EXHIBIT 10.13
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Agreement") is made and entered into as of
September 14, 1998, by and among THE XXXXXXX-XXXXX COMPANY ("Xxxxxxx-Xxxxx"), a
California corporation, XXXXXXXX XXXXXXXXX ("Matzorkis") and 800-U.S. SEARCH, a
California corporation (the "Company").
WHEREAS, the parties have had various discussions between them in an
attempt to resolve certain issues between Matzorkis and the Company and/or
Xxxxxxx-Xxxxx;
WHEREAS, the parties entered into that certain term sheet, dated as of
September 14, 1998 (the "Term Sheet"); and
WHEREAS, pursuant to the terms of the Term Sheet, the parties now desire to
set forth this agreement with respect to the matters set forth therein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and for other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereby agree as
follows:
1. ANCILLARY AGREEMENTS. Matzorkis and Xxxxxxx-Xxxxx have simultaneously
herewith entered into a shareholders' agreement, dated as of September 14, 1998,
a copy of which is attached hereto as Exhibit A (the "Shareholders' Agreement").
Matzorkis and the Company have simultaneously herewith entered into the Amended
and Restated Employment Agreement, dated as of September 14, 1998, a copy of
which is attached hereto as Exhibit B (the "Amended and Restated Employment
Agreement"). Xxxxxxx-Xxxxx and the Company have entered into the Administrative
Services Agreement, dated as of July 1, 1998, a copy of which is attached hereto
as Exhibit C (the "Administrative Services Agreement").
2. TRANSFER OF SHARES. Matzorkis hereby agrees that as soon as reasonably
practicable, but in no event later than March 9, 1999, he shall transfer all of
his shares of Common Stock, no par value, of the Company (the "Common Stock"),
and all options, warrants or other rights to acquire shares of Common Stock and
any security exchangeable for, or convertible into, Common Stock, owned or
controlled, directly or indirectly, by Matzorkis, as of this date hereof or
hereafter acquired by Matzorkis into an irrevocable trust for the sole benefit
of his family members (other than Matzorkis) and/or Xxxxx Xxxxx (the "Trust").
The Trust shall be managed by an independent trustee which is not Matzorkis, a
relative or family member of either Matzorkis or his spouse or an entity which
controls, is controlled by or is under common control with any of the foregoing.
The initial trustee shall be initially designated by Matzorkis.
3. COMPANY ASSUMPTION OF OBLIGATION. The Company will assume upon the
transfer by Matzorkis of his shares of Common Stock to the Trust the obligations
of Matzorkis under that certain Promissory Note by and between Matzorkis and
Xxxxx Xxxxx, dated as of June 25, 1998, in the original principal amount of
$296,000, a copy of which is attached hereto as Exhibit D (the "Promissory
Note"). The Company hereby waives any subrogation rights against Matzorkis it
may have under the Promissory Note.
1.
4. AMORTIZATION OF OBLIGATIONS. The Company shall continue to amortize the
approximately $45,000 of outstanding loans (the "Loan"), as of the date hereof,
owed by the Company to Matzorkis. Such Loan shall be amortized and paid to
Matzorkis at a rate of $ 1,100 per month and shall bear no interest. Matzorkis
shall forbear from any action to collect payment of such Loan without the
Company's prior written consent.
5. ASSIGNMENT OF RIGHTS. Matzorkis hereby assigns the copyright and any and
all other rights, if any, in and to the lyrics, music and composition titled
"Reuniting, America" (the "Song") to the Company except that Matzorkis shall
retain the right to collect artist royalties, if any, payable by any royalty
collection society in connection with the Song. Within five days of the
execution and delivery of this Agreement by the parties hereto, the Company
agrees to pay Matzorkis $10,000 in respect of the assignment set forth in this
Section 5.
6. VOICE-OVER SERVICES. Beginning as of the date of execution hereof,
Matzorkis shall not be required to provide voice-over services to the Company
except to the extent the Company agrees to compensate Matzorkis for such
services in a manner commensurate with amounts which would be payable to other
non-celebrities providing such voice-over services in an arm's length
transaction.
