SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, made as of this 30th day of January, 1997, by and
among RT Industries, Inc., a Delaware corporation (the "Company"), Xxx Xxxxx
(a/k/a Xxxxxx Xxxxx) ("Tygar"), FRNT Realty Co., Ltd. ("FRNT"), and RT
Consulting, Inc., a Florida corporation ("Consultant" and, together with Tygar
and FRNT sometimes herein collectively referred to as the "Settlement Parties").
W I T N E S S E T H :
WHEREAS, the Company, Tygar, FRNT and Consultant are parties to various
agreements more fully herein described; and
WHEREAS, the parties now wish to settle certain differences between them in
the manner hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, including without limitation the release by the
Company's principal creditor, Congress Financial Corporation, of Tygar's
personal guarantee of the Company's obligations to such creditor, the receipt
and sufficiency of which are hereby acknowledged, and subject to the conditions
set forth herein, the parties hereto agree as follows:
1. Settlement Payment.
a. A payment to the Settlement Parties by the Company of an aggregate of
75,678 shares of the common stock, par value $.01 per share, of the Company (the
"Settlement Shares"), having a value of $387,850 based upon the closing bid
price of $5.125 per share as reported by the NASDAQ SmallCap Market for the
Company on January 1, 1997.
b. Forty-five (45) days after the effective date of the S-3 Registration
(as defined in Paragraph 3.b. hereof), the Settlement Parties may elect an
alternative payment (in lieu of retaining any unsold Settlement Shares) by the
Company of an amount equal to the difference between the sum of $387,850 and the
lesser amount, if any, theretofore realized upon sale of the Settlement Shares
(the "Settlement Amount"), in accordance with the terms of this Agreement,
against surrender of all unsold Settlement Shares.
2. Release from Bank Guarantee. Tygar hereby acknowledges that the release
by Congress Financial Corporation (the "Bank"), in the form attached hereto as
Exhibit A, with respect to his personal guarantee of the Company's obligations
to
the Bank is a direct result of the Company paying down its outstanding
obligations to the Bank; it being the intention of the parties hereto that such
release constitutes partial consideration for the parties entering into this
Agreement.
3. Sale and Registration of Shares.
a. The Settlement Parties may, directly or indirectly, sell, offer for
sale, transfer, assign, hypothecate, pledge or otherwise dispose of, the
Settlement Shares and the Option Shares (as defined in paragraph 5.d. hereof),
in whole or part, consistent with the applicable Federal and state securities
laws; provided, however, that the Settlement Parties covenant and agree not sell
or dispose, without the consent of the Company, of any Settlement Shares or
Option Shares other than through Xxxxx, Xxxxxxx Securities, Inc. or other
marketmaker for RT Industries Inc. designated by the Company. All proceeds
realized by the sale or disposition pursuant hereto shall, within five (5)
business days of having been so realized, be distributed among the Settlement
Parties as they may agree.
b. The Company hereby agrees, at its sole cost and expense except as
otherwise provided herein, to undertake to prepare and file with the Securities
and Exchange Commission (the "Commission") a registration statement on Form S-3
covering equity and debt securities of the Company held by its stockholders (the
"S-3 Registration"), which S-3 Registration shall, upon the request of the
Settlement Parties deemed given simultaneously herewith, include the Settlement
Shares and Option Shares. Notwithstanding the preceding sentence, the Settlement
Parties (and their respective affiliates) shall be solely responsible for the
fees of any counsel retained by them in connection with such registration and
any transfer taxes or underwriting discounts or applicable commissions. In
connection with the S-3 Registration, the Company further hereby agrees to use
its reasonable efforts (1) to effect as promptly as possible the registration
under the Securities Act of 1933, as amended (the "Securities Act") of the
Settlement Shares and Option Shares (which it has been hereby requested by the
Settlement Parties to register) and, if any stop order shall be issued by the
Commission in connection therewith, to use its reasonable efforts to obtain the
removal of such order and (2) to qualify or register the Settlement Shares and
Option Shares, as the case may be, included in a registration statement for
offering and sale under the securities or blue sky laws of such states as are
reasonably requested by the Settlement Parties, provided that the Company shall
not be obligated to execute or file any general consent to service of process or
to qualify as a foreign corporation to do business under the laws of any such
jurisdiction.
