Exhibit 10.5
THIS MASTER AGREEMENT (this "Agreement") is entered into as of
February 22, 2000 (the "Effective Date"), by and among SUNRISE TELECOM, INC., a
California corporation ("Buyer") represented by Xxxxx Xxxxxxx Esq. born Novara
on March 14, 1958, Fiscal Code XXX XXX 00X00 X000X, domiciled at Milan, Via
Vivaio n. 6, duly appointed, to such extent, through Special Powers of Attorney
granted to the latter by virtue of Unanimous Written Consent of the Board of
Directors of Buyer on February 15, 2000, and XXXXXX XXXXXXX, XXXXXX XXXXXXXXX,
XXXXXX XXXXXXXXX, and XXXXX XXXXXXX XXXXXXX (the "Shareholders").
WHEREAS, the Shareholders own, as hereinafter set forth, the quotas
representing the 55% of the issued and outstanding stock capital (the "Quotas ")
of Pro. Tel. S.r.l., an Italian limited liability company (the "Company"):
(i) Xxxxxx Xxxxxxx 40%;
(ii) Xxxxxx Xxxxxxxxx 5%;
(iii) Xxxxxx Xxxxxxxxx 5%;
(iv) Lucia Xxxxxxx Xxxxxxx 5%.
WHEREAS, the Shareholders desire to sell to Buyer, and Buyer desires
to purchase from the Shareholders all of the Quotas.
WHEREAS, the Board of Directors of Buyer has approved the acquisition
of the Quotas by Buyer on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows :
ARTICLE I
---------
Sale and Purchase of Common Stock
---------------------------------
SECTION 1.01. Sale and Purchase. Subject to the terms and conditions
-----------------
herein set forth, the Shareholders shall sell, assign and transfer to Buyer and
Buyer shall purchase from the Shareholders the Quotas.
1
SECTION 1.02. Closing. The closing of the purchase and sale of the
-------
Quotas (the "Closing") will take place on February 22, 2000, at the offices of
Xxxx Xxxxxxxxxx Notary Public in Milan, Via Xxxxxxxx Xxxxx No. 1.
(a) Shareholder Deliveries. The Shareholders shall deliver to Buyer at the
----------------------
Closing:
(i) Consents executed by all necessary parties whose consent to the
transactions contemplated hereby is required under the terms of the
Company's contracts, licenses or rights as listed in Schedule 1.02 (a)
hereto.
(ii) Noncompetition agreements in substantially the form of Exhibit
A hereto executed by each of the Shareholders.
(iii) Employment Agreements in substantially the form of Exhibit B
hereto executed by each of the Shareholders and any other person listed in
Exhibit E hereto.
(iv) Lockup Agreements in substantially the form of Exhibit C hereto
executed by each of the Shareholders.
(v) Confidential Information and Invention Assignment Agreements in
substantially the form of Exhibit D hereto executed by each of the
Shareholders and each of the Company's other employees.
(b) Buyer Deliveries. Buyer shall deliver to the Shareholders at the
----------------
Closing:
(i) Wire transfers payable to the Shareholders in the respective
amounts indicated on Schedule 1.02(b) attached hereto and in the aggregate
amount of $ 2.145 million
2
(ii) Stock certificates registered in the names of the Shareholders
in the respective amounts indicated on Schedule 1.02(b) attached hereto and
evidencing a total of No. 91.668 Common Stock of Buyer.
(iii) Noncompetition agreements in substantially the form of Exhibit
A hereto with each of the Shareholders executed by Buyer.
(iv) Employment Agreements in substantially the form of Exhibit B
hereto with each of the persons listed in Exhibit E hereto executed by
Buyer.
(v) Stock Option Agreements in substantially the form of Exhibit F
hereto with each of the persons listed in Exhibit E hereto executed by
Buyer
(c) Short-form. At the Closing, the Buyer and the Shareholders
----------
(hereinafter jointly the "Parties") shall execute before the Italian Notary
Public the agreement for the sale and purchase of the Quotas, the contents
thereof being similar to those referred in Exhibit G (hereinafter the "Short-
form"). The Parties acknowledge that the Short-form shall be executed in
compliance with the provisions of article 2479 of the Italian Civil Code. It is
also agreed by the Parties that this Agreement shall, in any case and for all
legal purposes, prevail over the Short-form.
SECTION 1.03. The Purchase Price. For purposes hereof the Purchase
------------------
Price shall consist of the sum of $ 2.145 million, plus 91,668 shares of Buyer
Common Stock (the "Buyer Common Stock") and shall be divided among and paid to
each of the Shareholders as follows:
(i) Xxxxxx Xxxxxxx $1,560,000 plus No 66,667 of shares of Buyer
Common Stock;
3
(ii) Xxxxxx Xxxxxxxxx $195,000 plus No 8,333 of shares of Buyer
Common Stock;
(iii) Xxxxxx Xxxxxxxxx $195,000 plus No 8,334 of shares of Buyer
Common Stock;
(iv) Lucia Xxxxxxx Xxxxxxx $195,000 plus No 8,334 of shares of
Buyer Common Stock.
The Purchase Price shall be subject to adjustment as provided in Section 1.04
hereof.
SECTION 1.04. Adjustments to Purchase Price. After the Closing,
-----------------------------
Buyer's accountants will prepare an audited balance sheet of the Company as of
the Closing (the "Closing Balance Sheet"). If the Closing Balance Sheet reflects
(i) the absence of any debt other than ordinary course trade payables, (ii)
Positive Net Assets and, (iii) in any case, the absence of any decline in Net
Assets from the net assets reflected in the balance sheet of the Company as of
December 31, 1999 audited by KPMG there shall be no adjustment to the Purchase
Price. The Purchase Price shall be adjusted downward on a dollar-for-dollar
basis by (i) the amount of debt other than ordinary course trade payables
reflected on the Closing Balance Sheet, and (ii) the amount of any Negative Net
Assets. For purposes hereof, Net Assets shall mean the sum of cash, accounts
receivable and inventory less total liabilities; and the amount of any positive
(or negative) Net Assets shall be the amount by which the Net Assets are greater
than (or less than) zero.
SECTION 1.05. Repayment. In the event of a Purchase Price adjustment
---------
pursuant to Section 1.04, each Shareholder shall promptly pay his pro rata
portion of such Purchase Price adjustment to Buyer in cash and/or Buyer Common
Stock. In the event that any Shareholder fails to make any such repayment,
Buyer, at its election may (i) cancel the
4
corresponding number of shares of Buyer Common Stock held by such Shareholder,
(ii) set off the amount of any such repayment obligation against any amounts
owed to such Shareholder by Buyer or the Company pursuant to the Noncompetition
Agreement with such Shareholder or (iii) take such other action as Buyer deems
appropriate.
SECTION 1.06. Further Cooperation. From time to time after the
-------------------
Closing, the Shareholders at Buyer's request and without further consideration,
agrees to take or cause to be taken such further or other action as may
reasonably be necessary or appropriate in order to effectuate the quotas
purchase and sale contemplated by this Agreement.
ARTICLE II
----------
Representations and Warranties
------------------------------
SECTION 2.01. Representations and Warranties of the Shareholders. The
--------------------------------------------------
Shareholders hereby jointly and severally represent and warrant to Buyer as
follows:
(a) Organization. The Company is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of Italy.
(b) Authority To Do Business. The Company has all requisite power and
------------------------
authority to own or lease and operate its properties and to carry on its
business as now conducted.
(c) Binding Obligation. This Agreement has been duly executed and
------------------
delivered by the Shareholders and constitutes a valid and binding obligation of
the Shareholders enforceable in accordance with its terms. The execution,
delivery and performance by the Shareholders of this Agreement does not and will
not conflict with, or result in any violation of or default under, any provision
of the Articles of Incorporation or By-laws of the Company or any ordinance,
rule, regulation, judgment, order, decree, agreement, instrument or license
applicable to the Company or to any of its respective properties or assets. No
consent, approval,
5
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by or with respect to the
Shareholders or the Company in connection with the Shareholders' execution,
delivery of this Agreement or the performance by the Shareholders or the Company
of the obligations contemplated hereby.
(d) Title to Quotas. The Shareholders have good and marketable title
---------------
to all of the Quotas, free and clear of all claims, liens, security interests,
pledges, charges or encumbrances of any nature whatsoever, and the transfer of
the Quotas to Buyer pursuant to this Agreement will pass good and marketable
title to the Quotas , free and clear of all claims, liens, security interests,
pledges, charges or encumbrances of any nature whatsoever.
(e) Capitalization. The Company's authorized capital stock is equal
--------------
to ITL 500,000,000 and it is fully subscribed and paid in. No other equity
securities of the Company other than the Quotas are authorized, issued or
outstanding, and there are no outstanding options, warrants, agreements,
contracts, calls, commitments, or demands of any character, preemptive or
otherwise, other than the Agreement, relating to any of the Common Stock.
(f) Real Property. Schedule 2.01(f) includes a complete list of all
-------------
real property used by the Company, all of which real property is leased by the
Company ("Leased Real Property"). Except as set forth on Schedule 2.01(f), the
Company has valid lease hold interests in all the Leased Real Property.
(g) Title to Assets. The Company has good and marketable title to
---------------
all of its assets, in each case free and clear of all mortgages, liens, security
interests, pledges, charges or encumbrances of any nature whatsoever.
6
(h) Contracts. Except as described in Schedule 2.01(h) and except,
---------
in the case of contracts primarily involving the receipt or payment of money,
for contracts involving the receipt of or payment of less than $25,000, the
Company is not a party to or bound by any lease, agreement, contract or other
commitment which relates in any way to the business of the Company
(collectively, the "Contracts"). Each Contract is a valid and binding obligation
of the Company and is in full force and effect. The Company has performed all
material obligations required to be performed by it to date under the Contracts,
is not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and is not alleged to be in
breach or default in any material respect thereunder. All Contracts are in the
name of the Company.
