SETTLEMENT AND MUTUAL RELEASE AGREEMENT
PARTIES
This Settlement and Mutual Release Agreement ("the Agreement") is
entered into on April 7, 1998, by and among the following parties:
1. U.S WIRELESS DATA, INC., a Colorado corporation (the "Company"); and
2. XXXX AND XXXXXXX XXXXX;
3. XXXXXX AND XXXXXXX XXXXXXX;
4. XXXXXXX XXXXXXX;
5. XX. XXXXX XXXXXXXXX;
6. XXXXXXX XXXXX;
7. XXXXX XXXXX;
8. XXXXXX XXXXXXX (parties 2-8 collectively referred to as the "Investors").
RECITALS
A. The Investors received in exchange for full consideration convertible
promissory notes with the Company in the form as set forth in Exhibit A,
attached hereto and incorporated herein (the "Notes")
B. There arose a dispute between the Company and the Investors regarding the
nature of the securities to be issued to the Investors upon the exercise of
their conversion rights.
C. Without admitting liability, each of the parties desires to resolve the
disputes as among the Company and the Investors pursuant to the terms and
conditions set forth in this Agreement.
NOW THEREFORE, in accordance with and subject to the terms and
conditions and in consideration of the promises and covenants contained herein
and the recitals set forth above, the parties agree as follows:
TERMS OF SETTLEMENT AND RELEASE
1. PAYMENT.
a. Issuance of Restricted Stock. Subject to the terms herein, the Company shall
issue to the Investors, upon return of the original Notes held by the Investors
that number of shares of restricted stock of the Company (the "Restricted
Stock") as is set forth on Exhibit B, attached hereto and incorporated herein.
b. Date of Issuance of Restricted Stock. The Company shall issue the Restricted
Stock to the Investors, c/o their counsel, P. Xxxxx Xxxxxxxxxxx, 000 Xxxxxxxxxx
Xxxxxx, Xxxxx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 no later than April 10,
1998.
2. ISSUANCE AND TRANSFERABILITY OF THE RESTRICTED STOCK. The Restricted
Stock so issued in conversion of each Note shall be resalable pursuant to Rule
144 promulgated under the Securities Act of 1933 ("Rule 144") one (1) year after
the date consideration was paid for such Note. In connection with the issuance
of the Restricted Shares to the Investors there shall become effective and filed
with American Security & Transfer & Trust of Lakewood Colorado (Transfer Agent)
within one business day of the date this Agreement is signed, the following
documents:
a. For Issuance:
(i) Board of Directors resolution authorizing the issuance of
the Restricted Stock in the form attached hereto as Exhibit C.
(ii) Instructions to the Transfer Agent from the Company
ordering the issuance of the Restricted Stock to the Investors in the amounts
set forth in Exhibit B.
(iii) Such other directions, instructions, authorizations or
opinions as may be required for issuance of the Restricted Stock pursuant to
this Agreement.
In connection with the sale of the Restricted Shares by the
Investors there shall become effective and filed with American Security &
Transfer & Trust of Lakewood Colorado (Transfer Agent) in a timely manner upon
request of the Transfer Agent, the following documents:
b. For Resale:
Such directions, instructions, authorizations or opinions as
may be required for the resale of the Restricted Stock per this Agreement.
3. GUARANTEE AND PUT.
This Section 3 shall apply to all of the Notes and the Restricted Stock issued
to the Investors under the Notes with the exception of the Note payable to
Xxxxxx Xxxxxxx in the amount of $16,825 and the 18,507 shares of Restricted
Stock issued thereunder.
a. Guarantee. In addition to the issuance of the Restricted Stock, in the event
that any of the Investors sells shares of the Restricted Stock during the one
year period from the date of the lapse of the restrictions under Rule 144 for a
price of less than $3 a share, the Company shall within thirty (30) days of
receipt of written notice from the Investor and a copy of the confirmation of
sale confirming such sale, transfer to the Investor, in cash, an amount equal to
the difference between $3 a share and the sales price.
