SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into on the 23rd day of
January, 1997 by and between, Westmark Group Holdings, Inc., a Delaware
corporation ("WGHI") and Medical Industries of America, Inc., a Florida
corporation ("MIOA"), and is made in reference to the following:
RECITALS
WHEREAS, WGHI and MIOA (formally Heart Labs of America, Inc.) entered into
a Stock Purchase Agreement on or about November 21, 1995 together with
amendments thereto and;
WHEREAS, WGHI is the owner and holder of 200,000 shares of convertible
preferred stock of MIOA and;
WHEREAS, MIOA is the owner and holder of 1,667,284 shares of unregistered
common stock of WGHI and;
WHEREAS, MIOA is the owner and holder of 200,000 shares of convertible
preferred stock of WGHI and;
WHEREAS, from time to time, since November 27, 1995, MIOA has provided
additional financing to WGHI in the approximate sum of One Million Nine Hundred
Fifty-Three Thousand Dollars ($1,953,000) and;
WHEREAS, various disputes have arisen by and between the parties with
regard to loans, liabilities, stock ownership and enforcement of the terms and
conditions of the aforementioned Stock Purchase Agreement as amended and;
WHEREAS, the parties hereto wish to settle and resolve any and all
disputes, debts, damages, accounts, claims and demands whatsoever between the
parties arising from the aforementioned Stock Purchase Agreement, loans,
liabilities and stock ownership;
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, and other covenants and conditions contained herein, WGHI and MIOA
mutually agree as follows:
1. CLOSING DATE. WGHI covenants and agrees that WGHI is diligently
negotiating a financing proposal that would provide additional capitalization to
WGHI in a minimum amount of $3,000,000 and a maximum amount of $6,000,000. For
the purpose of this Agreement, "Additional Capitalization" shall be defined as
gross proceeds. The parties hereto further mutually agree that the terms and
conditions of this Agreement and the duties and responsibilities herein
contained are subject to and expressly conditioned upon the receipt by
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WGHI of minimum Additional Capitalization in the sum of $3,000,000 by March 15,
1997 ("First Tranche"). Upon receipt of said Additional Capitalization WGHI and
MIOA agree to do and perform the following no later than April 15, 1997 (the
"Closing Date"):
a. WGHI shall pay MIOA as follows:
(i) $1.5 million cash on or before April 15, 1997, provided
that WGHI shall have received no less than $6,000,000 in gross
proceeds as a result of Additional Capitalization. In the
event the Additional Capitalization received by WGHI is less
than $6,000,000 but more than $5,000,000, MIOA shall receive
all proceeds in excess of $5,000,000. In the further event the
Additional Capitalization received by WGHI is less than
$5,000,000 but more than $3,000,000, MIOA shall receive ten
percent (10%) of said Additional Capitalization. If WGHI
receives no more than $3,000,000 in Additional Capitalization
by March 15, 1997, MIOA shall receive a cash payment of
$300,000 on March 28, 1997.
(ii) WGHI shall execute a promissory note pursuant to the
schedule set forth on Exhibit "A" which is attached hereto and
by this reference made a part hereof. Said promissory note
shall bear interest at ten percent (10%) per annum. Payments
of principal and interest shall be amortized equally over ten
(10) years, with payments commencing July 31, 1997. All unpaid
principal and accrued interest shall be due and payable no
later than three (3) years from the date of execution of this
Agreement. The form of the promissory note is attached hereto
as Exhibit "B" and incorporated herein. On the Closing Date an
amortization schedule will be prepared, attached hereto as
Exhibit "C" and incorporated herein.
(iii) Said promissory note shall also provide for a principal
reduction in the sum of $500,000 in the event of the sale or
disposition by WGHI of its wholly owned subsidiary, Green
World Technologies, Inc. prior to the maturity date of the
note, provided, however, that WGHI shall have
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received a minimum of $500,000 cash from said sale or
disposition. MIOA shall be entitled to all cash received by
WGHI up to $500,000. Said principal reduction will occur
contemporaneously with the closing of the sale or disposition
of Green World Technologies, Inc. WGHI represents that it is
diligently pursuing the sale of Green World technologies Inc.
and that said company will not be sold or disposed for less
than fair market value. The parties mutually agree that WGHI
may elect to "spin off" Green World Technologies in which
event MIOA shall not be entitled to a principal reduction
unless said "spin-off" shall result in the payment of cash to
WGHI.
