
the Sellers, McDermott nor Yost has any Knowledge of any Basis for any
such action, suit, proceeding, hearing, or investigation.
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(iii) Neither the Company nor the Subsidiary
has incurred, and neither the Sellers, McDermott nor Yost has any
reason to expect that the Company or the Subsidiary will incur, any
Liability to the PBGC (other than with respect to PBGC premium payments
not yet due) or otherwise under Title IV of ERISA (including any
withdrawal liability as defined in ERISA Section 4201) or under the
Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan, or under COBRA with respect to any such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(c) None of the Company, the Subsidiary, and any
ERISA Affiliate has incurred any Liability on account of a "partial withdrawal"
or a "complete withdrawal" (within the meaning of ERISA Section Section 4205 and
4203, respectively) from any Multiemployer Plan, no such Liability has been
asserted, and there are no events or circumstances which could result in any
such partial or complete withdrawal; and none of the Company, the Subsidiary,
and any ERISA Affiliate is bound by any contract or agreement or has any
obligation or Liability described in ERISA Section 4204. Each Multiemployer Plan
complies in form and has been administered in accordance with the requirements
of ERISA and, where applicable, the Code, and each Multiemployer Plan is
qualified under Code Section 401(a).
(d) Neither the Company nor the Subsidiary maintains,
contributes to or has an obligation to contribute to, or has any Liability or
potential Liability with respect to, any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their dependents
(other than in accordance with COBRA).
4.25 GUARANTIES. Neither the Company nor the Subsidiary is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
4.26 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(a) Each of the Company and the Subsidiary has
complied and is in compliance with all Environmental, Health, and Safety
Requirements.
(b) Without limiting the generality of the foregoing,
each of the Company and the Subsidiary has obtained and complied with, and is in
compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth in Section 4.26 of
the Disclosure Schedule.
(c) Neither the Company nor the Subsidiary has
received any written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements,
or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
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(d) None of the following exists at any property or
facility owned or operated by the Company or the Subsidiary: (i) underground
storage tanks, (ii) asbestos-containing material in any form or condition, (iii)
materials or equipment containing polychlorinated biphenyls, or (iv) landfills,
surface impoundments, or disposal areas.
(e) Neither the Company nor the Subsidiary has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Solid Waste Disposal Act, as amended, or any other Environmental, Health, and
Safety Requirements.
(f) Neither this Agreement nor the consummation of
the transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(g) Neither the Company nor the Subsidiary has,
either expressly or by operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective or remedial action,
of any other Person relating to Environmental, Health, and Safety Requirements.
(h) No facts, events or conditions relating to the
past or present facilities, properties or operations of the Company or the
Subsidiary will prevent, hinder or limit continued compliance with
Environmental, Health, and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and Safety
Requirements, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental, Health, and
Safety Requirements, including without limitation any relating to onsite or
offsite releases or threatened releases of hazardous materials, substances or
wastes, personal injury, property damage or natural resources damage.
4.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND THE
SUBSIDIARY. Except as set forth in Section 4.27 of the Disclosure Schedule,
neither of the Sellers nor their Affiliates has been involved in any business
arrangement or relationship with the Company or the Subsidiary within the past
twelve (12) months, and neither of the Sellers nor their Affiliates owns any
asset, tangible or intangible, which is used in the business of the Company or
the Subsidiary.
4.28 STOCK REPURCHASES. The Stock Repurchases comply in all
respects with all applicable laws including without limitation Section 500 of
the California Corporations Code and all state and federal securities laws. The
materials distributed by the Company and the Subsidiary to their respective
shareholders in connection with the Stock Repurchases did not contain any untrue
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statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. All of
the agreements between the Company and its shareholders and the Subsidiary and
its shareholders with respect to the Stock Repurchases constitute the valid and
legally binding obligations of the respective parties thereto, enforceable in
accordance with their respective terms and conditions.
4.29 DISCLOSURE. The representations and warranties contained
in this SECTION 4 do not contain any untrue statement of a fact or omit to state
any fact necessary in order to make the statements and information contained in
this SECTION 4 not misleading.
5. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period
following the Closing.
5.1 GENERAL. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under SECTION 7). The
Sellers acknowledge and agree that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company and the
Subsidiary.