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4. Sale of Real Estate.
a. For and in consideration of the Settlement Shares and notwithstanding
any provisions to the contrary contained in that lease and option agreement
between FRNT and the Company, dated April 28, 1989, as amended on March 11, 1992
(the "Lease"), FRNT hereby grants to the Company the absolute, irrevocable
option (the "Option") to purchase from it (or its successors and assigns) at the
expiration or earlier termination of the Lease the real property leased
thereunder, located at 000 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxx (the "Real
Estate"), for a purchase price of no greater than $282,202.91 unless the Option
is exercised prior to the expiration of the Lease, in which case the purchase
price for the Real Estate shall be equal to (x) the aggregate principal balance
owing under the Mortgages (as defined below) at the time the Option is exercised
increased by (y) an incremental amount equal to $3,000 for each and every month
that the Option is exercised prior to the expiration of the term of the Lease.
Title to such Real Estate will be delivered to the Company (or its designee) by
FRNT (or its successors and assigns) free and clear of any and all liens and
encumbrances other that the mortgage(s) in the current aggregate principal
amount of $282,202.91 and more particularly described on Exhibit B attached
hereto (the "Mortgages"). It is the intention of the parties hereto that the
appraisal provisions of the Lease with respect to determining the fair market
value of the Real Estate are hereby deleted and that the purchase price shall
consist solely of the assumption by the Company of the balance of the payments
coming due under the Mortgages subsequent to the date the Option first becomes
exercisable. Except as otherwise provided herein, the exercise of the Option
shall be upon the terms and conditions more particularly set forth in Sections
16 and 17 of the Lease, which Lease, to the extent not otherwise modified
herein, shall remain in full force and effect. Any exercise of the Option by the
Company shall be subject to the representations and warranties of contained in
Xxxxxxxxx 0x hereof and as set forth in the definitive Purchase Agreement.
b. The parties hereby agree to execute and deliver a mutually satisfactory
real estate Purchase Agreement (the "Purchase Agreement") appropriate for the
sale of commercial property located in the State of Florida which Purchase
Agreement (x) reflects the above terms; (y) provides, and is subject to, the
release of Tygar (and any affiliates) from the Mortgages, and any and all
promissory notes and guaranties appendant thereto, by either the assumption of
the Mortgages by the Company (or its designees) or the satisfaction of the
Mortgages by the Company (or its designees) by payment in full of any
outstanding balance thereunder; and (z) contains such representations and
warranties (which would survive any closing thereof), covenants and closing
conditions of a type which are customarily included in such agreements,
including without limitation provisions pertaining to form of title, absence of
encumbrances, allocation of taxes, operating permits, and reciprocal
indemnification provisions by
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the Company (on the one hand) and Tygar, FRNT and affiliates (on
the other hand) and subject to the Mortgages.
c. For purposes hereof, FRNT represents, warrants and covenants to the
Company that: (1) any interest of UBC Real Estate Corporation, as Lessor, with
respect to the Lease and/or the Real Estate has been validly transferred and
assigned to, and is now fully owned and exclusively held by, FRNT Realty Co.
Ltd., a Florida corporation; (2) neither FRNT, as lessor, nor the Company, as
tenant, is in default with respect to any of the terms, conditions, and
obligations imposed upon them or either of them by the Lease; (3) FRNT has
timely paid all monthly mortgage payments, in the aggregate amount of $6,549.28
per month, up to and through the date hereof; (4) from the date hereof to the
expiration or earlier termination of the Lease term, FRNT shall (x) preserve
intact the Lease and its relationships with the mortgagee and other entities
with whom it has business relations in connection with the Lease, (y) perform
its obligations under the Lease in a manner consistent with past practice and in
compliance with applicable laws, including without limitation the timely payment
of the outstanding mortgage on the Real Estate; and (z) not, directly or
indirectly, sell, lease, mortgage or otherwise encumber or subject to any lien
or dispose of the Real Estate, except as otherwise provided herein and in the
Lease.