(iv) Said promissory note shall further provide that if prior
to the maturity date of the note, WGHI sells its note
receivable or other collateral resulting from the Green World
Technologies, Inc. sale, or disposition, the balance of the
MIOA promissory note shall be paid in full to the extent of
the proceeds received from the sale of said note receivable or
other collateral.
(v) Said promissory note may be pre-paid in part or in full by
WGHI without penalty.
(vi) Said promissory note shall be secured by a mortgage on
the real property described on Exhibit "D" attached hereto and
incorporated herein and if necessary, by an assignment by WGHI
to MIOA of the Green World Technologies' note receivable or
other collateral referred to hereinabove, or a pledge of the
shares of Green World Technologies stock retained by WGHI in
the event of a "spin off" of Green World Technologies, Inc.
MIOA shall have no proprietary rights or voting rights with
respect to the collateral in the absence of a default by WGHI.
The value of the security shall not exceed the balance of the
principal and interest due pursuant to the MIOA promissory
note.
b. WGHI shall endorse, assign, transfer and convey to MIOA any and
all MIOA convertible preferred stock owned by WGHI.
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c. WGHI shall waive any and all rights, claims, demands or
entitlements with respect to the aforementioned Stock Purchase
Agreement, as amended.
d. WGHI shall provide quarterly financial statements of WGHI and its
subsidiaries to MIOA.
2. MIOA OBLIGATIONS. In consideration of the foregoing, MIOA covenants and
agrees to do the following:
a. MIOA shall endorse, assign, transfer and convey to WGHI any and
all WGHI shares of convertible preferred stock owned by MIOA. b.
MIOA shall endorse, assign, transfer and convey to WGHI any and all
WGHI shares of common stock owned by MIOA. Upon receipt of
certificates representing all of the common stock of WGHI owned by
MIOA, WGHI shall reissue a certificate for 70,000 shares of common
stock to MIOA in full and final satisfaction and settlement of any
and all claims with respect to WGHI shares owned by MIOA except as
hereinafter set forth. WGHI further agrees that certain other shares
of common stock of WGHI shall be reissued to MIOA pursuant to the
schedule set forth on Exhibit "A" which is incorporated herein. MIOA
shall have demand registration rights and "piggyback" registration
rights with respect to said shares at the expense of WGHI. All
re-issued shares shall be deemed to have been re-issued on the date
of the original issuance. MIOA covenants and agrees that upon
registration of said reissued shares of common stock, MIOA shall not
sell, transfer or convey more than 60,000 shares of said common
stock per month, or fifteen percent (15%) of the total reissued
shares per month, whichever is less. In the event WGHI completes a
reverse stock split within seven (7) months of the Closing Date and
prior to the sale, transfer or conveyance of all the reissued shares
held by MIOA, WGHI shall register and issue additional shares of
common stock to MIOA in the event of any diminution in the value of
the remaining reissued shares thirty (30) days after the date of the
reverse stock split. MIOA shall assume the market risk with respect
to said shares prior to and thirty-one (31) days after any reverse
stock split.
c. MIOA shall waive any and all rights, claims, demands or
entitlements with respect to the aforementioned Stock Purchase
Agreement, as amended.
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d. MIOA shall release and forever discharge WGHI with respect to any
rights, claims, demands or entitlements pertaining to any money,
financing, loans or other consideration given or provided to WGHI by
MIOA.
3. UNENCUMBERED SHARES. WGHI and MIOA mutually covenant and agree that
each and every share of common and preferred stock to be transferred, assigned
and conveyed by one party to the other, shall be free and clear of all liens,
encumbrances and restrictions on transfer other than restrictions, pursuant to
applicable state and federal securities laws.
4. ACCRUED DIVIDENDS AND INTEREST. On the Closing Date, WGHI and MIOA
mutually agree to waive any and all claims or demands with respect to dividends
or interest arising out of the ownership of preferred stock or any other
business relationship by and between the parties.
