EXHIBIT 10.1
SETTLEMENT AND MODIFICATION AGREEMENT
This Settlement and Modification Agreement ("Agreement") is entered into
in Santa Ana, California as of October 1, 2004 by and between VitroTech
Corporation, a Nevada corporation ("VitroTech"), VitroCo Incorporated, a Nevada
corporation, a wholly owned subsidiary of VitroTech ("VitroCo"), Hi-Tech
Environmental Products, LLC, a Nevada limited liability company ("Hi-Tech"),
Enviro Investment Group, LLC, a Nevada limited liability company ("EIG"), Red
Rock Canyon Mineral, LLC, a California limited liability company ("Red Rock")
and Valley Springs Mineral, LLC, a California limited liability company ("Valley
Springs"). EIG, Red Rock and Valley Springs are sometimes collectively referred
to herein as the "Mining Companies". The Mining Companies and Hi-Tech are
sometimes collectively referred to herein as the "Private Companies". VitroTech
and VitroCo are collectively referred to herein as the "Public Companies".
RECITALS
A. Pursuant to an agreement dated September 8, 1997 with Xxxxxxx
Xxxxxxx, EIG has the right to mine and market that certain rhyolite type mineral
("Mineral") located on property owned by Xx. Xxxxxxx in Calaveras County,
California.
B. Red Rock is the owner of certain real property located in Xxxx
County, California (subject to a lien in favor of the seller, Xxxxxx and Xxxxxx
Xxxxxxxxx), upon which is located Mineral.
C. Pursuant to a Purchase and Sale Agreement dated February 8, 2000
with Xxxxxxx Xxxxxx and Xxxxx Xxxxxx, an Agreement dated March 6, 2002 with
Xxxxxx Xxxxxxxx, Trustee of the Alpha Operating Trust, which rights were
subsequently assigned by Alliance Asset Management Corp. to Valley Springs,
Valley Springs may have certain rights to mine and market Mineral located on
property currently owned by the heirs of Messrs. Dubnow and Xxxxxx, as to a
tenancy in common interest, and Xx. Xxxxxxxx, as Trustee of the Alpha Operating
Trust, as to a tenancy in common interest.
D. The Mining Companies entered into the following agreements,
respectively, with Hi-Tech, pursuant to which Hi-Tech was granted the right to
mine and market the Mineral on behalf of the Mining Companies, in exchange for
which Hi-Tech agreed to pay to the Mining Companies a purchase price based on
each pound of Mineral sold from the respective properties:
1. EIG - Second Amended and Restated Agreement dated as of March
16, 2001, as amended by a First Amendment dated as of December 31, 2001, a
Second Amendment dated as of December 31, 2002, a Third Amendment dated as of
February 2, 2004 and a Fourth Amendment dated February 10, 2004;
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2. Red Rock - Agreement dated as of April 5, 2002, as amended by
a First Amendment dated as of February 2, 2004 and a Second Amendment dated as
of February 10, 2004; and
3. Valley Springs - Agreement dated as of April 5, 2002, as
amended by a First Amendment dated as of February 2, 2004 and a Second Amendment
dated as of February 10, 2004.
The Agreements between the Mining Companies and Hi-Tech are collectively
referred to herein as the "Mining Contracts".
E. Pursuant to an Assignment and Assumption of Agreements dated as of
February 3, 2004, VitroCo received an assignment of the rights and obligations
of Hi-Tech under the Mining Contracts, in consideration of which Hi-Tech
received Fifteen Million (15,000,000) shares of VitroTech stock. In addition,
VitroCo and Hi-Tech entered into a Royalty Agreement dated as of February 3,
2004, as amended by a First Amendment dated February 10, 2004, pursuant to which
Hi-Tech is entitled to receive a royalty based on each pound of Mineral sold
from the respective properties.
F. The purchase price due the Mining Companies and the royalty due
Hi-Tech are collectively referred to herein as the "Private Company Payments".
G. Over the years, pursuant to various Private Offering Memoranda,
Hi-Tech raised money from private investors, who received promissory notes
("Notes"), which provide in part that the investors would receive contingent
interest based on each pound of Mineral sold from the respective properties, up
to a certain pre-determined number of pounds. The obligation to the investors
was assumed by VitroCo.
