SETTLEMENT AGREEMENT
This Settlement Agreement entered into as of the 22nd day of
July, 2005 (this "Agreement"), by and among Headliners Entertainment
Group, Inc., a Delaware corporation with offices at 000 Xxxxxxxxxx
Xxxxxx, Xxxxxxxxx, XX 00000 ("Headliners"), Xxxx Xxxxxx ("Xxxxxx"),
Xxx X. Field and Xxx X. Field (collectively, "Field"), each an
individual having an address at 0000 Xxxxxx Xxxx, Xxxxxx, XX 00000,
and JHF Property Holdings, LLC, d/b/a JHF Properties, LLC ("JHF"), an
Ohio limited liability company with offices at 0000 Xxxxxx Xxxx,
Xxxxxx, XX 00000.
W I T N E S S E T H:
WHEREAS, Headliners, Xxxxxx and JHF executed a Consolidated
Acquisition Agreement dated March 29, 2005 (the "Acquisition
Agreement"), pursuant to which Headliners acquired from Xxxxxx and
JHF (together with Field, collectively, the "Transferors") all equity
interest in 0000 Xxxxxxxx Xx. LLC, 0000 Xxxx Xxxxxx LLC, 296 X. Xxxxx
LLC, 0000 Xxxxxxxxx Xx LLC, and 0000 Xxxxxx Xx LLC, each of which is
an Ohio limited liability company which operates a dance club in one
of several jurisdictions (collectively, the "Acquired LLCs"); and
WHEREAS, the parties entered into an Amended and Restated
Consolidated Acquisition Agreement, dated June 6, 2005 (the
"Amendment"), amending and restating the Acquisition Agreement,
pursuant to which, inter alia, Headliners was to acquire from Xxxxxx
and JHF all equity interest in JP 0xx Xxxxxx Line LLC ("Louisville")
and JEP, Power Plant Way, LLC ("Virginia"), two additional limited
liability companies which operate dance clubs in Louisville, KY and
Hampton, VA, respectively, but such equity interests were never in
fact transferred; and
WHEREAS, Headliners commenced an action against Xxxx X. Field,
Xxxx Xxxxxx, Xxx X. Field, JHF Property Holdings, LLC, and JHF
Properties, LLC in the United States District Court, District of New
Jersey, Civil Action Number 1:05-cv-03519, for breach of certain
representations and warranties contained in certain agreements,
including the Acquisition Agreement and Amendment (such action being
hereinafter referred to as the "Litigation"); and
WHEREAS, the parties wish to enter into this Agreement for the
purpose of amending the Amendment and to set forth the terms of their
settlement of the Litigation.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties agree as follows:
1. Termination of Prior Agreements and Discontinuance of Action.
1.1 Except as specifically stated herein to the contrary with
respect to certain provisions, this Agreement supersedes the
Acquisition Agreement, the Amendment, and any other agreements
between or among the parties hereto (including the Properties
Acquisition Agreement - Xxxxxx, the Project Acquisition
Agreement and the Properties Acquisition Agreement - Field,
all dated as of June 23, 2004, and the Omnibus Modification
Agreement, dated November 22, 2004), all of which agreements
are hereby terminated and of no further force or effect.
1.2 Headliners agrees to file a voluntary discontinuance of
the Litigation, without prejudice. Headliners shall complete
their due diligence within 60 days and, provided that all
documents requested to be executed by Transferors have been so
executed and returned to Headliners, and Transferors have
otherwise complied with their obligations hereunder,
Headliners shall file an Amended Notice of Dismissal with
prejudice.
2. Transfer of LLC Interests; Further Action.
2.1 The parties agree and acknowledge that all record and
equity interest in all of the Acquired LLCs has passed from the
Transferors to Headliners in exchange for valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, pursuant to the Acquisition Agreement and the
Amendment, and that neither JHF, Xxxxxx, Field nor any of their
respective affiliates has any remaining equity interest in any
of the Acquired LLCs.
2.2 No later than July 22, 2005 (the "Closing Date"), the
Transferors shall transfer to Headliners all record and equity
interest in Louisville, on an "as is" basis, and shall execute
an assignment of LLC interest and such other documents and
instruments of transfer as may be necessary or appropriate to
effect such transfer. Any agreement or arrangement providing
for (i) the management or operation of Louisville, (ii)
compensation to be paid by Louisville or (iii) the
participation in any profits or cash flows of Louisville
between either of the Transferors or any of their respective
affiliates, on the one hand, and Headliners or Louisville, on
the other hand, shall be null and void and of no further force
or effect as against Headliners or Louisville.