5. MUTUAL RELEASE. Subject to the Closing Date as hereinabove set forth
and the performance of the terms and conditions contained in this Agreement,
each party hereby forever releases and discharges the other party and each of
its heirs, officers, directors, shareholders, employees, agents, affiliates,
subsidiaries, attorneys, successors and assigns of and from any and all claims,
rights, duties, obligations, debts, liabilities, damages, injuries, actions and
causes of action of every kind and nature, foreseen and unforeseen, contingent
and actual, liquidated and unliquidated, suspected and unsuspected, disclosed
and undisclosed, whether direct or by way of indemnity, contribution or
otherwise, arising out of or related to the aforementioned Stock Purchase
Agreement and amendments thereto, the ownership of shares of common and
preferred stock as hereinabove set forth and the business relationship by and
between the parties.
6. EXCEPTIONS TO MUTUAL RELEASE. Nothing contained in this Agreement shall
operate to release or discharge either party or its successors or assigns from
any claims, rights or causes of action arising out of or relating to a breach of
any of the obligations of the parties contained in this Agreement.
7. SURVIVAL OF MIOA WARRANT OBLIGATION. The parties acknowledge that the
aforementioned Stock Purchase Agreement, as amended, provided for the issuance
of warrants by MIOA for the benefit of WGHI shareholders and that said warrants
will not expire until November 21, 1997. MIOA covenants and agrees that MIOA
will have a continuing responsibility to the shareholders of WGHI with respect
to the terms and conditions of the Warrant Agreement contained in said Stock
Purchase Agreement. Said warrant terms and conditions shall survive the
termination of the Stock Purchase Agreement and amendments thereto.
8. NATURE OF AGREEMENT. The provisions contained in this Agreement
constitute a compromise of disputed issues. This Agreement shall not, in any
way, be construed
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as an admission by either party of any unlawful, wrongful or invalid act.
9. AUTHORITY TO EXECUTE. Each party to this Agreement represents that all
necessary corporate action has been taken to authorize the execution, delivery
and performance by each party to this Agreement. This Agreement is the legal,
valid and binding obligation of each party, enforceable against each party in
accordance with its terms, subject as to enforcement only as to applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application relating to or affecting the rights of creditors generally
and to general equitable principals. This Agreement does not violate any
agreement or contract to which either party is a party thereto.
10. PUBLICITY. No press release or public disclosure, written or oral, of
the transactions contemplated by this Agreement shall be made by either of the
parties hereto without the written consent of both parties and until the parties
have jointly issued a press release or otherwise publicly disclosed the
transactions. This prohibition shall not apply to any disclosure required by
law.
11. ORGANIZATION, GOOD STANDING AND QUALIFICATIONS. WGHI and MIOA are
corporations duly organized, validly existing and in good standing under the
laws of the state of incorporation for each incorporation. Each party has all
the requisite corporate power and authority to own and operate its properties
and assets, and to carry on its business, to execute and deliver this Agreement
and to carry out the provisions of this Agreement. Both WGHI and MIOA are duly
qualified to transact business and are in good standing in each jurisdiction in
which the failure to so qualify would have a material and adverse effect on the
business, properties, condition (financial or otherwise) or operations of each
party to perform its obligations under this Agreement.
12. GOVERNMENTAL CONSENTS. No consent, approval, qualification, order or
authorization of or filing with any local, state or federal governmental
authority is required on the part of either WGHI or MIOA in connection with the
execution and performance of this Agreement.
13. NO VIOLATION, CONFLICT OR DEFAULT. The execution, delivery and
performance by WGHI and MIOA of this Agreement and consummation of the
transactions contemplated hereby will not result in any violation or default of
any provision of either corporations' Certificate of Incorporation or By-Laws,
any statute, law, regulation, order or decree applicable to either party or any
contract, commitment, agreement, arrangement or restriction of any kind to which
either WGHI or MIOA, is a party. WGHI has not entered into nor does WGHI
contemplate entering into any agreement that would alter or change the intent of
this Agreement.
14. LITIGATION. WGHI and MIOA each warrant that there are no legal
administrative, governmental or arbitration proceedings pending by or before any
court, governmental administrative agency or commission or arbitrator against
WGHI or MIOA that
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would prevent a consummation of the transactions contemplated in this Agreement.
The parties further mutually agree that either party may terminate this
Agreement by giving written notice of termination to the other party, if the
other party, prior to the Closing Date has: (i) a receiver of its assets or
property appointed because of insolvency; (ii) filed a voluntary or involuntary
petition in bankruptcy; (iii) made a general assignment for the benefit of
creditors or (iv) been adjudged a bankrupt; (v) instituted or suffered to be
instituted any proceeding for the reorganization or rearrangement of its
affairs.
