EXHIBIT 2.4
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (the "PLEDGE AGREEMENT"), executed
this 13th day of July, 2004, is made by and among MicroTel International Inc., a
Delaware corporation ("PLEDGOR"), Noel McDermott, an individual ("COLLATERAL
AGENT"), and the persons and entities listed on the Schedule of Lenders attached
hereto as EXHIBIT A (each, a "LENDER" and collectively, the "LENDERS").
RECITALS
A. Pledgor and the Lenders are parties to the Stock Purchase Agreement
of even date herewith (the "STOCK PURCHASE AGREEMENT") relating to the purchase
by Pledgor of all of the issued and outstanding shares of common stock of Larus
Corporation, a California corporation ("LARUS").
B. Pursuant to the terms of the Stock Purchase Agreement, Pledgor
issued certain long term promissory notes (which are defined in the Stock
Purchase Agreement as well as herein as the "LONG TERM NOTES") to each of the
Lenders to satisfy a portion of the aggregate consideration to be paid by
Pledgor for the purchase of the shares of Larus from Lenders.
C. In order to induce Lenders to extend the credit evidenced by the
Long Term Notes, Pledgor has agreed to enter into this Pledge Agreement to
pledge and grant Collateral Agent, for the benefit of itself and the Lenders,
the security interest in the Collateral described below.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined herein, all
other capitalized terms used herein and defined in the Long Term Notes shall
have the respective meanings given to those terms in the Long Term Notes, and
all terms defined in the California Uniform Commercial Code (the "UCC") shall
have the respective meanings given to those terms in the UCC.
2. THE PLEDGE. To secure the Obligations as defined in SECTION 3
hereof, Pledgor hereby pledges and grants to Collateral Agent a security
interest in all of Pledgor's right, title and interest, whether now existing or
hereafter arising, in all instruments, certificated and uncertificated
securities, money and general intangibles of, relating to or arising from the
following property (the "COLLATERAL"):
(a) the equity securities of Larus acquired by Pledgor
pursuant to the Stock Purchase Agreement and the equity securities of the Larus
Entity, if applicable (collectively, the "PLEDGED SECURITIES");
(b) all dividends (including cash dividends), other
distributions (including redemption proceeds), or other property, securities or
instruments in respect of or in exchange for the Pledged Securities, whether by
way of dividends, stock dividends, recapitalizations, mergers, consolidations,
split-ups, combinations or exchanges of shares or otherwise; and
(c) all proceeds of the foregoing (the "PROCEEDS").
3. SECURITY FOR OBLIGATIONS. The obligations secured by this Pledge
Agreement (the "OBLIGATIONS") shall mean and include all obligations of Pledgor
as provided in the Long Term Notes.
4. DELIVERY OF COLLATERAL; FINANCING STATEMENTS. All certificates or
instruments representing or evidencing the Collateral shall be promptly
delivered to Collateral Agent and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Collateral Agent.
Concurrently with the execution of this Pledge Agreement, Pledgor shall execute
and deliver to Collateral Agent the UCC-1 financing statement provided by
Collateral Agent.
5. REPRESENTATIONS WARRANTIES. Pledgor hereby represents and warrants
to Collateral Agent and the Lenders as follows:
(a) AUTHORIZATION. Pledgor has full power and authority to
enter into this MicroTel Pledge Agreement.
(b) STOCK POWERS. The stock powers and assignments separate
from certificate are duly executed and give Collateral Agent and Lenders the
authority they purport to confer.
(c) ISSUANCE OF PLEDGED SECURITIES, ETC. The Pledged
Securities are owned by Pledgor free and clear of any and all liens, pledges,
encumbrances or charges, and Pledgor has not optioned or otherwise agreed to
sell, hypothecate, pledge, or otherwise encumber or dispose of the Pledged
Securities except for any liens, pledges, encumbrances or charges in favor of
the Senior Lenders.
(d) SECURITY INTEREST. The pledge of the Collateral creates a
valid security interest in the Collateral securing the payment of the
Obligations and the obligations hereunder.
(e) RESTATEMENT OF REPRESENTATIONS AND WARRANTIES. On and as
of the date any property becomes Collateral, the foregoing representations and
warranties shall be deemed restated with respect to such additional Collateral.
6. COVENANTS. Pledgor hereby agrees as follows:
(a) LIENS ON COLLATERAL. Pledgor agrees not to create, incur,
assume or suffer to exist any lien or security interest of any kind upon the
Collateral other than in favor of the Senior Lenders.
