Exhibit 99.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
YDI WIRELESS, INC.
AND
RICOCHET INVESTMENTS, LLC
DATED AS OF JUNE 25, 2004
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of June 25, 2004 between YDI WIRELESS, Inc., a Delaware corporation
("Buyer"), and RICOCHET INVESTMENTS, LLC, a Colorado limited liability company
(the "Seller").
RECITALS
A. Seller owns all of the issued and outstanding shares of capital stock
of Ricochet Networks, Inc., a Delaware corporation (the "Company").
B. Seller desires to sell such shares to Buyer and Buyer desires to buy
such shares from Seller.
C. Buyer and Seller desire to make certain representations and warranties
and other agreements in connection with the Stock Sale.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.1 Purchase and Sale of Shares. Subject to and upon the terms and
conditions of this Agreement, at the Closing, Seller shall sell, assign,
transfer, convey, and deliver to Buyer, and Buyer shall purchase and accept
delivery of all of the Shares (as defined in Section 2.2 below), free and clear
of all liens, claims, charges, security interests, pledges, options, rights of
first refusal, first offer rights, and any other encumbrances or restrictions of
any nature whatsoever (other than under applicable securities laws) (the "Stock
Sale").
1.2 Pre-Closing Transactions. On or prior to the Closing Date but subject
to the accuracy of the representation in Section 2.5(b) below, (a) the Company
shall pay all expenses incurred by the Seller and the Company in connection with
this Agreement (up to a maximum of $140,000), including the fees and expenses of
Seller's counsel, the fees and expenses of Bathgate Capital, and certain
payments promised to Dotsolve Partners and Xxxxx Xxxxx; and (b) the Company
shall pay down the balance owed under the promissory note currently outstanding
from the Company to Seller (the "Company Note") to a principal balance of the
$300,000.
1.3 Purchase Price. The purchase price for the Shares shall be Three
Million Two Hundred Thousand Dollars ($3,200,000), to be paid on the
Closing Date as follows: (a) Three Million Dollars ($3,000,000) in cash, plus
(b) 42,105 restricted shares of common stock of Buyer valued at $200,000 using a
price of $4.75, the last sale price of Buyer's common stock on the day preceding
the Closing Date (the "Buyer Stock").
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1.4 Closing. The Stock Sale shall be consummated (the "Closing") at the
offices of the Company on June 25, 2004 (the "Closing Date").
1.5 Deliveries at Closing. At the Closing,
(a) Seller shall deliver to Buyer:
(i) certificates representing the Shares duly endorsed in
blank or accompanied by duly executed share transfer forms or stock
powers (in either case, with all necessary transfer taxes, if any,
paid or other revenue stamps affixed thereto), in form and substance
reasonably satisfactory to Buyer;
(ii) the original Company Note, marked "cancelled", together
with such other documents requested by Buyer to evidence the
termination of any and all security agreements and interests
securing the payment of such Note, in form and substance reasonably
satisfactory to Buyer;
(iii) resignations of all current officers and directors of
the Company, in form and substance reasonably satisfactory to Buyer;
(iv) a noncompetition agreement in favor of Buyer from Xxxxxx
Xxxxxxxx for a term of two years, in the business of wireless data
services and equipment, and otherwise in form and substance
reasonably satisfactory to Buyer and Xx. Xxxxxxxx;
(v) a guarantee in favor of Buyer from Xxxxxx Xxxxxxxx as
contemplated in Section 5.1 below;
(vi) evidence reasonably satisfactory to Buyer of the
authority of Seller to enter into this Agreement; and
(vii) a certificate as to the incumbency of the manager of
Seller executing this Agreement and all related agreements,
documents, and certificates.
(b) Buyer shall deliver to Seller:
(i) Documentation demonstrating that the Buyer has delivered
instructions to its transfer agent to issue the Buyer Stock to
Seller;
(ii) an unsecured promissory note (the "Buyer Note") from
Buyer and its affiliates (jointly and severally) in the principal
amount of Three Hundred Thousand Dollars ($300,000), which shall
bear interest at 8% per annum and provide for the payment of 36
equal monthly installments of principal and interest beginning July
1, 2004, in replacement of the Company Note;
(iii) good funds in the amount of $3,000,000;
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(iv) copies of resolutions of Buyer's board of directors
approving this Agreement and the transactions contemplated hereby,
certified by the Secretary of Buyer; and
(v) a certificate as to the incumbency of the officer(s) of
Buyer executing this Agreement and all related agreements,
documents, and certificates.
1.6 Failure to Close. If the Closing does not occur on or before June 25,
2004, then either party may terminate this Agreement after that date, and
neither party will have any further obligations under this Agreement (other than
any liability resulting from a breach of this Agreement prior to the date it was
terminated).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to Buyer, subject to the exceptions
specifically disclosed in the disclosure letter supplied by the Seller to Buyer
(the "Seller Letter") and dated as of the date hereof, as follows:
2.1 Organization of the Company and Seller. Each of the Company and each
of its material subsidiaries and Seller is a corporation or limited liability
company duly organized, validly existing, and in good standing under the laws of
the jurisdiction of its formation, has the corporate or company power to own,
lease, and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and in good standing as a
foreign corporation or company in each jurisdiction in which the failure to be
so qualified would have a Material Adverse Effect (as defined below) on the
Company. The Company owns, directly or indirectly through one or more
subsidiaries, 100% of the capital stock of each of its subsidiaries (each of
which is listed in Section 2.1 of the Seller Letter), and does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any interest in, any corporation,
partnership, joint venture, or other business association or entity other than
the securities of any publicly traded entity held for investment only and
constituting less than 5% of the outstanding capital stock of any such entity.