This right of termination may be exercised without prejudice to any
other remedy to which either party may be entitled to at law or in equity under
this Agreement.
15. FURTHER COOPERATION. Each party hereto agrees to execute, acknowledge,
and/or deliver any and all documents reasonably necessary to carry out and
perform its obligations hereunder.
16. ENTIRE AGREEMENT. This Agreement contains the entire Agreement and
understanding between the parties as to the settlement of all claims and
supersedes and replaces all prior settlement negotiations and proposed
agreements, written and oral. The parties hereto acknowledge that no other party
or agent or attorney of any other party has made any promise, representation or
warranty whatsoever express or implied not contained in this Agreement
concerning the subject matter hereof to induce either party to enter into this
Agreement, and each party acknowledges that it has not executed this Agreement
in reliance upon any such promise, representation or warranty not contained
herein.
17. SEVERABILITY. Every provision of this Agreement is intended to be
severable. In the event any term or provision hereof is declared to be illegal
or invalid for any reason whatsoever by a tribunal of competent jurisdiction,
such illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
18. NO WAIVER. The waiver, either expressed or implied, by any party
hereto of any term or condition of this Agreement, shall not constitute a
relinquishment by said party of its right to enforce the term or condition at
any later date unless this Agreement is amended in writing to so provide for an
unconditional waiver.
19. NO ASSIGNMENT. As a condition of this Agreement, the parties represent
and warrant that there has been no actual assignment or purported assignment or
other transfer of any claims or other matter or any interest which has been
released by any provision of this Agreement. The parties represent and warrant
that they are the sole owners and real-party-in- interest regarding their
respective claims and matters being released by this Agreement. In the event
that any representation or warranty made by any of the parties in this paragraph
is false or incorrect, it is agreed that the party making such representation or
warranty shall indemnify the other party for any and all claims, demands, causes
of action, obligations, set-offs, liabilities, damages, losses, injuries, costs,
expenses and attorneys' fees incurred by them or any of them
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as a result of such a false or incorrect representation or warranty. Further, it
is agreed by the parties that the foregoing indemnity does not require the party
seeking the indemnification to have made a payment to a third party claimant as
a condition precedent to recovery of the indemnity granted pursuant to this
action.
20. ADVICE OF COUNSEL. Prior to the execution of this Agreement and any
other document to which reference is made herein, each party hereto and thereto
has fully understood and carefully read all of the provisions of this Agreement.
That each party has consulted with or alternatively has had opportunity to
consult with, legal counsel of its own choice concerning the terms and
conditions of this Agreement and any other document to which reference is made
herein, and such other opportunity to participate in the drafting of this
Agreement and such other document, and that each such party to this Agreement
and such other document is voluntarily entering into this Agreement.
21. COUNTERPARTS. This Agreement may be executed in any number of original
counterparts. Any such counterpart, when executed shall constitute an original
of this Agreement, and all such counterparts together shall constitute one and
the same Agreement.
22. NO MODIFICATION. No waiver, modification or amendment of any term,
condition or provision of this Agreement shall be valid or have any force or
effect unless made in writing and signed by the parties against whom the waiver,
modification or amendment is asserted.
23. GOVERNING LAW. This Agreement shall be governed by and interpreted
according to the laws of the State of Florida.
24. INTERPRETATION. None of the parties hereto, nor their respective
counsel, shall be deemed the drafter of this Agreement for purposes of
construing the provisions hereof. The language in all parts of this Agreement
shall in all cases be construed according to its fair meaning, not strictly for
or against any of the parties hereto.
25. ATTORNEYS' FEES TO ENFORCE THIS AGREEMENT. In the event that any
action is commenced to seek enforcement of this Agreement or a declaration of
rights thereunder, the prevailing party in such action shall be entitled to
recover its reasonable attorneys' fees and costs incurred in connection with
that action.
26. JURISDICTION AND VENUE. In the event that any action is commenced to
seek enforcement of this Agreement or a declaration of rights thereunder, the
jurisdiction and venue for any such action shall be in Palm Beach County,
Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
WESTMARK GROUP HOLDINGS, INC. MEDICAL INDUSTRIES OF AMERICA
By:_________________________ By:________________________
Its:________________________ Its:_______________________
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