Except as described in Schedule 2.01(h) and except, in the case of
contracts primarily involving the receipt or payment of money, for contracts
involving the receipt of or payment of less than $25,000, the Company is not a
party to or bound by any of the types of agreement enumerated below:
(i) agreement or contract not made in the ordinary course of
business;
(ii) agreement or contract with any Shareholders, director or
employee of the Company or any of its subsidiaries, except for those agreements
required by the Italian laws;
(iii) agreement or contract which is oral; or
(iv) agreement or contract the terms of which are known by the
Shareholders to be unfavorable to the Company.
(i) Litigation. There are no lawsuits, claims, proceedings or
----------
investigations pending or, to the best knowledge of the Company, threatened by
or against or affecting the Company or any of its properties, assets, operations
or business which could in any way adversely affect the
7
transactions contemplated by this Agreement or the value to the Buyer of the
business being acquired by it, and the Shareholders are not aware of any
reasonable basis for any such lawsuit, claim, proceeding or investigation.
(j) Licenses. The Company holds each license, permit or other
--------
governmental authorization (collectively hereinafter referred to as "Licenses")
which is required for the operation of its business and, all such Licenses are
in full force and effect and will remain in full force and effect
notwithstanding the closing of the transactions contemplated hereby.
(k) Employee and Related Matters. There are no employment-related claims,
----------------------------
actions, proceedings or investigations pending or, to the best knowledge of the
Shareholders, threatened against or relating to the Company before any court,
governmental, regulatory or administrative authority or body, or arbitrator or
arbitration panel. The Company is not subject to any outstanding order, writ,
judgment, injunction, decision, award, compliance order, consent decree,
conciliation agreement, settlement agreement, affirmative action plan,
determination letter or advisory of any court, governmental, regulatory or
administrative authority or body, or arbitrator or arbitration panel. The
Company is in compliance with all contracts, laws and regulatory requirements
relating to employment matters.
(l) Absence of Changes or Events. Since December 31, 1998, the business
----------------------------
of the Company has been conducted in the ordinary course and there has not been
any material adverse change in the financial condition, results of operations,
business, assets or prospects of the Company. Without limiting the generality of
the foregoing, since December 31, 1998 the Company has not, except as described
in Schedule 2.01(l)(i):
8
(i) acquired or agreed to acquire any assets which are material,
individually or in the aggregate, to the Company, except in the ordinary
course of business consistent with prior practice;
(ii) sold, leased or otherwise disposed of any of its assets, which
are material, individually or in the aggregate, to the Company, except in the
ordinary course of business consistent with prior practice;
(iii) adopted or amended in any material respect any agreement with
employees or benefit plans, other than in the ordinary course of business
consistent with prior practice and in compliance with the Italian laws;
(iv) increased the compensation of any employee other than in the
ordinary course of business consistent with prior procedure and in
compliance with the Italian laws;
(v) sustained any material loss or damage to its properties, whether
or not insured;
(vi) issued capital stock or declared or paid a dividend or made any
other payment from capital or surplus or other distribution of any nature, or
directly or indirectly, redeemed, purchased or otherwise acquired or
recapitalized or reclassified any of its capital stock or liquidated in whole
or in part;
(vii) merged or consolidated with another corporation;
(viii) created, incurred or assumed or committed to create, incur or
assume indebtedness or other liability, except for accounts payable or other
current liabilities which (1) are not for borrowed money, (2) were incurred
in the usual and ordinary course of business and (3) have not been and will
not be materially adverse to the general affairs,
9
business, prospects, properties, financial condition, results of operations
or net worth of the Company;
(ix) altered or amended its articles of incorporation or bylaws; or
(x) entered into, materially amended or terminated any material
contract, agreement, franchise, permit or license, except for those set forth
into Schedule 2.01 (l)(ii).
(m) Compliance with Laws. The Company is not in violation of any law, order,
--------------------
ordinance, rule or regulation of any governmental authority.
(n) No Broker's or Finder's Fees. No agent, broker, investment banker,
----------------------------
person or firm acting on behalf of the Shareholders, the Company or any related
entity is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated herein.
(o) Employee Benefit Plans. Except as set forth on Schedule 2.01(o),
----------------------
neither the Company nor any entity under common control with the Company
maintains, is required to contribute to, or is required to provide benefits
under, any plan, fund or program providing any pension, profit sharing, deferred
compensation, severance pay, bonuses, incentive compensation, stock options,
stock purchases, or any other form of retirement or deferred benefit, or any
health, accident, dependent care, or other welfare benefit (a "Plan"), save as
provided for by the Italian laws.
(p) Customers. Schedule 2.01(p) contains a true and correct list of the
---------
Company's largest 20 customers (as determined by dollar amount of orders) for
each of the last two years. The Company has no information which would cause it
to believe that any such customer will not
10
continue to do business with Buyer after the Closing upon substantially the same
terms and at such volumes as such customer did business with the Company prior
to the Reference Date.
(q) Condition of Equipment. The equipment of the Company is in good
----------------------
operating condition, normal wear and tear excepted.
(r) Trademarks and Other Intellectual Property. Except as set forth in
------------------------------------------
Schedule 2.01(r), there are no patents, trademarks, service marks, trade names,
or applications therefor or registrations thereof ("Intellectual Property"),
which have been used or owned within the last three years by the Company.
Schedule 2.01(r) contains a true and complete description of the rights of the
Company with respect to each of such items of Intellectual Property. Except as
set forth in Schedule 2.01(r), the Company has sole, full and clear title to all
of such items of Intellectual Property, without any liens, encumbrances or
restrictions whatsoever, and upon closing of the transactions contemplated
hereby, the Company will continue to possess sole, full and clear title to all
of such items of Intellectual Property, without any liens, encumbrances or
restrictions whatsoever. The Company is not and, during the last two years, has
not (i) infringed or violated any trademark, service xxxx, trade name, patent or
copyright or other Intellectual Property right; or (ii) unlawfully or improperly
used any trade secrets belonging to any third party. Without limiting the
generality of the foregoing, with respect to the Ghepardo product:
(1) The Company is the sole and rightful owner of all right, title
and interest in and to any and all technology which is necessary or
desirable in connection with such product (the "Technology") and, it has
the unrestricted right to market, license and exploit the Technology;
(2) At all times prior to Closing, the Company has taken and shall
take all necessary steps to secure all right and title to and protect the
Technology
11
(including, without limitation, obtaining executed non-disclosure
agreements with any third party having access to the Technology, and
executed confidentiality and proprietary right assignment agreements with
all employees and independent contractors performing work for the Company)
and to prevent the disclosure of, publication of or other activity that
would jeopardize any trade secret or confidential information related to
the Technology;
(3) There has been no disclosure of, publication of or other
activity that would jeopardize any trade secret or confidential information
related to the Technology;
(4) The Technology does not infringe or misappropriate any third-
party proprietary right;
(5) No claims have been made in respect of the Technology and no
demands of any third party have been made pertaining to the Technology, and
no proceedings have been instituted or are pending or threatened that
challenge the rights of the Company in respect thereof; and
(6) All software, firmware and systems containing software or
firmware related to the Technology (collectively, "Software Systems") shall
accurately and automatically handle and process all dates (including
without limitation all leap years), date values, and date-related data,
including, without limitation, interpreting, calculating, comparing and
sequencing and prior to, during, and after January 1, 2000.
(s) Environmental Matters. There have been no private or governmental
---------------------
claims, citations, complaints, notices of violation or letters made, issued to
or threatened against the Company by any governmental entity or private or other
party for the impairment or diminution
12
of, or damage, injury or other adverse effects to, the environment or public
health resulting, in whole or in part, from the ownership, use or operation of
any of the facilities used by the Company past or present (the "Property").
There are no hazardous materials or hazardous waste on, under, in or
about the Property, including but not limited to the soil and groundwater at and
below the Property, and surface water on and running through the Property.
The Company has duly complied with, and the Property is in compliance
with, the provisions of all Italian state and local environmental, health and
safety laws, codes and ordinances and all rules and regulations promulgated
thereunder.
The Company has been issued and maintains all required federal, state
and local permits, licenses, certificates and approvals with respect to the
Property relating to (i) air emissions, (ii) discharges to surface water or
groundwater, (iii) noise emissions, (iv) solid or liquid waste disposal, (v) the
use, generation, storage, transportation or disposal of hazardous materials or
hazardous wastes, or (vi) other environmental, health or safety matters.
The Company has received no notice of, and neither knows of nor
suspects, any fact(s) which might constitute violation(s) of any or Italian
state or local environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder, which relate to the use,
ownership or occupancy of the Property, and is not in violation of any
covenants, conditions, easements, rights of way or restrictions affecting the
Property or any rights appurtenant thereto.
Except as set forth in Schedule 2.01(s), the Company has no
information in its possession which pertains to the environmental history of the
Property which has not been furnished to Buyer.
13
(t) Tax Returns and Payments. All VAT and any and all other Italian or
------------------------
Foreign, state and local tax returns and reports of the Company required by law
to be filed (including without limitation returns and reports relating to
required social funds, employment taxes, withholding and VAT) have been duly and
timely filed, and all VAT, withholding taxes, employment taxes and any and all
other taxes, required social funds, fees or other governmental charges of any
nature shown on such returns and reports have been timely paid. All such filed
tax returns and reports were correct and complete in all material respects.