H. VitroTech guaranteed the obligations of VitroCo to pay the Private
Company Payments and the Notes (including principal, interest and contingent
interest) to the investors.
I. The purchase price due to the Mining Companies and the obligations
under the Notes to the investors pre-existed the assignment of rights to
VitroCo. The royalty due Hi-Tech was created as consideration of the assignment
of the Mining Contracts to VitroCo, and occurred concurrently with the merger of
VitroCo Materials into Star Computing, and the subsequent name change from Star
Computing to VitroTech.
J. It was anticipated at the time of the merger that the Mineral would
be able to be sold to users, either by VitroCo directly or through distributors,
for a minimum of Five Dollars and Twenty Five Cents ($5.25) per pound. Based on
that purchase price, and the anticipated rate of sales, there would be ample
cash flow to pay the Private Company Payments, sums due under the Notes, and for
VitroCo to maintain an appropriate rate of return. The overall purchase
price/royalty structure was created based on advice from Xxxxx Xxxxx, a
consultant who was retained to provide advice in connection with the public
activities, and legal counsel Xxxxxxxxxx & Xxxxx, LLP as well as sales forecasts
created by Hi-Tech, in concert with Xxxxx Xxxxx, based on Xxxxx Xxxxx'x
representations about sales to international customers commencing in 2004.
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K. It was Hi-Tech's understanding that in addition to providing advice,
Xxxxx Xxxxx and Xxxxxx Xxxxxx would raise sufficient money for VitroTech to (i)
allow VitroCo to expand its sales force, therefore accelerating sales, and (ii)
create a cash reserve sufficient to allow VitroCo to operate until such time as
sales occurred and VitroCo was "cash positive". In consideration of such
obligation, Xxxxx Xxxxx and Xxxxxx Xxxxxx, through Elgin Investments, LLC,
received Thirteen Million (13,000,000) shares of stock in VitroTech. The monies
required are evidenced by a variety of schedules prepared by both Hi-Tech and
Xxxxx Xxxxx.
L. VitroTech subsequently split its shares 4:1, resulting in Hi-Tech
owning Sixty Million (60,000,000) shares and Elgin Investments owning Fifty Two
Million (52,000,000) shares.
M. Sufficient monies were not raised and significant sales have not
occurred.
N. Some of the managers and members of the Private Companies are also
officers and/or employees of VitroTech and/or VitroCo.
O. One or more of the shareholders of VitroTech has questioned (i) the
amount of the Private Company Payments relative to the market price for the
Mineral, and (ii) the perceived conflict of interest of individuals who are
managers or members of the Private Companies, as well as officers and/or
employees of VitroTech and/or VitroCo. One of these shareholders, on behalf of
1568931 Ontario Ltd. ("Lender"), has delivered a letter to VitroTech dated
September 29, 2004, pursuant to which the Lender would lend certain monies to
VitroTech, and make certain other financial commitments, all as contained in the
letter, based in part of the restructure of the Private Company Payments. In
order to partially satisfy the Lender's concerns of conflict of interest, Xxxx
Xxx Xxxxx has resigned his positions as President and CEO of VitroTech and
VitroCo.
P. The Private Companies have no obligation to amend the Private
Company Payments, the Mining Contracts or the Royalty Agreement. The Mining
Contracts provide that upon a default by VitroCo, and appropriate notice and
opportunity to cure, the Mining Companies have all rights available to them at
law or in equity, including but not limited to the right to terminate VitroCo's
rights under the Mining Contracts.
Q. VitroCo has requested that the Mining Companies not currently
exercise its rights to claim such an event of default. In reliance on
representations and warranties from VitroCo that it is in the process of
obtaining financing, which financing should be sufficient to allow VitroCo to
(i) fund its current operations, and (ii) add sales people to increase sales, on
September 29, 2004, Xxxx Xxx Xxxxx, as Chairman Manager of the Mining Companies,
and Xxxxx Xxxxxx, as Chairman Manager of Hi-Tech, delivered a non-binding letter
to VitroTech, pursuant to which it agreed to restructure the Private Company
Payments in exchange for 17,107,657 shares of VitroTech stock.