For purposes of this Agreement, the term "subsidiary" of the Company or Buyer,
as the case may be, means any Person (other than a natural person) of which the
Company or Buyer, as the case may be, owns, either directly or indirectly, a
majority of the total combined voting power of all classes of equity thereof
having general voting power under ordinary circumstances to elect a majority of
the board of directors or its equivalent. Seller has provided to Buyer a true
and correct copy of the Certificate of Incorporation, By-laws or other
organizational documents of Seller and the Company and similar governing
instruments of its material subsidiaries, each as amended to date. The current
directors, officers and managers of the Seller and the Company are set forth in
Section 2.1 of the Seller Letter. For purposes of this Agreement, "Material
Adverse Effect" shall mean a material adverse effect on the business,
properties, assets (including intangible assets), financial condition, or
results of operations of a Person (as defined below), taken as a whole, but
shall not include any of the foregoing arising out of, related to, or otherwise
by virtue of (a) conditions affecting the economy or the financial markets
generally (except to
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the extent that such conditions have a disproportionate adverse effect on such
Person compared to other companies similarly situated as to size, financial
strength, and/or other relevant factors), (b) the announcement of or pendency of
any of the transactions contemplated by this Agreement, (c) events,
circumstances, or conditions generally affecting the industry in which such
Person operates (except to the extent that such events, circumstances, or
conditions have a disproportionate adverse effect on such Person compared to
other companies similarly situated as to size, financial strength, and/or other
relevant factors), (d) any change in law or generally accepted accounting
principles, or (e) as to Buyer, any change in the market price or trading volume
of the securities of such Person (provided, that if such change in market price
or trading volume is caused by an underlying cause or effect which would
otherwise constitute a Material Adverse Effect, such underlying cause or effect
shall nonetheless continue to constitute and qualify hereunder as a Material
Adverse Effect). For purposes of this Agreement, "Person" shall mean any natural
person, corporation, general partnership, limited partnership, limited liability
company, proprietorship, or other business organization.
2.2 Company Capital Structure. The authorized capital stock of the Company
consists of 75,000 shares of common stock, par value $0.001 per share (the
"Company Common Stock"), and 25,000 shares of preferred stock, par value $0.001
per share. As of the date of this Agreement, 95 shares of Company Common Stock
are issued and outstanding, and no shares of preferred stock are issued or
outstanding. All such shares have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully paid and nonassessable.
Since the date of the Company Balance Sheet (as defined in Section 2.5 below),
there have been no changes in the capital structure of the Company. The Seller
is the sole record and beneficial owner of all issued and outstanding shares of
Company Common Stock (the "Shares"). The Seller has full power to vote or direct
the voting of the Shares. As of the date of this Agreement, the Shares are, and
at all times prior to the Closing will be, free and clear of any voting
agreements or restrictions, rights of first refusal, co-sale rights, security
interests, liens, pledges, claims, options, charges, other encumbrances, or any
other interests of any third party.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities of any class of the Company, or any
security convertible or exchangeable into or exercisable for such equity
securities, issued, reserved for issuance, or outstanding. Except for securities
the Company owns, directly or indirectly through one or more subsidiaries, there
are no equity securities of any class of any subsidiary of the Company, or any
security convertible or exchangeable into or exercisable for such equity
securities, issued, reserved for issuance, or outstanding. Except as set forth
in Section 2.2, there are no options, warrants, equity securities, calls,
rights, commitments, or agreements of any character to which the Company or any
of its subsidiaries is a party or by which it is bound obligating the Company or
any of its subsidiaries to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of capital stock of the Company or any of
its subsidiaries or obligating the Company or any of its subsidiaries to grant,
extend, accelerate the vesting of, or enter into any such option, warrant,
equity security, call, right, commitment, or agreement. There are no
registration rights, and there is no voting trust, proxy, rights agreement,
"poison pill" anti-takeover plan or other agreement or understanding to which
Seller or the Company or any of its subsidiaries is a party or by which it or
any of its subsidiaries is bound with respect to any security of any class of
the Company or with respect to any security, partnership interest, or similar
ownership interest of any class of any of its subsidiaries.
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2.4 Authority.
(a) The Seller has all requisite company power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
company action on the part of the Seller, including all necessary authorizations
and required votes by the members of the Seller. This Agreement has been duly
executed and delivered by the Seller and constitutes the valid and binding
obligation of the Seller, enforceable against the Seller in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity. The execution and delivery of this
Agreement by the Seller does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (i) any provision of the Certificate of Incorporation
or By laws of the Company or similar governing instruments of Seller or any of
the Company's subsidiaries or (ii) any material mortgage, indenture, lease,
contract or other agreement, or any material permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Seller, the Company, or either of their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity"), is required by or with respect to the Seller or the Company in
connection with the execution and delivery of this Agreement by the Seller or
the consummation of the transactions contemplated hereby, except for such
consents, authorizations, filings, approvals, and registrations which, if not
obtained or made, would not have a Material Adverse Effect on the Company.
2.5 Company Financial Statements; Cash on Hand.
(a) The Company has furnished Buyer with a copy of its unaudited
consolidated financial statements for the fiscal year ended December 31, 2003,
and with copies of its unaudited consolidated financial statements for the
five-month period ending May 31, 2004 (collectively, including in each case any
related notes thereto, the "Company Financial Statements"). Each of the Company
Financial Statements (i) was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and (ii)
fairly presented the financial position of the Company at and as of the
respective dates thereof and the results of its operations, cash flows, and
changes in stockholders' equity (if presented) for the periods indicated, except
that any unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments. The unaudited balance sheet of the Company
as of May 31, 2004 provided by the Company to Buyer is hereinafter referred to
as the "Company Balance Sheet."
(b) At the time of the Closing, the Company shall have cash on hand
at least equal to $350,000 (prior to the payments contemplated by Sections
1.2(a) and (b) above).
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2.6 Absence of Certain Changes or Events. Except with respect to the
actions contemplated by this Agreement, since the date of the Company Balance
Sheet, the Company and its subsidiaries have conducted their businesses only in
the ordinary course and in a manner consistent with past practice and, since
such date, there has not been (a) any Material Adverse Effect on the Company or
any development that reasonably would be expected to have a Material Adverse
Effect on the Company or (b) any material liability or obligation (direct or
contingent) which did not arise in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other government charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts, net
operating losses, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) Each of the Company and its subsidiaries has timely filed
all federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to Taxes
required to be filed by the Company and each of its subsidiaries,
except such Returns which are not material to the Company. All such
Returns were correct and complete in all material respects. Each of
the Company and its subsidiaries has paid all Taxes due and owing by
the Company and its subsidiaries (whether or not shown on any Tax
Return). None of the Company and its subsidiaries currently is the
beneficiary of any extension of time within which to file any
Return.