2.3 Headliners shall, at its expense, prepare such documents
and take any and all further action as may, in the discretion
of Headliners or its management, reasonably exercised, be
necessary for Headliners to assume all licenses, leases (for
real estate and equipment) and accounts of Louisville and
obtaining any regulatory approval required to operate the
business of the Acquired LLCs and Louisville, including without
limitation, transfer of all leases and bank accounts and filing
with the appropriate regulatory authorities of an application
for the transfer of the licenses required for the Acquired LLCs
and Louisville to sell alcoholic beverages in their respective
states of operation, as soon as practicable but no later than
August 22, 2005. The Transferors shall cooperate with
Headliners and sign any and all documentation and take such
further acts as are necessary to accomplish such transfers. In
the event that Headliners has not filed the necessary
application and supporting documentation for the transfer of
the liquor licenses with the relevant state liquor authorities
by August 22, 2005, provided that the Transferors have executed
all necessary documents and taken all actions within their
control to accomplish the transfers, then, after seven (7)
days' notice to Headliners of their intention to do so, and
unless Headliners has acted in that period to cure any failure
to file, the Transferors shall have the option to surrender the
liquor licenses.
2.4 All bank accounts in the name of Xxxxxx or JHF used for
the business of any of the Acquired LLCs or Louisville (the
"Accounts") shall be the property of Headliners until such time
as new accounts can be established or the Accounts have been
transferred to Headliners. Headliners shall establish such
new accounts or prepare all necessary documentation for the
transfer of the Accounts to its name as soon as practicable but
in no event later than August 22, 2005. The Transferors shall
cooperate with Headliners and sign any and all documentation
and take such further acts as are necessary to accomplish such
transfers. In the event that Headliners has not established new
accounts or has not filed the necessary application for the
transfer of the Accounts by August 22, 2005, provided that the
Transferors have executed all necessary documents and taken all
actions within their control to accomplish the transfers, then,
after seven (7) days' notice to Headliners of their intention
to do so, and unless Headliners has acted in that period to
cure any failure to file, the Transferors shall have the option
to close the Accounts. Headliners agrees to hold the
Transferors harmless for any loss arising out of Headliners's
use of the Accounts.
2.5 The Transferors and Headliners shall take any and all
action to transfer title and all related financing documents to
the 2004 BMW 745LI automobile currently in use by Headliners
for the operation of the Acquired LLCs from JHF to Headliners,
and Headliners agrees to assume liability for payments due
thereon, to continue making such payments and to maintain
insurance on the vehicle.
2.6 Guarantees. Headliners hereby assumes liability for
personal guarantees of real estate leases made by the
Transferors for the Acquired LLCs and Louisville and credit
card machine leases with Ladco for equipment located in the
Acquired Clubs and in Louisville, each of which is listed on
Schedule 2.5 hereto and a copy of which has been provided to
Headliners.
3. Reversion of Net Cash Flow and Operations of Virginia.
3.1 Any right of Headliners to operate or receive Net Cash
Flow (as such term is defined in the Amendment) from Virginia
which the Transferors transferred to Headliners pursuant to
the Amendment shall, as of the Closing Date, revert back to
the Transferors. Headliners shall surrender all property of
Virginia in its possession, including leases to premises
operated by Virginia and all inventory, on an "as is" basis,
without any representation as to the amount or condition
thereof. However, the safe shall contain at least $8,000 in
cash, the same amount as when Headliners took control of
Virginia.
3.2 Headliners shall take any and all further action as may
be necessary or appropriate to return management of Virginia
to the Transferors, including delivering all records
pertaining to Virginia's operating bank account, which shall
reflect a zero book value, after taking account of any
outstanding checks which have not yet cleared such account.
3.3 The Transferors shall assume any and all expenses
incurred or coming due in the operation of the business of
Virginia on or after the Closing Date, including, without
limitation, payroll and rent, and shall pay all taxes
associated therewith. Headliners hereby represents that it
has paid all rent due through July 2005 and has paid or will
pay all sales taxes due through July 21, 2005.