5.2 LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(a) any transaction contemplated under this Agreement or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company or the Subsidiary, each of the other
Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access
to their books and records as shall be necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under SECTION 7 below).
5.3 TRANSITION. None of the Sellers, McDermott and Yost will
take any action that is designed or intended to have the effect of discouraging
any lessor, licensor, customer, supplier, or other business associate of the
Company or the Subsidiary from maintaining the same business relationships with
the Company or the Subsidiary after the Closing as it maintained with the
Company or the Subsidiary prior to the Closing. Each of the Sellers, McDermott
and Yost will refer all customer inquiries relating to the businesses of the
Company and the Subsidiary to the Buyer from and after the Closing.
5.4 CONFIDENTIALITY. Each of the Sellers, McDermott and Yost
will treat and hold as such all of the Confidential Information, refrain from
using any of the Confidential Information except in connection with this
Agreement, and deliver promptly to the Buyer or destroy, at the request and
option of the Buyer, all tangible embodiments (and all copies) of the
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Confidential Information which are in his or its possession. In the event that
any of the Sellers, McDermott or Yost is requested or required (by oral question
or request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Seller, McDermott or Yost will notify the Buyer
promptly of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this SECTION 5.4.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Sellers, McDermott or Yost is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller, McDermott or Yost may disclose the Confidential
Information to the tribunal; PROVIDED, HOWEVER, that the disclosing Seller,
McDermott or Yost shall use his or its best efforts to obtain, at the reasonable
request of the Buyer, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate. The foregoing provisions shall not apply
to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
5.5 NON-COMPETITION.
(a) As further consideration for the purchase and sale of the
Company Shares and the transactions contemplated by this Agreement, during the
period commencing on the Closing Date, and ending on the date which is five (5)
years thereafter (the "RESTRICTED PERIOD"), neither the Sellers, McDermott nor
Yost shall, in any Restricted Territory, directly or indirectly:
(i) subject to the terms and conditions of
the Consulting Agreements, engage in any business, activity, or
enterprise competitive with or substantially similar to the Business,
including, without limitation, in the manufacture, production, design,
engineering, importation, purchase, marketing, sale, distribution,
research or development of any Products, or engage or invest in, own,
manage, operate, finance, control, solicit business related to, or
participate in the ownership, management, operation, financing, or
control of, be employed by, lend his name or any similar name, or lend
his credit to, or render services or advice to, any Person engaged in
any business, activity or enterprise competitive with or substantially
similar to the Business including, without limitation, in the
manufacture, production, design, engineering, importation, purchase,
marketing, sale, distribution, research or development of any Products;
(ii) individually or on behalf of any other
Person, recruit or solicit any person who has been an employee,
representative, consultant or agent of the Buyer or former employee of
the Company hired by the Buyer, to terminate his or her employment with
the Buyer;
(iii) use, incorporate or otherwise create
any business organization utilizing any name which uses, the words
"Larus" or "Vista" or which are confusingly similar to any such words;
or
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(iv) solicit, call upon, or attempt to
communicate with any customer, former customer, or prospective customer
of the Buyer, the Company or the Subsidiary for the purposes of
manufacture, production, design, engineering, importation, purchase,
marketing, sale, distribution, research or development of any Products.
This restriction shall only apply to any customer, former customer or
prospective customer of the Buyer, the Company or the Subsidiary with
whom the Company, the Subsidiary, the Sellers, McDermott or Yost had
contact with prior to the Closing Date. For purposes of this paragraph,
"contact" means interaction between the Sellers, McDermott or Yost,
directly or indirectly, and the customer, former customer or
prospective customer which takes place to further the business
relationship, or performing of services, on behalf of the Company, the
Subsidiary, the Sellers, McDermott or Yost.
(b) The Sellers, McDermott and Yost shall be deemed
to be competing with Buyer in violation of SECTION 5.5(a) if any thereof, or any
Affiliate thereof, is engaged or participates in any activity or activities
described in SECTION 5.5(a), directly or indirectly, whether for his own account
or for that of any other Person, and whether as a shareholder, partner or
investor controlling any such entity or as principal, agent, representative,
proprietor or partner, or in any other capacity; PROVIDED, HOWEVER, that nothing
herein shall prohibit purely passive investments in any business so long as the
aggregate interest represented by such investments does not exceed one percent
(1%) of any class of the outstanding debt or equity securities of said business.