b. Put. If, on the date that is one year from the date the restriction on the
respective Restricted Stock lapses, or, if the market on which the Restricted
Stock is traded is closed on that date, on the next trading day, the opening
price for the stock of the Company is below $3 a share, each Investor shall have
the option, for a five day period, thereafter, ending on midnight Pacific Time
on the fifth day, to put their remaining Restricted Stock back to the Company
for a price of $3 a share. If an Investor exercises the put, the Company shall
have the option, to be exercised within three days of receipt of the put, to
require the Investor to sell the Restricted Stock on the open market and shall
then be obligated to pay the Investor the difference between $3 a share and the
sales price. If an Investor exercises the put, and the Company does not exercise
its option to require the Investor to sell the Restricted Stock into the open
market, the Company shall pay the Investor, in cash, under this paragraph within
fifteen (15) days of the put. If an Investor exercises the put, and the Company
exercises its option to require the Investor to sell the Restricted Stock into
the open market, the Company shall pay the Investor, in cash, the amount to be
paid under this paragraph within fifteen (15) days of receipt of written notice
from the Investor and a copy of the confirmation of sale confirming such sale.
4. REPRESENTATIONS AND WARRANTIES.
As a condition to the settlement, the Company represents and warrants
as follows:
a. The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on behalf of the Company. The Company is registered with the
California Secretary of State as a foreign corporation.
b. This Agreement when executed and delivered by the Company will
constitute legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws effecting the enforcement of creditor's rights.
c. The undersigned individuals signing this Agreement on behalf of the
Company represent and warrant that they are duly authorized to execute and
deliver this instrument on its behalf and have the right to execute this
Agreement.
d. The Company is authorized to issue the Restricted Stock as set forth
in this Agreement.
e. The Company shall comply with the requests of the Transfer Agent to
effectuate the transfer and sale of the Restricted Stock.
f. The Restricted Stock issued pursuant to this settlement shall be
saleable under Rule 144 one year from the date of the payment of the underlying
consideration for the investment, such dates upon which the restrictions on sale
will lapse are set forth on Exhibit D, attached hereto and incorporated herein.
g. The Company is currently in compliance with and shall remain
in compliance with all rules and conditions of federal and State securities,
corporate or other law, including but not limited to Rule 144, which are
required to or are a prerequisite for the issuance of the opinion letter by the
Company's legal counsel, to allow for the sale of the Restricted Stock.
h. The securities issued to Xxxx X. Xxxxxxxx and Xxxxxx X. Xxxx and
Liviakis Financial Communications, Inc., as set forth in Exhibit E are subject
to a Lock-up Agreement and may not be sold prior to August 1, 1998 even if
registered.
i. The Restricted Shares when issued and delivered will be validly
authorized and issued and will be fully paid and non-assessable and no
shareholder of the Company will have any preemptive right of subscription or
purchase thereof.
j. It shall be a condition of any merger, consolidation, sale of all or
substantially all of the Company (either by way of stock transaction or of all
or substantially all assets of the Company other than in the ordinary course of
business), acquisition or other reorganization or recapitalization of the
Company occurring prior to the date the Restricted Stock is actually issued to
the Investors hereunder, that any agreements or other consummating documents
entered or to be entered into or filed or to be filed by the Company with the
Colorado Secretary of State in connection with or to effect any such transaction
shall include provisions that provide for treatment of the Investors in any such
transaction as if the Restricted Stock had been issued to such Parties as of the
time immediately preceding the consummation or effective time of any such
transaction.
k. To the best of the Company's knowledge, it has filed all reports
required to be filed by it pursuant to the Securities Exchange Act of 1934, as
amended, through the date of this Agreement.
l. If and whenever, prior to the full performance of the guarantee and
put granted in Section 3 above is effective, the Company shall effect a
subdivision or consolidation of shares or other capital, reorganization or
readjustment, (other than those described in subsection 4m below), the payment
of a stock dividend (except for dividends payable on the shares of the Company's
Series A Preferred Stock outstanding on the date of this Agreement), or other
increase or reduction of the number of shares of the Company's stock outstanding
without receiving compensation thereof in money, services, or property, the
number of shares of Restricted Stock then remaining to be sold by the Investors
shall (a) in the event of an increase in the number of outstanding shares, be
proportionately increased, and the $3.00 amount of the said guarantee and put
shall be proportionally reduced; and (b) in the event of a reduction in the
number of outstanding shares, be proportionally reduced, and the amount of the
said guarantee and put shall be proportionately increased.
m. It shall be a condition of any merger, consolidation, sale of all or
substantially al the Company (either by way of a stock transaction or of all or
substantially all assets of the Company other than in the ordinary course),
acquisition or other reorganization during said guarantee and put period, that
the surviving Company shall provide to the Investors, a guarantee
and put sufficient to provide them with the same minimum cash return for sales
of the Investors interest in the surviving entity as they would have received if
they had sold the Restricted Stock prior to the said merger, sale, acquisition
or other reorganization, if such right is requested by the
Investors.
n. The Company covenants that it will not, by voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Agreement, but it will at all times in good faith assist in carrying out all
those terms and take all action necessary or appropriate to protect the rights
of the Investors against dilution or other impairment and take all necessary
action in a timely manner and without delay to effect the resale of the
Restricted Stock by the Investors at such time or times as the Investors desire
to sell such Restricted Stock, whether or not any such sale may occur in or out
of the period of the guarantee.
