SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the “Agreement”) is
effective as of September 30, 2008 (the “Effective Date”) by
and between: (i) AudioStocks, Inc. (the “Company”); (ii) Xxxxx
X. Xxxxx (the “Noteholder”); and
(iii) DAO Information Systems, LLC (“DAO”). The
Company, the Noteholder and DAO may be individually referred to herein as a
“Party” and
collectively as the “Parties.”
RECITALS
WHEREAS,
on or about January 16, 2008, the Company and the Noteholder entered into a
Subscription Agreement (the “Subscription
Agreement” a copy of which has been attached hereto as Exhibit A)
whereby, for a total purchase price of $12,500, the Noteholder purchased: (i) a
$12,500 Convertible Promissory Note (the “Note” a copy of which
has been attached hereto as Exhibit
B); and (ii) a Series A Warrant to purchase up to 16,667 shares of the
Company’s common stock (the “Warrant” a copy of
which has been attached hereto as Exhibit C,
and collectively with the Note, the “Securities”);
WHEREAS,
the Company has expressed concerns regarding its ability to timely repay the
Note;
WHEREAS,
either concurrently with or closely following the Effective Date of this
Agreement, the Company and DAO have or will enter into the Asset Purchase
Agreement (the “Asset
Agreement,” a copy of which has been attached hereto as Exhibit D)
whereby DAO will purchase certain assets from the Company;
WHEREAS,
as a condition to closing the Asset Agreement, DAO has agreed to assume certain
liabilities of the Company related to the Securities;
WHEREAS,
the Noteholder and the Company wish to enter into this Agreement and fully
settle and forever resolve all past, present and future claims the Noteholder
may have against the Company, including, but not limited to, any claims relating
to the Securities;
NOW,
THEREFORE, for good and valuable consideration, including the mutual covenants
contained in this Agreement and for entering into the Asset Agreement, the
receipt of which is hereby acknowledged, the parties hereby agree as
follows:
AGREEMENT
1. Release of
Claims. The Noteholder hereby agrees to fully
settle and forever resolve any and all past, present and future claims the
Noteholder may have against the Company for, but not limited to, claims arising
from and/or relating directly or indirectly to the purchase and delivery of the
Securities (hereinafter collectively referred to as “Claims”).
2. Settlement
Compensation. As compensation for the settlement of the
Securities and the release of the Claims:
(i) the
Company shall issue the Noteholder 16,667 shares of the Company’s common stock
(the “Settlement
Shares”); and
(ii) DAO
shall issue the Noteholder a new $12,500 Zero Interest Non-Convertible
Promissory Note (the “DAO Note” a copy of
which has been attached hereto as Exhibit E
and collectively, with the Settlement Shares, the “Settlement
Compensation”).
The
Settlement Compensation shall represent the complete and final settlement of the
total compensation the Noteholder has claimed as due and payable in connection
with Claims.
3. Waiver of Section
1542. In signing this Agreement, the
Noteholder has been advised of, understands and knowingly waives his rights
under California Civil Code Section 1542 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.
4. No Further
Claims. The Noteholder covenants and agrees
never to commence against the Company or DAO, any legal action or proceeding
based in whole or in part upon the Securities, Claims, demands, allegations,
and/or injuries released in this Agreement.
5. No
Admission. This Agreement shall not be considered
as an admission of liability by either Party and by entering into this
Agreement, neither Party has admitted the validity of any Claims herein
released.
6. Compliance with Securities
Laws. The Noteholder understands that the
Settlement Shares it is receiving by the Company hereunder are characterized as
“restricted securities” under the federal securities laws and that under such
laws and applicable regulations such securities may be resold without
registration under the United States Securities Act of 1933, as amended only in
certain limited circumstances. It understood that the certificates evidencing
the Settlement Shares issued hereunder will bear a legend in substantially the
below form:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR A LEGAL OPINION THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”
7. Miscellaneous.
a. Necessary
Acts. Each Party to this Agreement agrees to perform any
further acts and execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
b. Entire Agreement;
Modifications; Waiver. This Agreement constitutes the entire
agreement between the Parties pertaining to the subject matter contained in it.