(c) Because a breach, or failure to comply with, this
SECTION 5.5 will cause irreparable injury to the Buyer for which there is no
adequate remedy at law and the exact amount of which will be difficult to
ascertain, if any of the Sellers, McDermott or Yost, or any Affiliate of any
thereof, should in any way breach, or fail to comply with, the terms of this
SECTION 5.5, the Buyer shall be entitled to an injunction restraining such
Person(s) from any such breach or failure. All remedies expressly provided for
herein are cumulative of any and all other remedies now existing at law or in
equity, to the extent permitted under applicable law. The Buyer shall, in
addition to the remedies herein provided, be entitled to avail itself of all
such other remedies as may now or hereafter exist at law or in equity for
compensation, and for the specific enforcement of the covenants contained herein
without the necessity of proving actual damages. Resort to any remedy provided
for hereunder or provided for by law shall not preclude or bar the concurrent or
subsequent employment of any other appropriate remedy or remedies, or preclude
the recovery by the Buyer of monetary damages and compensation.
(d) If any provision of this SECTION 5.5 shall
finally be judicially determined to be invalid, ineffective or unenforceable,
such determination shall apply only in the jurisdiction in which such
adjudication is made and every other provision of this SECTION 5.5 shall remain
in full force and effect. The invalid, ineffective or unenforceable provision
shall, without further action by the parties, be automatically amended, to the
extent permitted under applicable law, to effect the original purpose and intent
of the invalid, ineffective or unenforceable provision (and if such provision
governs the duration of the Restricted Period or geographic scope of the
Restricted Territory, such provision shall be amended to reduce such duration or
scope, as applicable, as minimally as possible so that such provision is valid,
effective and enforceable for the longest period of time and fullest geographic
area as is adjudged permissible for such provision to be valid, effective and
enforceable); PROVIDED, HOWEVER, that such amendment shall apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
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(e) Each of the Sellers, McDermott and Yost
acknowledges that the duration of the Restricted Period, the geographic scope of
the Restricted Territory, and the scope of restricted activities described in
SECTION 5.5(a) are reasonable and necessary to protect the legitimate business
interests of the Buyer in view of the nature of the Business of the Company, the
nature of the business in which the Buyer is engaged, and the nature of the
transactions contemplated by this Agreement. Each of the Sellers, McDermott and
Yost understands that the foregoing restrictions will significantly limit or bar
his ability to earn a livelihood in the Business or a business related to the
Business, but each of them nevertheless believes that he or it has received and
will receive, directly or indirectly, sufficient consideration and other
benefits pursuant to this Agreement and the other agreements relating to this
Agreement to clearly justify such restrictions.
5.6 PREPARATION AND DELIVERY OF CLOSING BALANCE SHEETS. Within
fifteen (15) days after the Closing Date, the Sellers shall deliver to the Buyer
all information necessary for the Buyer to prepare the balance sheets of the
Company and the Subsidiary dated as of the Closing Date (the "CLOSING BALANCE
Sheets") in accordance with GAAP. The Buyer shall deliver to the Sellers the
Closing Balance Sheets within twenty-five (25) days after the Closing Date.
5.7 CERTAIN TAX PAYMENTS. The Buyer shall be responsible for
the payment of any income tax liability resulting from a disallowance of the tax
deduction of the aggregate $400,000 in bonuses to the directors of the Company
and the Subsidiary for fiscal 2003 set forth on the Company's and/or the
Subsidiary's federal and state or franchise tax returns.