(ii) Except as is not material to the Company, each of the
Company and its subsidiaries will have withheld as of the Closing
with respect to its employees all income Taxes, FICA, FUTA, and
other Taxes required to be withheld.
(iii) Except as is not material to the Company, neither the
Company nor any of its subsidiaries has been delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding,
proposed or assessed against the Company or any of its subsidiaries,
nor has the Company or any of its subsidiaries executed any waiver
of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(iv) Except as is not material to the Company, no audit or
other examination of any Return of the Company or any of its
subsidiaries is presently
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in progress, nor has the Company or any of its subsidiaries been
notified of any request for such an audit or other examination.
(v) Neither the Company nor any of its subsidiaries has any
liability for unpaid Taxes which have not been accrued for or
reserved against on the Company Balance Sheet in accordance with
GAAP, whether asserted or unasserted, contingent or otherwise, which
is material to the Company, except liability for unpaid Taxes which
have accrued since the date of the Company Balance Sheet in the
ordinary course of business.
(vi) None of the Company's assets is treated as "tax exempt
use property" within the meaning of Section 168(h) of the Internal
Revenue Code of 1986, as amended (the "Code").
(vii) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any of
its subsidiaries that, individually or collectively, could give rise
to the payment of any amount for which a deduction will be
disallowed by reason of Sections 280G, 404 or 162(b) through (o) of
the Code.
(viii) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company or any of is
subsidiaries.
(ix) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning
of Section 897(c)(2) of the Code.
(x) None of the Company and its subsidiaries is a party to any
tax allocation or sharing agreement. None of the Company and its
subsidiaries (A) has been a member of an Affiliated Group (within
the meaning of Section 1504(a) of the Code, or any similar group
defined under a similar provision of state, local, or foreign law)
filing a consolidated federal Return (other than a group the common
parent of which was the Company) or (B) has any liability for the
taxes of any person (other than any of the Company and its
subsidiaries) under Treas. Reg. ss.1.1502 6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(xi) The Company has furnished Buyer with a list of all
federal, state, local, and foreign Tax Returns filed with respect to
the Company and its subsidiaries for taxable periods ended on or
after January 1, 2000, which list indicates those Tax Returns that
have been audited. The Company has delivered to 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 and its subsidiaries since January 1, 2000.
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(xii) The Company will not be required to include any item of
income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing
Date as a result of any (A) change in method of accounting for a
taxable period ending on or prior to the Closing Date; (B) "closing
agreement" as described in Codess.7121 (or any corresponding or
similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (C) intercompany
transactions or any excess loss account described in Treasury
Regulations under Codess.1502 (or any corresponding or similar
provision of state, local or foreign income Tax law); (D)
installment sale or open transaction disposition made on or prior to
the Closing Date; or (E) prepaid amount received on or prior to the
Closing Date.
2.8 Absence of Liens and Encumbrances. Each of the Company and its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
liens or encumbrances except as reflected in the Company Financial Statements,
except for the lien to secure the Company Note (for which appropriate release
documents will be delivered at Closing), and except for liens for taxes not yet
due and payable and such imperfections of title and encumbrances, if any, which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby. Without limiting the generality of
the foregoing and subject to the limitations in the preceding sentence, the
Company has good and valid title to the properties and assets listed in Section
2.8 of the Seller Letter, free and clear of any liens or encumbrances.
2.9 Intellectual Property.
(a) The Company, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material (excluding Commercial
Software as defined in Paragraph (c) below) that are material to the business of
the Company as currently conducted or as proposed to be conducted by the Company
(the "Company Intellectual Property Rights").
(b) To Seller's knowledge, the Company is not in violation of any
license, sublicense, or agreement related directly to the Company Intellectual
Property Rights except such violations as do not materially impair the Company's
rights under such license, sublicense, or agreement. To Seller's knowledge, the
execution and delivery of this Agreement by Seller, and the consummation of the
transactions contemplated hereby, will neither cause the Company to be in
violation or default under any such license, sublicense, or agreement nor
entitle any other party to any such license, sublicense, or agreement to
terminate or modify such license, sublicense, or agreement except such
violations or defaults as do not materially impair the Company's rights under
such license, sublicense, or agreement. No material claims with respect to the
Company Intellectual Property Rights have been asserted or, to the knowledge of
Seller, are threatened by any Person nor, to the knowledge of Seller, are there
any valid grounds for any
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bona fide material claims (i) to the effect that the manufacture, sale,
licensing, or use of any of the products of the Company or any of its
subsidiaries as now manufactured, sold, licensed, or used or proposed for
manufacture, sale, licensing, or use by the Company infringes on any copyright,
patent, trade xxxx, service xxxx, or trade secret, (ii) against the use by the
Company or any of its subsidiaries of any trademarks, service marks, trade
names, trade secrets, copyrights, patents, technology, know how, or computer
software programs and applications used in the Company's business as currently
conducted or as proposed to be conducted, or (iii) challenging the ownership by
the Company, validity, or effectiveness of any of the Company Intellectual
Property Rights. All material registered trademarks, service marks, and
copyrights held by the Company are valid and subsisting. To the knowledge of
Seller, there is no material unauthorized use, infringement, or misappropriation
of any of the Company Intellectual Property Rights by any third party, including
any employee or former employee of the Company. No Company Intellectual Property
Right owned by the Company or product of the Company or any of its subsidiaries,
or, to the knowledge of Seller, Company Intellectual Property Right licensed by
the Company or its subsidiaries, is subject to any outstanding decree, order,
judgment, or stipulation restricting in any manner the licensing thereof by the
Company or any of its subsidiaries.