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R. Nothing herein shall affect the repayment of the Notes to the
investors, including principal, interest and contingent interest, the obligation
of which was assumed by VitroCo and guaranteed by VitroTech.
S. To the extent applicable, this Agreement shall be deemed to be an
amendment to both the Mining Contracts and the Royalty Agreement. Capitalized
terms which are not defined herein are used as they are defined in the
applicable Mining Contract and/or Royalty Agreement.
Now, therefore, in consideration of the foregoing, and other consideration
actually received, the parties hereto agree as follows:
1. Sums Currently Due Private Companies. Attached hereto as Schedule A
is a list of sums due the Private Companies as of the date hereof totaling
$1,085,652.98 ("Pre-Modification Delinquencies"). The Public Companies
acknowledge the accuracy of Schedule A. The Mining Companies currently have the
right to declare VitroCo to be in default under the Mining Contracts. Hi-Tech
currently has the right to declare VitroCo to be in default under the Royalty
Agreement. Notwithstanding the foregoing, the Private Companies agree that,
solely as it relates to the failure to currently pay the Pre-Modification
Delinquencies, the Private Companies shall defer their right to declare VitroCo
to be in default under the Mining Contracts or the Royalty Agreement until
December 31, 2006; provided, however, that (i) at such time as VitroCo becomes
"cash flow positive", as defined below, all monies over and above breakeven
shall first be paid to the Private Companies to reduce the Pre-Modification
Delinquencies, and (ii) to the extent possible, if VitroCo or VitroTech obtains
third party financing, it shall endeavor to include an allocation of monies from
such financing to reduce the Pre-Modification Delinquencies. Nothing herein
shall otherwise limit the right of the Private Companies to declare an event of
default under the Mining Contracts and the Royalty Agreement for any reason
permitted thereunder.
2. No Defaults by Private Companies. The Public Companies acknowledge
and agree that the Private Companies have performed any and all of their
obligations under the Mining Contracts, the Assignment and Assumption of
Agreements and the Royalty Agreement, as well as any other agreement between the
Private Companies and the Public Companies, and that none of the Private
Companies have any further obligation thereunder.
3. Purchase Price and Royalty Payment to Private Companies.
A. Mining Companies. Paragraph 5 of the EIG Mining Contract, and
paragraph 4 of the Red Rock Mining Contract and the Valley Springs Mining
Contract, are hereby amended to read as follows:
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"Purchase Price. In consideration of the exclusive right to mine,
remove and market the Mineral for sale, VitroCo shall pay to the Mining Company,
its successors or assigns, from which mine the Mineral was removed, a sum equal
to ten percent (10%) of the "gross sales price" per pound of Mineral sold
("Purchase Price")."
B. Hi-Tech. Paragraph 5 of the Royalty Agreement is hereby
amended to read as follows:
"Reservation of Royalty. Hi-Tech reserves and excepts unto
itself, its successors and assigns a royalty equal to the sum of Five Percent
(5%) of the "gross sales price" per pound of Mineral purchased pursuant to the
Mining Contracts, or any subsequent agreement with an Affiliated Mineral Entity
("Royalty"). Payment to Hi-Tech of the Royalty by VitroCo, or its successors or
assigns, shall be due and payable concurrently with the payments to EIG, Red
Rock and/or Valley Springs pursuant to their respective Mining Contracts, or to
any Affiliated Mineral Entity pursuant to any subsequent agreement with an
Affiliated Mineral Entity, including but not limited to payments which may be
paid to EIG, Red Rock, Valley Springs (and/or an Affiliated Mineral Entity) to
satisfy the Minimum Requirements, as defined in the Amendments to the Mining
Contracts."