3.4 The Transferors shall forward to Headliners at its
address appearing in the notice provision of this Agreement,
unopened, any correspondence received by any of the
Transferors and addressed to Headliners, any of its
principals, the Acquired LLCs or Louisville. However, if such
mail was improperly addressed to Headliners or any of its
principals, such mail shall promptly be forwarded to the
Transferrors at the address in paragraph 6.5 below.
Inadvertently opening the mail is not a breach.
4. Cancellation of Shares; Escrow of Debenture; Payment. On
the Closing Date, JHF shall (i) return to Headliners original stock
certificates representing all shares of capital stock of Headliners
held by JHF, Xxxxxx, Field or any of their respective affiliates or
transferees, which stock certificates shall be cancelled and
thereafter of no further force or effect and (ii) place, within seven
(7) days of the date of this Agreement, into escrow with Xxxxx X.
Bank, Esq. the originally executed $5,000,000 convertible debenture
issued by Headliners pursuant to Section 1.5.2 of the Amendment,
which debenture shall remain in escrow as collateral for the payment
in full of all obligations of Headliners under this Section 4 and,
upon such payment in full, shall be returned to Headliners for
cancellation. Headliners shall pay to JHF, in full satisfaction of
any and all claims against Headliners for amounts due to either of
the Transferors or Field, the following:
4.1 $675,000 in cash, less $301,565.10 received by
Transferors to date, leaving a balance due of $373,434.90,
payable in five equal weekly installments of $74,686.98, the
first such installment being payable on August 3, 2005 and,
thereafter, on each succeeding Wednesday (August 10, August 17,
August 24, August 31). All amounts owed under this paragraph
shall be paid in full by August 31, 2005; and
4.2 $15,000 per week, payable weekly commencing September 7,
2005 and, thereafter, on each succeeding Wednesday for 28 weeks
(totaling 28 payments in the aggregate for total combined
payments under this paragraph in the amount of $420,000.00).
All amounts owed under this paragraph shall be paid in full by
March 15, 2006.
4.3 In the event Headliners defaults in the making of any
payments under paragraphs 4.1 or 4.2 above, the Transferors may
give written notice, in accordance with the notice provision in
this Agreement, and Headliners shall have seven (7) business
days to cure such default. In the event Headliners fails to
cure such default, the Transferors shall be entitled to receive
all payments then due plus a penalty of two times the amount of
the delinquent payment and to convert the Debenture, in
accordance with its terms, into shares of Headliners's common
stock. In the event that the Transferors bring suit against
Headliners seeking damages for the default by Headliners and
are successful on the merits in such suit, the Transferors
shall be entitled to reimbursement for all reasonable attorneys
fees incurred in bringing such suit.
5. Representations and Warranties; Indemnification.
5.1 By executing this Agreement, the Transferors and Field
hereby jointly and severally represent and warrant to Headliners
that:
(a) subject to any transfers by Headliners, immediately prior
to their transfer of same to Headliners, the Transferors
were (in the case of the Acquired LLCs) or are (in the case
of Louisville) the sole beneficial and record owners of all
interests in the Acquired LLCs and Louisville with right of
transfer, and, upon consummation of the transactions
contemplated by the Amendment and this Agreement, such
interests have been (in the case of the Acquired LLCs) or
will be (in the case of Louisville) effectively vested in
the Purchaser; and
(b) subject to any transfers by Headliners, immediately prior
to their transfer of same to Headliners, the Transferors and
Field had the sole rights to manage and operate the
businesses of the Acquired LLCs and Louisville, and hold
valid title to all leases, licenses and any intellectual
property necessary for the operation of such businesses.
5.2 The Transferors and Field hereby jointly and severally
indemnify and hold Headliners harmless from and against any
and all claim, damage, liability, cost or other expense
resulting from or arising out of the breach of any of the
representations and warranties contained in Section 5.1 of
this Agreement.
5.3 By executing this Agreement, Headliners hereby represents
and warrants to Transferors and Field that to its knowledge:
(a) there are no claims against Virginia, arising from
Headliners's operation of the facility;
(b) that there have been no liquor violations during
Headliners's management of the club nor any other
circumstances which would cause it to doubt that the liquor
license is in good standing as of the Closing Date; and
(c) that the debenture previously issued to JHF has not been
cancelled and is valid. Headliners shall deliver to Xxxxx
Xxxx, Esq. a replacement original signature page to the
debenture upon receipt by Headliners from Transferors of an
originally executed standard form lost instrument affidavit
and indemnity regarding the debenture.