(c) "Commercial Software" means packaged commercially available
software programs generally available to the public through retail dealers which
have been licensed to the Company pursuant to end user licenses and which are
used in the Company's business but are in no way a component of or incorporated
in any of the Company's products and related trademarks, technology and know
how.
2.10 Agreements, Contracts and Commitments. Neither the Company nor any of
its subsidiaries has, nor is it a party to nor is it bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit sharing or retirement plans, or any other employee benefit plans
or arrangements;
(c) any employment or consulting agreement, contract or commitment
with any officer or director-level employee, not terminable by the Company on
thirty days' notice without liability, except to the extent general principles
of wrongful termination law may limit the Company's ability to terminate
employees at will;
(d) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(e) any agreement, contract or commitment (excluding real and
personal property leases) which involves payment by the Company of $20,000 or
more (excluding amounts which are already owing by the Company or such
subsidiary at the date of the Company Balance Sheet);
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(f) any agreement under which the Company or its subsidiaries is
restricted from selling, licensing, or otherwise distributing any of its
products to any class of customers, in any geographic area, during any period of
time, or in any segment of the market;
(g) any agreement under which the Company is restricted from
entering into any line of business, introducing any products, undertaking any
activities, or competing with any other person or entity in any line of
business, in any geographic area, during any period of time, or in any segment
of the market;
(h) any agreement under which the Company or its subsidiaries
provides warranty for any of its products or services or pursuant to which the
Company or its subsidiaries has any repair, replacement, service, or similar
warranty obligations for products or services previously sold by the Company or
its subsidiaries; or
(i) any agreement under which the Company or its subsidiaries is or
may be obligated to remove any products, radios, cables, base stations, or
related equipment previously sold or installed by the Company.
2.11 No Default. Since November 25, 2003, neither the Company nor any of
its subsidiaries has breached in any material respect, or received in writing
any claim or threat that it has breached in any material respect, any of the
terms or conditions of any (i) agreement, contract or commitment that was or is
material to the Company or (ii) any agreement under which the Company or any of
its subsidiaries licenses from a third party any Company Intellectual Property
Rights included in the Company's products in such a manner as would permit any
other party to cancel or terminate the same or would permit any other party to
seek material damages from the Company thereunder. Each of the agreements,
contracts and commitments referred to in clauses (i) and (ii) above that has not
expired or been terminated in accordance with its terms is in full force and
effect and, except as otherwise disclosed, is not subject to any material
default thereunder of which the Company is aware by any party obligated to the
Company pursuant thereto.
2.12 Governmental Authorization. The Company holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of the Company's business as currently conducted
(the "Company Permits"). The Company is in material compliance with the terms of
the Company Permits. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any Governmental Entity, except
for violations or possible violations which individually or in the aggregate
would not have a Material Adverse Effect on the Company. As of the date of this
Agreement, no investigation or review by any Governmental Entity with respect to
the Company is pending or, to the knowledge of the Seller, threatened, nor to
the knowledge of the Seller, has any Governmental Entity indicated an intention
to conduct the same, other than, in each case, those the outcome of which would
not have a Material Adverse Effect on the Company.
2.13 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which the Company or any of its subsidiaries
has received any notice of assertion nor, to the Seller's knowledge, have any
such matters been threatened.
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2.14 Environmental Matters. Neither the Company nor any of its
subsidiaries has been or is currently in material violation of any applicable
statute, law or regulation relating to the environment or occupational health
and safety ("Environmental and Occupational Laws"). Each of the Company and its
subsidiaries has all permits and other governmental authorizations currently
required by all applicable statutes, laws or regulations relating to the
environment or occupational health and safety necessary for the conduct of its
business. Neither the Company nor any of its subsidiaries has received any
communication from a Governmental Entity, or any written communication from any
Person other than a Governmental Entity, that alleges that it is not in full
compliance with Environmental or Occupational Laws, except for matters alleging
items which would not have a Material Adverse Effect on the Company. There is no
claim of a violation of Environmental and Occupational Laws pending or, to the
knowledge of the Seller, threatened against the Company or any of its
subsidiaries, except for matters alleging items which would not have a Material
Adverse Effect on the Company.
2.15 Brokers' and Finders' Fees. Except for the fee payable to Bathgate
Capital and the amounts to be paid to Dotsolve Partners and Xxxxx Xxxxx, as
provided in Section 1.2, neither the Company nor Seller has incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement,
the Stock Sale, or any transaction contemplated hereby.
2.16 Bank Accounts. Section 2.16 of the Seller Letter lists the name and
address of each bank, trust company, and other financial institution where the
Company has an account, safe deposit box, or vault or where funds of the Company
are stored or invested and the names of all Persons authorized to withdraw funds
from such accounts or who are authorized to have access to any such safe deposit
boxes or vaults.
2.17 Labor Matters. There are no pending or, to the Seller's knowledge,
threatened material claims against the Company or any of its subsidiaries under
any workers' compensation plan or policy or for long term disability. Each of
the Company and its United States subsidiaries has complied in all material
respects with all applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and has no material obligations with
respect to any former employees or qualifying beneficiaries thereunder.
2.18 Employee Benefit Plans.
(a) The only Benefit Plans that the Company has or has had at any
time since November 25, 2003 are the Company's 401(k) Plan (as defined in
Section 4.5(d) below) and the Company's current medical, dental, and life
insurance plans (collectively, the "Company Benefit Plans"). The Company has
made available to Buyer accurate and complete copies of all all material
summaries, reports, financial statements, and other documents relating to the
Company Benefit Plans. "Benefit Plans" means all employee benefit plans within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and any related or separate contracts, plans,
trusts, programs, policies, arrangements, practices, customs and understandings,
in each case whether formal or informal, that provide benefits of economic value
to any present or former employee of the Company or present or former
beneficiary, dependent or assignee of any such employee or former employee.
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(b) To Seller's knowledge, all Company Benefit Plans conform (and at
all times since November 25, 2003 have conformed) in all material respects to,
and are being administered and operated (and have at all time been administered
and operated) in material compliance with, the requirements of ERISA, the Code
and all other applicable laws or governmental regulations.