C. Definition of "Gross Sales Price". For purposes of both the
Mining Contracts and the Royalty Agreement, the "gross sales price" shall mean
the actual price which VitroCo charges to a third party (whether to a
distributor, customer or otherwise). If any Mineral is provided to a third party
or otherwise used, and is not paid for (such as for testing purposes), then for
purposes of determining the Purchase Price and Royalty Payment, the average
sales price of Mineral for the prior calendar quarter shall be used. If any
Mineral is sold or otherwise transferred to a third party, and cash
consideration is not paid by such third party (i.e. Mineral which is used as
consideration for the purchase of third party stock or assets), then the Mining
Companies shall have the option of electing to receive either ten percent (10%)
of the benefit received by VitroCo, or the average sales price of Mineral for
the prior calendar quarter for each pound of Mineral so sold or transferred, and
Hi-Tech shall have the option of electing to receive either five percent (5%) of
the benefit received by VitroCo, or the average sales price of Mineral for the
prior calendar quarter for each pound of Mineral so sold or transferred. If the
Mineral is sold in a "value added" state, such as, for example, the Mineral is
compounded prior to sale (and therefore there is no actual sales price for the
Mineral), then the gross sales price shall be the average sales price of Mineral
for the prior calendar quarter for each pound of Mineral so sold or transferred.
The purpose of this paragraph is for the Private Companies to receive ten
percent (10%) and five percent (5%), respectively, of the consideration which
the Public Companies receive for the Mineral.
D. Net Payment. The Purchase Price due the Mining Companies and
the Royalty due Hi-Tech shall not be reduced by any sum whatsoever, including
but not limited to taxes, whether sales, use, ad valorum or otherwise, fees or
other obligations, including royalties or payments to third parties (all of
which shall be the obligation of VitroCo).
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E. Cash Flow Positive. Notwithstanding anything contained in this
paragraph 3, all sums due hereunder shall be deferred (without interest), and
not paid by VitroCo to the Private Companies, until such time as the
Consolidated Statement of Cash Flows for VitroTech Corporation indicates that
there is Positive Net Cash Flow from Operating Activities for the time period
commencing on February 3, 2004 and terminating at the end of a calendar quarter.
The foregoing analysis shall be performed at the end of each calendar quarter
until such time as the test is satisfied. Once satisfied, there shall be no
further deferral of Purchase Price or Royalty Payments (even if VitroTech
Corporation ceases to have Positive Net Cash Flow from Operating Activities in
the future for one or more quarters). The foregoing deferral shall not affect
the amount of Purchase Price or Royalty Payments due from VitroCo to the Mining
Companies and Hi-Tech, as the case may be, but only the timing of the payment
thereof. For purposes of this definition "Operating Activities" means solely the
exploitation of the use of the Mineral the plastics or paint/coatings
industries.
All Purchase Price and Royalty Payments first becoming due and
payable after the end of the calendar quarter in which the Positive Net Cash
Flow test is satisfied shall be timely paid by VitroCo to the Mining Companies
and Hi-Tech, as the case may be, as otherwise provided in this paragraph 3.
After the payment of all such current Purchase Price and Royalty Payments,
within ten (10) days after the end of each calendar quarter, VitroCo shall pay
to the Private Companies all Positive Net Cash Flow from Operating Activities,
as shown on the Consolidated Net Cash Flow for VitroTech Corporation, until such
time as all of the deferred Purchase Price and Royalty Payments are paid.
The foregoing "cash flow positive" limitation shall expire on
December 31, 2005, regardless of whether or not VitroTech is or has ever been
cash flow positive. At that point in time, any then unpaid Purchase Price or
Royalties shall be due and payable. The foregoing shall not apply to the payment
of Pre-Modification Delinquencies, which are the subject of paragraph 1 above.
VitroCo's obligation to advance on the Mining Companies' behalf
certain costs and expenses relating to the properties which are the subject of
the Mining Contracts are not subject to the limitations contained in this "cash
flow positive" provision, and VitroCo shall timely pay same, irrespective of
their cash position.
F. Transfer of Title. Title to the Mineral shall be deemed to
have passed to VitroCo only when VitroCo both sells the Mineral to a third party
(whether a distributor, customer or otherwise), and such Mineral has left the
physical possession of VitroCo. Until such time, and notwithstanding the mining,
removing and milling of the Mineral by VitroCo, title to the Mineral shall
remain with the applicable Mining Company.