There is no asserted, or to the knowledge of the Shareholders proposed,
deficiency for additional tax or governmental charge, and there is no tax
proceeding pending before any agency or court to which the Company or the
Shareholders is a party. There are no unpaid taxes of the Company which are a
lien on its properties and assets, except liens for taxes not yet due and
payable. All taxes not yet due and payable which require accrual under
generally accepted accounting principles have been properly accrued on the books
of account of the Company and are reflected in the Company's financial
statements. The Company has incurred no tax obligations of any kind except in
the ordinary course of business. No consents extending the statute of
limitations have been filed by the Company with respect to the Company's tax
liability for any fiscal year. The Company is currently not a beneficiary of
any extension of time within which to file a tax return or report. All monies
required to be collected or withheld by the Company in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party have been collected or withheld, and either paid to the
respective governmental agencies or set aside in accounts for such purpose. The
Company has no tax liability for the taxes of any other taxpayer, including as a
transferee or successor, by contract or otherwise.
14
(u) Other Activities of the Shareholders. Neither the Shareholders nor any
------------------------------------
officer, director or other Key Employee of the Company owns, directly or
indirectly, any interest or has any investment or profit participation in a
corporation or other entity which is a competitor or potential competitor of or
which otherwise, directly or indirectly, does business with the Company or
Buyer, except as set forth in Schedule 2.01 (u), as well as possible
shareholdings not exceeding the 0,25% of the stock capital of public companies.
(v) Related Party Transactions. The Company does not have outstanding
--------------------------
loans or other advances to any of the Shareholders or any officer, director or
other employee of the Company or to any entity in which any of the Shareholders
or the Company has a direct or indirect interest, other than travel advances in
the usual and ordinary course of business.
(w) No Undisclosed Liabilities. The Company has no obligations or
--------------------------
liabilities except (i) liabilities and obligations which are described in
Schedule 2.01(w), and (ii) liabilities and obligations under any contracts set
forth in Schedule 2.01(h).
(x) The Shareholder List. Set forth as Schedule 2.01(x) is a true and
--------------------
accurate copy of the list of Shareholders of the Company.
(y) Disclosure. No representation or warranty made by the Shareholders in
----------
this Agreement and no statement contained in a certificate, schedule, list or
other instrument or document specified in or delivered pursuant to this
Agreement, whether heretofore furnished to the Buyer or hereafter required to be
furnished to the Buyer (all such documents being taken as a whole), contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make the statements contained herein or
therein not misleading.
15
(z) Corporate Securities Law. THE SALE OF THE BUYER COMMON STOCK WHICH
-----------------------
ARE TO BE INTENDED AS A MEANS OF PAYMENT OF A PART OF THE PURCHASE PRICE OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED.
(aa) Investment Representation. Each of the Shareholders acknowledges
-------------------------
that he is aware that the Buyer Common Stock has not been registered under the
Securities Act of 1933 (the "Securities Act"). In this connection, each
Shareholder represents and warrants to Buyer that he is acquiring the Buyer
Common Stock for investment and not with a view to or for sale in connection
with any distribution thereof or with any present intention of selling any such
Buyer Common Stock in connection with a distribution.
(bb) Restricted Securities. Each of the Shareholders understands that the
---------------------
Buyer Common Stock will be characterized as "Restricted Securities" under the
federal securities laws inasmuch as the Buyer Common Stock is being acquired
from the Buyer in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
(cc) Legends.
-------
(i) Unless and until otherwise permitted, each certificate representing
the Buyer Common Stock shall be stamped or otherwise imprinted with any legends
restricting transfer
16
required by the California Commissioner of Corporations, and the Buyer Common
Stock may not be transferred except in compliance with the regulations of the
Commissioner.
(ii) The certificates representing the Buyer Common Stock shall be stamped
or otherwise imprinted with a legend in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD PURSUANT TO REGULATION S UNDER
THE ACT. THESE SECURITIES MAY NOT BE TRANSFERRED OR SOLD IN THE UNITED STATES OR
TO U.S. PERSONS UNLESS IN ACCORDANCE WITH REGULATION S, OR PURSUANT TO
REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE ACT.
THESE SECURITIES ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS AS SET FORTH IN
THE LOCKUP AGREEMENT DATED AS OF FEBRUARY 22, 2000. COPIES OF THIS AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST OF THE HOLDER OF RECORD OF THE
CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE COMPANY.
Such legend shall be removed by Buyer from any certificate upon delivery
to it of an opinion by counsel satisfactory to Buyer, in form and substance
satisfactory to Buyer, that a registration statement under the Securities
Act is at the time in effect with respect to the shares evidenced by such
certificate or that the shares evidenced by such certificate can be freely
transferred without such registration statement being in effect and that
such transfer will not jeopardize the exemption or exemptions from
registration pursuant to which the Buyer Common Stock is issued.
17
(iii) The certificates representing the Buyer Common Stock shall be stamped
or otherwise imprinted with the legend referred to in the Lockup Agreement.
(dd) Affiliates. Shareholders represent and guarantee to Buyer that
----------
all representations and warranties given to Buyer under Section 2.01 are
also referred to and given with respect to all other entities under control
of or related to the Company.
SECTION 2.02 Representations and Warranties of Buyer. Buyer represents and
----------------------------------------------------
warrants to, and agrees with, the Shareholders as follows:
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the state of its
incorporation.
(b) Binding Obligation. Buyer has all requisite corporate power
------------------
and authority to enter into and perform its obligations under this Agreement.
All corporate acts and other proceedings required to be taken by Buyer to
authorize the execution, delivery and performance by Buyer of this Agreement and
the transactions contemplated hereby, have been duly and properly taken. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms. The execution, delivery and performance by Buyer of
this Agreement does not and will not conflict with, or result in any violation
of, any provision of the Articles of Incorporation or By-laws of Buyer, or any
provision of any law, ordinance, rule, regulation, judgment, order, decree,
agreement, instrument or license applicable to Buyer or to its property or
assets. 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, domestic or foreign, is
required by or with respect to Buyer in connection with its execution, delivery
or performance of this Agreement.
18
(c) Buyer Stock. The shares of Buyer Common Stock to be issued to the
-----------
Shareholders pursuant to this Agreement will be validly issued, fully paid and
nonassessable. At Closing, the Shareholders will acquire good and marketable
title to all of such Buyer Commons Stock, free and clear of any lien,
encumbrance, pledge, security interest or claim whatsoever.
(d) Right to the Shareholders. The Shareholders will have the right to
---------------------------
cause the Buyer to purchase the Buyer Common Stock at a per-share exercise price
of $ 30 per share, on and only on the 90/th/ day (on May 22, 2000 only) from
the Closing, provided that such a right be exercised by the Shareholders jointly
with the other shareholders of the Company Xx. Xxxxxxxx Sala, Xx. Xxxx Xxxxx
Xxxxxxxxxx, Xx. Xxxxxx Zucchini, Xx. Xxxx Xxxxxxxxx and Xx. Xxxxxx Xxxxxxxxx.
Such right will expire if written notice signed by all of the Shareholders
referred to in this Section 2.02 (d) is not received by Buyer on or before the
close of business on May 22, 2000. The $ 30 per share price shall be
appropriately adjusted to reflect any stock splits or similar transactions
occurring prior to May 22, 2000.
ARTICLE III
-----------
Additional Agreements
---------------------
SECTION 3.01. Legal Conditions. The Shareholders and Buyer will take
------------------------------
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on the Company or Buyer with respect to the transactions
contemplated hereby and will promptly cooperate with and furnish information to
the other party in connection with any such requirements imposed upon such other
party in connection with the transactions contemplated hereby. Each party will
take all reasonable actions to obtain (and to cooperate with the other party in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any governmental agency, commission, board, authority, court or other
entity, or other third party,
19
required to be obtained or made by the Company or by Buyer in connection with
the transactions contemplated hereby or the taking of any action contemplated
thereby or by this Agreement.
SECTION 3.02.Expenses. Whether or not the transactions contemplated
---------------------
hereby are consummated, all costs and expenses incurred by Buyer or the
Shareholders in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs. Without limiting the
generality of the foregoing, the Shareholders shall be solely responsible for
the fees and expenses of their counsel in connection with the transactions
contemplated hereby.
SECTION 3.03. Additional Agreements. Subject to the terms and
-----------------------------------
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all reasonable action and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, whether before or after the
Closing.
SECTION 3.04. Press Releases. None of the parties hereto shall issue
----------------------------
a press release or other publicity announcing the transactions contemplated
hereby without the prior written approval of the other party, unless such
disclosure is required by applicable law.
ARTICLE IV
----------
Indemnification
---------------
SECTION 4.01. Warranty Claims. Indemnification for Warranty Claims
-----------------------------
shall be governed by this Section 4.01.
(a) By the Shareholders. Except as hereinafter set forth, the
-------------------
Shareholders shall jointly and severally indemnify and hold harmless on an
after-tax basis Buyer, and its successors and assigns and its and their
respective officers, directors, shareholders, employees and agents, against, and
in respect of, any and all damages, claims, losses, liabilities and
20
expenses, which arise out of: (i) any breach or violation of this Agreement by
the Shareholders; or (ii) any breach of any of the representations, warranties
or covenants made in this Agreement by the Shareholders; or (iii) any inaccuracy
or misrepresentation in the Schedules hereto or in any certificate or document
delivered in accordance with the terms of this Agreement by the Shareholders
(collectively, "Warranty Claims"); provided however, that Buyer shall be
entitled to indemnification hereunder only when, and only with respect to
amounts by which, the aggregate of all such Warranty Claims exceeds $25,000.
