EXHIBIT 1
NO. 01CI-003322 JEFFERSON CIRCUIT COURT
DIVISION 1
XXXXXX XXXXXXXX PLAINTIFF
vs. SETTLEMENT AGREEMENT
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TW FUNDING, LLC, et al. DEFENDANTS
* * * * * * * * * *
Parties
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This Settlement Agreement (hereinafter "Agreement") is made and entered
into effective as of the 18th day of September, 2001 (hereinafter "Effective
Date"), by and among Xxxxxx Xxxxxxxx (hereinafter "Xxxxxxxx" or "Plaintiff"), TW
Funding, LLC (hereinafter "Company"), Xxxx X. Xxxxxxx, Xx., Xxxxxxx X. Xxxxxxx
(both individually and as Trustee of the Xxxx X. Xxxxxxx, III Trust of the 21st
Century, the Xxxx X. Xxxxxxx Trust of the 21st Century, and the Xxxxxxxxx X.
Xxxxxxx Trust of the 21st Century), Xxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxxxx,
Xxxxx X. Xxxx, Xxxxxx X. Xxxx, Xxxxxxx X. Xxxxxx, Xxxxxx Xxxxxx, Xxxx X. Xxxxxx,
Xxxxx X. Xxxxxx, Xxxx Xxxxxx, Xxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxx X.
Xxxxxxx, Xxxxx X. Xxxxx, Xxxxx Xxxxx Xxxxx, and Valley Vista Ventures, LLC
(collectively referred to hereinafter as the "Guarantor Defendants").
Recitals
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X. Xxxxxxxx filed Civil Action No. 01-CI-003322 in Jefferson Circuit
Court, Division One (hereinafter referred to as the "Litigation"), against the
Company and the Guarantor Defendants and alleged, among other things, that:
(1) A Promissory Note dated December 30, 1998 executed by the Company
in favor of Xxxxxxxx in the original principal amount of $4,000,000.00 (the
"Note") was in default;
(2) A Guaranty Agreement dated December 30, 1998 executed by the
Guarantor Defendants (the "Guaranty Agreement") was in default; and
(3) As a result of said defaults, Xxxxxxxx was entitled to exercise
various rights with respect to shares of the common capital stock ("Shares") of
Tumbleweed, Inc., a Delaware corporation ("Tumbleweed") which were pledged to
him as collateral by the Company and some of the Guarantor Defendants.
B. In the Litigation, Xxxx X. Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxx
filed a Counterclaim against Xxxxxxxx (the "Counterclaim"), and a Cross-Claim
against Xxxxx X. Xxxx (the "Cross-Claim").
C. The Parties desire to resolve: the claims asserted in the
Litigation by the Plaintiff against the Guarantor Defendants; the Counterclaim;
the Cross-Claim; and the other matters referenced below; without incurring
additional expenses and costs, and therefore have reached the comprehensive
terms of compromise as embodied in this Agreement.
Now, Therefore, in consideration of the Recitals set forth above and
the terms and mutual covenants hereinafter set forth, Xxxxxxxx, the Company, and
the Guarantor Defendants (collectively referred to herein as the "Parties")
agree as follows:
1. Incorporation of Recitals. The Recitals are incorporated
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herein by reference as if fully set forth in this Agreement.