(c) The Company's 401(k) Plan has been established under a
standardized prototype plan for which an Internal Revenue Service opinion letter
has been obtained by the plan sponsor and is valid as to the Company as an
adopting employer or has been determined by the Internal Revenue Service to be
so qualified or an application for such determination is pending. Any such
opinion letter or determination that has been obtained remains in effect and has
not been revoked, and with respect to any application that is pending, the
Seller has no reason to suspect that such application for determination will be
denied. Nothing has occurred since the date of any such establishment or
determination that is reasonably likely to affect adversely such qualification
or exemption, or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to the Company's
401(k) Plan.
(d) There are no pending or, to the knowledge of the Seller,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf of
any individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of the Company or any of its officers,
directors or employees under ERISA or any other applicable regulations, or
claiming benefit payments (other than those made in the ordinary operation of
such plans). The Benefit Plans are not the subject of any pending (or to the
knowledge of the Seller, any threatened) investigation or audit by the Internal
Revenue Service, the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC").
(e) The Company has timely made all required contributions under the
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(f) All Company Benefit Plans may be amended or terminated at any
time on or after the Closing Date. No Company Benefit Plan provides any health,
life or other welfare coverage to employees of the Company beyond termination of
their employment with the Company by reason or retirement or otherwise, other
than coverage as may be required under Section 4980B of the Code or Part 6 of
ERISA, or under the continuation of coverage provisions of the laws of any state
or locality.
2.19 Compliance With Laws. To Seller's knowledge, since November 25, 2003,
each of the Company and its subsidiaries has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation with respect to the ownership, operation or conduct of its business.
2.20 FIRPTA. The Company Common Stock is not a "U.S. Real Property
Interest" as defined in Treasury Regulation Section 1.897 2(h)(2).
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2.21 Antitakeover Laws Not Applicable. No "fair price," "business
combination," "moratorium," "control share acquisition" or other form of
antitakeover statute or regulation (a "Takeover Statute") is or will be
applicable (as to the Company) to the execution, delivery, or performance of
this Agreement or the consummation of the Stock Sale or the other transactions
contemplated by this Agreement.
2.22 Independent Investigation. The Seller has made its own investigation
concerning the advisability of entering into this Agreement and related
transactions and agreements. The Seller has consulted with and obtained advice
from its own legal, tax, financial, and other advisors to the extent the Seller
has desired. THE SELLER IS NOT RELYING ON ANY REPRESENTATIONS, WARRANTIES,
AGREEMENTS, ADVICE, OR OTHER STATEMENTS, WRITTEN OR ORAL, (OTHER THAN AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT) FROM OR MADE BY OR ON BEHALF OF BUYER
OR ITS DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS.
2.23 Accredited Investor; Restricted Stock.
(a) The Seller is an "accredited investor" as defined in Rule 501
promulgated under the Securities Act. The Seller has such knowledge and
experience in financial and business matters in general and investments in
particular so that the Seller is able to evaluate the merits and risks of an
investment in the securities issuable by Buyer and to protect its own interests
in connection with such investment. The Seller is purchasing such securities for
investment and not for the distribution of such securities. In addition, the
Seller has received such information as it considers necessary or appropriate
for deciding whether to make an investment in the securities issuable by Buyer.
The Seller acknowledges that Buyer has afforded the Seller a reasonable
opportunity to ask questions and receive answers from Buyer and its management
regarding the business and affairs of Buyer.
(b) The Seller acknowledges and understands that (i) the Buyer Stock
to be issued pursuant to this Agreement will be issued in a private transaction
pursuant to a specific exemption under the provisions of applicable federal and
state securities laws, which depends upon the representations and warranties
being made by the Seller in this Agreement, (ii) such shares have not been
registered under the Securities Act or any applicable state securities laws,
(iii) such shares will be subject to substantial limitations on sale or other
transfer, (iv) no market may exist for the resale of such shares, (v) the Seller
has no right to require registration of any of such shares under any applicable
federal or state securities laws, (vi) an appropriate restrictive legend will be
placed on the certificates representing such shares issued to it referring to or
stating explicitly the restrictions on transfer, (vii) Buyer's transfer agent
will be instructed not to transfer any of such shares without compliance with
all applicable legal and other restrictions on transfer, and (viii) it is aware
of any and all consequences arising from the restrictions described above,
including, but not limited to, any restrictive legends appearing on the
certificate, required holding periods, and stop transfer orders.
2.24 Full Disclosure. Neither this Agreement nor any written statement,
report, or other document furnished by the Seller or the Company pursuant to
this Agreement or in connection with the transactions contemplated hereby with
respect to Seller or the Company contains any untrue statement of a material
fact or omits to state a material fact necessary in
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order to make the statements contained herein or therein, in light of the
circumstances under which they are made, not false or misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, subject to the exceptions
specifically disclosed in the disclosure letter supplied by Buyer to Seller (the
"Buyer Letter") and dated as of the date hereof, as follows:
3.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own, lease, and operate its property
and to carry on its business as now being conducted and as proposed to be
conducted. Buyer has made available to counsel for the Company a true and
correct copy of the Certificate of Incorporation and By laws of Buyer, each as
amended to date.
3.2 Capital Structure.
(a) The authorized capital stock of Buyer consists of 100,000,000
shares of Buyer Common Stock and 4,500,000 shares of Preferred Stock, $.01 par
value. As of the date of this Agreement, 15,278,402 shares of Buyer Common Stock
are issued and outstanding and no shares of Preferred Stock of Buyer are issued
or outstanding.
