EXHIBIT 10.10
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is dated December _____, 2002 and is by
and between GATEWAY DISTRIBUTORS, LTD., a Nevada Corporation ("Gateway"), and
XXXXXXX XXXXx, Xx. an individual resident of the Commonwealth Of Kentucky
("Xxxxx").
RECITALS
WHEREAS, on or about August 17, 1999, Gateway entered into an Asset Purchase
Agreement with TeamUp International, Inc. ("TeamUp"), which was, at the time, a
Nevada Corporation, which has subsequently been administratively dissolved by
the Secretary of State of Nevada. A copy of the Asset Purchase Agreement is
attached hereto as Exhibit "A"; and
WHEREAS, Xxxxx was a 27.5% shareholder in TeamUp; and
WHEREAS, the Asset Purchase Agreement contained certain requirements for the
shareholders of TeamUp, including Xxxxx to be paid a certain sum of money in
exchange for their shares of TeamUp; and
WHEREAS, TeamUp now having been administratively dissolved, the debts owed for
the shares become personal debts due the shareholders, including Xxxxx; and
WHEREAS, certain disputes, controversies and disagreements have arisen among the
parties concerning Gateway's performance under the Asset Purchase Agreemen
including that Gateway is in breach of its obligation to pay Xxxxx the
consideration due under the Asset Purchase Agreement for his share of TeamUp
stock (hereinafter the "Dispute"); and
WHEREAS, the parties have negotiated a resolution and settlement of the Dispute
on the terms hereinafter set forth, pursuant to which they desire to settle and
compromise all disputes, controversies and disagreements among them which exist
as of the date hereof; and
NOW, THEREFORE, the parties agree as follows:
1. DEBT. There are two components to Xxxxx' debt:
(1) Xxxxx is owed $137,500.00 for his share of the stock sold as a
result of the Asset Purchase Agreement; and
(2) Xxxxx is owed $110,000.00 representing Xxxxx' loss on the dilution
of the original shares issued by Gateway for the purchase of his
shares of TeamUp.
2. CONSIDERATION. For good and valuable consideration, it is agreed that Xxxxx
will be paid as follows on the debt:
(1) On the date of the execution of this Agreement, Xxxxx will be
issued 400,000 shares of Gateway restricted common stock representing
debt due to Xxxxx owed for more than two years that should have been
issued at the time of the Asset Purchase Agreement, which Xxxxx may at
any time in the first 90 days of this Agreement, sell at the best
price obtainable on the open market. In order to effectuate this
provision, the restricted stock must have the restriction lifted to
become free trading stock. Gateway shall, at its sole expense,
immediately upon execution of this Agreement, obtain an opinion letter
from an licensed attorney at law, expressing an opinion that the
restriction(s) on the share certificate(s) have been fulfilled and
that the restriction(s) on the certificate(s) should be removed to
allow the stock to become free trading stock, the effect of this
opinion letter shall be to allow Xxxxx to be able to sell the stock
immediately.
(2) Immediately upon proof of sale of the block of 400,000 shares or
any subsequent block of shares Gateway shall issue additional blocks
of shares to Xxxxx as described herein below. Xxxxx will report to
Gateway the amount of money realized from the sale of the first
400,000 shares of Gateway stock along with proof of sale. Upon receipt
of that report, Gateway shall immediately issue additional blocks of
unrestricted stock based on the Gateway stock's value on the date of
issue to Xxxxx so that the sale proceeds of the second and subsequent
blocks of stock issued shall
result in proceeds, within the first 90 days of this Agreement, to
Xxxxx that shall total $34,375.00. Xxxxx shall, on all subsequent
sales of stock, provide proof of sale of the shares issued and the
proceeds realized from the sale before being entitled to any
additional blocks of stock from Gateway.