5.4 Headliners shall indemnify and hold the Transferors and
Field harmless from and against any and all claim, damage,
liability, cost or other expense resulting from or arising out
of the breach of any of the representations and warranties
contained in Section 5.3 of this Agreement.
6. Miscellaneous
6.1 Further Assurances. At its own expense, each party will,
at such time and from time to time on and after the Closing Date,
upon request by the other party, execute, acknowledge and deliver, or
will cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances that may be reasonably required for the
carrying out of the purposes of this Agreement. The parties shall
execute mutual releases from liability for claims except only for the
performance of obligations under this Agreement and subject to
Section 6.3 hereof.
6.2 Complete Agreement. This Agreement and the documents, if
any, referred to herein shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and
shall supersede all previous agreements, amendments thereto,
negotiations, commitments, and writings with respect to such subject
matter.
6.3 Termination and Remedies. This Agreement may be
terminated (a) at any time by the mutual written agreement executed
by all parties hereto, (b) at any time by a party hereto if the other
party hereto shall have materially breached any of its obligations or
agreements hereunder. Upon its termination, this Agreement shall be
null and void and of no further effect, and, in the event of a
material breach hereof by either of the Transferors or Field,
Headliners shall have the option of reinstating and continuing to
prosecute the Litigation.
6.4 Waiver, Discharge, etc. This Agreement may not be
amended or modified in any manner except by an instrument in writing
signed on behalf of each of the parties hereto by their duly
authorized representatives.
6.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered by hand,
mailed by certified or registered mail (return receipt requested) or
sent by overnight courier to the parties at the following addresses
(or at such other address for a party as may be specified by like
notice) and shall be deemed given on the date on which it is so hand-
delivered or on the third business date following the date on which
it is so mailed.
(a) If to Headliners:
000 Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xx Xxxxxxxxx
with a copy to:
HodgsonRuss LLP
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxx X.Xxxxxx, Esq.
(b) If to the Transferors or Field:
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
with a copy to:
Xxxxx X. Bank
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
E-mail: xxxxx@xxx.xxxxxxx.xxx
6.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey
without regard to the rules of conflict of laws. Each of the parties
consents to the jurisdiction of the state and federal courts in the
State of New Jersey and the County of Essex in connection with any
dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdiction.
6.7 Successors and Assigns. No party hereto may assign any
of its rights, or delegate any of its duties, hereunder without the
prior written consent of the other party hereto. This Agreement shall
be binding upon and inure to the benefit of the parties hereto, and
their successors or assigns.
6.8 Execution in 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 a binding
agreement when one or more counterparts have been signed by each
party and delivered to the other party.
6.9 Expenses. The parties shall each bear their respective
costs and expenses incurred in connection with the negotiation,
preparation and consummation of the Transaction.
6.10 Trademarks. The parties confirm that all trade names
associated with the Acquired LLCs and Louisville were effectively
transferred to Headliners pursuant to the Acquisition Agreement and
the Amendment. Headliners shall permit the Transferors to use the
trade names associated with the Acquired LLCs and Louisville provided
that neither the Transferors nor any of their affiliates or assigns
may use any such trade name to engage in any trade or business within
50 miles of a business conducted by an Acquired LLC or Louisville.
6.11 Upon five (5) business days' notice to Headliners, the
Transferors or Field may assign the payments hereunder without
penalty.
IN WITNESS WHEREOF, the parties have hereunto set their hand and
executed this Agreement on the date first written above.
HEADLINERS ENTERTAINMENT JHF PROPERTY HOLDINGS, LLC
GROUP, INC.
By: /s/Xxxxxxx Xxxxxxxxx By: /s/ Xxx X. Field
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Xxxxxxx Xxxxxxxxx, C.E.O. Xxx X. Field, C.E.O.
/s/ Xxx X. Field /s/ Xxxx Xxxxxx
------------------------------ --------------------------
Xxx X. Field Xxxx Xxxxxx
/s/ Xxx X. Field
------------------------------
Xxx X. Field