7. RETENTION OF OBLIGATIONS. Matzorkis agrees to retain all obligations, if
any, to pay any and all fees and/or expenses of Xxxxxx Associates ("Xxxxxx") and
will hold harmless the Company and all of its Affiliates (as defined below) of
any of the foregoing with respect to any and all claims made by or on behalf of
Xxxxxx.
8. REIMBURSEMENT OF EXPENSES. The Company agrees to reimburse Matzorkis for
reasonable actual out-of-pocket legal expenses arising out of or in connection
with the matters set forth in the Term Sheet up to a maximum of $20,000.
9. INITIAL PUBLIC OFFERING.
(A) REGISTRATION. If the Company at any time proposes after the date
hereof to effect a Registration (as defined below) of shares of Common Stock, it
will give prompt written notice on or prior to the date thirty (30) days before
the initial filing with the Securities and Exchange Commission (a "Notice of
Registration") to the Trust of the Company's intention to do so and of the
Trust's rights under this Section 9. Upon the written request of the Trust made
within twenty (20) calendar days after receipt of a Notice of Registration
(which request shall specify the number of shares of Common Stock (the
"Requested Trust Shares") the Trust agrees to sell in such Registration), the
Company and Xxxxxxx-Xxxxx will use their reasonable best efforts to include in
the registration statement relating to such Registration (the "Registration
Statement") all Requested Trust Shares. Notwithstanding the foregoing, if, at
any time after giving a Notice of Registration and prior to the effective date
of the applicable Registration Statement, the Company shall determine for any
reason not to register or to delay registration of such shares of Common Stock,
the Company may, at its election, give written notice of such determination to
the Trust and, thereupon, (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Requested Trust Shares, and
(ii) in the case of a determination to delay such registration, shall be
permitted to delay registering any or all Requested Trust Shares for the same
period as the delay in the registration of such other shares of Common Stock.
2.
(B) PRIORITY IN CUTBACK REGISTRATIONS.
(I) If a Registration becomes a Cutback Registration (as defined
below), the Company shall include in such Registration the amount of Common
Stock of the Company which the Managing Underwriter (as defined below) advises
the Company can be sold in such offering, in the following order of priority:
(a) first, the Common Stock proposed by the Company to be sold for its own
account, (b) second, the Common Stock requested to be included in such
Registration by holders thereof who acquired such shares of Common Stock in, or
in connection with, a private placement by the Company and the terms of such
private placement require such Registration (without cutback) if so requested,
and (c) third, the Common Stock requested to be included in such Registration by
each of Xxxxxxx-Xxxxx and the Trust up to, but not exceeding, (1) in the case of
Xxxxxxx-Xxxxx, 80%, and (2) in the case of the Trust, 20%, of the balance of the
Common Stock which the Managing Underwriter advises the Company can be sold in
such offering; provided, however, that if the Managing Underwriter advises the
Company in writing that the registration of shares of Common Stock beneficially
owned by the Trust will have a material adverse effect on such Registration,
then the Trust shall not include any shares of Common Stock in such
Registration. Any securities so excluded shall be withdrawn from and shall not
be included in any such Registration.
(II) If the Company at any time proposes to register its Common Stock
in a Registration and such shares of Common Stock are to be distributed by or
through one or more underwriters, the Company will use its reasonable best
efforts, if requested by either Xxxxxxx-Xxxxx or the Trust (each a "Selling
Shareholder"), to arrange, subject to the proviso in Section 9(b)(i) above, for
such underwriters to include such shares of Common Stock to be offered and sold
by such Selling Shareholders among the shares of Common Stock to be distributed
by such underwriters, and such Selling Shareholders shall be obligated to sell
such shares of Common Stock in such Registration through such underwriters on
the same terms and conditions as apply to the other shares of Common Stock to be
sold by such underwriters in connection with such Registration. The Selling
Shareholders shall, if requested by the Company or the Managing Underwriter, be
parties to the underwriting agreement between the Company and such underwriter
or underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters also be made to and for such
Selling Shareholders' benefit and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement also be
conditions precedent to such Selling Shareholders' obligations. The Selling
Shareholders shall be required to make representations and warranties regarding
such Selling Shareholder and its ownership of the shares of Common Stock being
registered on its behalf and such Selling Shareholder's intended method of
distribution and any other representation required by law or reasonably required
by the Managing Underwriter. No Selling Shareholder may participate in such
underwritten offering unless such Selling Shareholder agrees to sell its
securities on the basis provided in such underwriting agreement and completes
and executes all questionnaires, powers of attorney, indemnities and other
documents reasonably required under the terms of such underwriting agreement;
provided that any indemnity obligation of a Selling Shareholder shall be limited
to the net proceeds received by such Selling Shareholder. If any Selling
Shareholder disapproves of the terms of an underwriting, such Selling
Shareholder may elect to withdraw all of its shares therefrom and from such
Registration by notice to the Company and the Managing Underwriter, and upon the
written consent of the Managing
3.