5. Consulting Agreement. For and in consideration of the Settlement Shares,
the Consultant hereby:
a. Agrees and covenants with the Company that the consulting agreement
between it and the Company dated October 20, 1995, as amended on October 20,
1995 and February 6, 1996 (the "Consulting Agreement"), shall terminate
effective upon payment of the Settlement Amount, and all obligations of the
Company thereunder shall cease; provided, however, that the provisions of (1)
Section 3 thereof setting forth the covenant not to compete and nondisclosure
obligations of the Consultant shall continue in full force and effect for a
period of two (2) years from the date hereof and (2) Section 2.C thereof,
pertaining to that option to purchase 100,000 shares (the "Option Shares") of
the Company's common stock, at an exercise price of $5.00, shall remain in full
force and effect.
b. Each of the Company and the Consultant releases and discharges, fully
and forever, the other party, (its officers, directors, employees, agents,
successors and assigns) from any and all suits, claims, causes of action and
demands in law or equity, that the Consultant or the Company, as the case may
be, ever had, now has, or hereafter may have, by reason of any matter, cause or
claims relating in any way to the Consulting Agreement except as specifically
preserved by the terms of this Agreement; it being understood and hereby agreed
that neither the Company nor the Settlement Parties (or any person(s) acting on
behalf of such parties) will file, or permit to be filed, any
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action for legal or equitable relief, including damages and injunctive,
declaratory, monetary or other relief, involving any matter occurring at any
time or related in any way to the Consulting Agreement or involving any
continuing effects of any acts or practices that may have arisen or occurred in
connection with the Consulting Agreement or the termination of the same, other
than the covenants and obligations contained in this Agreement.
6. Alleged Stock Options. For and in consideration of the Settlement
Amount, Tygar hereby:
a. Acknowledges and covenants to the Company that any alleged stock option
agreement between the Company and Tygar, dated June 2, 1995 (the "Alleged Option
Agreement"), for 206,044 shares of the Company's common stock is null and void
and of no force and effect as to the parties thereto.
b. Releases and discharges, fully and forever, the Company (as well as its
officers, directors, employees, agents, successors and assigns) from any and all
suits, claims, causes of action and demands in law or equity, that Tygar ever
had, now has, or hereafter may have, by reason of any matter, cause or claims
relating in any way to the Alleged Option Agreement; it being understood and
hereby agreed by Tygar that none of the Settlement Parties (or any person(s)
acting on behalf of such parties) will file, or permit to be filed, any action
for legal or equitable relief, including damages and injunctive, declaratory,
monetary or other relief, involving any matter occurring at any time or related
in any way to the Alleged Option Agreement or involving any continuing effects
of any acts or practices that may have arisen or occurred in connection with the
Alleged Option Agreement or the termination of the same, other than the
covenants and obligations contained in this Agreement.
7. Indemnification of Tygar from Personal Guarantees. The Company hereby
agrees to indemnify and hold harmless Tygar from any and all suits, claims,
causes of action and demands in law or equity, against Tygar by reason of any
matter, cause or claim resulting from the legitimate obligations of the Company
entered into by the Company in the ordinary course of business and for a valid
business purpose and which obligations Tygar personally guaranteed.
8. Representations, Warranties and Covenants. Each of the Settlement
Parties, jointly and severally, represents, warrants and covenants to the
Company as follows:
a. Each of FRNT and the Consultant is a corporation duly organized, validly
existing and in good standing under the laws of the respective jurisdiction of
its formation, with full corporate power, right, legal capacity and authority to
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enter into this Agreement and to carry out its obligations hereunder, and this
Agreement has been duly and validly authorized by all necessary corporate action
and constitutes the valid and binding obligation of FRNT and the Consultant,
enforceable against FRNT and the Consultant in accordance with its terms;
x. Xxxxx has the right, power, legal capacity and authority to enter into
this Agreement and to carry out his respective obligations hereunder, and this
Agreement constitutes the valid and binding obligation of Tygar, enforceable
against him in accordance with its terms;
c. The execution of this Agreement by the Settlement Parties will not
conflict with or constitute an event of default under, or breach of, any
agreement, document or instrument to which any of the Settlement Parties is a
party, or any law, rule or regulation or court order applicable to any of the
Settlement Parties;
d. That the Settlement Shares or Option Shares issued pursuant to this
Agreement are being acquired for the Settlement Parties' own accounts for
investment and not with a view to the sale or distribution thereof except
pursuant to an effective registration statement or an exemption from the
registration requirements under the Securities Act; and that no representation
or warranty of any nature respecting the acquisition of the Settlement Shares or
Option Shares has been made by the Company or any agent, employee or affiliate
of the Company upon which the Settlement Parties or such other parties relied in
connection with such acquisition or which has induced such Settlement Parties in
any manner in respect thereof; that the Settlement Parties have such knowledge
and expertise in financial and business matters and are capable of evaluating
the merits and risks involved in acquiring the Settlement Shares or Option
Shares and, in entering into this Agreement, none of the Settlement Parties is
relying upon any information other than the results of his or its, as the case
may be, independent investigation;
e. That the Settlement Shares and/or Option Shares may not be sold,
transferred or otherwise disposed of (and the undersigned hereby agree that such
shares will not be sold, transferred or otherwise disposed of) unless (1) the
Settlement Shares and/or Option Shares, as the case may be, have been registered
under the Securities Act, or (2) prior thereto, there is delivered to the
Company (i) a written opinion, in form and substance reasonably satisfactory to
the Company, of the Company's counsel or counsel for the undersigned reasonably
acceptable to the Company, or (ii) a copy of a letter from the staff of the
Securities and Exchange Commission, to the effect that the proposed transaction
may be effected without compliance with the registration provisions of the
Securities Act. The
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undersigned understands that, in the absence of any of the aforementioned
circumstances, the Option Shares must be held by the undersigned indefinitely.