(b) By Buyer. Except as hereinafter set forth, Buyer shall indemnify and
--------
hold harmless on an after-tax basis the Shareholders and their heirs,
beneficiaries and estates against, and in respect of, any and all damages,
claims, losses, liabilities and expenses, including, without limitation,
reasonable legal, accounting and other expenses, which arise out of: (i) any
breach or violation of this Agreement by Buyer; or (ii) any breach of any of the
representations, warranties or covenants made in this Agreement by Buyer; or
(iii) any inaccuracy or misrepresentation in the Schedules hereto or in any
certificate or document delivered in accordance with the terms of this Agreement
by Buyer (collectively, "Warranty Claims"); provided however, that the
Shareholders shall be entitled to indemnification hereunder only when, and only
with respect to amounts by which, the aggregate of all such Warranty Claims
exceeds $25,000.
SECTION 4.02 Third Party Claims. Without regard to the limitations
-------------------------------
set forth in Section 4.01 hereof, the Shareholders shall jointly and severally
indemnify and hold Buyer and its successors and assigns and its and their
respective officers, directors, shareholders, employees and agents harmless on
an after-tax basis against any and all damages, claims, losses, liabilities and
expenses, including, without limitation, reasonable legal, accounting and other
21
expenses, arising out of any legal, governmental or administrative actions, suit
or proceeding against Buyer, including those included in Schedule 2.01(i)
hereto, which legal governmental or administrative action, suit or proceeding
arises from the conduct of the business of the Company or the ownership or
condition of the properties owned or leased by the Company prior to Closing.
SECTION 4.03. Notice of Claim. Upon obtaining knowledge thereof, the
-----------------------------
indemnified party shall within 60 days from said acknowledgement, notify the
indemnifying party in writing of any damage, claim, loss, liability or expense
which the indemnified party has determined has given or could give rise to a
claim under Sections 4.01 or 4.02 (such written notice being hereinafter
referred to as a "Notice of Claim"). A Notice of Claim shall contain a brief
description of the nature and estimated amount of any such claim giving rise to
a right of indemnification.
SECTION 4.04. Defense of Third Party Claims. With respect to any
-------------------------------------------
claim or demand set forth in a Notice of Claim relating to a third party claim,
the indemnifying party may defend, in good faith and at its expense, any such
claim or demand, and the indemnified party, at its expense, shall have the right
to participate in the defense of any such third party claim. So long as the
indemnifying party is defending in good faith any such third party claim, the
indemnified party shall not settle or compromise such third party claim. If the
indemnifying party does not so elect to defend any such third party claim, the
indemnified party shall have no obligation to do so.
ARTICLE 5
---------
General Provisions
------------------
SECTION 5.01. Survival of Representations and Warranties. All
--------------------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall
22
survive the Closing for a period of two years, and, thereafter, to the extent a
claim is made prior to such expiration with respect to any breach of such
representation, warranty or agreement, until such claim is finally determined or
settled; provided, however, that all claims with respect to the tax matters or
resulting from any action or threatened action by any federal, state or local
taxing authority and all claims with respect to litigation by former
Shareholders of the Company regardless of whether or not disclosed shall expire
when the applicable period under the statute of limitations therefor (including
any waivers thereof) shall have expired and cannot thereafter be asserted.
SECTION 5.02. Notices. All notices and other communications hereunder
---------------------
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Buyer to
SUNRISE TELECOM, INC.
00 Xxxxx Xxxx Xxxxxxxxx
X.X. Xxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
with a copy to: Xxxx X. Xxxxxx, Esq.
XXXXXX, XXXXXXXXXX & XXXXXXXXX LLP
The Old Federal Reserve Bank Building
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(b) if to the Shareholders, to
23
Xx Xxxxxx Messori
Xxx Xxx Xxxxxxx x. 00
00000 Xxxxxxxxxxx Xxxxxxx (XX)
All notices given hereunder shall be deemed given at the time of
personal delivery or, if mailed, on the earlier of actual receipt as shown on
the registry receipt or three business days after the date of such mailing.
SECTION 5.03. Interpretation. When a reference is made in this
----------------------------
Agreement to Sections, Schedules or Exhibits, such reference shall be to a
Section, Schedule or Exhibit to this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. For purposes of contract interpretation, the parties agree that
they are joint authors of this document.
SECTION 5.04. 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 party, it being understood that
all parties need not sign the same counterpart.
SECTION 5.05. Miscellaneous. This Agreement, the documents and
---------------------------
instruments and other agreements between the parties hereto required by this
Agreement (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, (b) is not intended to confer upon any other person any rights or
remedies hereunder and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
24
SECTION 5.06. Governing Law. This Agreement shall be governed in all
---------------------------
respects, including validity, interpretation and effect, by the substantive laws
of the State of California.
SECTION 5.07. No Waiver. No term or provision of this Agreement shall
-----------------------
be waived or any breach of this Agreement excused except in writing signed by
the party that is claimed to have so waived or excused. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision.
Any consent or waiver by any party to any breach of this Agreement by the other
party, whether expressed or implied, shall not constitute a consent to, waiver
of, or excuse for, any other breach. The failure of any party to give notice to
the other party, or to take any other step in respect of, any breach of any
provision of this Agreement shall not constitute a waiver thereof. Acceptance
of payment by a party after the breach of any provision of this Agreement by the
other party shall not constitute a waiver thereof.
SECTION 5.08. Prevailing version. This agreement has been duly signed
--------------------------------
by the parties also into the Italian version, provided that the Buyer and the
Shareholders agree that in any case of disputes referred to the interpretation,
fulfillment and/or termination of the Agreement, the English version shall
apply.
IN WITNESS WHEREOF, Buyer and the Shareholders have executed this
Agreement, all as of the date first written above.
SUNRISE TELECOM, INC.
By_________________________________
SHAREHOLDERS:
___________________________________
25
XXXXXX XXXXXXX
___________________________________
XXXXXX XXXXXXXXX
___________________________________
XXXXXX XXXXXXXXX
___________________________________
LUCIA XXXXXXX XXXXXXX
26
--------------------------------------------------------------------------------
MASTER AGREEMENT
Effective as of February 22, 2000
among
XXXXXX XXXXXXX, XXXXXX XXXXXXXXX, XXXXXX XXXXXXXXX,
LUCIA XXXXXXX XXXXXXX
and
SUNRISE TELECOM, INC.
--------------------------------------------------------------------------------
ARTICLE I Sale and Purchase of Common Stock
SECTION 1.01. Sale and Purchase.......................................... 1
SECTION 1.02. Closing.................................................... 1
(a) Shareholder Deliveries........................................ 1
(b) Buyer Deliveries.............................................. 2
(c) Short-form.................................................... 2
SECTION 1.03. The Purchase Price......................................... 2
SECTION 1.04. Adjustments to Purchase Price.............................. 2
SECTION 1.05. Repayment.................................................. 3
SECTION 1.06. Further Cooperation........................................ 3
ARTICLE II Representations and Warranties
SECTION 2.01. Representations and Warranties of the Shareholders......... 3
(a) Organization.................................................. 3
(b) Authority To Do Business...................................... 3
(c) Binding Obligation............................................ 3
(d) Title to Quotas............................................... 3
(e) Capitalization................................................ 3
(f) Real Property................................................. 4
(g) Title to Assets............................................... 4
(h) Contracts..................................................... 4
(i) Litigation.................................................... 4
(j) Licenses...................................................... 4
(k) Employee and Related Matters.................................. 4
(l) Absence of Changes or Events.................................. 5
(m) Compliance with Laws.......................................... 5
(n) No Broker's or Finder's Fees.................................. 5
(o) Employee Benefit Plans........................................ 5
(p) Customers..................................................... 6
(q) Condition of Equipment........................................ 6
(r) Trademarks and Other Intellectual Property.................... 6
(s) Environmental Matters......................................... 7
(t) Tax Returns and Payments...................................... 7
(u) Other Activities of the Shareholders.......................... 8
(v) Related Party Transactions.................................... 8
(w) No Undisclosed Liabilities.................................... 8
(x) The Shareholder List.......................................... 8
(y) Disclosure.................................................... 8
(z) Corporate Securities Law...................................... 8
(aa) Investment Representation..................................... 8
(bb) Restricted Securities......................................... 8
(cc) Legends....................................................... 9
(dd) Affiliates.................................................... 9
SECTION 2.02. Representations and Warranties of Buyer.................... 9
(a) Organization.................................................. 10
(b) Binding Obligation............................................ 10
(c) Buyer Stock................................................... 10
(d) Right to the Shareholders..................................... 10
ARTICLE III Additional Agreements
SECTION 3.01. Legal Conditions........................................... 10
SECTION 3.02. Expenses................................................... 10
SECTION 3.03. Additional Agreements...................................... 11
SECTION 3.04. Press Releases............................................. 11
ARTICLE IV Indemnification
SECTION 4.01. Warranty Claims............................................ 11
(a) By the Shareholders........................................... 11
(b) By Buyer...................................................... 11
SECTION 4.02. Third Party Claims......................................... 11
SECTION 4.03. Notice of Claim............................................ 12
SECTION 4.04. Defense of Third Party Claims.............................. 12
ARTICLE V General Provisions
SECTION 5.01. Survival of Representations and Warranties................. 12
SECTION 5.02. Notices.................................................... 12
SECTION 5.03. Interpretation............................................. 13
SECTION 5.04. Counterparts............................................... 13
SECTION 5.05. Miscellaneous.............................................. 13
SECTION 5.06. Governing Law.............................................. 13
SECTION 5.07. No Waiver.................................................. 13
SECTION 5.08. Prevailing version.......................................... 13
EXHIBIT A NONCOMPETITION AGREEMENT..........................................
EXHIBIT B EMPLOYMENT AGREEMENT..............................................