Underwriter, the remaining Selling Shareholder shall be entitled to increase the
number of shares of Common Stock being registered to the extent of the shares of
Common Stock so withdrawn.
(III) Upon the request of the Managing Underwriter, each of Xxxxxxx-
Xxxxx and the Trust shall enter into substantially similar agreements in form
and substance reasonably satisfactory to such Managing Underwriter whereby they
each agree not to effect any public sale or distribution (including a sale under
Rule 144) of shares of Common Stock owned by such shareholder, or any securities
convertible into or exchangeable or exercisable for such shares of Common Stock,
during a period of up to one hundred eighty (180) days after the effective date
of any Registration Statement in connection with a Registration distributed by
or through one or more underwriters (or in any case for such shorter period of
time as is sufficient and appropriate, in the opinion of the Managing
Underwriter, in order to complete the sale and distribution of the Common Stock
included in such Registration), except as part of and pursuant to such
Registration Statement, whether or not such shareholder participates in such
Registration.
(IV) "Cutback Registration" means any Registration in which the
Managing Underwriter with respect thereto advises the Company and the Selling
Shareholder in writing that, in its opinion, the number of shares of Common
Stock requested to be included in such Registration exceeds the number which can
be sold in such offering without a reduction in the selling price anticipated to
be received for the Common Stock to be sold in such public offering.
(V) "Managing Underwriter" means, with respect to any public
offering, the lead managing underwriter for such public offering.
(VI) "Registration" means any registration of an initial public
offering of the Common Stock under the Securities Act of 1933, as amended, for
sale for the account of the Company or for the account of any holder of
securities of the Company.
10. RELEASE.
(A) Each of the parties hereto and its respective Affiliates hereby fully
and completely release and forever discharge, on behalf of himself or itself and
each of his or its respective affiliates, officers, directors, partners,
shareholders, agents, employees, attorneys, custodians, administrators,
conservators, predecessors, successors, assigns, heirs, legatees, executors,
representatives, agents, guardians and associates or any other representative of
the foregoing (collectively, "Affiliates") and any other person or entity,
respectively, who may in any fashion or manner claim any interest in the subject
matter hereof by, through or on behalf of such parties, each of the other
parties to this Agreement and their respective Affiliates (collectively, the
"Releasees") from any and all claims, demands, controversies, liabilities,
damages, judgments, debts, obligations, costs, expenses, losses, compensation,
attorneys' fees, accountant's fees, expert witness' fees or causes of action of
any kind or nature, whether now known or unknown, suspected or unsuspected, in
law or in equity, that arose from the beginning of time through and including
the date hereof (collectively, the "Claims"), other than any Claims relating to
the performance of, and obligations set forth in, any of the following:
(I) this Agreement;
(II) the Shareholders' Agreement;
4.
(III) the Amended and Restated Employment Agreement;
(IV) the Administrative Services Agreement;
(V) the Designation of Purchaser, dated November 14, 1997;
(VI) the Indemnification Agreement, dated November 21, 1997, by and
between Dayton Way Pictures V, Inc. and Xxxxxxxx Xxxxxxxxx;
(VII) the Letter Agreement, dated October 24, 1997, by and between
The Xxxxxxx-Xxxxx Company and Xxxxxxxx Xxxxxxxxx;
(VIII) any inter-company loans or advances between Xxxxxxx-Xxxxx and
the Company;
(IX) any outstanding loans to or from the current shareholders of
the Company that are currently reflected in the financial statements of the
Company; and
(X) the Warrant (as defined in Section 11 below).