2. Transfer of Tumbleweed Shares to Company. Immediately following
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the execution of this Agreement, the following transfers of Shares of Tumbleweed
shall occur:
(a) Xxxxxxx X. Xxxxxxx shall assign to Xxxx X. Xxxxxxx, Xx. all
of her rights, title and interest in and to 800,000 Shares of the common capital
stock of Tumbleweed, as represented by certificates numbered TUWD1080 and
TUWD1079, who in turn shall then transfer all of said Shares to the Company;
(b) Xxxxx X. Xxxxxxxxx shall transfer to the Company 800,000
Shares of the common capital stock of Tumbleweed, as represented by certificates
numbered TUWD1175 and TUWD1176;
(c) Xxxxxx X. Xxxx shall assign to Xxxxx X. Xxxx all of her
right, title and interest in and to 72,232 Shares of the common capital stock of
Tumbleweed, as represented by certificates numbered TUWD1214 and TUWD1213, who
in turn shall then transfer all of said Shares to the Company;
(d) Xxxxx X. Xxxx shall transfer to the Company 27,768 Shares of
the common capital stock of Tumbleweed, as represented by certificates numbered
TUWD1207 and TUWD1208;
(e) Valley Vista Ventures, LLC shall transfer to the Company
100,000 Shares of the common capital stock of Tumbleweed, as represented by
certificates numbered TUWD1230 and TUWD1229; and
(f) Xxxxxxx X. Xxxxxx shall transfer to the Company 100,000
Shares of the common capital stock of Tumbleweed, as represented by certificates
numbered TUWD1197 and TUWD1198.
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The Parties agree that the Shares transferred pursuant to this paragraph shall
be valued at a price of $1.75 per share. In consideration of said transfers of
Shares to the Company, a new class of members known as the "Class C Members"
shall be created in the Company. Immediately following their execution of this
Agreement and prior to the transfer to the Company of any Shares of the common
capital stock of Tumbleweed as provided above, each of Xxxxxxxx, Xxxx X.
Xxxxxxx, Xx., Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxx, Xxxxxxx X. Xxxxxx, Xxxx X.
Xxxxxx, Xxxx Xxxxxx, Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxx, and Valley Vista
Ventures, LLC, hereby agrees to execute a First Amendment to Operating Agreement
in the form of Exhibit "A" attached hereto (the "First Amendment") providing,
inter alia, for (i) the creation of a new class of Members of the Company known
as "Class C Members" and (ii) the issuance to the Class C Members of a new class
of membership equity interests in the Company known as "Class C Units." As set
forth in the First Amendment, the new Class C Units shall be issued to Xxxx X.
Xxxxxxx, Xx., Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxx, Xxxxxxx X. Xxxxxx and Valley
Vista Ventures, LLC (in the proportions set forth in the First Amendment), in
exchange for their transfer to the Company, as capital contributions, of the
Shares of the common capital stock of Tumbleweed as provided above.
3. Transfer of Tumbleweed Shares By the Company to Xxxxxxxx.
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Contemporaneously with the execution of this Agreement, the Company shall
transfer to Xxxxxxxx the Shares transferred to the Company pursuant to section 1
above, plus the 400,000 Shares of Tumbleweed owned by the Company and
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represented by Certificate No. TUWD0847, for a total of 2,300,000 Shares. The
Parties agree that the Shares transferred to Xxxxxxxx shall be valued at a price
equal to $1.75 per share for a total value of $4,025,000.00, which shall be
applied as follows:
(a) First, $4,000,000.00 shall be applied to the outstanding
principal balance due under the Note; and
(b) Second, $25,000.00 shall be applied toward costs, expenses, and
attorney fees incurred by Xxxxxxxx in the Litigation, and in the enforcement of
his rights under the Note, the Guaranty Agreement, and other documents executed
in connection therewith, and including but not limited to, expenses paid by
Xxxxxxxx to the firm of Xxxxx & XxXxxxxx, PLC and to Xxxxxxxx Xxxxx Company. The
Parties agree that (i) the transfer of Shares to Xxxxxxxx hereunder is in
partial satisfaction only of the Judgment entered in favor of Xxxxxxxx and
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against the Company in the Litigation, and (ii) the Company shall continue to be
indebted to Xxxxxxxx for the remaining portion of such Judgment although all of
the Guarantor Defendants are being released from any continuing liability with
respect to, or as a result of, such Judgment against the Company, or with
respect to the Note, Guaranty Agreement, Litigation, Counterclaim, or
Cross-Claim except for the obligations and duties of the Guarantor Defendants
provided for under this Agreement.
