SETTLEMENT AND RELEASE AGREEMENT
THIS SETTLEMENT AND RELEASE AGREEMENT (the "Agreement") is made and entered
into as of May 1, 2002, by and between Deutsche Financial Services Corporation,
a Nevada corporation ("DFS"), and Colmena Corp., a Delaware corporation,
("Colmena") (collectively the "Parties").
Recitals:
WHEREAS,
A. DFS and Business Technology Systems, Inc. (" Borrower") entered into that
certain Agreement For Wholesale Financing (Security Agreement-Arbitration)
dated on or about February 26, 1997, as amended, whereby Borrower agreed to
pay DFS any and all indebtedness owing by virtue of advances made by DFS on
behalf of Borrower for its acquisition of inventory (collectively, the
"Financing Agreement").
B. Borrower's obligations and liabilities to DFS were guaranteed by Colmena,
Xxx Xxxxx, Xxxxx Xxxxx, and Xxxxxxx X. Xxxxxx, Xx. pursuant to certain
guaranty agreements dated August 5, 1997 by Xxx Xxxxx and Xxxxx Xxxxx,
dated May 1, 1998 by Xxxxxxx X. Xxxxxx, Xx. (collectively, the "Individual
Guarantors"), and dated May 1, 1998 by Colmena. The Colmena guaranty will
be referred to as the "Guaranty".
C. On or about August 26, 1998, following a default under the Financing
Agreement and Guaranty, DFS, Colmena and the Individual Guarantors executed
an Extension Agreement ("Extension Agreement") and Consent Arbitration
Award ("Award").
D. Following a default under the Extension Agreement, DFS sought issuance of
the Award by an arbitrator against Borrower, Colmena, and Xxxxxxx X.
Xxxxxx, Xx. The arbitrator issued an Award in favor of DFS on or about
October 8, 1999, in the aggregate principal sum of $348,858.39 plus
interest charges at the per annum rate of Prime plus 6.5% from August 1,
1998 (collectively, the "Debt"). Colmena has disputed the validity of the
Award.
E. As of the date hereof, Borrower's obligations t DFS pursuant to the
Financing Agreement and Award remain in default, and Borrower has failed to
cure such default.
F. In order to avoid the costs and uncertainties of continued litigation in
this matter, the Parties deem it in their best interests to enter into this
Agreement.
NOW THEREFORE, in consideration of the premises, the mutual covenants and
promises contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, DFS and Colmena agree as
follows:
1. MUTUAL RELEASES.
Subject to the timely performance of their obligations under this Agreement
and excluding the obligations created by this Agreement, the Parties and
each of their predecessors, successors, assigns, officers, directors,
employees, agents, representatives, subsidiaries, divisions, attorneys,
affiliates and all persons acting by, through, under or in concert with
them, or any of them, hereby release and forever discharge each other and
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each of each other's predecessors, successors, assigns, past and present
officers, directors, employees, agents, representatives, attorneys,
subsidiaries, divisions, affiliates and all persons acting by, through,
under or in concert with them, from any and all actions, causes of action,
suits, debts, liens, contracts, rights, agreements, obligations, promises,
liabilities, claims, demands, damages, controversies, losses, costs, and
expenses of any nature whatsoever, known or unknown, suspected or
unsuspected, fixed or contingent, which they now have, own or hold or claim
to have, own or hold or at anytime heretofore had, owned or held, or claim
to have, owned, or held, or may hereafter have, own or hold or claim to
have, own or hold, arising out of the conduct or matters occurring prior to
the date hereof relating to DFS' extension of credit to Borrower. DFS'
release of Colmena expressly excludes Xxxxxxx X. Xxxxxx, Xx., one of the
Individual Guarantors. By executing this release, Colmena in no way waives
its rights to seek indemnification and/or contribution from Borrower or any
of the Individual Guarantors.
2. Colmena Obligations.
A. Colmena will pay DFS the amount of Twenty Thousand Dollars
($20,000.00) ("Initial Payment Amount") to be received by DFS on or
before 5pm C.S.T. on May 15, 2002. Payment will be in the form of a
company check.