(b) As of the date of this Agreement, (i) Buyer has reserved 389,626
shares of Buyer Common Stock for issuance upon exercise of warrants and no more
than 1,294,836 shares of Buyer Common Stock for issuance upon exercise of stock
options, (ii) there are warrants outstanding to purchase 389,626 shares of Buyer
Common Stock, and (iii) there are options outstanding to purchase no more than
823,214 shares of Buyer Common Stock. All of the outstanding options were issued
pursuant to Buyer's 1986 Stock Plan, 1987 Stock Plan, 1996 Stock Plan, 1997
Stock Plan, 1999 Stock Plan, 2001 Nonqualified Stock Option Plan, or 2002 Stock
Incentive Plan. Except as described above, there are no options, warrants,
equity securities, calls, rights, commitments, or agreements of any character to
which the Buyer is a party or to which it is bound, obligating the Buyer to
issue, deliver, or sell, or cause to be issued, delivered, or sold, additional
shares of capital stock of the Buyer or obligating the Buyer to grant, extend,
accelerate the vesting of, or enter into any such option, warrant, equity
security, call, right, commitment, or agreement.
3.3 Authority.
(a) Buyer has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes the valid and binding obligations of Buyer,
enforceable against Buyer in accordance with its terms, except as enforceability
may be
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limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement by Buyer does not, and the
consummation of the transactions contemplated hereby by Buyer will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation,
or acceleration of any obligation or loss of any benefit under (i) any provision
of the Certificate of Incorporation or By laws of Buyer or (ii) any material
mortgage, indenture, lease, contract, or other agreement, or any material
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Buyer or its properties or assets.
(b) No consent, approval, order, or authorization of, or
registration, declaration, or filing with, any Governmental Entity is required
by or with respect to Buyer in connection with the execution and delivery of
this Agreement by Buyer or the consummation by Buyer of the transactions
contemplated hereby, except for (i) the filing of a Form 8 K with the Securities
and Exchange Commission (the "SEC") and (ii) such other consents,
authorizations, filings, approvals, and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Buyer.
3.4 Full Disclosure. Neither this Agreement nor any written statement,
report or other document furnished by Buyer pursuant to this Agreement or in
connection with the transactions contemplated hereby with respect to Buyer
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they are made, not false or misleading.
3.5 Independent Investigation. The Buyer has made its own investigation
concerning the advisability of entering into this Agreement and related
transactions and agreements. The Buyer has consulted with and obtained advice
from its own legal, tax, financial, and other advisors to the extent the Buyer
has desired. THE BUYER IS NOT RELYING ON ANY REPRESENTATIONS, WARRANTIES,
AGREEMENTS, ADVICE, OR OTHER STATEMENTS, WRITTEN OR ORAL, (OTHER THAN AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT) FROM OR MADE BY OR ON BEHALF OF SELLER
OR ITS DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Confidentiality. The parties acknowledge that Buyer and Seller have
previously executed a Confidentiality Agreement dated April 6, 2004 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms.
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4.2 Public Disclosure.
(a) Buyer and Seller shall consult with each other before issuing
any press release or otherwise making any public statement with respect to the
Stock Sale or this Agreement and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by law or any listing agreement with a national securities exchange or The
Nasdaq Stock Market, Inc., so long as Buyer has provided Seller with notice of
such requirement and makes reasonable efforts to get confidential treatment if
so requested by Seller and in any event in accordance with the terms of the
Confidentiality Agreement.
(b) Seller agrees that the information supplied by Seller for
inclusion in any press release (including any information relating to Seller
that is approved by Seller) that is jointly issued or approved by Buyer and
Seller shall not, on the date such press release is issued, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier press release which has become
false or misleading. If at any time prior to the Closing Seller shall determine
that any information in any issued press release was or may have become false or
misleading, Seller shall promptly inform Buyer. Notwithstanding the foregoing,
Seller makes no representation or warranty with respect to any information
relating to Buyer which is contained in any of the foregoing documents.
(c) Buyer agrees that the information supplied by Buyer for
inclusion in any press release (including any information relating to Buyer that
is approved by Buyer) that is jointly issued or approved by Buyer and Seller
shall not, on the date such press release is issued, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier press release which has become
false or misleading. If at any time prior to the Closing Buyer shall determine
that any information in any issued press release was or may have become false or
misleading, Buyer shall promptly inform Seller. Notwithstanding the foregoing,
Buyer make no representation or warranty with respect to any information
relating to Seller which is contained in any of the foregoing documents.
4.3 Legal Requirements. Each of Buyer and Seller will use all reasonable
best efforts to comply promptly with all legal requirements which may be imposed
on them with respect to the consummation of the transactions contemplated by
this Agreement and will promptly cooperate with and furnish information to any
party hereto necessary in connection with any such requirements imposed upon any
of them or their respective subsidiaries in connection with the consummation of
the transactions contemplated by this Agreement, and will use all reasonable
best efforts to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order, or authorization of, or any
registration, declaration, or filing with, any Governmental Entity or other
public or private third party required to be obtained or made in connection with
consummating the transactions contemplated by this Agreement.
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4.4 Reasonable Best Efforts and Further Assurances. Each of the parties to
this Agreement shall use its reasonable best efforts to effectuate the
transactions contemplated hereby (including prompt resolution of any litigation
prompted hereby). Each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be reasonably necessary for effecting completely
the consummation of the transactions contemplated hereby.
4.5 Certain Benefit Plans.
(a) Buyer shall take such reasonable actions as are necessary to
allow eligible employees of the Company to participate in the benefit programs
of Buyer, or alternative benefit programs substantially comparable in the
aggregate to those applicable to employees of Buyer, as soon as practicable
after the Closing in accordance with the terms of such programs. Buyer shall
assume all of the Company's liability under Section 4980B of the Code and Part 6
of Title I of ERISA with respect to COBRA participants (other than any liability
of the Company to pay, or reimburse any such participants for, COBRA premiums)
in accordance with applicable law.
(b) Buyer shall cause each such benefit program in which employees
of Buyer and its subsidiaries are eligible to participate to take into account
for purposes of eligibility and vesting thereunder the service of such employees
with the Company and its subsidiaries to the same extent as such service was
credited for such purpose by the Company; provided, that in no circumstances
shall the crediting of such service create duplicative benefits.