This Agreement supersedes all prior and contemporaneous agreements,
representations, and understandings of the Parties. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by all the Parties. No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the
Party making the waiver.
c. Dispute
Resolution. The subject matter of this Agreement shall
be governed by and construed in accordance with the laws of the State of
California (without reference to its choice of law principles), and to the
exclusion of the law of any other forum, without regard to the jurisdiction in
which any action or special proceeding may be instituted. EACH PARTY
HERETO AGREES TO SUBMIT TO THE PERSONAL JURISDICTION AND VENUE OF THE STATE
AND/OR FEDERAL COURTS LOCATED IN THE NORTH COUNTY OF SAN DIEGO, CALIFORNIA FOR
RESOLUTION OF ALL DISPUTES ARISING OUT OF, IN CONNECTION WITH, OR BY REASON OF
THE INTERPRETATION, CONSTRUCTION, AND ENFORCEMENT OF THIS AGREEMENT, AND HEREBY
WAIVES THE CLAIM OR DEFENSE THEREIN THAT SUCH COURTS CONSTITUTE AN INCONVENIENT
FORUM. AS A MATERIAL INDUCEMENT FOR THIS AGREEMENT, EACH PARTY
SPECIFICALLY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY ISSUES SO
TRIABLE.
d. Attorney’s
Fees. Should any Party hereto employ an attorney for the
purpose of enforcing or constituting this Agreement, or any judgment based on
this Agreement, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other Party or Parties thereto
reimbursement for all reasonable attorneys’ fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The
“prevailing party” means the party determined by the court to most nearly
prevail and not necessarily the one in whose favor a judgment is
rendered.
e. No Oral Change;
Waiver. This Agreement may only be changed, modified, or
amended in writing by the mutual consent of the Parties hereto. The
provisions of this Agreement may only be waived in or by writing signed by the
Party against whom enforcement of any waiver is sought.
f. Severability. If
any provision of this Agreement is invalid, illegal, or unenforceable, the
balance of this Agreement shall remain in effect. If any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
g. Execution of the
Agreement. The Parties have the requisite individual and/or
corporate power and authority to enter into and carry out the terms and
conditions of this Agreement, as well as all transactions contemplated
hereunder. All necessary corporate proceedings, if any, have been taken and all
corporate authorizations and approvals have been secured which are necessary to
authorize the execution, delivery and performance by the Parties to this
Agreement. This Agreement has been duly and validly executed and
delivered by the Parties and constitutes a valid and binding obligation,
enforceable in accordance with the respective terms herein. Upon
delivery of this Agreement, this Agreement, and the other agreements and
exhibits referred to herein, will constitute the valid and binding obligations
of the Parties, and will be enforceable in accordance with their respective
terms.
h. Joint Drafting and Exclusive
Agreement. This Agreement is the only Agreement executed by
and between the Parties related to the Claims described herein. There
are no additional oral agreements or other understandings related to the Claims
described herein. This Agreement shall be deemed to have been drafted
jointly by the Parties hereto, and no inference or interpretation against any
one Party shall be made solely by virtue of such Party allegedly having been the
draftsperson of this Agreement. The Parties have each conducted
sufficient and appropriate due diligence with respect to the facts and
circumstances surrounding and related to this Agreement. The Parties
expressly disclaim all reliance upon, and prospectively waive any fraud,
misrepresentation, negligence or other claim based on information supplied by
the other Party, in any way relating to the subject matter of this
Agreement.
i. Conflicts of
Interest. The Parties shall exercise their best efforts to the
other Party aware of any conflicts of interest that exist between such Party,
including any other business of entity that such Party beneficially owns or
controls, and any interest of the other Party. Disclosure of such
conflicts of interest may be made in writing or through oral
communication. Acknowledgement of such conflicts of interest and
waiver of any cause of action against a Party related to a conflict of interest
may be made in writing or through oral communication.
j. Acknowledgments and
Assent. The Parties acknowledge that they have been given at
least ten (10) days to consider this Agreement and that they were advised to
consult with an independent attorney prior to signing this Agreement and that
they have in fact consulted with counsel of their own choosing prior to
executing this Agreement. The Parties may revoke this Agreement for a
period of three (3) calendar days after signing this Agreement, and the
Agreement shall not be effective or enforceable until the expiration of this
three (3) day revocation period. The Parties agree that they have
read this Agreement and understand the content herein, and freely and
voluntarily assent to all of the terms herein.
IN
WITNESS WHEREOF the Parties have executed this Agreement effective as of the day
and year first above written.
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NOTEHOLDER
Xxxxx
X. Xxxxx
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/s/ Xxxxx X. Xxxxx
___________________________________
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By:
Xxxxx X. Xxxxx
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An
individual
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COMPANY
AudioStocks,
Inc.
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/s/ Xxxx X. Xxxxx
___________________________________
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By:
Xxxx X. Xxxxx
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Its:
President
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XXX
XXX
Information Systems, LLC
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/s/ Xxxx X. Xxxxx
___________________________________
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By:
Xxxx X. Xxxxx
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Its:
President
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THIS SETTLEMENT AGREEMENT (the “Agreement”) is
effective as of September 30, 2008 (the “Effective Date”) by
and between: (i) AudioStocks, Inc. (the “Company”); (ii) Xxxx
Xxxxxxx (the “Noteholder”); and
(iii) DAO Information Systems, LLC (“DAO”). The
Company, the Noteholder and DAO may be individually referred to herein as a
“Party” and
collectively as the “Parties.”