6. CONDITIONS TO OBLIGATION TO CLOSE.
6.1 CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions as of
the Closing:
(a) the representations and warranties set forth in
SECTION 3.1 and SECTION 4 shall be true and correct in all material respects at
and as of the Closing Date;
(b) the Sellers shall have performed and complied
with all of their covenants hereunder in all material respects through the
Closing;
(c) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the Buyer
to own the Company Shares and to control the Company and the Subsidiary, or (iv)
affect adversely the right of the Company or the Subsidiary to own its assets
and to operate its businesses (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(d) the Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified in SECTIONS
6.1(a)-(c) are satisfied in all respects;
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(e) the Parties, the Company and the Subsidiary shall
have received all authorizations, consents, and approvals of governments and
governmental agencies referred to in SECTION 3.1(a), SECTION 3.2(b), and SECTION
4.3;
(f) the relevant parties shall have entered into the
Short Term Notes, the Long Term Notes, and the Warrant Agreements and the same
shall be in full force and effect;
(g) the relevant parties shall have entered into the
Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") in form and
substance as set forth on EXHIBIT F attached hereto and the same shall be in
full force and effect;
(h) the Sellers, McDermott and Yost shall each have
entered into a Lock-Up Agreement (collectively, the "LOCK-UP AGREEMENTS") with
the Buyer covering the resale of each such holder of the Buyer Shares in form
and substance as set forth in EXHIBIT G attached hereto and the same shall be in
full force and effect;
(i) McDermott and Yost, or an entity controlled by
them, shall have entered into a noncancelable triple net lease agreement (the
"FACILITY LEASE AGREEMENT") with the Buyer for the lease of the approximately
30,000 square foot facility located at 894 Faulstich Court, San Jose, California
95112, in form and substance as set forth in EXHIBIT H attached hereto and the
same shall be in full force and effect;
(j) each of McDermott and Yost shall have entered
into a Consulting Agreement (collectively, the "CONSULTING AGREEMENTS") in form
and substance as set forth on EXHIBIT I and EXHIBIT J, respectively, attached
hereto and the same shall be in full force and effect;
(k) all trade accounts payable of the Company and the
Subsidiary, excluding any payables between the Company and the Subsidiary, shall
be within terms (i.e., equal to or less than forty-five (45) days) and within
the range of trade accounts payable at the end of each month for the previous
twelve (12) months prior to the Closing Date, excluding any accrued payable for
NEBS approval;
(l) no outstanding funded debt of either the Company
or the Subsidiary shall exist, other than inter-company debt;
(m) in the Buyer's sole judgment, a credible fiscal
2004 sales forecast of each of the Company and the Subsidiary shall exist in
writing and have been delivered to the Buyer showing results of operations at
least as good as fiscal 2003;
(n) satisfactory reviews of the projected Closing
Balance Sheets prepared by management of the Company and the Subsidiary or
requested by the Buyer from time to time prior to the Closing shall have been
completed;
(o) the Buyer's independent auditors shall be able to
provide comfort to the Buyer that the financial statements of each of the
Company and the Subsidiary as of their respective Most Recent Fiscal Year End
are auditable and that the financial statements of each of the Company and the
Subsidiary as of their respective Most Recent Fiscal Month End are may be
reviewed;
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(p) fiscal 2003 aggregate annual bonus payments made
by the Company and the Subsidiary shall not have been greater than $50,000, and
fiscal 2003 profit sharing amounts shall not have been greater than $50,000 and
no accrued bonus or profit sharing amounts to non-directors shall exist on the
Most Recent Balance Sheet of the Company and/or the Subsidiary. In addition,
there shall not have been any fiscal 2003 bonus payments made to the directors
of either of the Company or the Subsidiary;
(q) the transactions contemplated by this Agreement
shall have been approved by all necessary corporate action on the part of the
Buyer, and the Company;
(r) the Buyer shall have received from counsel to the
Sellers an opinion in form and substance as set forth in EXHIBIT K attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
(s) the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company and the
Subsidiary; and
(t) all actions to be taken by the Sellers in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Buyer.
The Buyer may waive any condition specified in this SECTION
6.1 if it executes a writing so stating at or prior to the Closing.