B Colmena will additionally pay to DFS the sum of $80,000.00 plus
interest at the per annum rate of U.S. Prime from May 1, 2002 (the
"Note Amount"). Colmena shall remit the sum of $2,500.00 on or before
the 15th day of each month for a period of thirty-two (32) months,
beginning June 15, 2002. In addition to the $2,500.00 monthly payment
called for herein, should the quarterly operating cash flow of Colmena
as presented in the financial statements filed by Colmena with the
Securities and Exchange Commission ("SEC") exceed $7,500.00, Colmena
shall remit to DFS an additional principal payment in an amount equal
to 10% of the operating cash flow in excess of $7,500.00 ("Cash Flow
Payment"), which Cash Flow Payments shall be applied against the Note
Amount as provided herein. The Cash Flow Payment shall be paid to DFS
on or before the 60th day following each calendar quarter until the
Note Amount is paid in full. Interest on the Note Amount shall be
calculated by DFS for each month using the U.S. Prime rate published
by JPMorganChase on the last business day of that month. Interest
charges will be paid by the 15th day of each month for interest
accrued for the prior month in addition to the payments called for
herein. All payments called for herein shall be made by Colmena for
receipt by DFS at its lockbox located at 0000 Xxxxxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx, Xxxxxxxx 00000. The Debt, including interest charges
accrued through the date of the last billing cycle, will be paid in
full no later than January 15, 2005. All payments will be first
applied to accrued interest and then to principal.
(c) Within ten (10) business days following the effectiveness of an
increase in Colmena's capitalization by its shareholders, whose Annual
Meeting is currently scheduled for May 10, 2002, Colmena will issue to
DFS 2,500,000 shares of restricted common stock of Colmena (the
"Shares") and provide a stock certificate therefor. Colmena hereby
grants transferable piggyback registration rights with respect to the
Shares, as provided more fully below in Paragraph 3.
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3. Registration Of Shares.
Upon the filing of a Registration Statement by Colmena with the SEC under
the Securities Act of 1933 (the "Securities Act") whereby Colmena shall seek to
register any shares of its common stock (the "Registration Statement"), Colmena
shall include the Shares in such filing and use its best efforts to cause the
Registration Statement to become and continue to remain effective.
a. The Registration Statement shall envision the registration of
Shares for resale by DFS, provided, however, that in conjunction
with any such registration, DFS must comply with any reasonable
restrictions on sales of the registered securities generally
required by an underwriter of securities included in such
Registration Statement, provided further that any such
restrictions apply pro rata to all other shares included in such
Registration Statement.
b. Colmena will utilize its best efforts to keep current and
supplement as needed any information or filings necessary for a
one (1) year period subsequent to the execution of this Agreement
in order to make it possible for DFS to sell its Shares during
this time period.
c. Colmena will furnish copies of any prospectus it maintains that
DFS may request.
d. Colmena expressly covenants to pay any and all expenses incurred
as a result of the preparation and filing of any Registration
Statements, but not any selling expenses, legal fees or
commissions which DFS may incur.
e. Colmena covenants to immediately notif DFS at any time when a
prospectus relating to the resale of the Shares by DFS is
required to be delivered under the Securities Act or the
happening of any event as a result of which the prospectus
included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing.
f. Colmena will provide any information o legal opinion of counsel
as may be reasonably requested by any underwriter or broker of a
DFS sale of Shares.
4. Representations and Warranties
(a) Colmena represents and warrants to DFS as follows:
(i) Colmena is a corporation, duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, with
the requisite corporate power and authority to own and use its
properties and assets and to transact the business in which it is
engaged and presently proposes to engage.
(ii) All corporate action on the part of Colmena, its officers,
directors and stockholders necessary for the authorization,
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execution and delivery of this Agreement and the performance of
all Colmena obligations hereunder and thereunder has been taken
or will be taken as agreed herein. This Agreement constitutes the
valid and legally binding obligation of Colmena enforceable
against Colmena in accordance with its terms.
(iii) All of the Shares when delivered shall have been duly authorized,
validly issued, fully paid and non-assessable.
(iv) The Shares will free and clear of all liens or encumbrances.
(v) No consent of any other party including without limitation
shareholders or creditors of Colmena and no consent,
authorization, approval or other action and no notice to or
filing with any governmental authority or regulatory body except
as required hereunder is required either for the execution,
delivery or performance of this Agreement by Colmena, except as
expressly stated herein.