(3) Presuming the Agreement is not otherwise terminated as described
herein, between the 91 st day and the 365 th day after the execution
of this Agreement, or any time before that date, Gateway shall
immediately and continuously issue Xxxxx additional blocks of
unrestricted Gateway stock so that Xxxxx' entire $137,500.00 debt is
paid in full by the 365 th day of this Agreement. Additional blocks of
stock shall be issued immediately upon proof from Xxxxx of the sale of
the stock and the proceeds realized from the sale. In the event that
during the distribution of the additional blocks of shares that the
share price should decrease as a result of Xxxxx selling shares or
otherwise, Gateway will continue to issue additional blocks of stock
to Xxxxx until Xxxxx has been able to collect, via sale of the shares,
the sum total of $137,500.00.
(4) Additionally, on day 90 of this Agreement, Gateway shall issue to
Xxxxx 110,000 shares of the Restricted 144 stock. This stock shall
have a warrant date of one year from the date of issuance at market
price.
3. DURATION OF THE AGREEMENT. On the 90 th day after the execution of this
Agreement, Xxxxx will determine whether he has realized, from the sale of blocks
of Gateway stock, capital sufficient to repay $34,375.00 to him. In the event
that Xxxxx has not been issued, and/or has not been able to sell enough Gateway
stock to recoup $34,375.00, then Gateway shall immediately issue stock to Xxxxx
for the balance of the $34,375.00, in full. If Gateway does not immediately
issue said additional stock (within no more than five days of the end of the 90
day period), then this Agreement, and all other agreements related to this
Agreement, including but not exclusively, the Non-Compete Agreement described
below, shall, at the sole option of Xxxxx, be terminated and be of no further
force and effect. Conversely, Xxxxx may agree, at his sole discretion, to
renegotiate the payment arrangements and continue with this Agreement as
amended. If, on the 365 th day after the execution of this Agreement Xxxxx has
not realized the sum total of $137,500.00 from the sale of Gateway stock, then
this Agreement shall terminate and all other agreements related to this
Agreement, including the Non Compete Agreement, shall at the sole option of
Xxxxx, terminate and be of no further force and effect. If Xxxxx chooses not to
terminate this Agreement on the 365 th day, Gateway is obligated to issue Xxxxx
enough stock in the 30 days following the end of the first year of this
Agreement to permit Xxxxx to pay off the remaining balance of the $137,500.00
debt owed to Xxxxx, or this Agreement and all other agreements related to this
Agreement, including but not exclusively, the Non-Compete Agreement shall be
immediately void and held for naught.
4. PUBLIC ANNOUNCEMENTS. None of the parties hereto shall make any public
announcement with respect to this transaction without the prior written consent
of Gateway.
5. RIGHT TO COMPETE. It is agreed and understood that it is in the best interest
of Xxxxx to see Gateway succeed. During the term of the Asset Purchase
Agreement, nevertheless, Gateway has diluted Xxxxx' interest in Gateway
substantially. Gateway has ceased selling over 75% of the former product line,
and has not paid Xxxxx under its obligations under the Asset Purchase Agreement
for over three years. To that end, it is agreed that Xxxxx may engage in a
business similar to that of Gateway which produces and/or sells products with
similar ingredients, so long as, Xxxxx does not use the product name TeamUp or
the name of any products distributed by TeamUp on the date of the closing of the
Asset Purchase Agreement. It is agreed that Xxxxx may use all or any part of the
distribution system used by Gateway to distribute and sell Xxxxx' products and
that this shall not constitute competition with Gateway or direct or indirect
enticement of employees or consultants of Gateway to leave their employment
engagement with Gateway as defined in this Agreement or in any separate
non-competition agreement. Xxxxx agrees that, during the term of this Agreement,
Xxxxx, will make no false or slanderous statements about Gateway operations to
the distributors, employees or consultants of Gateway and Xxxxx will instruct
his employees and business affiliates that they are to do the same. Neither
Xxxxx nor any employee, representative, or business affiliate of Xxxxx may make
any representation to any Gateway distributor or consultant that he has the
permission of Gateway to make any sort of contact or communication with the
distributor or consultant.
6. EARLY PAYOFF. Gateway has the right to pay off any balance owed to Xxxxx at
any time without penalty. In the event Xxxxx is paid off, Xxxxx shall return any
unused Gateway stock in his possession at the close of the business day after
receipt of certified uncashed funds from Gateway.