6.2 CONDITIONS TO OBLIGATION OF THE SELLERS, MCDERMOTT AND
YOST. The obligation of the Sellers, McDermott and Yost to consummate the
transactions to be performed by them in connection with the Closing is subject
to satisfaction of the following conditions as of the Closing:
(a) the representations and warranties set forth in
SECTION 3.2 shall be true and correct in all material respects at and as of the
Closing Date;
(b) the Buyer shall have performed and complied with
all of its covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
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(d) the Buyer shall have delivered to the Sellers a
certificate to the effect that each of the conditions specified in SECTIONS
6.2(a)-(c) are satisfied in all respects;
(e) the Parties, the Company and the Subsidiary shall
have received all authorizations, consents, and approvals of governments and
governmental agencies referred to in SECTION 3.1(a), SECTION 3.2(b), and SECTION
4.3;
(f) the relevant parties shall have entered into the
Short Term Notes, the Long Term Notes, the Warrant Agreements, the Registration
Rights Agreement, the Lock-Up Agreements, the Facility Lease Agreement, and the
Consulting Agreements and the same shall be in full force and effect;
(g) the transactions contemplated by this Agreement
shall have been approved by all necessary corporate action on the part of the
Buyer and the Company;
(h) the Sellers shall have received from counsel to
the Buyer an opinion in form and substance as set forth in EXHIBIT L attached
hereto, addressed to the Sellers, and dated as of the Closing Date; and
(i) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Sellers.
The Sellers, McDermott or Yost may waive any condition
specified in this SECTION 6.2 if they execute a writing so stating at or prior
to the Closing.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Sellers contained in SECTION 3.1, all of
the representations and warranties of the Sellers, McDermott and Yost contained
in SECTION 4 (other than SECTIONS 4.11 AND 4.21 and even if the Buyer knew or
had reason to know of any misrepresentation or breach of warranty with respect
to SECTION 4.10 at the time of Closing) and all of the representation and
warranties of the Buyer contained in SECTION 3.2 shall survive the Closing
hereunder and continue in full force and effect for a period of one (1) year
thereafter. All of the representations and warranties of the Sellers, McDermott
and Yost contained in SECTION 4.21 relating to the Products shall survive the
Closing hereunder and continue in full force and effect with respect to each
Product for a period after the Closing equal to the warranty period relating to
each such Product; PROVIDED, HOWEVER, that in no event shall such period exceed
two (2) years after the Closing. All of the representations and warranties of
the Parties of the Sellers, McDermott and Yost contained in SECTION 4.11 shall
survive the Closing and continue in full force and effect forever thereafter
(subject to any applicable statutes of limitations).
7.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(a) Subject to SECTION 7.7, in the event the Sellers,
McDermott or Yost breaches any of their representations and warranties contained
in SECTION 4, if there is an applicable survival period pursuant to SECTION 7.1,
provided that the Buyer makes a written claim for indemnification against
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McDermott or Yost pursuant to SECTION 9.7 within such survival period, then each
of the Sellers, McDermott and Yost agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences the Buyer may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach.
(b) Subject to SECTION 7.7, in the event any of the
Sellers breaches any of his representations and warranties in SECTION 3.1, and,
if there is an applicable survival period pursuant to SECTION 7.1, provided that
the Buyer makes a written claim for indemnification against the Seller pursuant
to SECTION 9.7 within such survival period, then such Seller agrees to indemnify
the Buyer from and against the entirety of any Adverse Consequences the Buyer
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).
7.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLERS.
Subject to SECTION 7.7, in the event the Buyer breaches any of its
representations, warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to SECTION 7.1, provided that any of the
Sellers makes a written claim for indemnification against the Buyer pursuant to
SECTION 9.7 within such survival period, then the Buyer agrees to indemnify each
of the Sellers from and against the entirety of any Adverse Consequences the
Seller may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Seller may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach).
7.4 MATTERS INVOLVING THIRD PARTIES.
(a) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM") which
may give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this SECTION 7, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; PROVIDED, HOWEVER,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen (15)
days after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) the Third Party
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Claim involves only money damages and does not seek an injunction or other
equitable relief, (iv) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with SECTION 7.4(b), (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in SECTION
7.4(b) is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
attorneys' fees and expenses), and (iii) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this SECTION 7.
(e) The foregoing provisions of SECTIONS 7.4(a)-(d)
notwithstanding, it is the intention of the Parties to cooperate fully with each
other in the event of a Third Party Claim. To that end, if the event of a Third
Party Claim resulting in McDermott, Yost or the Sellers being an Indemnifying
Party, the Buyer will consult with McDermott and Yost prior to taking any action
in defense of such Third Party Claim, especially if the Third Party Claim
involves matters concerning the FCC or the Internal Revenue Service.
