SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT (the "Agreement"), dated May 4, 2001 by and
among, XXXXXXXXX-XXXXX, INC., a New York corporation (ASTEINBOCK-BRAFF@), XXXXX
XXXXXXXXX ("XXXXXXXXX"), G-MAT DIST. INC., a New York corporation ("G-Mat"),
XXXXXXX XXXX ("Wald" and together with Xxxxxxxxx-Xxxxx, Xxxxxxxxx and G-Mat, the
"Plaintiffs") and ATEC GROUP, INC. ("ATEC" or "Defendant"), sometimes
individually referred to as a "Party" or collectively referred to as "Parties".
RECITALS
WHEREAS, each of the Parties are a party to a lawsuit pending in the Supreme
Court of the State of New York, Nassau County styled Xxxxxxxxx-Xxxxx, Inc. d/b/a
Kat Nap Products, Xxxxx Xxxxxxxxx d/b/a G-Mat Dist. Inc, and Xxxxxxx Xxxx v.
ATEC Group, Inc., Index No. 017923/98 (the "Litigation"); and
WHEREAS, ATEC believes that the claims against it in the Litigation are without
merit and deny any liability to the Plaintiffs and have agreed to settle this
action solely to avoid the inconvenience and expense of litigation.
NOW THEREFORE, in consideration of their mutual promises and undertakings
contained in this agreement, the Parties agree, as follows:
1. General Release. At the Closing (as defined below), the Plaintiffs and
the Defendant shall exchange duly executed general releases in the form annexed
hereto as Exhibit A. Said releases are to be held in escrow by the attorneys for
the parties, pending the completion of the parties' obligations pursuant to this
Stipulation of Settlement.
2. Settlement Payments. ATEC shall pay $200,000, by check payable to
Xxxxxxxxx Xxxxxxxx LLP, as attorneys, at the Closing;
3. Preferred Stock and Representations.
(a) ATEC shall adopt and file with the Secretary of State of
Delaware on or before the Closing (as defined below) a Certificate
of Designations, Preferences and Rights (the "Certificate of
Designation") setting forth the terms and conditions of ATEC=s
Series J Convertible Preferred Stock, par value $.01 per share (the
"Series J Preferred Stock"), such Certificate of Designation to be
in the form and substance of the Certificate of Designation annexed
hereto as Exhibit B. Such Certificate of Designation will further
amend ATEC's Certificate of Incorporation.
(b) At the Closing, ATEC shall deliver to counsel for the
Plaintiff=s preferred stock certificates representing an aggregate
of 105,000 shares of its Series J Preferred Stock (the APreferred
Shares@). The Preferred Shares shall be issued to the following
persons in share amounts designated as follows:
Holder
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Xxxxxxx Xxxxxxxxx 43,417.5 Shares
Xxxxxxx Xxxx and Xxxxxxxxx Xxxx 26,617.5 Shares
Xxxxxxxxx Xxxxxxxx LLP 34,965 Shares
(c) The Plaintiffs and each of the holders of the Preferred Shares
acknowledge that the Preferred Shares and the shares of Common Stock
(as defined in Section 5 below) to be issued upon the conversion of
the Preferred Shares (collectively, the "Securities") are being
acquired for investment and that the Plaintiffs will not offer, sell
or otherwise dispose of the Securities except under circumstances
which will not result in a violation of federal or state securities
laws. The certificates for the Securities (unless registered under
the Securities Act of 1933 , as amended (the "Securities Act"))
shall bear the following legend:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
After the above requirement for a legend is no longer applicable
because the Preferred Shares or the shares of Common Stock into
which they are convertible are freely transferable under the
Securities Act, ATEC shall with all due diligence and without delay
instruct ATEC=s counsel to remove such legend upon request of any
Plaintiff and or "Holder" of the shares as designated in paragraph
3(b) hereinabove.
4. Stipulation Discontinuing Action. At the Closing, the Plaintiffs and
ATEC will execute a Stipulation Discontinuing Action, substantially in the form
annexed hereto as Exhibit C, dismissing the Litigation with prejudice and
without costs, which stipulation shall be filed with the Court by the attorneys
for ATEC.
5. Registration Rights.
(a) This Section 5 sets forth ATEC=s agreement with respect to the
registration of shares of Common Stock that the Plaintiffs may
acquire upon conversion of any shares of Series J Preferred Stock.
Subject to the foregoing, ATEC covenants and agrees with respect to
the registration of the Common Stock as follows:
(1) Definitions. For purposes of this Section 5:
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(i) The term ACommon Stock@ shall mean ATEC=s common stock,
par value $.01 per share.
(ii) The term "Holder" means any person owning or having the
right to acquire Registrable Securities.
(iii) The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
(iv) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with
the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(v) The term "Registrable Securities" means the Common Stock
issuable or issued upon conversion of the Series J Preferred
Stock and any other shares of Common Stock issued in respect
of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events.)