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G. Timing of Payment - Calendar Years 2004 and 2005. Subject to
the "cash flow positive" limitation contained in paragraph E above, for sales
made during calendar years 2004 and 2005, VitroCo shall pay the purchase price
due the Private Companies on a monthly basis on or before the last business day
of the following month, based on sales revenue actually received by VitroCo
(that is, cash or other property collected by VitroCo). VitroCo shall not be
obligated to pay any sum to the Private Companies until and unless VitroCo
actually receives payment for the Mineral. VitroCo shall accompany payment with
evidence reasonably acceptable to the applicable Mining Company and Hi-Tech of
all revenues from Mineral actually received by VitroCo during the prior month.
H. Timing of Payment - Commencing January 1, 2006. For all sales
made commencing January 1, 2006, payment by VitroCo to the Private Companies
shall be due and payable within sixty (60) days after shipment to a third party
(whether customer, distributor or otherwise), or removal of the Mineral from the
Continental United States, whether or not such Mineral is sold. "Shipment" shall
be defined to mean when the Mineral has left VitroCo's mine site, warehouse or
processing facility, as the case may be. The payments due under this paragraph H
are not subject to the "cash flow positive" limitations contained in paragraph
E. Return of goods for any reason, or the failure by VitroCo to receive payment
for any shipment, or any claim of product liability, defective goods or the
like, shall not affect the timing of payment due hereunder, or give rise to any
claim for reimbursement or offset by VitroCo against either the Mining Companies
or Hi-Tech (however, VitroCo shall have no obligation to pay the Mining
Companies or Hi-Tech a second time if Mineral previously returned is resold).
4. Minimum Requirements. The "Minimum Requirements" contained in the
Mining Contracts is amended to provide that there are no Minimum Requirements
for pounds of Mineral sold in calendar years 2004 and 2005. Commencing calendar
year 2006, and for every year thereafter, the Minimum Requirements will be equal
to the greatest number of pounds of Mineral sold during any prior year.
5. Issuance of stock to Hi-Tech. In consideration of the amendment to
the Mining Contracts and the Royalty Agreement, VitroTech hereby agrees to
issues 17,107,657 shares of VitroTech common stock to Hi-Tech, as follows:
A. On January 3, 2005, VitroTech shall issue 5,000,000 shares of
its common stock.
B. On or before the Applicable Measurement Date (as defined
below) beginning in 2007 and annually thereafter until an aggregate of
12,107,657 shares (the "Additional Shares") shall have been issued (exclusive of
the shares issuable pursuant to Paragraph 5.A.), VitroTech shall issue a number
of shares of its common stock determined pursuant to the Issuance Formula (as
defined below).
C. The "Issuance Formula" shall be computed by (i) multiplying
(a) the Applicable Year Payment Delta (as defined below) by (b) 35%; and (ii)
dividing the product so determined by the Applicable Year End Stock Price (as
defined below).
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D. The "Applicable Year Payment Delta" shall be computed with
respect to each calendar year, beginning in 2006 and continuing until the
Additional Shares have all been issued (each such year being referred to as an
"Applicable Year"), by subtracting (i) the total Private Company Payments for
the Applicable Year as determined after giving effect to the provisions of this
Settlement and Modification Agreement, from (ii) the total Private Company
Payments for the Applicable Year that would have been due the Private Companies
if this Settlement and Modification Agreement had not been executed.
E. The "Applicable Year End Stock Price" shall be the average
closing price of VitroTech's common stock over the five trading day period
ending on the last trading day of the Applicable Year. For purposes hereof, the
"closing price" shall mean the price of VitroTech's common stock for such date
(or the nearest preceding date) (i) on the primary Principal Market (as defined
below) on which the common stock is then listed or quoted as reported by
Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m. EST to 4:02 p.m.
Eastern Time); (ii) if the Common Stock is not then listed or quoted on the
Principal Market and if prices for the Common Stock are then reported in the
"Pink Sheets" published by the National Quotation Bureau Incorporated (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the common stock so reported; or (c) in
all other cases, the fair market value of a share of common stock as determined
by a nationally recognized-independent appraiser selected in good faith by
VitroTech. For purposes hereof, "principal market" shall mean initially the OTC
Bulletin Board and shall also include the American Stock Exchange, New York
Stock Exchange, the NASDAQ Small-Cap Market or the NASDAQ National Market,
whichever is at the time the principal trading exchange or market for the common
stock, based upon share volume.