RECITALS
WHEREAS,
on or about January 6, 2008, the Company and the Noteholder entered into a
Subscription Agreement (the “Subscription
Agreement” a copy of which has been attached hereto as Exhibit A)
whereby, for a total purchase price of $10,000, the Noteholder purchased: (i) a
$10,000 Convertible Promissory Note (the “Note” a copy of which
has been attached hereto as Exhibit
B); and (ii) a Series A Warrant to purchase up to 13,334 shares of the
Company’s common stock (the “Warrant” a copy of
which has been attached hereto as Exhibit C,
and collectively with the Note, the “Securities”);
WHEREAS,
the Company has expressed concerns regarding its ability to timely repay the
Note;
WHEREAS,
either concurrently with or closely following the Effective Date of this
Agreement, the Company and DAO have or will enter into the Asset Purchase
Agreement (the “Asset
Agreement,” a copy of which has been attached hereto as Exhibit D)
whereby DAO will purchase certain assets from the Company;
WHEREAS,
as a condition to closing the Asset Agreement, DAO has agreed to assume certain
liabilities of the Company related to the Securities;
WHEREAS,
the Noteholder and the Company wish to enter into this Agreement and fully
settle and forever resolve all past, present and future claims the Noteholder
may have against the Company, including, but not limited to, any claims relating
to the Securities;
NOW,
THEREFORE, for good and valuable consideration, including the mutual covenants
contained in this Agreement and for entering into the Asset Agreement, the
receipt of which is hereby acknowledged, the parties hereby agree as
follows:
AGREEMENT
1. Release of
Claims. The Noteholder hereby agrees to fully
settle and forever resolve any and all past, present and future claims the
Noteholder may have against the Company for, but not limited to, claims arising
from and/or relating directly or indirectly to the purchase and delivery of the
Securities (hereinafter collectively referred to as “Claims”).
2. Settlement
Compensation. As compensation for the settlement of the
Securities and the release of the Claims:
(i) the
Company shall issue the Noteholder 13,334 shares of the Company’s common stock
(the “Settlement
Shares”); and
(ii) DAO
shall issue the Noteholder a new $10,000 Zero Interest Non-Convertible
Promissory Note (the “DAO Note” a copy of
which has been attached hereto as Exhibit E
and collectively, with the Settlement Shares, the “Settlement
Compensation”).
The
Settlement Compensation shall represent the complete and final settlement of the
total compensation the Noteholder has claimed as due and payable in connection
with Claims.
3. Waiver of Section
1542. In signing this Agreement, the
Noteholder has been advised of, understands and knowingly waives his rights
under California Civil Code Section 1542 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.
4. No Further
Claims. The Noteholder covenants and agrees
never to commence against the Company or DAO, any legal action or proceeding
based in whole or in part upon the Securities, Claims, demands, allegations,
and/or injuries released in this Agreement.
5. No
Admission. This Agreement shall not be considered
as an admission of liability by either Party and by entering into this
Agreement, neither Party has admitted the validity of any Claims herein
released.
6. Compliance with Securities
Laws. The Noteholder understands that the
Settlement Shares it is receiving by the Company hereunder are characterized as
“restricted securities” under the federal securities laws and that under such
laws and applicable regulations such securities may be resold without
registration under the United States Securities Act of 1933, as amended only in
certain limited circumstances. It understood that the certificates evidencing
the Settlement Shares issued hereunder will bear a legend in substantially the
below form:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR A LEGAL OPINION THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”
7. Miscellaneous.
a. Necessary
Acts. Each Party to this Agreement agrees to perform any
further acts and execute and deliver any further documents that may be
reasonably necessary to carry out the provisions of this Agreement.
b. Entire Agreement;
Modifications; Waiver. This Agreement constitutes the entire
agreement between the Parties pertaining to the subject matter contained in it.
This Agreement supersedes all prior and contemporaneous agreements,
representations, and understandings of the Parties. No supplement,
modification, or amendment of this Agreement shall be binding unless executed in
writing by all the Parties. No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the
Party making the waiver.
c. Dispute
Resolution. The subject matter of this Agreement shall
be governed by and construed in accordance with the laws of the State of
California (without reference to its choice of law principles), and to the
exclusion of the law of any other forum, without regard to the jurisdiction in
which any action or special proceeding may be instituted. EACH PARTY
HERETO AGREES TO SUBMIT TO THE PERSONAL JURISDICTION AND VENUE OF THE STATE
AND/OR FEDERAL COURTS LOCATED IN THE NORTH COUNTY OF SAN DIEGO, CALIFORNIA FOR
RESOLUTION OF ALL DISPUTES ARISING OUT OF, IN CONNECTION WITH, OR BY REASON OF
THE INTERPRETATION, CONSTRUCTION, AND ENFORCEMENT OF THIS AGREEMENT, AND HEREBY
WAIVES THE CLAIM OR DEFENSE THEREIN THAT SUCH COURTS CONSTITUTE AN INCONVENIENT
FORUM. AS A MATERIAL INDUCEMENT FOR THIS AGREEMENT, EACH PARTY
SPECIFICALLY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY ISSUES SO
TRIABLE.