(b) DFS represents and warrants to Colmena as follows:
(i) DFS is a corporation, duly incorporated, validly existing and in
good standing under the laws of the State of Nevada, with the
requisite corporate power and authority to own and use its
properties and assets and to transact the business in which it is
engaged and presently proposes to engage.
(ii) DFS confirms that an investment in the Shares involves a high
degree of risk, and it is able (i) to bear the economic risk of
this investment, (ii) to hold the Shares for an indefinite period
of time, and (iii) to afford a complete loss of its investment.
(iii) DFS hereby represents that DFS, by reason of DFS' business or
financial experience, has the capacity to protect DFS' own
interests in connection with the transactions contemplated by
this Agreement.
(iv) DFS hereby acknowledges that in connection with the acquisition
of the Shares DFS has been furnished by Colmena with all
information regarding Colmena which DFS or its representative has
requested, has been afforded the opportunity to ask questions of,
and to receive answers from, duly authorized officers or other
representatives of Colmena concerning the terms and conditions of
the Shares and the affairs of Colmena and has received any
additional information which such DFS or its representative has
requested.
(v) DFS has relied solely upon its own independent investigation and
Colmena's representations in this Agreement in making the
decision to acquire the Shares. To the extent deemed necessary or
advisable by it, DFS has retained, at the sole expense of DFS,
and relied upon, appropriate professional advice regarding the
investment, tax and legal merits and consequences of the
acquisition of the Shares.
(vi) DFS hereby acknowledges that the offer and sale of the Shares has
not been reviewed by the SEC or any state regulatory authority,
since the Offering is intended to be exempt from the registration
requirements of Section 5 of the Securities Act. DFS shall not
sell or otherwise transfer the Shares unless a subsequent
disposition is registered under the Securities Act in accordance
with this Agreement or is exempt from such registration.
(vii) DFS understands that the Shares have not been registered under
the Securities Act by reason of a claimed exemption under the
provisions of the Securities Act which depends, in part, upon
DFS' investment intention. In this connection, DFS hereby
represents that it is acquiring the Shares for its own account
for investment and not with a view toward the resale or
distribution to others or for resale, except in accordance with
applicable securities laws.
(viii) DFS understands that unless and until the Shares are registered,
the Shares are subject to significant limitations on resale under
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applicable securities laws. DFS understands that reliance upon
Rule 144 under the Securities Act for resale of the Shares
requires, among other conditions, a one-year holding period prior
to the resale (such resale after such one-year holding period
being further subject to sales volume limitations).
(ix) DFS consents to the placement of a legend, or substantial
equivalent thereof, set forth below on any certificate or other
document evidencing the Shares, until such time as a Registration
Statement registering the Shares becomes effective.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER THE SECURITIES ACT OR AN EXEMPTION
FROM THE SECURITIES ACT. ANY SUCH TRANSFER MAY ALSO BE
SUBJECT TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS
AND THE LAWS OF OTHER APPLICABLE JURISDICTIONS.
5. Governing Effect.
To the extent that the terms and provisions of the Financing Agreement,
Guaranty, or any other agreement between DFS and Colmena shall be inconsistent
with the provisions of this Agreement, the provisions of this Agreement shall
govern.
6. Events of Default.
The occurrence of any one or more of the following shall constitute an
Event of Default under this Agreement: (a) the failure of either Party to comply
with the terms, covenants, agreements and conditions of this Agreement, except
as expressly modified or waived herein; (b) if any representation or warranty
made herein shall be incorrect in any material respect.
7. Survival.
This Agreement shall be binding upon and shall inure to the benefit of the
Parties hereto and there respective successors and assigns. Each and every one
of the obligations and undertakings of the Parties herein shall be continuing
obligations and undertakings and shall not cease and terminate until all of the
obligations and undertakings set forth herein shall have been fully paid,
performed and discharged as specified herein.
8. Consultation;
Consideration. The Parties hereby acknowledge that they have each had the
benefit of consultation with their respective legal counsel concerning this
Agreement. The parties further agree that the consideration each of them has
given for this Agreement is reasonably equivalent in value and therefore
constitutes adequate consideration.