F. The "Applicable Measurement Date" shall mean, with respect to
each Applicable Year, the earlier date of (i) ten (10) business days following
the completion of the audit of VitroTech annual financial statements with
respect to an Applicable Year, or (ii) April 15 of the year immediately
following an Applicable Year.
G. Each issuance of shares pursuant to Paragraph 5.B above shall
be accompanied by a written calculation setting forth the Issuance Formula for
the Applicable Year in question. In the event there are any disputes with
respect to the calculation of the Issuance Formula, the same shall be submitted
to VitroTech's independent public accounting firm and said firm shall review all
applicable data and compute the Issuance Formula. The determination of such firm
shall be deemed conclusive. In the event a dispute with respect to the Issuance
Formula is submitted to the independent public accounting firm of VitroTech
pursuant to the provisions hereof and it is determined that VitroTech under
computed the shares issuable, VitroTech shall be solely responsible for the
payment of all fees incurred as a result of engaging the independent public
accounting firm in that regard, and VitroTech shall immediately issue the
additional shares to Hi-Tech. Otherwise, Hi-Tech and the Mining Companies will
be solely responsible for payment of such fees, in which case VitroTech shall
have the right to withhold shares of common stock otherwise issuable hereunder
to satisfy those accounting fees based on the Applicable Year End Stock Price.
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6. No Other Modifications. Except as expressly provided herein,
the Mining Contracts and the Royalty Agreement, as well as all other agreements
between the Private Companies and the Public Companies, remain unmodified and in
full force and effect.
7. Release of Private Companies Released Parties. The Public
Companies, and each of their respective parents, subsidiaries, affiliates,
officers, directors, agents, servants, employees, successors, assigns and
representatives (collectively, "Public Companies Affiliates") do hereby forever
release, discharge and acquit the Private Companies and their predecessors,
successors, assigns, parents, subsidiaries, representatives, affiliates,
officers, directors, managers, members, agents, servants, employees and
attorneys, as well as all individuals who are current or former officers,
directors, shareholders, employees and attorneys of the Public Companies who are
also current or former managers, members, employees or attorneys of the Private
Companies (collectively, "Private Companies Released Parties"), of and from any
and all claims, demands, obligations, liabilities, indebtednesses, breaches of
contract, breaches of duty or any relationship, acts, omissions, misfeasance,
malfeasance, cause or causes of action, debts, sums of money, accounts,
compensations, contracts, controversies, promises, damages, costs, losses and
expenses, of every type, kind, nature, description or character, and
irrespective of how, why, or by reason of what facts, whether heretofore, now
existing or hereafter arising, or which could, might, or may be claimed to
exist, of whatever kind or name, whether known or unknown, suspected or
unsuspected, liquidated or unliquidated, each as though fully set forth herein
at length (hereinafter "Claims") which in any way arise out of, are connected
with or relate to the Mining Contracts, the Assignment and Assumption of Assets
and the Royalty Agreement.
As further consideration for this Agreement, the Public Companies
hereby agree, represent and warrant that the matters released herein are not
limited to matters which are known or disclosed, and the Public Companies
understand and on advice of counsel, hereby waive any and all rights and
benefits which they now have, or in the future may have, conferred upon them by
virtue of the provisions of Section 1542 of the California Civil Code, which
provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
In this connection, the Public Companies hereby agree, represent and
warrant that they realize and acknowledge that factual matters now unknown to
them may have given or may hereafter give rise to Claims, and they further
agree, represent and warrant that this Agreement has been negotiated and agreed
upon in light of that realization and that they nevertheless hereby intend to
release, discharge and acquit the parties set forth hereinabove from any such
Claims.
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The Public Companies hereby state that they have read, understand,
and on the advice of counsel, hereby waive, relinquish and release the Private
Companies and all Private Company Released Parties as hereinabove provided.