Investors, where appropriate, and each Investor, individually, where
appropriate, represent and warrant to the Company that (both at the time of
execution of this agreement and as of the date upon which Investor first
purchased the Notes being converted into shares of the Company's no par value
Common Stock (the "Shares") pursuant to the terms of this agreement):
a. Investor or the Investors either: (1) had or have a pre-existing
personal or business relationship with the Company; and/or (2) either alone or
through a purchaser representative of the Investors choosing (who is not
affiliated in any way with the Company) are sophisticated in business and
financial matters and by reason of either such pre-existing relationship and/or
their knowledge and experience in such matters, they have the capacity to
evaluate the merits and risks of the prospective investment in the Shares.
b. To the extent Investor or the Investors deemed necessary, they have
consulted with their attorney, accountant or other business and/or financial
advisors regarding all aspects of the proposed investment in the Company.
c. Investor was and the Investors are the sole parties in interest as
to the Shares being acquired by them and are acquiring the Shares for their own
account, for investment only and not with view toward the resale or distribution
thereof, except as permitted by law or rule.
d. The Investors understand that the Shares are not registered under
the Securities Act of 1993, (the "1993 Act") and the Shares will be "Restricted
Securities" as defined under Rule 144 promulgated under the 0000 Xxx. The Shares
may not be resold unless registered under the 1933 Act or an exemption from such
registration is available. The Investors agree that they will not attempt to
dispose of the Shares except in compliance with the 1933 Act.
e. The Investors understand that the Shares will be imprinted with a
legend in substantially the following form:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE OR FOREIGN LAW. THE
SHARES MAY NOT BE SOLD TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS (i) THEY SHALL HAVE BEEN REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE AND FOREIGN SECURITIES ACT OR OTHER LAW OR (ii) AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION SHALL HAVE BEEN FUNISHED
WITH AN OPINION OF COUNSEL SATISFACOTRY TO THE CORPORATION, THAT REGISTRATION OR
OTHER COMPLIANCE IS NOT REQUIRED UNDER ANY OF SUCH ACTS OR LAWS.
f. At the time of any resale of Shares, the selling Investors will
return the appropriate number of Shares sold to the Transfer Agent.
g. The Investors understand and agree that the Company will lodge stop
transfer instructions with its transfer agent to prohibit transfer of the Shares
except in strict compliance with the provisions of this agreement.
h. The Investors understand and agree that the Shares do not have any
"registration" or other rights entitling them to have the Shares registered
under the 1993 Act and that absent registration, the most likely method by which
the shares may be resold in the public market absent registration is under Rule
144 promulgated by the SEC under the 1933 Act, which will become available at
the earliest, as to each Investor, one year from the date such Investor paid
consideration for the Note (from which the Restricted Shares being sold by that
Investor were converted). The Investors understand and agree that there is no
guarantee that Rule 144 will be available for resales of the Shares and that if
Rule 144 is not available to them for any reason, they may not be able to resell
the Shares in the public market at all.
i. The Investors understand that the Company files reports and other
information concerning the Company, its business and financial affairs with the
United States Securities and Exchange Commission (the "SEC") that are publicly
available. To the extent the Investors deemed necessary, they have examined such
reports and information as are available through the SEC, including, without
limitation, the Company's Annual Report on Form 10-OSB, for the fiscal quarters
ended September 30, 1997 and December 31, 1997, as amended to date; the
Company's Definitive Proxy Statement for its Annual Meeting of Shareholders held
February 6, 1998 and its Current Report on Form 8-K Reporting an Even of
November 14, 1997, as filed with the SEC on or about December 17, 1997.
j. The Investors fully understand that an investment in the Company's
securities (including the Shares) involves a high degree of risk and could
result in the entire loss of the investment. The Investors have adequate means
of providing for their current needs and possible financial contingencies, and
have no need, and anticipate no need in the foreseeable future, to sell the
Shares for an indefinite period of time and have sufficient net worth to sustain
a loss of the entire investment in the Shares in the event such loss should
occur.