d. Attorney’s
Fees. Should any Party hereto employ an attorney for the
purpose of enforcing or constituting this Agreement, or any judgment based on
this Agreement, in any legal proceeding whatsoever, including insolvency,
bankruptcy, arbitration, declaratory relief or other litigation, the prevailing
party shall be entitled to receive from the other Party or Parties thereto
reimbursement for all reasonable attorneys’ fees and all reasonable costs,
including but not limited to service of process, filing fees, court and court
reporter costs, investigative costs, expert witness fees, and the cost of any
bonds, whether taxable or not, and that such reimbursement shall be included in
any judgment or final order issued in that proceeding. The
“prevailing party” means the party determined by the court to most nearly
prevail and not necessarily the one in whose favor a judgment is
rendered.
e. No Oral Change;
Waiver. This Agreement may only be changed, modified, or
amended in writing by the mutual consent of the Parties hereto. The
provisions of this Agreement may only be waived in or by writing signed by the
Party against whom enforcement of any waiver is sought.
f. Severability. If
any provision of this Agreement is invalid, illegal, or unenforceable, the
balance of this Agreement shall remain in effect. If any provision is
inapplicable to any person or circumstance, it shall nevertheless remain
applicable to all other persons and circumstances.
g. Execution of the
Agreement. The Parties have the requisite individual and/or
corporate power and authority to enter into and carry out the terms and
conditions of this Agreement, as well as all transactions contemplated
hereunder. All necessary corporate proceedings, if any, have been taken and all
corporate authorizations and approvals have been secured which are necessary to
authorize the execution, delivery and performance by the Parties to this
Agreement. This Agreement has been duly and validly executed and
delivered by the Parties and constitutes a valid and binding obligation,
enforceable in accordance with the respective terms herein. Upon
delivery of this Agreement, this Agreement, and the other agreements and
exhibits referred to herein, will constitute the valid and binding obligations
of the Parties, and will be enforceable in accordance with their respective
terms.
h. Joint Drafting and Exclusive
Agreement. This Agreement is the only Agreement executed by
and between the Parties related to the Claims described herein. There
are no additional oral agreements or other understandings related to the Claims
described herein. This Agreement shall be deemed to have been drafted
jointly by the Parties hereto, and no inference or interpretation against any
one Party shall be made solely by virtue of such Party allegedly having been the
draftsperson of this Agreement. The Parties have each conducted
sufficient and appropriate due diligence with respect to the facts and
circumstances surrounding and related to this Agreement. The Parties
expressly disclaim all reliance upon, and prospectively waive any fraud,
misrepresentation, negligence or other claim based on information supplied by
the other Party, in any way relating to the subject matter of this
Agreement.
i. Conflicts of
Interest. The Parties shall exercise their best efforts to the
other Party aware of any conflicts of interest that exist between such Party,
including any other business of entity that such Party beneficially owns or
controls, and any interest of the other Party. Disclosure of such
conflicts of interest may be made in writing or through oral
communication. Acknowledgement of such conflicts of interest and
waiver of any cause of action against a Party related to a conflict of interest
may be made in writing or through oral communication.
j. Acknowledgments and
Assent. The Parties acknowledge that they have been given at
least ten (10) days to consider this Agreement and that they were advised to
consult with an independent attorney prior to signing this Agreement and that
they have in fact consulted with counsel of their own choosing prior to
executing this Agreement. The Parties may revoke this Agreement for a
period of three (3) calendar days after signing this Agreement, and the
Agreement shall not be effective or enforceable until the expiration of this
three (3) day revocation period. The Parties agree that they have
read this Agreement and understand the content herein, and freely and
voluntarily assent to all of the terms herein.
IN
WITNESS WHEREOF the Parties have executed this Agreement effective as of the day
and year first above written.
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NOTEHOLDER
Xxxx
Xxxxxxx
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/s/ Xxxx Xxxxxxx
___________________________________
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By:
Xxxx Xxxxxxx
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An
individual
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COMPANY
AudioStocks,
Inc.
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/s/ Xxxx X. Xxxxx
___________________________________
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By:
Xxxx X. Xxxxx
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Its:
President
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XXX
XXX
Information Systems, LLC
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/s/ Xxxx X.
Xxxxx
___________________________________
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By:
Xxxx X. Xxxxx
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Its:
President
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