8. Indemnification by the Public Companies. The Public Companies
represent and warrant that they have not heretofore assigned or transferred, or
purported to assign or transfer, to any person, firm, or corporation whomsoever,
any action or actions, causes of action in law or equity, suit, debt, lien,
liabilities, claim, demand, damages, losses, costs or expenses, of any nature
whatsoever that are herein released. Public Companies agree to indemnify and
hold harmless Private Companies and all related parties against action or
actions, causes of action in law or equity, suit, debt, lien, liabilities,
claim, demand, damages, losses, costs or expenses, of any nature whatsoever
based on, arising out of or in connection with any such transfer or assignment
or purported transfer or assignment, as well as any Claim made by any Public
Company shareholder which is the subject to the release contained herein.
9. Independent Advice of Counsel. The parties hereto, and each of
them, represent and declare that in execution of this Agreement they rely solely
on their own judgment, belief and knowledge, and the advice and recommendations
of their own independently selected counsel, concerning the nature, extent and
duration of their rights and claims, and that they have not been influenced to
any extent whatsoever in executing the same by any of the parties hereto or by
any person requesting them, or any of them.
10. Voluntary Agreement. The parties hereto, and each of them,
further represent and declare that they have carefully read this Agreement and
know the contents thereof, and that they sign the same freely and voluntarily.
11. Payment of Legal Fees. As additional consideration, the Public
Companies agree to pay the legal fees incurred by the Private Companies in
connection with the negotiation and preparation of this Agreement and the review
and/or negotiation of the Lender's documents as it relates to the Private
Companies, payable upon mutual execution of this Agreement, or if incurred after
such date, on the first day of the month thereafter. The legal fees paid shall
reduce the Pre-Modification Delinquencies.
12. Payment of Lease Obligations. Hi-Tech executed an office lease
dated June 2, 2003 for the office space currently occupied by the Public
Companies. The Public Companies shall be responsible for the payment of rent and
any other sum due under the Lease, and shall indemnify Hi-Tech against same. The
Public Companies shall have the right to request that Hi-Tech assign the Lease
or sublet all or a portion of the premises, provided (i) the Public Companies
bear any expense relating thereto, and (ii) the Public Companies locate the
proposed assignee or sublessee(s). Such assignment and/or sublease(s) shall not
affect the Public Companies' obligation to pay rent and any other sum due under
the Lease.
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13. Obligations under Notes. Any party who assumes the obligations
of the Public Companies under the Private Company Agreements (whether or not
through a bankruptcy proceeding), including but not limited to the Lender, shall
also be deemed to have assumed the obligations under the Notes (including
principal, interest and contingent interest).
14. Disclosure re Valley Springs. Valley Springs is the assignee
from Alliance Asset Management Corp. of two agreements: (i) the agreement with
Xxxxx Xxxxxx and Xxxxxxx Xxxxxx, and (ii) the agreement with Xxxxxx Xxxxxxxx,
Esq., Trustee for the Alpha Operating Trust. Paragraph 4.2 of the Dubnow and
Xxxxxx agreement provides that escrow must close no later than three years after
opening of escrow (which would have been February, 2003) in which case Messrs.
Dubnow and Xxxxxx were obligated to assign to Valley Springs any rights it had
against Xx. Xxxxxxxx.
Escrow did not close, and no formal demand has been made by the
heirs of Messrs. Dubnow and Xxxxxx to terminate the purchase agreement because
of such failure to close. However, counsel for the Private Companies recently
received a letter from counsel for the heirs of Messrs. Xxxxxx and Dubnow
requesting that Alliance Asset or Valley Springs close escrow now at a cash
price of One Million Five Hundred Thousand Dollars ($1,500,000.00). That letter
has been provided to the Public Companies.
Paragraph 7.C. of the Xxxxxxxx agreement provides that if
entitlements are not obtained within two years of the date of the agreement
(which would have been March 6, 2004), that Xx. Xxxxxxxx can terminate the
agreement. Valley Springs has received no notice from Xx. Xxxxxxxx of his desire
to terminate the agreement. However, counsel for the Private Companies recently
received a letter from Xx. Xxxxxxxx, stating that Xx. Xxxxxxxx would release his
attorneys' fee lien and dismiss with prejudice his lawsuit conditioned upon the
closing of the transaction with the heirs of Messrs. Dubnow and Xxxxxx. That
letter has been provided to the Public Companies.