9. Attorney Fees.
In the event that this Agreement or any provision hereof shall be enforced
by an attorney, whether in-house or retained by a party hereto, whether by suit
or otherwise, the reasonable fees and costs of such attorney shall be paid by
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the party who breaches or defaults hereunder, including reasonable fees and
costs incurred upon appeal or in bankruptcy court.
10. Assignment.
Colmena may not assign its rights or delegate the performance of its
duties, obligations and undertakings hereunder without the express written
consent of DFS, which consent shall not be unreasonably withheld.
11. Notices.
All notices shall be in writing and shall be deemed to have been
sufficiently given or served when presented personally, sent by facsimile,
Federal Express, or deposited in the United States mail, by registered or
certified mail, to the address of the Parties and their counsel below. Such
addresses may be changed by notice to the other party given in the same manner
as above provided. Any notice given hereunder shall be deemed given as of the
date delivered.
Deutsche Financial Services Corporation
Attention: Xxxxxxxxxxx X. Xxxxxxx
000 Xxxxxxxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xx. Xxxxx, XX 00000
Facsimile: 000-000-0000
With a copy to:
Deutsche Financial Services Corporation
000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile: 000-000-0000
If to Colmena:
Colmena Corp.
Attention: General Counsel or Chief Administrative Officer
0000 Xxxxxxxxx 00xx Xxxxxx
Xxxxx, XX 00000 Facsimile: 000-000-0000
12. Severability.
If any term or provision of this Agreement shall, to any extent, be
determined by an arbitrator or a court of competent jurisdiction to be void,
voidable or unenforceable, such void, voidable or unenforceable term or
provision shall not affect any other term or provision of this Agreement.
13. Captions.
The section headings contained in this Agreement are for purposes of
reference only and shall not limit, expand or otherwise affect the construction
of any provisions hereof.
14. Governing Law.
This Agreement and all matters relating hereto shall be governed by,
construed and interpreted in accordance with the laws of the State of Missouri.
15. Counterparts.
This Agreement may be executed in any number of counterparts, each or any
of which may be facsimile signatures, and each of which when so executed and
delivered shall be deemed an original, but all such counterparts taken together
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shall constitute only one instrument.
16. Entire Agreement.
This Agreement constitutes the entire understanding and agreement between
the Parties hereto and supersedes all prior agreements, representations or
understandings between them relating to the Debt. All preceding agreements
between the Parties relating to such Debt, whether written or oral, are hereby
merged into this Agreement.
17. Further Action.
The parties hereby agree to execute and deliver such additional documents
and to take further action as may become necessary or desirable to fully carry
out the provisions and intent of this Agreement.
18. Recitals.
The above recitals are true and correct in all respects and incorporated
herein by reference.
THIS AGREEMENT has been executed to be effective as of the day and year
first above written.
Deutsche Financial Services Corporation
By:/s/ X. X. Xxxxxxx /s/
Print name: Xxxxxxx X. Xxxxxxx
Its: Executive Vice President
Colmena Corp.
By: /s/ Xxxxxx X. Xxxxxxx /s/
Xxxxxx X. Xxxxxxx
Its: President & Chief Executive Officer
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ACKNOWLEDGMENT
STATE OF FLORIDA )
) ss:
COUNTY OF Palm Beach )
On the 10th day of May, 2002, before me personally came, , who being by me
duly sworn, did depose and say that he is the Chief Executive Officer of Colmena
Corp., known to me to be the officer who executed the within Agreement on behalf
of said corporation, and acknowledged to me that he executed the same for the
purposes therein stated.
/s/ Xxxxxxx X. Xxxxxxx /s/
------------------------------------
Notary Public - State of Florida
My commission expires: 08/26/04
ACKNOWLEDGMENT
STATE OF MISSOURI )
) ss:
COUNTY OF St. Louis )
On the 7th day of May, 2002, before me personally came, Xxxxxxx X. Xxxxxxx,
who being by me duly sworn, did depose and say that s/he is the Executive Vice
President of Deutsche Financial Services Corporation, known to me to be the
officer who executed the within Agreement on behalf of said corporation, and
acknowledged to me that they executed the same for the purposes therein stated.
/s/ Xxxxxx X. Xxxxxxx /s/
-------------------------
Notary Public
My commission expires: May 11, 2004
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