-2-
(b) FURTHER ASSURANCES. Pledgor agrees that at any time and
from time to time, at Pledgor's expense, Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that Collateral Agent may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Collateral Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral.
7. VOTING RIGHTS; DIVIDENDS; ETC.
(a) RIGHTS PRIOR TO AN EVENT OF DEFAULT. So long as no Event
of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Securities or any
part thereof for any purpose not inconsistent with the terms of this Pledge
Agreement; and
(ii) Pledgor shall be entitled to receive and retain
free and clear of the security interest of Collateral Agent and Lenders
hereunder any and all dividends and interest paid in respect of the Pledged
Securities.
(b) RIGHTS FOLLOWING AN EVENT OF DEFAULT. Upon the occurrence
and during the continuance of an Event of Default:
(i) all rights of Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to SECTION 7(a)(i) and to receive the dividends and interest payments
which it would otherwise be authorized to receive and retain pursuant to SECTION
7(a)(ii) shall cease and all such rights shall thereupon become vested in
Collateral Agent which shall thereupon have the sole right, but not the
obligation, to exercise such voting and other consensual rights and to receive
and hold as Collateral such dividends and interest payments; and
(ii) all dividends and interest payments which are
received by Pledgor contrary to the provisions of SECTION 7(b)(i) shall be
received in trust for the benefit of Collateral Agent and Lenders, shall be
segregated from other funds of Pledgor and shall be forthwith delivered to
Collateral Agent as Collateral in the same form as so received (with any
necessary endorsement).
8. EVENTS OF DEFAULT; REMEDIES.
(a) EVENT OF DEFAULT. An Event of Default shall be deemed to
have occurred under this Pledge Agreement upon the occurrence and during the
continuance of an Event of Default (as defined in the Long Term Notes).
(b) RIGHTS UNDER THE UCC. In addition to all other rights
granted hereby, and otherwise by law, Collateral Agent shall have, with respect
to the Collateral, the rights and obligations of a secured party under the UCC.
-3-
(c) NOTICE, ETC. In any case where notice of sale is required,
ten (10) days notice shall be deemed reasonable notice. Collateral Agent may
have resort to the Collateral or any portion thereof with no requirement on the
part of Collateral Agent to proceed first against any other Person (as defined
in the Long Term Notes) or property.
(d) OTHER REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, at the request of Collateral Agent, Pledgor
shall assemble and make available to Collateral Agent all records relating to
the Pledged Securities.
(e) APPLICATION OF COLLATERAL PROCEEDS. The proceeds and/or
avails of the Collateral, or any part thereof, and the proceeds and the avails
of any remedy hereunder (as well as any other amounts of any kind held by
Collateral Agent at the time of, or received by Collateral Agent after, the
occurrence of an Event of Default) shall be paid to and applied as follows:
(i) first, to the payment of reasonable costs and
expenses, including all amounts expended to preserve the value of the
Collateral, of foreclosure or suit, if any, and of such sale and the exercise of
any other rights or remedies, and of all proper fees, expenses, liability and
advances, including reasonable legal expenses and attorneys' fees, incurred or
made hereunder by Collateral Agent;
(ii) second, to the payment to each Lender of the
amount then owing or unpaid on such Lender's Long Term Note, and in case such
proceeds shall be insufficient to pay in full the whole amount so due, owing or
unpaid upon such Long Term Note, then its Pro Rata Share of the amount remaining
to be distributed (to be applied first to accrued interest and second to
outstanding principal); and
(iii) third, to the payment of the surplus, if any,
to Pledgor, its successors and assigns, or to whomsoever may be lawfully
entitled to receive the same.
For purposes of this Pledge Agreement, the term "Pro Rata Share" shall mean,
when calculating a Lender's portion of any distribution or amount, that
distribution or amount (expressed as a percentage) equal to a fraction (i) the
numerator of which is the original outstanding principal amount of such Lender's
Long Term Note and (ii) the denominator of which is the original aggregate
outstanding principal amount of all Long Term Notes issued under the Stock
Purchase Agreement. In the event that a Lender receives payments or
distributions in excess of its Pro Rata Share, then such Lender shall hold in
trust all such excess payments or distributions for the benefit of the other
Lenders and shall pay such amounts held in trust to such other holders upon
demand by such holders.