EXHIBIT C LOCKUP AGREEMENT..................................................
EXHIBIT D CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT.......
EXHIBIT E SCHEDULE OF STOCK OPTION GRANTS...................................
EXHIBIT F FORM OF STOCK OPTION AGREEMENT....................................
EXHIBIT G SHORT-FORM........................................................
THIS MASTER AGREEMENT (this "Agreement") is entered into as of
February 22, 2000 (the "Effective Date"), by and among SUNRISE TELECOM, INC., a
California corporation ("Buyer") represented by Xxxxx Xxxxxxx Esq., born Novara
on March 14, 1958, Fiscal Code XXX XXX 00X00 X000X, domiciled at Milan, Via
Vivaio n. 6, duly appointed, to such extent, through Special Powers of Attorney
granted to the latter by virtue of Unanimous Written Consent of the Board of
Directors of Buyer on February 15, 2000, and XXXXXXXX XXXX, GIAN XXXXX
XXXXXXXXXX, XXXXXX ZUCCHINI, XXXX XXXXXXXXX, and XXXXXX XXXXXXXXX (the
"Shareholders").
WHEREAS, the Shareholders own, as hereinafter set forth, the quotas
representing the 45% of the issued and outstanding stock capital (the "Quotas ")
of Pro. Tel. S.r.l., an Italian limited liability company (the "Company"):
(i) Xxxxxxxx Xxxx 5%;
(ii) Gian Xxxxx Xxxxxxxxxx 25,6%;
(iii) Pietro Zucchini 3,2%;
(iv) Xxxx Xxxxxxxxx 8%;
(v) Xxxxxx Xxxxxxxxx 3,2%;
WHEREAS, the Shareholders desire to sell to Buyer, and Buyer desires
to purchase from the Shareholders all of the Quotas .
WHEREAS, the Board of Directors of Buyer has approved the acquisition
of the Quotas by Buyer on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
Sale and Purchase of Common Stock
---------------------------------
SECTION 1.01. Sale and Purchase. Subject to the terms and conditions
-----------------
herein set forth, the Shareholders shall sell, assign and transfer to Buyer and
Buyer shall purchase from the Shareholders the Quotas.
1
SECTION 1.02. Closing. The closing of the purchase and sale of the
-------
Quotas (the "Closing") will take place on February 22, 2000, at the offices of
Xxxx Xxxxxxxxxx Notary Public in Milan, Via Xxxxxxxx Xxxxx No. 1.
(a) Shareholder Deliveries. The Shareholders shall deliver to Buyer
----------------------
at the Closing:
(i) Consents executed by all necessary parties whose consent to the
transactions contemplated hereby is required under the terms of the
Company's contracts, licenses or rights as listed in Schedule 1.02 (a)
hereto.
(ii) Lockup Agreements in substantially the form of Exhibit A hereto
executed by each of the Shareholders.
(iii) Confidential Information and Invention Assignment Agreements in
substantially the form of Exhibit B hereto executed by each of the
Shareholders and each of the Company's other employees.
(b) Buyer Deliveries. Buyer shall deliver to the Shareholders at the
----------------
Closing:
(i) Wire transfers payable to the Shareholders in the respective
amounts indicated on Schedule 1.02(b) attached hereto and in the aggregate
amount of $ 1.755 million
(ii) Stock certificates registered in the names of the Shareholders
in the respective amounts indicated on Schedule 1.02(b) attached hereto and
evidencing a total of No. 74,999 Common Stock of Buyer.
(c) Short-form. At the Closing, the Buyer and the Shareholders
----------
(hereinafter jointly the "Parties") shall execute before the Italian Notary
Public the agreement for the sale and purchase of the Quotas, the contents
thereof being similar to those referred in Exhibit C
2
(hereinafter the "Short-form"). The Parties acknowledge that the Short-form
shall be executed in compliance with the provisions of article 2479 of the
Italian Civil Code. It is also agreed by the Parties that this Agreement shall,
in any case and for all legal purposes, prevail over the Short-form.
SECTION 1.03. The Purchase Price. For purposes hereof the Purchase
------------------
Price shall consist of the sum of $ 1.755 million, plus 74,999 shares of Buyer
Common Stock (the "Buyer Common Stock") and shall be divided among and paid to
each of the Shareholders as follows:
(i) Xxxxxxxx Xxxx $ 195,000 plus No. 8,333 of shares of
Buyer Common Stock;
(ii) Gian Xxxxx Xxxxxxxxxx $ 998,400 plus No. 42,667 of shares of
Buyer Common Stock;
(iii) Pietro Zucchini $ 124,800 plus No. 5,333 of shares of
Buyer Common Stock;
(iv) Xxxx Xxxxxxxxx $ 312,000 plus No. 13,333 of shares of
Buyer Common Stock;
(v) Xxxxxx Xxxxxxxxx $ 124,800 plus No. 5,333 of shares of
Buyer Common Stock.
The Purchase Price shall be subject to adjustment as provided in Section 1.04
hereof.
SECTION 1.04. Adjustments to Purchase Price. After the Closing,
-----------------------------
Buyer's accountants will prepare an audited balance sheet of the Company as of
the Closing (the "Closing Balance Sheet"). If the Closing Balance Sheet reflects
(i) the absence of any debt other than ordinary course trade payables, (ii)
Positive Net Assets and, (iii) in any case, the absence of
3
any decline in Net Assets from the net assets reflected in the balance sheet of
the Company as of December 31, 1999 audited by KPMG there shall be no adjustment
to the Purchase Price. The Purchase Price shall be adjusted downward on a
dollar-for-dollar basis by (i) the amount of debt other than ordinary course
trade payables reflected on the Closing Balance Sheet, and (ii) the amount of
any Negative Net Assets. For purposes hereof, Net Assets shall mean the sum of
cash, accounts receivable and inventory less total liabilities; and the amount
of any positive (or negative) Net Assets shall be the amount by which the Net
Assets are greater than (or less than) zero.
SECTION 1.05. Repayment. In the event of a Purchase Price adjustment
---------
pursuant to Section 1.04, each Shareholder shall promptly pay his pro rata
portion of such Purchase Price adjustment to Buyer in cash and/or Buyer Common
Stock. In the event that any Shareholder fails to make any such repayment,
Buyer, at its election may (i) cancel the corresponding number of shares of
Buyer Common Stock held by such Shareholder, (ii) or take such other action as
Buyer deems appropriate.
SECTION 1.06. Further Cooperation. From time to time after the
-------------------
Closing, the Shareholders at Buyer's request and without further consideration,
agrees to take or cause to be taken such further or other action as may
reasonably be necessary or appropriate in order to effectuate the quotas
purchase and sale contemplated by this Agreement.
ARTICLE II
Representations and Warranties
------------------------------
SECTION 2.01. Representations and Warranties of the Shareholders. The
--------------------------------------------------
Shareholders hereby jointly and severally represent and warrant to Buyer as
follows:
(a) Organization. The Company is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of Italy.
4
(b) Authority To Do Business. The Company has all requisite power
------------------------
and authority to own or lease and operate its properties and to carry on its
business as now conducted.
(c) Binding Obligation. This Agreement has been duly executed and
------------------
delivered by the Shareholders and constitutes a valid and binding obligation of
the Shareholders enforceable in accordance with its terms. The execution,
delivery and performance by the Shareholders of this Agreement does not and will
not conflict with, or result in any violation of or default under, any provision
of the Articles of Incorporation or By-laws of the Company or any ordinance,
rule, regulation, judgment, order, decree, agreement, instrument or license
applicable to the Company or to any of its respective properties or assets. 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, domestic or foreign, is required by
or with respect to the Shareholders or the Company in connection with the
Shareholders' execution, delivery of this Agreement or the performance by the
Shareholders or the Company of the obligations contemplated hereby.
(d) Title to Quotas. The Shareholders have good and marketable title
---------------
to all of the Quotas, free and clear of all claims, liens, security interests,
pledges, charges or encumbrances of any nature whatsoever, and the transfer of
the Quotas to Buyer pursuant to this Agreement will pass good and marketable
title to the Quotas , free and clear of all claims, liens, security interests,
pledges, charges or encumbrances of any nature whatsoever.
(e) Capitalization. The Company's authorized capital stock is equal
--------------
to ITL 500,000,000 and it is fully subscribed and paid in. No other equity
securities of the Company other than the Quotas are authorized, issued or
outstanding, and there are no outstanding options,
5
warrants, agreements, contracts, calls, commitments, or demands of any
character, preemptive or otherwise, other than the Agreement, relating to any of
the Common Stock.
(f) Real Property. Schedule 2.01(f) includes a complete list of all
-------------
real property used by the Company, all of which real property is leased by the
Company ("Leased Real Property"). Except as set forth on Schedule 2.01(f), the
Company has valid lease hold interests in all the Leased Real Property.
(g) Title to Assets. The Company has good and marketable title to
---------------
all of its assets, in each case free and clear of all mortgages, liens, security
interests, pledges, charges or encumbrances of any nature whatsoever.
(h) Contracts. Except as described in Schedule 2.01(h) and except,
---------
in the case of contracts primarily involving the receipt or payment of money,
for contracts involving the receipt of or payment of less than $25,000, the
Company is not a party to or bound by any lease, agreement, contract or other
commitment which relates in any way to the business of the Company
(collectively, the "Contracts"). Each Contract is a valid and binding obligation
of the Company and is in full force and effect. The Company has performed all
material obligations required to be performed by it to date under the Contracts,
is not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and is not alleged to be in
breach or default in any material respect thereunder. All Contracts are in the
name of the Company.