(c) If active employees of the Company or any of its subsidiaries
become eligible to participate in a medical, dental, or vision plan of Buyer,
Buyer shall cause each such plan to (i) waive any preexisting condition
limitations to the extent such conditions are covered unconditionally for such
person under the applicable medical, dental, or vision plans of the Company,
(ii) honor under such plans any deductible, co-payment, and out-of-pocket
expenses incurred by the employees and their beneficiaries during the portion of
the calendar year prior to such participation, and (iii) waive any waiting
period limitation or evidence of insurability requirement which would otherwise
be applicable to such employee on or after the Closing to the extent such
employee had satisfied any similar limitation or requirement under an analogous
Company benefit program prior to the Closing.
(d) At Buyer's request, the Company will terminate its tax-qualified
401(k) Plan (the "Company's 401(k) Plan") prior to, and contingent upon, the
Closing. If the Company is required to terminate the Company's 401(k) Plan,
Buyer will, with the approval of the plan administrator of the Buyer's
tax-qualified 401(k) plan (the "Buyer's 401(k) Plan"), cause Buyer's 401(k) Plan
to accept rollovers or direct rollovers of "eligible rollover distributions"
within the meaning of Section 402(c) of the Code made with respect to current
employees of the Company who will continue as employees after the Closing from
the Company's 401(k) Plan. Buyer will use its good faith best reasonable efforts
to obtain such approval from the plan administrator of Buyer's 401(k) Plan. In
the case of any Company employee, the Buyer's 401(k) Plan will take into
account, for eligibility and vesting purposes, such employee's pre-Closing
service creditable to such employee for purposes of Company's 401(k) Plan.
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4.6 Xxxxxxxx Computer and Printer. From and after the Closing Date, Xxxxxx
Xxxxxxxx shall be permitted to keep as his own property, and remove from his
offices at the Company, the two computers and printer used by him in his office.
In addition, for a period of at least two years from and after the Closing Date,
Xx. Xxxxxxxx shall be entitled to use (without charge) his current e-mail
address (xxxxxxxx@xxxxxxxx.xxx) unless the continuation of this ability to use
is unduly burdensome to Buyer or this continuation cannot be maintained for
reasons beyond the reasonable control of Buyer.
4.7 Responsibility for Expenses. The Company shall be responsible for and
pay, on or before the Closing Date, all expenses incurred by the Seller and the
Company in connection with this Agreement (up to a maximum of $140,000),
including but not limited to fees and expenses of Seller's counsel and fees and
expenses of Bathgate Capital, in accordance with Section 1.2. The Seller shall
be responsible for and pay, on or before the Closing Date, all expenses incurred
by the Seller or the Company in connection with this Agreement in excess of
$140,000.
4.8 Consultation Following the Closing. In the two-year period following
the Closing Date, Xxxxxx Xxxxxxxx will provide up to 250 hours of consultation
free of charge to Buyer as requested by Buyer to the extent he is available to
do so.
ARTICLE V
GENERAL PROVISIONS
5.1 Survival of Representations, Warranties, and Covenants; Setoff;
Pledge; Limitation of Liability; Deductible.
(a) The representations and warranties of the Company, the Seller
and the Buyer contained in this Agreement shall survive the Closing for a period
of one year from the date of this Agreement. Only the covenants of Buyer,
Seller, and the Company that by their terms survive the Closing shall survive
the Closing.
(b) Buyer shall have the right to withhold and set off, at any time
against any amount due under the Buyer Note to the Seller, the amount of any
loss, liability, damage, cost, or expense (including, without limitation,
reasonable attorney's fees and expenses), whether now existing or arising during
the one-year period following the date of this Agreement, of any nature suffered
or incurred by Buyer arising from, in connection with, or relating to any
failure, breach, default, inaccuracy, or lack of performance on the part of the
Seller of any of its representations, warranties, agreements, or covenants in
this Agreement or any other agreement contemplated by or entered into pursuant
to this Agreement or in connection with the transactions contemplated by this
Agreement (collectively, "Buyer Damages"). In addition, if the amount of the
Buyer Damages exceeds the principal amount due under the Buyer Note (as reduced
by payments over time), Seller shall pay and reimburse Buyer for the amount of
such excess Buyer Damages up to an amount of $250,000. Xxxxxx Xxxxxxxx hereby
personally covenants that Seller shall perform promptly its obligations set
forth in the preceding sentence, personally agrees to perform any of such
obligations that Seller fails to perform within five (5) business days after
demand is made to
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Seller for performance, and personally agrees to deliver to Buyer such further
documentation as Buyer may reasonably request reflecting this personal
undertaking. The foregoing right of set off against the Buyer Note and payment
and reimbursement from Seller and/or Xxxxxx Xxxxxxxx shall be the Buyer's
exclusive remedy with respect to any such Buyer Damages (except for any such
Buyer Damages arising from any willful or intentional acts or omissions), and
such remedy shall only be available with respect to Buyer Damages that have
arisen by the end of the one-year period following the date of this Agreement.
The amounts of Buyer Damages for which Seller is responsible and for which Buyer
has setoff and payment or reimbursement rights under this Section 5.1(b) are
subject to the provisions of Sections 5.1(c) and (d) below.
(c) Notwithstanding any other provisions of this Agreement, but
subject to the provisions of Section 5.1(d), the maximum, aggregate liability of
the Seller for any Buyer Damages (except for any Buyer Damages arising from any
willful or intentional acts or omissions) shall not exceed the sum of (a) the
principal amount of the Buyer Note as of the Closing Date as such principal
amount is reduced by payments on such Note from and after the Closing Date; plus
(b) $250,000.
(d) Notwithstanding any other provisions of this Agreement, the
Seller shall be liable for any Buyer Damages only if, and to the extent that,
the amount of the Buyer Damages exceeds $200,000 in the aggregate. As provided
in the Seller Letter, certain items described in such Letter shall be included
in the calculation of Buyer Damages for purposes of this Section 5.1(d) (as well
as the other provisions of this Section 5.1), notwithstanding their disclosure
in such Letter.