7.5 DETERMINATION OF ADVERSE CONSEQUENCES. All indemnification
payments under this SECTION 7 shall be deemed adjusted to the Purchase Price.
7.6 SET OFF. In addition to any and all other remedies
hereunder or at law or in equity, the Buyer shall be entitled to recover any
indemnification payment or other amounts due from the Sellers, by retaining and
setting off the amounts (whether or not such amounts are liquidated or reduced
to judgment) against any amounts due or to become due from the Buyer to the
Sellers under the Buyer Notes.
7.7 LIMITATIONS ON INDEMNIFICATION MATTERS.
(a) The maximum aggregate amount of indemnification
which can be required of McDermott, Yost and the Sellers under SECTIONS 7.2(a)
and (b) for any breach of any representation, warranty or covenant set forth
herein shall not exceed $250,000; PROVIDED, HOWEVER, that McDermott and Yost
shall provide additional indemnification in the amount of $250,000 with respect
to any breach of any representation or warranty set forth in SECTION 4.10, such
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that the maximum aggregate amount of indemnification required of McDermott, Yost
and the Sellers shall not exceed $500,000, and PROVIDED, FURTHER, that the
indemnification obligations of McDermott, Yost and Sellers relating to the
representations and warranties contained in SECTION 4.10 shall not extend to the
payment of any legal fees incurred by the Indemnified Party in connection with
the defense of any Adverse Consequence in connection therewith.
(b) The Sellers, McDermott and Yost shall not have
any obligation to indemnify the Buyer from and against any Adverse Consequences
resulting from, arising out of, relating to, in the nature of, or caused by the
breach of any representation or warranty until the Buyer has suffered Adverse
Consequences by reason of all such breaches in excess of a $120,000 aggregate
threshold (at which point the Sellers, McDermott and Yost will be obligated to
indemnify the Buyer from and against all such Adverse Consequences in excess of
such amount up to the amounts set forth in SECTION 7.2(a)); PROVIDED, HOWEVER,
that the $120,000 threshold shall not apply to any indemnification obligation of
the Sellers, McDermott or Yost relating to the breach of any representation and
warranty set forth in SECTIONS 3.1(c) AND 4.4.
(c) Neither the Sellers, McDermott nor Yost shall be
required to indemnify, defend or hold Buyer harmless from and against any
Adverse Consequences the Buyer may suffer relating to the research and
development contract between the Company and the Subsidiary.
8. TAX MATTERS.
The following provisions shall govern the allocation of
responsibility as between the Buyer and the Sellers for certain tax matters
following the Closing Date:
8.1 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Company and the Subsidiary for Tax periods which
begin before the Closing Date and end on or after the Closing Date and shall be
responsible for the payment of any Taxes relating thereto.
8.2 COOPERATION ON TAX MATTERS.
(a) The Buyer, the Company, the Subsidiary and the
Sellers shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this
SECTION 8 and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company and the Subsidiary and the
Sellers agree (i) to retain all books and records with respect to Tax matters
pertinent to the Company and the Subsidiary relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
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limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company and
the Subsidiary or Sellers, as the case may be, shall allow the other party to
take possession of such books and records.
(b) The Buyer and the Sellers further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(c) The Buyer and the Sellers further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
8.3 TAX SHARING AGREEMENTS. All tax sharing agreements or
similar agreements with respect to or involving the Company and the Subsidiary
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and the Subsidiary shall not be bound thereby or have any liability
thereunder.
9. MISCELLANEOUS.
9.1 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party or any
of their respective subsidiaries, affiliates, officers, directors, employees or
agents shall make any public statement or announcement or any release to trade
publications or through the press or otherwise, or make any statement to any
third party with respect to this Agreement or the transactions contemplated
hereby (including, without limitation, with respect to the entering into of this
Agreement and the terms hereof) without the prior written approval of the Buyer
and McDermott and Yost, which approval shall not be unreasonably withheld and
shall be given within forty-eight (48) hours after delivery of a copy of the
proposed press release or public announcement to the Party whose approval is
being requested; PROVIDED, HOWEVER, that any Party may make any public
disclosure it believes in good faith is required by applicable law, governmental
order or regulation, stock exchange rule or regulation or legal proceeding, and
then only after notice to the other Parties. The Parties agree and acknowledge
that the Buyer will file with the SEC a Form 8-K disclosing the terms of this
Agreement, including the financial terms of the Agreement, after the Closing and
within the time period prescribed by the Securities Exchange Act.