4. Release of Guarantor Defendants By Xxxxxxxx. In consideration of the
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covenants, terms and conditions contained herein, Xxxxxxxx does hereby and
forever relieve, release and discharge the Guarantor Defendants, and their
respective agents, representatives, estates, employees, attorneys, firms,
successors and assigns, and each of them, in any and all capacities, from any
and all claims, debts, liabilities, demands, obligations, liens, promises, acts,
agreements, costs and
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expenses (including but not limited to attorney's fees), damages, actions and
causes of action, of whatever kind or nature, whether known or unknown, fixed or
contingent, which arise, are alleged to have arisen, or could have arisen out of
the claims made by Xxxxxxxx in the Litigation, and including but not limited to
claims against the Guarantor Defendants which might arise under the Note or the
Guaranty Agreement, except for the obligations and duties of the Guarantor
Defendants provided for under this Agreement.
5. Release of Xxxxxxxx By Guarantor Defendants. In consideration of the
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covenants, terms and conditions contained herein, the Guarantor Defendants, and
each of them, do hereby and forever relieve, release and discharge Xxxxxxxx and
his respective agents, representatives, estates, employees, attorneys, firms,
successors and assigns, in any and all capacities, from any and all claims,
debts, liabilities, demands, obligations, liens, promises, acts, agreements,
costs and expenses (including but not limited to attorney's fees), damages,
actions and causes of action, of whatever kind or nature, whether known or
unknown, fixed or contingent, which arise, are alleged to have arisen, or could
have arisen out of the claims made by the Guarantor Defendants or any of them,
in the Litigation, and including but not limited to the Counterclaim.
6. Releases Among the Guarantor Defendants. In consideration of the
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covenants, terms and conditions contained herein, each of the Guarantor
Defendants does hereby and forever relieve, release and discharge each of the
other Guarantor Defendants and their respective agents, representatives,
estates, employees, attorneys, firms, successors and assigns of each of the
other Guarantor Defendants, in any and all capacities from any and all claims,
debts, liabilities, demands, obligations, liens, promises, acts, agreements,
rights or obligations of contribution, costs and expenses (including but not
limited to attorney's fees, damages, actions and causes of action), of whatever
kind or nature, whether known or unknown, fixed or contingent, which arise, are
alleged to have arisen, or could have arisen out of the claims made by Xxxxxxxx,
the Guarantor Defendants, or any of them, in the Litigation, including but not
limited to the Counterclaim and the Cross-Claim. Specifically, but not by way of
limitation of the foregoing, Xxxx X. Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxx,
individually and as Trustee of the Xxxx X. Xxxxxxx, III Trust of the 21/st/
Century, the Xxxx X. Xxxxxxx Trust of the 21/st/ Century, and the Xxxxxxxxx X.
Xxxxxxx Trust of the 21/st/ Century, do hereby and forever relieve, release and
discharge Xxxxx X. Xxxx and his respective agents, representatives, estates,
employees, attorneys, firms, successors and assigns, in any and all capacities,
from any and all claims, debts, liabilities, demands, obligations, liens,
promises, acts, agreements, costs and expenses (including but not limited to
attorney's fees), damages, actions and causes of action, of whatever kind or
nature, whether known or unknown, fixed or contingent, which arise, are alleged
to have arisen, or could have arisen out of the claims made by Xxxx X. Xxxxxxx,
Xx. and Xxxxxxx X. Xxxxxxx in the Litigation, and including but not limited to
the Cross-Claim.
7. Termination of Shareholders' Agreement. Xxxxxxxx; Xxxx X. Xxxxxxx,
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Jr.; Xxxxxxx X. Xxxxxxx, individually and as Trustee of the Xxxx X. Xxxxxxx, III
Trust of the 21st Century, the Xxxx X. Xxxxxxx Trust of the 21st Century, and
the Xxxxxxxxx X. Xxxxxxx Trust of the 21st Century; Xxxxx X. Xxxxxxxxx; Xxxxx X.