(B) Each party hereto hereby waives any and all rights which it may have
with respect to this Agreement or the subject matter hereof, under the
provisions of Section 1542 of the Civil Code of the State of California as now
worded and as hereafter amended, which section provides in pertinent part:
"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."
It is understood and agreed that the facts in respect to which this
Agreement is executed may turn out to be other than or different from the facts
in that respect now known or believed by each of the parties to be true; and
with such understanding and agreement, each of the parties hereto expressly
accepts and assumes the risk of facts being other than or different from the
assumptions and perceptions as of any date prior to and including the date
hereof, and agrees that this Agreement shall not be subject to termination or
rescission by reasons of any such difference of facts.
(C) Each of the parties hereto represents as to itself that:
(I) it has received independent legal advice with respect to the
advisability of entering into this Agreement and no party is entitled to rely
upon or has in fact relied upon the legal or other advice of any other party or
any other party's counsel in entering into this Agreement;
5.
(II) it has carefully read this Agreement, that this Agreement has
been fully explained to it by its attorney, that it fully understands all of the
terms and provisions and the binding effect of this Agreement, and that it is
entering into this Agreement voluntarily;
(III) it had the opportunity to conduct an adequate investigation into
the matters with respect to which this Agreement is executed and has reviewed
all of the documentation that it needed to review in connection with entering
into this Agreement, notwithstanding any documentation or facts that may later
come to light with respect thereto; and
(IV) it has not heretofore assigned or transferred, or purported to
assign or transfer, and it agrees that it will not hereafter assign or transfer
or purport to assign or transfer, to any person or entity, any Claim released
under this Agreement, or any portion thereof or interest therein. Each party
hereto agrees to indemnify, defend and hold harmless each Releasee from and
against any claims, demands, liabilities, damages, judgments, debts,
obligations, costs, losses and expenses (including, without limitation,
attorneys' fees), incurred by such Releasee as a result of any person or entity
asserting any such assignment or transfer of any rights or Claims under such
assignment or transfer.
11. WARRANTS. The Company simultaneously herewith has delivered to Xxxxxxx-
Xxxxx a warrant, substantially in the form attached hereto as Exhibit E (the
"Warrant"), in consideration of, its prior advances, making available its
personnel to the Company, entering into certain guarantees on behalf of the
Company and entering into of this Agreement and the agreements contemplated
hereby. Nothing herein or in any agreement contemplated hereby shall limit the
Company's obligations to repay to Xxxxxxx-Xxxxx such advances or to fulfill any
and all of its obligations to Xxxxxxx-Xxxxx.
12. SUCCESSORS AND ASSIGNS, NO THIRD PARTY BENEFICIARIES. The rights and
obligations of any party to this Agreement shall not be assignable without the
prior written consent of the other parties hereto. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
the parties. Nothing contained in this Agreement is intended to confer upon any
person or entity, other than the parties and their respective permitted
successors, permitted assigns and nominees and other than the Releasees of the
parties hereto pursuant to Section 10 hereof, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
13. MISCELLANEOUS PROVISIONS.
(A) GOVERNING LAW AND FORUM. This Agreement shall be governed by,
construed, interpreted and enforced in accordance with the laws of the State of
California without regard to the conflict of laws principles of such state. The
parties hereto agree that all actions or proceedings arising in connection with
this Agreement shall be tried and litigated exclusively in the state and federal
courts located in the County of Los Angeles, State of California. The
aforementioned choice of venue is intended by the parties hereto to be mandatory
and not permissive in nature, thereby precluding the possibility of litigation
between the parties hereto with respect to or arising out of this Agreement in
any jurisdiction other than that specified in this paragraph. Each of the
parties hereto hereby waives any right it may have to assert the doctrine of
forum non conveniens or similar doctrine or to object to venue with respect to
any
6.
proceeding brought in accordance with this paragraph, and stipulates that the
state and federal courts located in the County of Los Angeles, State of
California shall have in personam jurisdiction and venue over each of them for
the purpose of litigating any dispute, controversy or proceeding arising out of
or related to this Agreement. Each of the parties hereto authorizes and accepts
service of process sufficient for personal jurisdiction in any action against it
as contemplated by this paragraph according to the procedure for the giving of
notices as set forth in this Agreement. Any final judgment rendered against
either of the parties hereto in any action or proceeding shall be conclusive as
to the subject of such final judgment and may be enforced in other jurisdictions
in any manner provided by law.