Except as described in Schedule 2.01(h) and except, in the case of
contracts primarily involving the receipt or payment of money, for contracts
involving the receipt of or payment of less than $25,000, the Company is not a
party to or bound by any of the types of agreement enumerated below:
6
(i) agreement or contract not made in the ordinary course of
business;
(ii) agreement or contract with any Shareholders, director or
employee of the Company or any of its subsidiaries, except for those agreements
required by the Italian laws;
(iii) agreement or contract which is oral; or
(iv) agreement or contract the terms of which are known by the
Shareholders to be unfavorable to the Company.
(i) Litigation. There are no lawsuits, claims, proceedings or
----------
investigations pending or, to the best knowledge of the Company, threatened by
or against or affecting the Company or any of its properties, assets, operations
or business which could in any way adversely affect the transactions
contemplated by this Agreement or the value to the Buyer of the business being
acquired by it, and the Shareholders are not aware of any reasonable basis for
any such lawsuit, claim, proceeding or investigation.
(j) Licenses. The Company holds each license, permit or other
--------
governmental authorization (collectively hereinafter referred to as "Licenses")
which is required for the operation of its business and, all such Licenses are
in full force and effect and will remain in full force and effect
notwithstanding the closing of the transactions contemplated hereby.
(k) Employee and Related Matters. There are no employment-related claims,
----------------------------
actions, proceedings or investigations pending or, to the best knowledge of the
Shareholders , threatened against or relating to the Company before any court,
governmental, regulatory or administrative authority or body, or arbitrator or
arbitration panel. The Company is not subject to any outstanding order, writ,
judgment, injunction, decision, award, compliance order, consent decree,
conciliation agreement, settlement agreement, affirmative action plan,
determination letter or advisory of any court, governmental, regulatory or
administrative authority or body, or arbitrator
7
or arbitration panel. The Company is in compliance with all contracts, laws and
regulatory requirements relating to employment matters.
(l) Absence of Changes or Events. Since December 31, 1998, the business
----------------------------
of the Company has been conducted in the ordinary course and there has not been
any material adverse change in the financial condition, results of operations,
business, assets or prospects of the Company. Without limiting the generality of
the foregoing, since December 31, 1998 the Company has not, except as described
in Schedule 2.01(l)(i):
(i) acquired or agreed to acquire any assets which are material,
individually or in the aggregate, to the Company, except in the ordinary
course of business consistent with prior practice;
(ii) sold, leased or otherwise disposed of any of its assets, which
are material, individually or in the aggregate, to the Company, except in
the ordinary course of business consistent with prior practice;
(iii) adopted or amended in any material respect any agreement with
employees or benefit plans, other than in the ordinary course of business
consistent with prior practice and in compliance with the Italian laws;
(iv) increased the compensation of any employee other than in the
ordinary course of business consistent with prior procedure and in
compliance with the Italian laws;
(v) sustained any material loss or damage to its properties, whether
or not insured;
(vi) issued capital stock or declared or paid a dividend or made any
other payment from capital or surplus or other distribution of any nature,
or directly or
8
indirectly, redeemed, purchased or otherwise acquired or recapitalized or
reclassified any of its capital stock or liquidated in whole or in part;
(vii) merged or consolidated with another corporation;
(viii) created, incurred or assumed or committed to create, incur or
assume indebtedness or other liability, except for accounts payable or
other current liabilities which (1) are not for borrowed money, (2) were
incurred in the usual and ordinary course of business and (3) have not been
and will not be materially adverse to the general affairs, business,
prospects, properties, financial condition, results of operations or net
worth of the Company;
(ix) altered or amended its articles of incorporation or bylaws; or
(x) entered into, materially amended or terminated any material
contract, agreement, franchise, permit or license, except for those set
forth into Schedule 2.01 (l)(ii).
(m) Compliance with Laws. The Company is not in violation of any law,
--------------------
order, ordinance, rule or regulation of any governmental authority.
(n) No Broker's or Finder's Fees. No agent, broker, investment banker,
----------------------------
person or firm acting on behalf of the Shareholders, the Company or any related
entity is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated herein.
(o) Employee Benefit Plans. Except as set forth on Schedule 2.01(o),
----------------------
neither the Company nor any entity under common control with the Company
maintains, is required to contribute to, or is required to provide benefits
under, any plan, fund or program providing any pension, profit sharing, deferred
compensation, severance pay, bonuses, incentive compensation,
9
stock options, stock purchases, or any other form of retirement or deferred
benefit, or any health, accident, dependent care, or other welfare benefit (a
"Plan"), save as provided for by the Italian laws.
(p) Customers. Schedule 2.01(p) contains a true and correct list of the
---------
Company's largest 20 customers (as determined by dollar amount of orders) for
each of the last two years. The Company has no information which would cause it
to believe that any such customer will not continue to do business with Buyer
after the Closing upon substantially the same terms and at such volumes as such
customer did business with the Company prior to the Reference Date.
(q) Condition of Equipment. The equipment of the Company is in good
----------------------
operating condition, normal wear and tear excepted.
(r) Trademarks and Other Intellectual Property. Except as set forth in
------------------------------------------
Schedule 2.01(r), there are no patents, trademarks, service marks, trade names,
or applications therefor or registrations thereof ("Intellectual Property"),
which have been used or owned within the last three years by the Company.
Schedule 2.01(r) contains a true and complete description of the rights of the
Company with respect to each of such items of Intellectual Property. Except as
set forth in Schedule 2.01(r), the Company has sole, full and clear title to all
of such items of Intellectual Property, without any liens, encumbrances or
restrictions whatsoever, and upon closing of the transactions contemplated
hereby, the Company will continue to possess sole, full and clear title to all
of such items of Intellectual Property, without any liens, encumbrances or
restrictions whatsoever. The Company is not and, during the last two years, has
not (i) infringed or violated any trademark, service xxxx, trade name, patent or
copyright or other Intellectual Property right; or (ii) unlawfully or improperly
used any trade secrets belonging to any third party. Without limiting the
generality of the foregoing, with respect to the Ghepardo product:
10
(1) The Company is the sole and rightful owner of all right, title
and interest in and to any and all technology which is necessary or
desirable in connection with such product (the "Technology") and, it has
the unrestricted right to market, license and exploit the Technology;
(2) At all times prior to Closing, the Company has taken and shall
take all necessary steps to secure all right and title to and protect the
Technology (including, without limitation, obtaining executed non-
disclosure agreements with any third party having access to the Technology,
and executed confidentiality and proprietary right assignment agreements
with all employees and independent contractors performing work for the
Company) and to prevent the disclosure of, publication of or other activity
that would jeopardize any trade secret or confidential information related
to the Technology;
(3) There has been no disclosure of, publication of or other activity
that would jeopardize any trade secret or confidential information related
to the Technology;
(4) The Technology does not infringe or misappropriate any third-
party proprietary right;
(5) No claims have been made in respect of the Technology and no
demands of any third party have been made pertaining to the Technology, and
no proceedings have been instituted or are pending or threatened that
challenge the rights of the Company in respect thereof; and
(6) All software, firmware and systems containing software or
firmware related to the Technology (collectively, "Software Systems") shall
accurately
11
and automatically handle and process all dates (including without
limitation all leap years), date values, and date-related data, including,
without limitation, interpreting, calculating, comparing and sequencing and
prior to, during, and after January 1, 2000.
(s) Environmental Matters. There have been no private or governmental
---------------------
claims, citations, complaints, notices of violation or letters made, issued to
or threatened against the Company by any governmental entity or private or other
party for the impairment or diminution of, or damage, injury or other adverse
effects to, the environment or public health resulting, in whole or in part,
from the ownership, use or operation of any of the facilities used by the
Company past or present (the "Property").
There are no hazardous materials or hazardous waste on, under, in or
about the Property, including but not limited to the soil and groundwater at and
below the Property, and surface water on and running through the Property.
The Company has duly complied with, and the Property is in compliance
with, the provisions of all Italian state and local environmental, health and
safety laws, codes and ordinances and all rules and regulations promulgated
thereunder.
The Company has been issued and maintains all required federal, state
and local permits, licenses, certificates and approvals with respect to the
Property relating to (i) air emissions, (ii) discharges to surface water or
groundwater, (iii) noise emissions, (iv) solid or liquid waste disposal, (v) the
use, generation, storage, transportation or disposal of hazardous materials or
hazardous wastes, or (vi) other environmental, health or safety matters.
The Company has received no notice of, and neither knows of nor
suspects, any fact(s) which might constitute violation(s) of any or Italian
state or local environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder, which
12
relate to the use, ownership or occupancy of the Property, and is not in
violation of any covenants, conditions, easements, rights of way or restrictions
affecting the Property or any rights appurtenant thereto.
Except as set forth in Schedule 2.01(s), the Company has no
information in its possession which pertains to the environmental history of the
Property which has not been furnished to Buyer.
(t) Tax Returns and Payments. All VAT and any and all other Italian or
------------------------
Foreign, state and local tax returns and reports of the Company required by law
to be filed (including without limitation returns and reports relating to
required social funds, employment taxes, withholding and VAT) have been duly and
timely filed, and all VAT, withholding taxes, employment taxes and any and all
other taxes, required social funds, fees or other governmental charges of any
nature shown on such returns and reports have been timely paid. All such filed
tax returns and reports were correct and complete in all material respects.
There is no asserted, or to the knowledge of the Shareholders proposed,
deficiency for additional tax or governmental charge, and there is no tax
proceeding pending before any agency or court to which the Company or the
Shareholders is a party. There are no unpaid taxes of the Company which are a
lien on its properties and assets, except liens for taxes not yet due and
payable. All taxes not yet due and payable which require accrual under
generally accepted accounting principles have been properly accrued on the books
of account of the Company and are reflected in the Company's financial
statements. The Company has incurred no tax obligations of any kind except in
the ordinary course of business. No consents extending the statute of
limitations have been filed by the Company with respect to the Company's tax
liability for any fiscal year. The Company is currently not a beneficiary of
any extension of time within which to file a tax return or report.