9. AUTHORIZED ACTION BY COLLATERAL AGENT.
(a) Pledgor hereby appoints Collateral Agent as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor or otherwise, from time to time in Collateral Agent's
discretion and to the full extent permitted by law to take any action and to
execute any instrument which Collateral Agent may deem reasonably necessary or
advisable to accomplish the purposes of this Pledge Agreement in accordance with
-4-
the terms and provisions hereof, including without limitation, to receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, interest payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same.
(b) This power of attorney is a power coupled with an interest
and shall be irrevocable. The powers conferred on Collateral Agent hereunder are
solely to protect the Collateral Agent and Lenders' interests in the Collateral
and shall not impose any duty upon Collateral Agent to exercise any such powers.
Collateral Agent shall be accountable only for amounts that he actually receives
as a result of the exercise of such powers and in no event shall Collateral
Agent or any of his employees or agents be responsible to Pledgor for any act or
failure to act, except for gross negligence or willful misconduct.
10. COLLATERAL AGENT.
(a) APPOINTMENT. The Lenders hereby appoint Noel McDermott as
Collateral Agent for the Lenders under this Pledge Agreement (in such capacity,
the "COLLATERAL AGENT") to serve from the date hereof until the termination of
this Pledge Agreement.
(b) POWERS AND DUTIES OF COLLATERAL AGENT, INDEMNITY BY
LENDERS.
(i) Each Lender hereby irrevocably authorizes the
Collateral Agent to take such action and to exercise such powers hereunder as
provided herein, together with such powers as are reasonably incidental thereto.
Collateral Agent may execute any of his duties hereunder by or through agents or
employees at his discretion.
(ii) Upon the death, resignation or removal of the
Collateral Agent, the Lenders shall appoint a successor collateral agent to act
under the Long Term Notes and this Pledge Agreement. If no such successor
collateral agent shall have been so appointed by the Lenders and shall have
accepted such appointment within 30 days after Collateral Agent's death, giving
of notice of resignation or removal as Collateral Agent, then Collateral Agent
shall be deemed to be Warren P. Yost or his successor-in-interest to his Long
Term Note. Upon the acceptance of any appointment as successor collateral agent
hereunder by a successor collateral agent, such successor collateral agent shall
thereupon succeed to and become vested with all rights, powers, privileges,
duties and obligations of Collateral Agent hereunder, and the Collateral Agent
shall be discharged from his duties and obligations. After Collateral Agent's
death, resignation or removal hereunder as the Collateral Agent, the provisions
of this SECTION 10 shall continue in effect for his benefit in respect of any
actions taken or omitted to be taken by him while he was acting as such
Collateral Agent.
11. MISCELLANEOUS.
(a) NOTICES. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Pledgor, Collateral Agent or Lenders under this Pledge Agreement shall be in
writing and telecopied, mailed or delivered to each party at the telecopier
number or its address set forth below (or to such other telecopy number or
address as the recipient of any notice shall have notified the other in
writing). All such notices and communications shall be effective (a) when sent
by Federal Express or other overnight service of recognized standing, on the
business day following the deposit with such service; (b) when mailed by
registered or certified mail, first class postage prepaid and addressed as
aforesaid through the United States Postal Service, upon receipt; (c) when
delivered by hand, upon delivery; and (d) when telecopied, upon confirmation of
receipt.
Pledgor: MicroTel International Inc.
9485 Haven Avenue, Suite 100
Rancho Cucamonga, CA 91730
Attention: Carmine T. Oliva
Telephone: (909) 987-9220
Facsimile: (909) 987-9228
Collateral Agent: Noel McDermott
502 Village Circle
Santa Cruz, CA 95060
Telephone: ____________________
Facsimile: _____________________
Lenders: See the Schedule of Lenders on EXHIBIT A.
(b) NONWAIVER. No failure or delay on Pledgor, Collateral
Agent or Lenders' part in exercising any right hereunder shall operate as a
waiver thereof or of any other right nor shall any single or partial exercise of
any such right preclude any other further exercise thereof or of any other
right.
(c) AMENDMENTS AND WAIVERS. This Pledge Agreement may not be
amended or modified, nor may any of its terms be waived, except by written
instruments signed by Pledgor and Collateral Agent. Each waiver or consent under
any provision hereof shall be effective only in the specific instances for the
purpose for which given.
(d) ASSIGNMENTS. This Pledge Agreement shall be binding upon
and inure to the benefit of Lenders, Collateral Agent and Pledgor and their
respective successors and assigns; PROVIDED, HOWEVER, that Pledgor may not
assign its rights and duties hereunder without the prior written consent of
Collateral Agent.