Xxxx; Xxxxxx X. Xxxx; Xxxxxxx X. Xxxxxx; and Valley Vista Ventures, LLC; hereby
agree that the Shareholders' Agreement executed by them and dated January 1,
1999
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is hereby terminated, and the Shares of the respective Parties as referenced in
the Shareholders' Agreement are released from the restrictions contained in the
Shareholders' Agreement, and all such rights are returned to the respective
owners of such Shares (and successor owners of such Shares, including but not
limited to, Xxxxxxxx pursuant to the provisions of this Agreement).
8. Termination of Agreement of Indemnity and Right of Contribution. The
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Guarantor Defendants hereby agree that the Agreement of Indemnity and Right of
Contribution executed by them and dated December 30, 1998, is hereby terminated
and rendered null and void.
9. Dismissal of Litigation. The Parties agree that the Litigation shall
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be remanded as to all claims asserted by Xxxxxxxx against the Guarantor
Defendants, and as to the Counterclaim and Cross-Claim, and the Parties agree
that each shall cause his, her, or its respective attorney to sign and file an
agreed order to dismiss said claims, with prejudice, in the form attached hereto
as Exhibit "B" (the "Agreed Order").
10. Subsequent Discovery of Different or Additional Facts and/or Causes
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of Action. The Parties each acknowledges that he, she or it is aware that they
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may hereafter discover facts different from or in addition to those he now knows
or believes to be true with respect to the claims, causes of action, rights,
obligations, debts, liabilities, accounts, liens, damages, losses and expenses
herein released, and he agrees that this Agreement will remain in effect in all
respects as a complete and general release as to all matters released herein,
notwithstanding any such different or additional facts and/or causes of action,
including but not limited to, any treatment of any of the transfers,
transactions or matters described herein for Federal, state, or local income or
other tax purposes in a manner which is or might be adverse to one or more
Parties, more adverse for one or more Parties than for one or more other
Parties, or otherwise contrary to the tax treatment anticipated by one or more
Parties.
11. Covenant Not to Xxx. All Parties to this Agreement agree that they
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shall not make, assert, or maintain against any other party released pursuant to
this Agreement any claim, demand, action, suit, or proceeding arising out of or
in connection with the matters respectively released herein.
12. Denial of Liability. The giving of the consideration specified herein
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affects the settlement of the matters released herein. Neither the giving of
said consideration nor anything contained herein shall be construed as an
admission by any party to this Agreement or its, assigns, successors, insurers,
representatives, agents, officers, directors, employees, attorneys or
shareholders, of the validity of the claims of any other party to this
Agreement. The Parties hereto specifically disclaim any liability or
responsibility to each other.
13. Binding Effect. This Agreement, and all covenants and releases set
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forth herein, shall be binding upon and shall inure to the benefit of the
respective Parties hereto, their legal successors, trustees, beneficiaries,
heirs, assigns, insurers, partners, representatives, executors, administrators,
agents, attorneys, officers, directors, members and shareholders.
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14. Choice of Law and Venue. This Agreement is executed and intended
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to be performed in the Commonwealth of Kentucky, and the laws of Kentucky
shall govern its interpretation and effect.
15. Legal Expenses. In the event any party to this Agreement commences
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any legal proceeding concerning any aspect of this Agreement, including, but not
limited to, the interpretation or enforcement of any of its provisions or based
on an alleged dispute, breach, default, or misrepresentation in connection with
any aspect or provision of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees and all other costs and expenses
incurred in connection with the action or proceeding, including, without
limitation, expert witness fees, court reporter fees and collection expenses,
whether or not such action proceeds to judgment. The "prevailing party" means
the party determined by the court to have most nearly prevailed, even if such
party did not prevail in all matters, not necessarily the one in whose favor a
judgment is rendered. If the court fails or refuses to make a determination of
the prevailing party, the party who is awarded costs of suit shall also be
deemed to be the prevailing party for purposes of awarding attorney's fees.
16. Severability. Should any portion or clause of this Agreement be
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found to be invalid, illegal, void, voidable or unenforceable for any reason
whatsoever, this Agreement shall be read as if it did not contain said portion
or clause to be severable from the remainder. Any such clause or portion and its
severance shall not affect the validity or effect of the remaining provisions of
this Agreement.
17. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which so executed shall be deemed to be an original and
such counterparts together constitute one and the same Agreement. It shall not
be necessary that the signature of, or on behalf of, each party, or that the
signatures of all Parties, be affixed to each counterpart. The signature pages
of the counterparts may be detached from them and be reattached to any other
counterpart identical in form hereto, but having attached to it one or more
additional signature pages, and it shall not be necessary in making proof of
this Agreement to produce or account for any particular number of counterparts
so long as one or more counterparts collectively shall contain the respective
signatures of, or on behalf of, all of the Parties hereto. Fax copies of
signatures shall have the same force and effect as original signatures.
18. Gender and Number. In this document, where the context so requires,
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the masculine, feminine or neutral gender shall be deemed to include each other,
and the singular to include the plural.
19. Section Headings. The captions, subject, section and paragraph
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headings in this Agreement are included for convenience and reference only. They
do not form a part hereof, and do not in any way codify, interpret, or reflect
the intent of the Parties. Said headings shall not be used to construe or
interpret any provision of this Agreement.
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20. Right to Consult With Attorney and Tax Advisor, Terms Understood.
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The Parties hereto acknowledge that each has read this Agreement; that each
fully understands his rights, privileges and duties under said Agreement; and
that each enters into said Agreement freely and voluntarily. Each party further
acknowledges that each has had the opportunity to consult with an attorney of
his choice to explain the terms of this Agreement and the consequences of
signing it. Each party further acknowledges that each has had the opportunity to
consult with a tax advisor of his choice to explain the tax consequences of
entering into the transactions contemplated hereby, and no party has relied on
any representation or warranty of any other party with respect to any tax
consequences, and no party has been induced to enter into this Agreement as a
result of any alleged representations as to tax consequences.
21. Reliance on Own Judgment, No Representations. The Parties hereby
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declare and represent that the full compensation for the aforementioned losses
and claims is uncertain and indefinite, and that in making this release
agreement it is understood and agreed that the Parties rely wholly upon their
own judgment, belief and knowledge as to the nature, extent and duration of said
damages. The Parties have not been influenced to any extent whatsoever in making
this release by any representation or statement regarding said damages, or
regarding any other matter, made by the person or persons or entities hereby
released, or by any person or persons representing them.
22. Entire Agreement. The undersigned each acknowledge and represent
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that no promise, representation or inducement not contained in this Agreement,
or any exhibit hereto, has been made to them and that this Agreement, together
with any exhibits or documents incorporated therein, contain the entire
understanding between the Parties and contain all terms and conditions
pertaining to the within compromise and settlement of the disputes referenced
herein. No express or implied warranties, covenants or representations have been
made concerning the subject matter of this Agreement unless expressly stated
herein. Any prior written or oral negotiations not contained in this Agreement
are of no force or effect whatsoever. In executing this Agreement, the Parties
have not and do not rely on any statements, inducements, promises or
representations made by the other party or their agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement,
except those specifically set forth in this Agreement. The undersigned further
acknowledge that the terms of this Agreement are contractual and not a mere
recital.
23. Modifications. No change in, addition to, or erasure of a printed
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portion of this Agreement shall be valid or binding upon any party hereto unless
initialed by all Parties hereto, and no verbal agreement of any nature relating
to the subject matter of this Agreement or to any relationship between the
Parties will be considered valid or enforceable. This Agreement may not be
superseded, modified or amended orally and no modification, waiver or amendment
shall be valid unless in writing and signed by the party against whom the same
is sought to be enforced.
24. No Presumption Against Drafting Party. This Agreement and the
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provisions contained herein shall not be construed or interpreted for or
against any party hereto because said party drafted or caused the party's legal
representative to draft any of its provisions.