9.2 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
9.3 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
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9.4 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and McDermott or Yost; PROVIDED, HOWEVER, that the
Buyer may (a) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (b) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
9.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.6 HEADINGS. The Section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two (2)
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Sellers: Mr. Noel McDermott
502 Village Circle
Santa Cruz, CA 95060
and
Mr. Warren P. Yost 10324 Miner Place
Cupertino, CA 95014
Copy to: Book & Book, LLP,
1414 Soquel Avenue, Suite 203
Santa Cruz, California 95062
Attention: Dennis Book, Esq.
If to the Buyer: MicroTel International Inc.
9485 Haven Avenue, Suite 100
Rancho Cucamonga, California 91730
Attention: Carmine T. Oliva
Copy to: Rutan & Tucker, LLP
611 Anton Boulevard, 14th Floor
Costa Mesa, California 92626
Attention: Larry A. Cerutti, Esq.
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Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
9.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
9.9 AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer, the Sellers, McDermott and Yost. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.10 SEVERABILITY. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
9.11 EXPENSES. Each of the Parties will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby (and in the case of
the costs and expenses of the Company and the Subsidiary, such costs and
expenses shall be borne by the Sellers). The Sellers, McDermott and Yost agree
that neither the Company nor the Subsidiary has borne or will bear any of the
Sellers', McDermott's or Yost's costs and expenses (including any expenses of
their financial advisors and any of their legal fees and expenses in excess of
$25,000) in connection with this Agreement or any of the transactions
contemplated hereby.
9.12 CONSTRUCTION. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
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9.13 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
9.14 SPECIFIC PERFORMANCE. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in SECTION 9.15), in addition to any other remedy to which they may be
entitled, at law or in equity.
9.15 SUBMISSION TO JURISDICTION. Each of the Parties submits
to the jurisdiction of any state or federal court sitting in Orange County,
California, any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each Party also agrees not to bring
any action or proceeding arising out of or relating to this Agreement in any
other court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto. Any Party may make service on any other Party by sending or delivering
a copy of the process to the Party to be served at the address and in the manner
provided for the giving of notices in SECTION 9.7. Nothing in this SECTION 9.15,
however, shall affect the right of any Party to serve legal process in any other
manner permitted by law or at equity. Each Party agrees that a final judgment in
any action or proceeding so brought shall be conclusive and may be enforced by
suit on the judgment or in any other manner provided by law or at equity.
(Signatures contained on following page)
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER: MICROTEL INTERNATIONAL INC.,
a Delaware corporation
By: /S/ CARMINE T. OLIVA
------------------------------------------------------
Carmine T. Oliva, Chairman, President and
Chief Executive Officer
SELLERS: /S/ NOEL MCDERMOTT, TRUSTEEE, BY WARREN P. YOST,
---------------------------------------------------------
ATTORNEY-IN-FACT
---------------------------------------------------------
Noel McDermott, as Trustee of the Noel C. McDermott
Revocable Living Trust dated December 18, 1995
ADDRESS: 502 Village Circle
Santa Cruz, CA 95060
/S/ WARREN P. YOST, TRUSTEE
---------------------------------------------------------
Warren P. Yost, Co-Trustee Under Declaration of Trust
dated March 9, 1988
/S/ GAIL A. YOST, TRUSTEE
---------------------------------------------------------
Gail A. Yost, Co-Trustee Under Declaration of Trust dated
March 9, 1988
ADDRESS: 10324 Miner Place
Cupertino, CA 95014
MCDERMOTT: /S/ NOEL MCDERMOTT, BY WARREN P. YOST, ATTORNEY-IN-FACT
-------------------------------------------------------
Noel C. McDermott, individually
YOST: /S/ WARREN P. YOST
---------------------------------------------------------
Warren P. Yost, individually
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