(e) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
Lenders and Collateral Agent under this Pledge Agreement shall be in addition to
all rights, powers and remedies given to Lenders and Collateral Agent by virtue
of any applicable law, rule or regulation of any governmental authority, the
Long Term Notes or any other agreement, all of which rights, powers, and
remedies shall be cumulative and may be exercised successively or concurrently
without impairing Collateral Agent's rights hereunder. Pledgor waives any right
to require Collateral Agent or Lenders to proceed against any Person or to
exhaust any collateral or to pursue any remedy in Collateral Agent or Lenders'
power.
-5-
(f) PARTIAL INVALIDITY. If at any time any provision of this
Pledge Agreement is or becomes illegal, invalid or unenforceable in any respect
under the law of any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Pledge Agreement nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
(g) EXPENSES. Pledgor shall pay on demand all reasonable fees
and expenses, including reasonable attorneys' fees and expenses, incurred by
Collateral Agent with respect to any amendments or waivers hereof requested by
Pledgor or in the enforcement or attempted enforcement of any of the Obligations
or in preserving any of Collateral Agent or Lenders' rights and remedies
(including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting this Pledge Agreement,
the Long Term Notes or the Obligations or any bankruptcy or similar proceeding
involving Pledgor or any of its Subsidiaries).
(h) GOVERNING LAW. This Pledge Agreement shall be governed by
and construed in accordance with the laws of the State of California without
reference to conflicts of law rules (except to the extent governed by the UCC).
(i) JURY TRIAL. PLEDGOR, LENDERS AND COLLATERAL AGENT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS MICROTEL PLEDGE AGREEMENT.
[Signature page follows]
-6-
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be
executed as of the day and year first above written.
PLEDGOR:
MicroTel International Inc.,
a Delaware corporation
By: /S/ Carmine T. Oliva
----------------------
Carmine T. Oliva, Chairman, President and
Chief Executive Officer
LENDERS:
See Schedule of Lenders on EXHIBIT A for signature
COLLATERAL AGENT:
/S/ Noel Mcdermott, by Warren P. Yost, Attorney-in-fact
-------------------------------------------------------
Noel McDermott, an individual
[Signatures continued on next page]
-7-
EXHIBIT A
---------
SCHEDULE OF LENDERS
PRINCIPAL
AMOUNT
LENDER'S NAME AND ADDRESS OF NOTE LENDER'S SIGNATURE
------------------------- ------- ------------------
Noel McDermott, as Trustee of the Noel C. $1,680,000 /S/ Noel Mcdermott, Trustee, by Warren P.
McDermott Revocable Living Trust dated -----------------------------------------
December 18, 1995 Yost, Attorney-in-fact
502 Village Circle ----------------------
Santa Cruz, CA 95060 Noel McDermott, Trustee of the Noel C.
McDermott Revocable Living Trust dated
December 18, 1995
Warren P. Yost and Gail A. Yost, as Co-Trustees $1,320,000 /S/ Warren P. Yost
Under Declaration of Trust dated March 9, 1988 ------------------
10324 Miner Place Warren P. Yost, Co-Trustee Under Declaration
Cupertino, CA 95014 of Trust dated March 9, 1988
/S/ Gail A. Yost
----------------
Gail A. Yost, Co-Trustee Under Declaration
of Trust dated March 9, 1988
A-1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement dated as of July ___, 2004 the undersigned hereby sells, assigns and
transfers unto Noel McDermott, as Collateral Agent, 910,000 shares of common
stock of Larus Corporation, a California corporation, standing in the
undersigned's name on the books of said corporation represented by certificate
number ___ delivered herewith, and does hereby irrevocably constitute and
appoint Noel McDermott as attorney-in-fact, with full power of substitution, to
transfer said stock on the books of said corporation.
Dated: As of July ___, 2004 By: MicroTel International Inc.
/S/ Carmine T. Oliva
---------------------------------------------
(Signature)
Carmine T. Oliva, Chairman, President and CEO
---------------------------------------------
(Please Print Name)
---------------------------------------------
(Spouse's Signature, if any)
---------------------------------------------
(Please Print Spouse's Name)
This Stock Power and Assignment Separate From Certificate was
executed by MicroTel International Inc. in conjunction with the terms of a
Pledge Agreement dated as of July ___, 2004.
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE AND NAME
LINES.