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25. Parties In Interest. Nothing in this Agreement, whether express or
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implied, is intended to confer any rights or remedies under or arising by reason
of this Agreement on any persons other than the Parties to it and their
respective successors and permitted assignees. Nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision give any third person
any right of subrogation or action over or against any party to this Agreement.
26. Waiver. The failure of either party to enforce any provision of
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this Agreement shall not be construed as a waiver of any such provision, nor
prevent such party thereafter from enforcing such provision or any other
provision of this Agreement. The rights and remedies granted all Parties herein
are cumulative and the election of one right or remedy shall not constitute a
waiver of such party's right to assert all other legal remedies available under
this Agreement or otherwise provided by law.
27. Execution of Further Documents. Each party agrees, upon the demand
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of any other, to execute or deliver any instrument, furnish any information, or
perform any other act reasonably necessary to carry out the provisions of this
Agreement without undue delay and without charge. Specifically, and not by way
of limitation, the Parties agree that they, as may be applicable, shall
immediately execute the consents, resolutions, and other corporate documents
relating to the Company which are attached hereto collectively as Exhibit "C,"
and such stock powers or other documents necessary to transfer the Shares as
contemplated by this Agreement, and shall cooperate with National City Bank as
the transfer agent for Shares of Tumbleweed. In the event any party fails or
refuses to comply with this paragraph, such party shall reimburse the other
party for any expenses, including attorney's fees and court costs, that as a
result of this failure become reasonably necessary to carry out this Agreement,
even if formal legal action is not commenced.
28. Approval of Form and Content. The Parties agree that the execution
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of this Agreement acknowledges that its form and content are approved by the
Parties and their respective counsel.
IN WITNESS WHEREOF, the Parties hereto have set their respective hands
and seals below.
TW FUNDING, LLC
By: /s/ Xxxxxx Xxxxxxxx
XXXXXX XXXXXXXX, Managing Director
Sole Member of Class A Director Group
By: /s/ Xxxxx X. Xxxx
XXXXX X. XXXX, Managing Director
Member of Class B Director Group
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By: /s/ Xxxxx X. Xxxxxxxxx
XXXXX X. XXXXXXXXX, Managing Director
Member of Class B Director Group
By: /s/ Xxxx X. Xxxxxxx, Xx.
XXXX X. XXXXXXX, XX., Managing Director
Member of Class B Director Group
/s/ Xxxx X. Xxxxxxx, Xx. /s/ Xxxxxxx X. Xxxxxxx
XXXX X. XXXXXXX, XX. XXXXXXX X. XXXXXXX
(both individually and as Trustee of the Xxxx
X. Xxxxxxx, III Trust of the 21/st/ Century, the
Xxxx X. Xxxxxxx Trust of the 21/st/ Century,
and the Xxxxxxxxx X. Xxxxxxx Trust of the 21/st/
Century)
/s/ Xxxxx X. Xxxxxxxxx /s/ Xxxxxx X. Xxxxxxxxx
XXXXX X. XXXXXXXXX XXXXXX X. XXXXXXXXX
/s/ Xxxxx X. Xxxx /s/ Xxxxxx X. Xxxx
XXXXX X. XXXX XXXXXX X. XXXX
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxxxx Xxxxxx
XXXXXXX X. XXXXXX XXXXXX XXXXXX
/s/ Xxxx Xxxxxx /s/ Xxxxx X. Xxxxxx
XXXX XXXXXX XXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxx X. Xxxxxxx
XXXXXXX X. XXXXXXX XXXXX X. XXXXXXX
/s/ Xxxxx X. Xxxxx /s/ Xxxxx Xxxxx Xxxxx
XXXXX X. XXXXX XXXXX XXXXX XXXXX
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/s/ Xxxx X. Xxxxxx /s/ Xxxxx X. Xxxxxx
XXXX X. XXXXXX XXXXX X. XXXXXX
VALLEY VISTA VENTURES, LLC /s/ Xxxxxx Xxxxxxxx
XXXXXX XXXXXXXX
By: /s/ Xxxxx X. Xxxx
XXXXX X. XXXX, Manager
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