It is the obligation of the Public Companies to advance the sums due
the heirs of Messrs. Dubnow and Xxxxxx, as well as the sums due Xx. Xxxxxxxx.
However, because the Public Companies do not have the resources to advance the
monies close escrow with the heirs of Messrs. Dubnow and Xxxxxx, Valley Springs,
with the consent of the Public Companies, shall attempt to renegotiate the terms
of the agreement with the heirs of Messrs. Dubnow and Xxxxxx, and with Xx.
Xxxxxxxx. Any such renegotiation shall be binding on the Public Companies. The
Public Companies are aware that the renegotiation may not be successful, and
Valley Springs shall have the right, if it so elects, to terminate the
agreements with the heirs of Messrs. Dubnow and Xxxxxx, and with Xx.Xxxxxxxx.
If the Public Companies obtain the right to the Mineral located on
the Valley Springs property, then the purchase price which would otherwise be
due Valley Springs under paragraph 3.A. above and the royalty which would
otherwise be due Hi-Tech under paragraph 3.B. shall apply. If Xx. Xxxxxxxx
agrees to accept as compensation two-thirds of the purchase price due Valley
Springs, then such amount due Xx. Xxxxxxxx shall be offset against the sum due
Valley Springs. If Xx. Xxxxxxxx is not willing to reduce his compensation, then
the Public Companies shall pay to Valley Springs its full purchase price per the
terms of paragraph 3.A. above, and the Public Companies shall be separately
responsible for the payment of any compensation due Xx. Xxxxxxxx or any third
party.
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15. Miscellaneous. This Agreement shall be governed by the laws of
the State of California. Venue for any action shall be in Orange County,
California. This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors, assigns, heirs and
representatives. This Agreement is the entire agreement among the parties hereto
with respect to the subject matter hereof, and supersedes all prior agreements
and understandings. Any modification to this Agreement shall be in writing and
executed by each party hereto. Each party represents and warrants that it has
the authority to enter into this Agreement, and that the party or parties
signing same have the authority to do so. If either party hereto commences
proceedings to enforce the terms of this Agreement, the party that prevails in
such proceeding shall be entitled to recover its reasonable attorneys' fees,
court costs and litigation expenses. This Agreement may be executed in
counterparts. Time is of the essence of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
PRIVATE COMPANIES: PUBLIC COMPANIES:
HI-TECH ENVIRONMENTAL PRODUCTS, VITROTECH CORPORATION,
LLC, a Nevada limited liability company a Nevada corporation
By:____________________________________ By:_________________________
Xxxxx Xxxxxx, Chairman Manager
Its:_____________________
ENVIRO INVESTMENT GROUP, LLC,
a Nevada limited liability company By:_________________________
By:____________________________________ Its:_____________________
Xxxx Xxx Xxxxx, Chairman Manager
RED ROCK CANYON MINERAL, LLC, VITROCO INCORPORATED,
a California limited liability company a Nevada corporation
By:____________________________________ By:_________________________
Xxxx Xxx Xxxxx, Chairman Manager
Its:_____________________
VALLEY SPRINGS MINERAL, LLC,
a California limited liability company By:_________________________
By:____________________________________ Its:_____________________
Xxxx Xxx Xxxxx, Chairman Manager
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EXHIBIT A
As of 9-30-04, the Public Companies owe the following amounts:
1. HI-TECH:
a. Balance owed to Hi-Tech at date of merger (2-3-04) $ None
b. Net cash advances from Hi-Tech to VitroCo between
2-3-04 and 9-30-04 $416,556.29
c. Royalties due to Hi-Tech based on collected sales
between 2-3-04 and 9-30-04 $28,164.99
Balance owed to Hi-Tech at 9-30-04 $444,721.28
2. ENVIRO INVESTMENT GROUP:
a. Balance owed to EIG at date of merger (2-3-04) $731,541.58
b. Payments to EIG between 2-3-04 and 9-30-04 ($115,446.75)
c. Purchase payments due to EIG based on collected sales
between 2-3-04 and 9-30-04 $24,836.87
Balance owed to EIG at 9-30-04 $640,931.70
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