13
All monies required to be collected or withheld by the Company in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party have been collected or withheld, and either
paid to the respective governmental agencies or set aside in accounts for such
purpose. The Company has no tax liability for the taxes of any other taxpayer,
including as a transferee or successor, by contract or otherwise.
(u) Other Activities of the Shareholders. Neither the Shareholders nor any
------------------------------------
officer, director or other Key Employee of the Company owns, directly or
indirectly, any interest or has any investment or profit participation in a
corporation or other entity which is a competitor or potential competitor of or
which otherwise, directly or indirectly, does business with the Company or
Buyer, except as set forth in Schedule 2.01 (u), as well as possible
shareholdings not exceeding the 0,25% of the stock capital of public companies.
(v) Related Party Transactions. The Company does not have outstanding
--------------------------
loans or other advances to any of the Shareholders or any officer, director or
other employee of the Company or to any entity in which any of the Shareholders
or the Company has a direct or indirect interest, other than travel advances in
the usual and ordinary course of business.
(w) No Undisclosed Liabilities. The Company has no obligations or
--------------------------
liabilities except (i) liabilities and obligations which are described in
Schedule 2.01(w), and (ii) liabilities and obligations under any contracts set
forth in Schedule 2.01(h).
(x) The Shareholder List. Set forth as Schedule 2.01(x) is a true and
--------------------
accurate copy of the list of Shareholders of the Company.
(y) Disclosure. No representation or warranty made by the Shareholders in
----------
this Agreement and no statement contained in a certificate, schedule, list or
other instrument or document specified in or delivered pursuant to this
Agreement, whether heretofore furnished to
14
the Buyer or hereafter required to be furnished to the Buyer (all such documents
being taken as a whole), contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
the statements contained herein or therein not misleading.
(z) Corporate Securities Law. THE SALE OF THE BUYER COMMON STOCK WHICH ARE
------------------------
TO BE INTENDED AS A MEANS OF PAYMENT OF A PART OF THE PURCHASE PRICE OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED.
(aa) Investment Representation. Each of the Shareholders acknowledges
-------------------------
that he is aware that the Buyer Common Stock has not been registered under the
Securities Act of 1933 (the "Securities Act"). In this connection, each
Shareholder represents and warrants to Buyer that he is acquiring the Buyer
Common Stock for investment and not with a view to or for sale in connection
with any distribution thereof or with any present intention of selling any such
Buyer Common Stock in connection with a distribution.
(bb) Restricted Securities. Each of the Shareholders understands that the
---------------------
Buyer Common Stock will be characterized as "Restricted Securities" under the
federal securities laws inasmuch as the Buyer Common Stock is being acquired
from the Buyer in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
15
(cc) Legends.
-------
(i) Unless and until otherwise permitted, each certificate representing
the Buyer Common Stock shall be stamped or otherwise imprinted with any legends
restricting transfer required by the California Commissioner of Corporations,
and the Buyer Common Stock may not be transferred except in compliance with the
regulations of the Commissioner.
(ii) The certificates representing the Buyer Common Stock shall be stamped
or otherwise imprinted with a legend in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION AND ARE BEING OFFERED AND SOLD PURSUANT TO REGULATION S UNDER
THE ACT. THESE SECURITIES MAY NOT BE TRANSFERRED OR SOLD IN THE UNITED STATES OR
TO U.S. PERSONS UNLESS IN ACCORDANCE WITH REGULATION S, OR PURSUANT TO
REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED
UNLESS IN COMPLIANCE WITH THE ACT.
THESE SECURITIES ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS AS SET FORTH IN
THE LOCKUP AGREEMENT DATED AS OF FEBRUARY 22, 2000. COPIES OF THIS AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST OF THE HOLDER OF RECORD OF THE
CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE COMPANY.
Such legend shall be removed by Buyer from any certificate upon delivery
to it of an opinion by counsel satisfactory to Buyer, in form and substance
satisfactory to Buyer, that a registration statement under the Securities
Act is at the time in effect with respect to the shares evidenced by such
certificate or that the shares evidenced by such certificate
16
can be freely transferred without such registration statement being in
effect and that such transfer will not jeopardize the exemption or
exemptions from registration pursuant to which the Buyer Common Stock is
issued.
(iii) The certificates representing the Buyer Common Stock shall be stamped
or otherwise imprinted with the legend referred to in the Lockup Agreement.
(dd) Affiliates. Shareholders represent and guarantee to Buyer
----------
that all representations and warranties given to Buyer under Section 2.01
are also referred to and given with respect to all other entities under
control of or related to the Company.
SECTION 2.02 Representations and Warranties of Buyer. Buyer represents and
-----------------------------------------------------
warrants to, and agrees with, the Shareholders as follows:
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the state of its
incorporation.
(b) Binding Obligation. Buyer has all requisite corporate power
------------------
and authority to enter into and perform its obligations under this Agreement.
All corporate acts and other proceedings required to be taken by Buyer to
authorize the execution, delivery and performance by Buyer of this Agreement and
the transactions contemplated hereby, have been duly and properly taken. This
Agreement has been duly executed and delivered by Buyer and constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms. The execution, delivery and performance by Buyer of
this Agreement does not and will not conflict with, or result in any violation
of, any provision of the Articles of Incorporation or By-laws of Buyer, or any
provision of any law, ordinance, rule, regulation, judgment, order, decree,
agreement, instrument or license applicable to Buyer or to its property or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court,
17
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by or with respect to Buyer in
connection with its execution, delivery or performance of this Agreement.
(c) Buyer Stock. The shares of Buyer Common Stock to be issued to the
-----------
Shareholders pursuant to this Agreement will be validly issued, fully paid and
nonassessable. At Closing, the Shareholders will acquire good and marketable
title to all of such Buyer Commons Stock, free and clear of any lien,
encumbrance, pledge, security interest or claim whatsoever.
(d) Right to the Shareholders. The Shareholders will have the right to
-------------------------
cause the Buyer to purchase the Buyer Common Stock at a per-share exercise price
of $ 30 per share, on and only on the 90th day (on May 22, 2000 only) from the
Closing, provided that such a right be exercised by the Shareholders jointly
with the other shareholders of the Company Xx.Xxxxxx Messori, Xx. Xxxxxx
Xxxxxxxxx, Xx. Xxxxxx Xxxxxxxxx and Xxx. Xxxxx Xxxxxxx Xxxxxxx. Such right will
expire if written notice signed by all of the Shareholders referred to in this
Section 2.02 (d) is not received by Buyer on or before the close of business on
May 22, 2000. The $ 30 per share price shall be appropriately adjusted to
reflect any stock splits or similar transactions occurring prior to May 22,
2000.
ARTICLE III
-----------
Additional Agreements
---------------------
SECTION 3.01. Legal Conditions. The Shareholders and Buyer will take
------------------------------
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on the Company or Buyer with respect to the transactions
contemplated hereby and will promptly cooperate with and furnish information to
the other party in connection with any such requirements imposed upon such other
party in connection with the transactions contemplated hereby. Each party will
take all reasonable actions to obtain (and to cooperate with the other
18
party in obtaining) any consent, authorization, order or approval of, or any
exemption by, any governmental agency, commission, board, authority, court or
other entity, or other third party, required to be obtained or made by the
Company or by Buyer in connection with the transactions contemplated hereby or
the taking of any action contemplated thereby or by this Agreement.
SECTION 3.02. Expenses. Whether or not the transactions contemplated
----------------------
hereby are consummated, all costs and expenses incurred by Buyer or the
Shareholders in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs. Without limiting the
generality of the foregoing, the Shareholders shall be solely responsible for
the fees and expenses of their counsel in connection with the transactions
contemplated hereby.
SECTION 3.03. Additional Agreements. Subject to the terms and
-----------------------------------
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all reasonable action and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, whether before or after the
Closing.
SECTION 3.04. Press Releases. None of the parties hereto shall issue
----------------------------
a press release or other publicity announcing the transactions contemplated
hereby without the prior written approval of the other party, unless such
disclosure is required by applicable law.
ARTICLE IV
----------
Indemnification
---------------
SECTION 4.01. Warranty Claims. Indemnification for Warranty Claims
-----------------------------
shall be governed by this Section 4.01.
(a) By the Shareholders. Except as hereinafter set forth, the
Shareholders shall jointly and severally indemnify and hold harmless on an
after-tax basis Buyer, and its
19
successors and assigns and its and their respective officers, directors,
shareholders, employees and agents, against, and in respect of, any and all
damages, claims, losses, liabilities and expenses, including, without
limitation, reasonable legal, accounting and other expenses, which arise out of:
(i) any breach or violation of this Agreement by the Shareholders; or (ii) any
breach of any of the representations, warranties or covenants made in this
Agreement by the Shareholders; or (iii) any inaccuracy or misrepresentation in
the Schedules hereto or in any certificate or document delivered in accordance
with the terms of this Agreement by the Shareholders (collectively, "Warranty
Claims"); provided however, that Buyer shall be entitled to indemnification
hereunder only when, and only with respect to amounts by which, the aggregate of
all such Warranty Claims exceeds $25,000.