f. That the Settlement Shares or Option Shares, as the case may be, shall
bear a restrictive legend setting forth the matters contained in this paragraph,
and that "stop transfer" instructions may be given to the Company's transfer
agent in respect of all Settlement Shares and Option Shares, and that if so
requested by the Company at the time of issuance of any Settlement Shares or
Option Shares, the Settlement Parties will execute such documents as the Company
may reasonably require in respect of the warranties, representations and
covenants made by the Settlement Parties in this paragraph.
9. Breach.
a. Except as otherwise provided in subparagraph (b) hereof, upon the
failure of any of the Settlement Parties, on the one hand, or the Company, on
the other hand, to perform, satisfy or comply with the covenants contained
herein, which failure is not timely cured by such party within fifteen (15) days
of written notice of such failure, any and all concessions contained herein with
respect to such agreements and/or understandings herein referenced shall, upon
the sole option of the party for whose benefit such covenant was made, be
rendered null and void and without effect and unenforceable as to the parties
hereto.
b. Notwithstanding anything contained herein to the contrary, the Company
shall be entitled to injunctive and other equitable relief for any breach or
threatened breach by Tygar or FRNT (or an affiliated party) of any of his or its
(as the case may be) covenants or obligations with respect to the Lease, in
addition to any other remedies available to the Company under the applicable
Federal and state laws.
10. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Florida without regard to its choice of
law principles. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Florida and of the United States located in Palm Beach County,
Florida (the "Florida Courts") for any litigation arising out of or relating to
this Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the Florida Courts
and agrees not to plead or claim that such litigation brought in the Florida
Courts has been brought in an inconvenient forum.
11. Notice. All notices and other communications given or made pursuant
hereto shall be in writing and shall be
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deemed to have been duly given if delivered personally, by overnight courier or
by express, registered or certified mail (postage prepaid, return receipt
requested) or by facsimile transmittal, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
If to the Company: RT Industries, Inc.
Attn: President
0000 X. Xxxx Xxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Fax: 000-000-0000
with a copy to: Xxxxxx Xxxxxxxxxx LLP
Attn: Xxxx X. Xxxxxxxxx, Esq.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
If to the Settlement Parties:
c/o Xxx Xxxxx
00000 Xxxxxxxx Xxxxx
Xxxxxx Xxxxx, XX 00000
with a copy to: Litow, Cutler, Zabludowski & Xxxxx
Attn: Xxxxxxxx Xxxxx, Esq.
One Biscayne Tower, Ste. 3100
0 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Fax: 000-000-0000
All such notices and communications shall, when telefaxed, be effective when
telefaxed or if sent by nationally recognized overnight courier service, be
effective one (1) business day after the same has been delivered to such courier
service marked for overnight delivery, or, if mailed, be effective three (3)
days after being mailed by registered or certified mail, return receipt
requested, postage prepaid.
12. Miscellaneous. This Agreement (i) may only be modified by a written
instrument executed by the party to be charged with such modification; (ii) sets
forth the entire agreement of the parties hereto with respect to the subject
matter hereof; and (iii) shall inure to the benefit of, and be binding upon, the
parties hereto and their respective heirs, legal representatives, successors and
assigns.
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13. Counterparts. This Agreement may be executed in one or more
counterparts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first set forth above.
RT INDUSTRIES, INC.
By:
-----------------------------
Xxxx X. Xxxxxx, President
Settlement Parties:
------------------------------------
XXXXXX XXXXX
FRNT REALTY CO., LTD.
By:
-----------------------------
Name:
Title:
RT CONSULTING, INC.
By:
-----------------------------
Xxxxxx Xxxxx , President
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