(vi) The term "SEC" shall mean the Securities and Exchange
Commission.
(b) On or before June 30, 2001, ATEC shall prepare and file with the
SEC a registration statement ("Registration Statement") on any form
for which ATEC then qualifies under the Securities Act covering the
registration of 105,000 shares of the Registrable Securities.
(c) Whenever required under this Section 5 to effect the
registration of any Registrable Securities, ATEC shall:
(1) Prepare and file with the SEC a Registration Statement
with respect to such Registrable Securities and use its
reasonable best efforts to cause such Registration Statement
to become effective and remain effective until the sale of all
Registrable Securities covered thereby, provided ATEC shall
have no further obligation to cause the Registration Statement
to remain effective if the Registrable Securities may be sold
to the public pursuant to Rule 144 promulgated under the
Securities Act.
(2) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
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such Registration Statement, provided ATEC shall have no
further obligation to prepare and file such amendments and
supplements if the Registrable Securities may be sold to the
public pursuant to Rule 144 promulgated under the Securities
Act.
(3) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity
with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by
them.
(4) Use its reasonable best efforts to register and to qualify
the securities covered by such Registration Statement under
such other securities or Blue Sky laws of such jurisdictions
as shall be reasonably requested by the Holders if applicable
as determined by ATEC=s counsel; provided that ATEC shall not
be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to
service of process or to submit to the jurisdiction of any
taxing authority in any such states or jurisdictions.
(5) Notify each Holder of Registrable Securities covered by
such Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of
which the prospectus included in such Registration Statement,
as then in effect, to the knowledge of ATEC, includes an
untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing.
(6) Cause all such Registrable Securities registered hereunder
to be listed on any securities exchange on which similar
securities issued by ATEC are then listed.
(7) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereto.
(d) In the event that any Preferred Shares remain outstanding on
October 31, 2003, upon request of any Plaintiff who is holder of the
Preferred Shares, which request must be delivered to ATEC by
November 30, 2003, ATEC shall prepare and file a Registration
Statement by the Maturity Date (as defined in the Certificate of
Designations) covering the remaining Registrable Securities, if any,
provided, ATEC shall have no obligation to prepare or file such
Registration Statement pursuant to this Section 5(d) and may at its
election terminate or withdraw such registration (i) if the
Registrable Securities may be resold to the public pursuant to Rule
144 promulgated under the Securities Act or (ii) if at any time
there are no remaining Preferred Shares outstanding.
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(e) It shall be a condition precedent to the obligations of ATEC
under this Section 5 that all of Holders furnish to ATEC such
information regarding himself or itself, the Registrable Securities
and the intended method of disposition of the Registrable Securities
as shall be reasonably requested, and shall execute such documents
in connection with such registration as ATEC may reasonably request.
(f) All expenses other than underwriting discounts, transfer taxes
and commissions incurred in connection with registrations, filings
or qualifications pursuant to this Section 5, including (without
limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for
ATEC shall be borne by ATEC.
(g) In the event that any Registrable Securities are included in a
Registration Statement under this Section 5:
(1) To the extent permitted by law, ATEC will indemnify and
hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the
Securities Act or the 1934 Act, against any losses, claims,
damages, or liabilities to which they may become subject under
the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement to the
knowledge of ATEC, of a material fact contained in such
Registration Statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission to state therein a
material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any
violation by ATEC of the Securities Act, the 1934 Act, any
state securities law or any rule or regulation promulgated
under the Securities Act, or the 1934 Act or any state
securities law; and ATEC will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity
agreement contained in this section 5(g), shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without
the consent of ATEC, nor shall ATEC be liable in any such case
for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with
such registration by any such Holder, underwriter or
controlling person.
(2) The obligations of ATEC under this Section 5 (g) shall
survive the completion of any offering of Registrable
Securities in a Registration Statement under this Section 5.
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(h) With a view to making available to the Holders the benefits of
Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell
securities of ATEC to the public without registration, ATEC agrees
to use its reasonable best efforts to:
(1) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times;
(2) file with the SEC in a timely manner all reports and other
documents required of ATEC under the Securities Act and the
1934 Act as to comply with Rule 144; and
(3) furnish to any Holder, so long as the Holder owns any
Preferred Shares or Registrable Securities, upon request (i) a
written statement by ATEC that it has complied with the
reporting requirements of SEC Rule 144, the Securities Act,
and the 1934 Act (ii) a copy, if not publicly available, if
applicable, of the most recent annual or quarterly report of
ATEC and such other reports and documents filed by ATEC with
the SEC, and (iii) such other information as may be reasonably
requested in availing a Holder of any rule or regulation of
the SEC which permits the selling of any such securities
without registration.