5. FUTURE CONDUCT.
(a) In consideration of the release set forth below, the
Company shall comply
with all Federal and State securities laws which are required to allow for the
sale of the Restricted Stock under Rule 144.
(b) The Company shall secure, within two (2) business days of any request from
the Investors, their brokers or the Transfer Agent, the necessary opinion from
the Company's Counsel that the Restricted Stock is eligible for sale under Rule
144.
(c) The Company acknowledges and agrees that any violation of
Sections 1, 2, 3, 4, and of this section 5 hereof of this Agreement or any
breach of the representations and warranties set forth above or the inability of
the Investors to resell the Restricted Stock pursuant to Rule 144 will cause
damage to the Investors and agree that in the event of such violation or breach,
this Agreement shall be null and void, at the option of the Investors, except
for the provisions of Section 7, 8,10 and 11 below.
6. MUTUAL RELEASE. The Company for itself and its partners,
shareholders, directors, officers, employees, assigns, predecessors, successors,
representatives affiliates, attorneys, heirs, legatees and agents on the one
hand, and Investors for themselves and their employees, assigns, predecessors,
successors, representatives affiliates, attorneys, heirs, legatees and agents on
the other hand, except as provided in Sections 1,2,3,4,5 and 7 of this
Agreement, each irrevocably and unconditionally releases the other from any and
all claims, demands, and causes of action of any kind whatsoever (collectively
referred to as "Claims"), whether known or unknown, which it/he/she now has or
ever has had, from the beginning of time to the date of this Agreement and
Release which arise out of the offer and sale of the Notes to the Investors.
Each party understands that it/he/she may have Claims of which the
party has no knowledge or suspicion; nevertheless, the party agrees that the
release contained in this Section 6 extends to all Claims whether or not known,
claimed or suspected by the party except the obligations of Sections 1,2,3,4 and
5 above. As to such matter, except as provided in Sections 1,2,3,4, and 5 of
this Agreement, each party expressly waives the benefits of Section 1542 of the
California Civil Code, which provides:
"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."
Each party acknowledges that the party knows and understands the
contents of this Agreement and Release, that the party has executed it
voluntarily and without coercion of any kind, and that the party understands
that after signing this Agreement and Release except as provided in paragraph 7
of this Agreement the party cannot proceed against any person or entity
mentioned in it with respect to or on account of any of the matters referred to
in it
7. LIMITATION ON RELEASE. The Parties agree that the release set forth
in Section 6 of this Agreement shall not apply to claims that the Investors may
have against the Company and its partners, shareholders, directors, officers,
employees, assigns, predecessors, successors, representatives affiliates,
attorneys, heirs, legatees and agents arising from or related
to fraud on the marketplace or market manipulation with regard to the Note or
their investment in the Company or for any claims against the Company and its
partners, shareholders, directors, officers, employees, assigns, predecessors,
successors, representatives affiliates, attorneys, heirs, legatees and agents if
the Company fails to perform its obligations under this Agreement or breaches
the representations or warranties set forth in this Agreement.
8. TOLLING. The Parties agree to toll and suspend the running or
accrual of time by which is determined any defense which they may have
individually or collectively against the other(s) by virtue of any statute of
limitations, laches or any similar defense, to and including June 19, 1999.
Nothing in this Agreement shall toll or suspend any statue of
limitations beyond the permissible periods set forth in California Code of Civil
Procedure Section 360.5 or any other applicable law or rule; provided, however,
that should the period of tolling or suspension of statutes of limitations
described in this Agreement be effective for a period or periods exceeding those
permitted by any said Section 360.5 or other applicable law or rule, such period
or periods shall be reduced to the period or periods permitted by said Section
or applicable law or rule.
9. NO CLAIMS. Each party affirms that the party has not initiated any
claim, charge, action, or legal proceeding of any kind against any party
he/she/it released with respect to the Claims released in this Agreement.
10. INDEMNIFICATION FOR BREACH. Each party agrees to indemnify each
party he/she/it released for all damages, including attorneys' fees, resulting
from his/her/its breach of any provision of this Agreement and Release.
11. ATTORNEYS' FEES. The parties agree that the prevailing party in any
action or proceeding henceforth between the parties, in regard to any action to
enforce or interpret this Agreement, shall be entitled to reasonable attorneys'
fees and costs in addition to all other relief to which he/she/it may be
entitled.