(B) NOTICES. All notices, requests and other communications under this
Agreement shall be in writing and shall be deemed to have been delivered on the
third Business Day after having been mailed in a general or branch post office
and enclosed in a registered or certified postage prepaid envelope; the first
Business Day after having been sent by recognized overnight courier; or when
personally delivered; and, in each case, addressed to the respective parties at
the addresses stated below or to such other changed addresses that the parties
may have fixed by notice in accordance herewith. The term "Business Day" shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the City of New York, New York or Los Angeles, California are
authorized or required by law, regulation or executive order to remain closed.
If to Xxxxxxx-Xxxxx: The Xxxxxxx-Xxxxx Company
00000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Xxxxxxxx Xxxxxxxxx: 800-U.S. Search
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
7.
with a copy to: Troop Xxxxxxx Xxxxxx Xxxxxxx & Xxxxx, LLP
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company: 800-U.S. Search
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
; provided, however, that any notice to the Company shall also be sent to the
other parties hereto in the manner provided in this Section 13(b).
(C) SECTION HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(D) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(E) AMENDMENT, WAIVER. Neither this Agreement nor any term or provision
hereof may be amended, waived, discharged or modified other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or modification is sought. Any amendment shall be effective
and binding on all of the parties hereto. Any waiver of the application of any
term or provision herein or breach hereof shall not be deemed to be a waiver of
any other term, provision or breach and shall not be deemed a waiver of any
subsequent application of such term or provision or the occurrence of a
subsequent breach.
(F) SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges and
agrees that (i) monetary damages would be an inadequate remedy for a breach of
any of the provisions of this Agreement, (ii) each party shall therefore be
entitled to specific performance of its rights under this Agreement without
obligation to post bond or other security in seeking such relief and (iii) in
the event of any action for specific performance of any right under this
Agreement by any party hereto against any other party hereto (such latter party,
the "Defending Party"), the Defending Party shall waive the defense that a
remedy at law would be adequate.
(G) ATTORNEY'S FEES. In any action or proceeding brought by any party
hereto to enforce any provision of this Agreement against any other party
hereto, or where any provision hereof is validly asserted as a defense, the
successful party (as determined by the Deciding Authority (as defined below)
based upon all of the facts and circumstances) shall be entitled to recover
reasonable attorney's fees and expenses, in addition to its costs and expenses
and any other available remedy, associated with such action or proceeding as may
be fixed by any court
8.
of competent jurisdiction, or other jurisdiction or quasi-judicial body
(including, without limitation, an arbitrator or arbitrators) having
jurisdiction thereof ("Deciding Authority") whether or not such action or
proceeding results in a final judgment or award.
(H) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
14. INTERPRETATION. The parties hereto agree that each party has participated
in the drafting and preparation of this Agreement, and, accordingly, in any
construction of interpretation of this Agreement, the same shall not be
construed against any party by reason of the source of drafting.
9.
IN WITNESS THEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE XXXXXXX-XXXXX COMPANY
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------
Xxxxx Xxxxxxxxx
Title: President
/s/ Xxxxxxxx Xxxxxxxxx
-----------------------------------
Xxxxxxxx Xxxxxxxxx
800-U.S. SEARCH
By: /s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx
Title: President
10.
EXHIBIT A
SHAREHOLDERS' AGREEMENT
1.
EXHIBIT B
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
1.
EXHIBIT C
ADMINISTRATIVE SERVICES AGREEMENT
1.
EXHIBIT D
PROMISSORY NOTE
1.
EXHIBIT E
WARRANT
1.