(i) The rights to cause ATEC to register Registrable Securities
pursuant to this Agreement may be assigned (but only with all
related obligations) by a Holder subject to an opinion of counsel
acceptable to ATEC authorizing said assignment to (i) a partner or
shareholder of such Holder or (ii) a transferee or assignee of such
securities who acquires at least twenty percent (20%) of the
Registrable Securities (as adjusted for stock splits, combinations
and the like) owned by such Holder, provided that: (a) ATEC is,
within a reasonable time after such transfer, furnished with written
notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are
being assigned; (b) such transferee or assignee agrees in writing to
be bound by and subject to the terms and conditions of this
Agreement; and (c) such assignment shall be effective only if
immediately following such transfer the further disposition of such
securities by the transferee is not a public offering requiring
registration under the Act.
6. The Closing. The closing under this Agreement (the "Closing") shall
take place at the offices of Xxxxxxxxx Xxxxxxxx LLP, 3333 New Hyde Xxxx Xxxx,
Xxxxx 000, Xxx Xxxx Xxxx, Xxx Xxxx, at 10:00 a.m. on May 9, 2001.
7. Each of the parties represents that all necessary action has been taken
by such party to authorize the execution, delivery and performance of this
Agreement. and that this Agreement is and will be after its execution the legal,
valid and binding obligation of the parties in accordance its terms.
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8. The parties acknowledge this Agreement is a compromise and settlement
of disputed claims and that such compromise and settlement shall not be taken as
an admission of liability on the part of any party to this Agreement. Neither
the Agreement, nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Agreement or the
settlement (i) is or may be deemed to be or may be used as an admission of, or
evidence of, the validity of any claim, or of any wrongdoing or liability of any
of the parties hereto, or (ii) is or may be deemed to be or may be used as an
admission of, or evidence of. any fault or omission in any civil, criminal or
administrative proceeding in any court, administrative agency or other tribunal.
9. This Agreement and the exhibits attached hereto constitute a complete
expression of the parties of the settlement agreed to by them and supersedes all
prior agreements and understandings among the parties hereto relating to the
subject matter hereof.
10. This Agreement may not be modified, superseded, terminated or amended
and no provision of this Agreement may be waived, except by a writing making
specific reference hereto signed by the party to be bound.
11. The terms of this Agreement may be disclosed as required by law or as
required by ATEC in order to comply with the disclosure requirements of federal
or state securities laws and the rules and regulations of the National
Association of Securities Dealers, Inc. and the American Stock Exchange.
12. This Agreement shall be construed and enforced in accordance with the
laws of the state of New York applicable to agreements made and to be performed
in the State of New York.
13. Any action to enforce this Agreement shall be brought only in the
federal or state courts of New York and each signatory hereby consents to the
jurisdiction and venue of such courts.
14. This Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their successors and assigns.
15. Each party hereto acknowledges that it has been represented by legal
counsel of its own choice throughout all of the negotiations which preceded the
execution of this Agreement and that it has executed this Agreement with the
consent and upon the advice of such independent legal counsel.
16. Each party hereto acknowledges that it has read this Agreement and
consulted with its attorneys as to the full meaning and effect of this Agreement
and agrees to all of the terms and conditions contained herein without any
reservation whatsoever and that it is signing this Agreement with full knowledge
of any and all rights which it may have, that it is not relying on any
representations made by any party hereto which are not explicitly set forth
herein and that
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it has conducted whatever investigation it has deemed necessary to ascertain all
facts and matters related to this Agreement.
17. Notice. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party) or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to ATEC:
ATEC Group, Inc.
00 Xxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
With a copy to:
Xxxxxxxxx, Xxxxxxx & Xxxxxxx, P.C.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx, Esq.
If to Xxxxxxxxx-Xxxxx, Xxxxxxxxx and/or G-Mat:
0000 Xxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: 000 000-0000
Attention: Xx. Xxxxx Xxxxxxxxx
With a copy to:
Xxxxxxxxx Xxxxxxxx XXX
0000 Xxx Xxxx Xxxx Road, Suite 000
Xxx Xxxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
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If to Wald:
Xx. Xxxxxxx Xxxx
000 Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxx
With a copy to:
Xxxxxxxxx Xxxxxxxx XXX
0000 Xxx Xxxx Xxxx Road, Suite 000
Xxx Xxxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
18. This Agreement may be signed in counterparts and shall be deemed
executed upon delivery by each party of the counterparts to the other parties.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
XXXXXXXXX-XXXXX, INC.
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By: XXXXX XXXXXXXXX
Title:
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Xxxxx Xxxxxxxxx
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Xxxxxxx Xxxxxxxxx
G-MAT DIST. INC.
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By: Xxxxx Xxxxxxxxx
Title:
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Xxxxxxx Xxxx
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Xxxxxxxxx Xxxx
XXXXXXXXX XXXXXXXX LLP
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By: Xxxxxx Xxxx Xxxxxxxx
Title: Partner
ATEC Group, Inc.
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By:
Title:
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