12. TAX LIABILITY. Except as otherwise required by applicable law, The
Investors agree that they alone will be responsible for all taxes applicable to
the securities issued under this Agreement.
13. NO ADMISSION OF LIABILITY. Each party acknowledges that this
Agreement is not an admission of guilt or liability.
14. WARRANTIES. Each party warrants and represents to each of the other
parties that the party has full power, legal capacity and authority to enter
into, perform and comply with the terms of this Agreement. Each party further
warrants and represents to each of the other parties that such party has not by
agreement, operation of law or otherwise, heretofore assigned, transferred,
hypothecated, or purposed to assign, transfer or hypothecate to any person or
party, the whole or any part of portion of such party's clams which constitute
matters released pursuant to this Agreement. Each party warrants and represents
to each of the other parties that such party
is the sole party who has the right, title and interest in or to the matters
such party is releasing. Each party agrees to indemnify, defend and hold
harmless, including for attorneys' fees and costs, the other party from and
against any claim threatened or instituted against any other party for breach by
such party of the representations and warranties set forth in this paragraph.
15. CONFIDENTIALITY. Each party agrees that the terms of this Agreement
are confidential and further agrees, except as required by law or to perform the
obligations hereunder, not to disclose its terms or the fact of its execution to
any other person or entity. This non-disclosure provision does not apply to the
party's immediate family, employer, stockholder, attorney or tax advisor.
16. VALIDITY. If any portion of this Agreement shall be held invalid by
a court of competent jurisdiction, the validity of the remainder of this
Agreement shall not be affected.
17. INTEGRATION. This Agreement supersedes any previous understandings,
agreements or correspondence of the parties on this subject and is binding on
the parties, their heirs, executors, administrators, and successors in interest.
18. CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties to this Agreement and their respective
heirs, executors, administrators, legal representatives, successors, assigns,
employees, partners, agents and attorneys.
20. COUNTERPARTS. This Agreement may be executed in multiple originals
or counterparts, in which event each multiple original or counterpart shall be
deemed to constitute an original of this Agreement as to any persons or entities
whose original signatures or that of their representatives, appear thereon.
21. MUTUALLY NEGOTIATED AGREEMENT. The terms of this Agreement were
freely negotiated by the parties and reviewed by counsel for the parties and
neither this Agreement nor any of its provisions shall be interpreted for or
against any party on the basis of the party that drafted the Agreement or the
provision at issue.
In witness whereof, the undersigned, and each of them, state that they
have read and understand the terms of the foregoing Agreement, that they enter
into the Agreement freely and without coercion or under duress, and have
executed this Agreement on the date and year first above written.
U. S. WIRELESS DATA, INC.
a Colorado Corporation
Dated:_____________ By
XXXX XXXXX, Chief Executive Officer
Dated:_____________ By
XXXXXX XXXXXXXXX,
Chief Financial Officer and Secretary
Dated:_____________ _____________________________________
XXXX XXXXX
Dated:_____________ _____________________________________
XXXXXXX XXXXX
Dated:_____________ _____________________________________
XXXXXXX XXXXXXX
Dated:_____________ _____________________________________
XXXXXX XXXXXXX
Dated:_____________ _____________________________________
XXXXXX XXXXXXX
Dated:_____________ _____________________________________
XXXXXXX XXXXXXX
Dated:_____________ _____________________________________
XXXXXXX XXXXX
Dated:_____________ _____________________________________
XXXXX XXXXX
Dated:_____________ _____________________________________
XX. XXXXX XXXXXXXXX
REVIEWED AND APPROVED:
Ireland Xxxxxxxxx
Dated:______________ By___________________________________
Dated:______________ Xxxxxx & Xxxx, P.C.
By___________________________________
LIST OF EXHIBITS
EXHIBIT "A" CONVERTIBLE NOTES
EXHIBIT "B" SHARES OF RESTRICTED STOCK OF U.S. WIRELESS DATA, INC.
EXHIBIT "C" BOARD OF DIRECTORS RESOLUTIONS
EXHIBIT "D" DATE OF LAPSE OF 144 RESTRICTIONS
EXHIBIT "E" SECURITIES OF U.S. WIRELESS DATA, INC. OWNED BY XXXX X.
XXXXXXXX, XXXXXX X. XXXX AND LIVIAKIS FINANCIAL
COMMUNICATIONS, INC.