(b) By Buyer. Except as hereinafter set forth, Buyer shall indemnify
--------
and hold harmless on an after-tax basis the Shareholders and their heirs,
beneficiaries and estates against, and in respect of, any and all damages,
claims, losses, liabilities and expenses, including, without limitation,
reasonable legal, accounting and other expenses, which arise out of: (i) any
breach or violation of this Agreement by Buyer; or (ii) any breach of any of the
representations, warranties or covenants made in this Agreement by Buyer; or
(iii) any inaccuracy or misrepresentation in the Schedules hereto or in any
certificate or document delivered in accordance with the terms of this Agreement
by Buyer (collectively, "Warranty Claims"); provided however, that the
Shareholders shall be entitled to indemnification hereunder only when, and only
with respect to amounts by which, the aggregate of all such Warranty Claims
exceeds $25,000.
SECTION 4.02 Third Party Claims. Without regard to the limitations
-------------------------------
set forth in Section 4.01 hereof, the Shareholders shall jointly and severally
indemnify and hold Buyer and its successors and assigns and its and their
respective officers, directors, shareholders,
20
employees and agents harmless on an after-tax basis against any and all damages,
claims, losses, liabilities and expenses, including, without limitation,
reasonable legal, accounting and other expenses, arising out of any legal,
governmental or administrative actions, suit or proceeding against Buyer,
including those included in Schedule 2.01(i) hereto, which legal governmental or
administrative action, suit or proceeding arises from the conduct of the
business of the Company or the ownership or condition of the properties owned or
leased by the Company prior to Closing.
SECTION 4.03. Notice of Claim. Upon obtaining knowledge thereof, the
-----------------------------
indemnified party shall within 60 days from said acknowledgement, notify the
indemnifying party in writing of any damage, claim, loss, liability or expense
which the indemnified party has determined has given or could give rise to a
claim under Sections 4.01 or 4.02 (such written notice being hereinafter
referred to as a "Notice of Claim"). A Notice of Claim shall contain a brief
description of the nature and estimated amount of any such claim giving rise to
a right of indemnification.
SECTION 4.04. Defense of Third Party Claims. With respect to any
-------------------------------------------
claim or demand set forth in a Notice of Claim relating to a third party claim,
the indemnifying party may defend, in good faith and at its expense, any such
claim or demand, and the indemnified party, at its expense, shall have the right
to participate in the defense of any such third party claim. So long as the
indemnifying party is defending in good faith any such third party claim, the
indemnified party shall not settle or compromise such third party claim. If the
indemnifying party does not so elect to defend any such third party claim, the
indemnified party shall have no obligation to do so.
21
ARTICLE 5
---------
General Provisions
------------------
SECTION 5.01. Survival of Representations and Warranties. All
--------------------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing for a period of two years,
and, thereafter, to the extent a claim is made prior to such expiration with
respect to any breach of such representation, warranty or agreement, until such
claim is finally determined or settled; provided, however, that all claims with
respect to the tax matters or resulting from any action or threatened action by
any federal, state or local taxing authority and all claims with respect to
litigation by former Shareholders of the Company regardless of whether or not
disclosed shall expire when the applicable period under the statute of
limitations therefor (including any waivers thereof) shall have expired and
cannot thereafter be asserted.
SECTION 5.02. Notices. All notices and other communications hereunder
---------------------
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Buyer to
SUNRISE TELECOM, INC.
00 Xxxxx Xxxx Xxxxxxxxx
X.X. Xxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
with a copy to: Xxxx X. Xxxxxx, Esq.
XXXXXX, XXXXXXXXXX & XXXXXXXXX LLP
22
The Old Federal Reserve Xxxx Xxxxxxxx
Xxxxxxx Xxxxxx
000 Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
(b) if to the Shareholders, to
Xx Xxxxxxxx Sala
Xxx X. Xxxxxxxx x. 00
00000 Xxxxxx
All notices given hereunder shall be deemed given at the time of
personal delivery or, if mailed, on the earlier of actual receipt as shown on
the registry receipt or three business days after the date of such mailing.
SECTION 5.03. Interpretation. When a reference is made in this
----------------------------
Agreement to Sections, Schedules or Exhibits, such reference shall be to a
Section, Schedule or Exhibit to this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. For purposes of contract interpretation, the parties agree that
they are joint authors of this document.
SECTION 5.04. 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 party, it being understood that
all parties need not sign the same counterpart.
SECTION 5.05. Miscellaneous. This Agreement, the documents and
---------------------------
instruments and other agreements between the parties hereto required by this
Agreement (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the
23
subject matter hereof, (b) is not intended to confer upon any other person any
rights or remedies hereunder and (c) shall not be assigned by operation of law
or otherwise except as otherwise specifically provided.
SECTION 5.06. Governing Law. This Agreement shall be governed in all
---------------------------
respects, including validity, interpretation and effect, by the substantive laws
of the State of California.
SECTION 5.07. No Waiver. No term or provision of this Agreement shall
-----------------------
be waived or any breach of this Agreement excused except in writing signed by
the party that is claimed to have so waived or excused. No waiver of any
provision of this Agreement shall constitute a waiver of any other provision.
Any consent or waiver by any party to any breach of this Agreement by the other
party, whether expressed or implied, shall not constitute a consent to, waiver
of, or excuse for, any other breach. The failure of any party to give notice to
the other party, or to take any other step in respect of, any breach of any
provision of this Agreement shall not constitute a waiver thereof. Acceptance
of payment by a party after the breach of any provision of this Agreement by the
other party shall not constitute a waiver thereof.
SECTION 5.08. Prevailing version. This agreement has been duly signed
--------------------------------
by the parties also into the Italian version, provided that the Buyer and the
Shareholders agree that in any case of disputes referred to the interpretation,
fulfillment and/or termination of the Agreement, the English version shall
apply.
IN WITNESS WHEREOF, Buyer and the Shareholders have executed this
Agreement, all as of the date first written above.
SUNRISE TELECOM, INC.
By ______________________________
24
SHAREHOLDERS:
_____________________________________
XXXXXXXX XXXX
_____________________________________
GIAN XXXXX XXXXXXXXXX
_____________________________________
PIERO ZUCCHINI
_____________________________________
XXXX XXXXXXXXX
_____________________________________
XXXXXX XXXXXXXXX
00
________________________________________________________________________________
MASTER AGREEMENT
Effective as of February 22, 2000
among
XXXXXXXX XXXX, GIAN XXXXX XXXXXXXXXX, XXXXXX ZUCCHINI,
XXXX XXXXXXXXX, XXXXXX XXXXXXXXX
and
SUNRISE TELECOM, INC.
________________________________________________________________________________
ARTICLE I Sale and Purchase of Common Stock
SECTION 1.01. Sale and Purchase....................................... 1
SECTION 1.02. Closing................................................. 1
(a) Shareholder Deliveries....................................... 1
(b) Buyer Deliveries............................................. 1
(c) Short-form................................................... 2
SECTION 1.03. The Purchase Price...................................... 2
SECTION 1.04. Adjustments to Purchase Price........................... 2
SECTION 1.05. Repayment............................................... 2
SECTION 1.06. Further Cooperation..................................... 3
ARTICLE II Representations and Warranties
SECTION 2.01. Representations and Warranties of the Shareholders...... 3
(a) Organization................................................. 3
(b) Authority To Do Business..................................... 3
(c) Binding Obligation........................................... 3
(d) Title to Quotas............................................. 3
(e) Capitalization............................................... 3
(f) Real Property................................................ 3
(g) Title to Assets.............................................. 3
(h) Contracts.................................................... 3
(i) Litigation................................................... 4
(j) Licenses..................................................... 4
(k) Employee and Related Matters................................. 4
(l) Absence of Changes or Events................................. 4
(m) Compliance with Laws......................................... 5
(n) No Broker's or Finder's Fees................................. 5
(o) Employee Benefit Plans....................................... 5
(p) Customers.................................................... 5
(q) Condition of Equipment....................................... 5
(r) Trademarks and Other Intellectual Property................... 6
(s) Environmental Matters........................................ 6
(t) Tax Returns and Payments..................................... 6
(u) Other Activities of the Shareholders......................... 6
(v) Related Party Transactions................................... 8
(w) No Undisclosed Liabilities................................... 8
(x) The Shareholder List......................................... 8
(y) Disclosure................................................... 8
(z) Corporate Securities Law..................................... 8
(aa) Investment Representation.................................... 8
(bb) Restricted Securities........................................ 8
(cc) Legends...................................................... 8
(dd) Affiliates................................................... 9
SECTION 2.02. Representations and Warranties of Buyer................. 9
(a) Organization................................................. 9
(b) Binding Obligation........................................... 9
(c) Buyer Stock.................................................. 10
(d) Right to the Shareholders.................................... 10
ARTICLE III Additional Agreements
SECTION 3.01. Legal Conditions........................................ 10
SECTION 3.02. Expenses................................................ 10
SECTION 3.03. Additional Agreements................................... 10
SECTION 3.04. Press Releases.......................................... 11
ARTICLE IV Indemnification
SECTION 4.01. Warranty Claims......................................... 11
(a) By the Shareholders.......................................... 11
(b) By Buyer..................................................... 11
SECTION 4.02. Third Party Claims...................................... 11
SECTION 4.03. Notice of Claim......................................... 11
SECTION 4.04. Defense of Third Party Claims........................... 12
ARTICLE V General Provisions
SECTION 5.01. Survival of Representations and Warranties.............. 12
SECTION 5.02. Notices................................................. 12
SECTION 5.03. Interpretation.......................................... 13
SECTION 5.04. Counterparts............................................ 13
SECTION 5.05. Miscellaneous........................................... 13
SECTION 5.06. Governing Law........................................... 13
SECTION 5.07. No Waiver............................................... 13
SECTION 5.08. Prevailing version...................................... 13
EXHIBIT A LOCKUP AGREEMENT...............................................
EXHIBIT B CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT....
EXHIBIT C SHORT-FORM.....................................................