7. NON-COMPETITION. Xxxxx agrees to execute a Non-Competition Agreement with
Gateway which shall remain in full force and effect so long as Gateway is not in
default or breach of this Settlement Agreement in any way. In the event
specifically that Gateway does not transfer to Xxxxx stock sufficient to meet
the debt payoff guidelines and deadlines set forth in Section 2 of this
Settlement Agreement, by which Xxxxx reserves the right to void and cancel this
Settlement Agreement, the effect of which shall be to also void and cancel the
Non-Competition Agreement executed herewith.
8. DEFAULT. In the event Gateway fails to perform any of its obligations under
this Settlement Agreement, time being of the essence, then Gateway shall be in
Default of this Settlement Agreement. In the event of a Default, Xxxxx may
declare that the Settlement Agreement and all other agreements relating to or as
a result of this Agreement, including but not exclusively, the Non-Competition
Agreement signed by Xxxxx to be void and unenforceable with no further force and
effect.
9. TAXES. All taxes due on the sale of stock will be the responsibility of
Xxxxx. Xxxxx will execute any tax documents necessary to allow Gateway to make
appropriate reporting to any governmental agency which regulates the buying and
selling of stock on an open market, including but not exclusively, the Internal
Revenue Service, and the Securities and Exchange Commission.
10. NOTICES. All notices shall be sent via overnight mail, with signature
confirmation, or via hand delivery, and if to Xxxxx, it shall be addressed as
follows: Xxxx Xxxxx, X.X. Xxx 00000, Xx. Xxxxxx, XX 00000-0000, with a copy to:
Xxxxxxx X. Xxxxxxxxxxx, Esq., Attorney for Xxxx Xxxxx, Xxxx, Xxxxxxxxxxx &
Xxxxxx LLP, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000. If to
Gateway, it shall be addressed as follows: Gateway Distributors, Ltd., 0000 Xxxx
Xxxxxxx Xxxx, Xxxxx 00, Xxx Xxxxx, XX 00000, ATTN: Xxxxxxx X. Xxxxxx,
President/CEO. Either party may designate a new address to which they desire to
be served with notices at any time in the future.
11. WARRANTIES AND REPRESENTATIONS. Each party hereto expressly warrants and
represents that none of the claims, causes of action, suit, demands, losses, or
damages which are the subject matter of this Agreement have been assigned or
transferred to any other person or entity and, accordingly, each party hereto
agrees to indemnify and hold the other party hereto harmless from any such
claims of third parties claiming by, through or under the indemnifying party.
12. ENTIRE AGREEMENT. This Agreement, together with any documents and agreements
executed in connection herewith, represents the entire agreement among the
parties related to the subject matter hereof and supercedes all prior or
contemporaneous agreements.
13. NO MODIFICATION. This Agreement may not be changed, modified, discharged or
abandoned, in whole or in part, except pursuant to the express written consents
of the parties hereto.
14. CHOICE OF LAW. This Agreement shall be construed under and in accordance
with the internal laws of the State of Nevada.
15. NO WAIVER. Each party and person executing this Settlement Agreement on
behalf of a party represents that the person signing this Agreement on behalf of
the party has been duly authorized to do so by all necessary corporation action
so that this Agreement represents the valid and binding agreement of the
parties.
16. EFFECTIVENESS OF AGREEMENT. No provision, condition, or term hereof may be
waived, except by an express written waiver, and then such waiver shall apply
only to the specific instance referred to and not any subsequent condition, term
or provision, even a similar one. No right or obligation hereunder may be
assigned or sublet without express prior written consent of all parties hereto.
17. This Agreement shall be binding upon and inure to the benefit of each of the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties have caused this Settlement Agreement to be
executed and witnessed as of the date and year first set forth above.
GATEWAY DISTRIBUTORS, LTD.
BY: ______________________________
Xxxxxxx X. Xxxxxx, President/CEO
XXXXXXX XXXXX, XX.
______________________________