(e) This section is included for the purpose of explaining the
intended operation of Sections 5.1(b), (c), and (d). The parties contemplate
that Buyer will be responsible for the first $200,000 of Buyer Damages. Seller
and/or Xxxxxx Xxxxxxxx shall be responsible for up to the next $550,000 of Buyer
Damages as follows: (i) Buyer may recover up to the next $300,000 of Buyer
Damages net of any principal payments made on the Buyer's Note (in other words,
from dollar $200,001 to dollar $500,000 of aggregate Buyer Damages, subject to
the $500,000 number being reduced by the amount of any principal payments on the
Buyer's Note) by means of offset and reducing the amounts due under the Buyer
Note and (ii) Buyer may then recover up to the next $250,000 of Buyer Damages
(in other words, from dollar $500,001 to dollar $750,000 of aggregate Buyer
Damages, subject to both the $500,001 and $750,000 numbers being reduced by the
amount of any principal payments on the Buyer's Note) from Seller and/or Xxxxxx
Xxxxxxxx by means of the undertaking in Section 5.1(b) above and related
guarantee. Any additional Buyer Damages (in other words, above dollar $750,000
of aggregate Buyer Damages, subject to the $750,000 number being reduced by the
amount of any principal payments on the Buyer's Note) shall be the
responsibility of Buyer.
5.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service or mailed by registered or certified mail (return receipt
requested) or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as the party shall specify by like notice). If so mailed,
they shall be deemed given upon the earlier of actual receipt or three business
days after mailing.
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(a) if to Buyer, to:
0000 Xxx Xxxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx
00 Xxxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
(b) if to Seller, to:
Ricochet Investments, LLC
c/o Xxxxxx and Xxxxxxxx Xxxxxxxx Family Partnership
0000 Xxxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Ducker, Montgomery, Xxxxx & Xxxxxxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
5.3 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." Any table of contents and the headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
5.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart. A facsimile or copy of a signature
is valid as an original.
5.5 Entire Agreement. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, including the
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Seller Letter and the Buyer Letter, (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement, and (b) are not
intended to confer upon any other person any rights or remedies hereunder.
5.6 Severability. If any provision of this Agreement or the application
thereof becomes or is declared by a court of competent jurisdiction to be
illegal, void, or unenforceable, the remainder of this Agreement will continue
in full force and effect and the application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business, and other
purposes of such void or unenforceable provision; and, if they do not act to
replace the provision, the Agreement will be interpreted as if they had replaced
it with such a provision.
5.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
5.8 Governing Law; Arbitration.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law thereof.
(b) Any claim, controversy or dispute, whether sounding in contract,
statute, tort, fraud, misrepresentation or other legal theory, between or among
the parties or their officers, directors, shareholders, members, managers,
employees, agents or distributors, shall be resolved exclusively by binding
arbitration provided, however, that nothing herein shall be deemed to prohibit
any party from seeking from relevant courts immediate injunctive or other
equitable relief. The Federal Arbitration Act, 9 U.S.C. Sects 1-16, not state
law, shall govern the arbitrability of all claims, unless these laws are not
applicable, in which case Delaware law will govern. Once an arbitration date has
been scheduled by the arbitrators, each party waives its right to any extension
of the arbitration date unless it is mutually agreed by the parties. The
arbitration shall be conducted under the then current rules of the American
Arbitration Association ("AAA"). The number of arbitrators shall be one (1). If
the parties hereto cannot agree on an arbitrator, the AAA shall appoint such
arbitrator. The arbitrator shall have authority to award any form of damages or
other relief. The arbitrator's award shall be final and binding and may be
entered in any court having jurisdiction thereof. The prevailing party shall
recover from the other party all its costs, including but not limited to any
filing fees, travel expenses, reasonable attorneys fees, and/or any other costs
incurred relating to the dispute. Either party shall have the right to demand a
"fast track" binding arbitration hearing, in which case the dispute will be
tried under AAA rules within 60 days of the demand notice provided by the
aggrieved party. In the event the aggrieved party demands a fast track
arbitration hearing and the
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arbitrator is unavailable within the 60-day time period, the dispute shall be
tried at the earliest date possible in accordance with the arbitrator's
schedule. Either party may also request that the parties attempt to mediate any
dispute that is subject to arbitration prior to the commencement of such
arbitration, in which case the parties shall undertake such mediation in good
faith (each at its own expense); provided, however, if the dispute has not been
resolved by mediation within 30 days of the date mediation was first requested,
either party may then require that the mediation process be terminated and the
dispute be arbitrated as provided for herein. It is expressly agreed that either
party may seek injunctive relief or specific performance of the obligations
hereunder in an appropriate court of law or equity pending an award in
arbitration. If any party hereto files a judicial or administrative action
asserting claims subject to arbitration, as prescribed herein, and another party
successfully stays such action and/or compels arbitration of said claims, the
party filing said action shall pay the other party's costs and expenses incurred
in seeking such stay and/or compelling arbitration, including reasonable
attorneys' fees. If the Seller should initiate any arbitration or mediation, the
arbitration or mediation shall take the place in Falls Church, Virginia. If the
Buyer should initiated any arbitration or mediation, the arbitration or
mediation shall take place in Denver, Colorado.
5.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding, or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
5.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
5.11 Amendment. No provision of this Agreement may be amended or modified
unless such amendment or modification is in writing and signed by the party
against whom enforcement is sought.
5.12 Certain Definitions. For purposes of this Agreement, the term:
(a) "business day" means any day on which the principal offices of
the SEC in Washington D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day (other than a Saturday or a
Sunday) on which banks are not required or authorized to close in Delaware;
(b) "knowledge" means with respect to any fact, circumstance, event,
or other matter in question, that such fact, circumstance, event, or other
matter was actually known by or upon reasonable inquiry or investigation would
have been actually known by (i) an individual, if used in reference to an
individual, (ii) Xxxxxx X. Xxxxxxxxxx, Xxxxxxx X. Xxxxxx, and Xxxxx X. Xxxxxxx
if used in reference to Buyer, or (iii) Xxxxxx Xxxxxxxx if used in reference to
Seller or the Company.
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
signed by their respective duly authorized officer or manager as of the date
first written above.
YDI WIRELESS, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
RICOCHET INVESTMENTS, LLC
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Manager
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