SETTLEMENT AGREEMENT AND GENERAL RELEASE
Exhibit
10.4
THIS
SETTLEMENT AGREEMENT AND GENERAL
RELEASE (“Agreement”) is made and entered into by and between plaintiff Xxxxx X.
Xxxxxxxxx (“Plaintiff” or “DL”), on the one hand, and defendant Xxxxxxx Xxxxxxx
(“Xxxxxxx”), and defendant Winsonic Digital Media Group, Inc. (“Winsonic”)
(collectively, “Defendants”), on the other hand. This Agreement also
will refer to Plaintiff and Defendants individually as “Party” and to Plaintiff
and Defendants collectively as “Parties.”
RECITALS
A. Winsonic
issued to Plaintiff a
convertible promissory note dated April 12, 2005 (the “Promissory Note”) in the
principal amount of $125,000 that provided, at Plaintiff’s sole election, for
the conversion of the Promissory Note into 200,000 shares of Winsonic’s common
stock (the “Shares”) in accordance with the terms of that certain convertible
stock agreement dated as of April 12, 2005 between the Plaintiff and Winsonic
(the “Convertible Stock Agreement”).
B. Disputes
have arisen amongst the
Parties related to payments due pursuant to, and the conversion of, the
Promissory Note.
C. On
May 18, 2006, Plaintiff filed claims
in the Los Angeles Superior Court against Defendants.
D.
Thereafter, Plaintiff filed claims in the United States District Court, Central
District of California for fraud and breach of contract (the
“Lawsuit”).
E. In
order to avoid the time and expense
of further litigation, Plaintiff and Defendants wish to settle and resolve,
fully and finally, all differences between them, including but not limited
to
settling and resolving the Lawsuit, as well as any and all matters arising
out
of or related in any way to the Lawsuit, the settlement thereof, the Promissory
Note and the Convertible Stock Agreement, and any other dealings or contacts
between Defendants and Plaintiff.
F. Except
for the lawsuits as described
above, Plaintiff represents that he has not filed any other claims, charges,
complaints, lawsuits or appeals of any kind, in any court or administrative
body, against either or both of the Defendants.
NOW,
THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Plaintiff and Defendants agree as follows:
1. Terms.
The
Parties agree as follows:
a. Winsonic
shall pay to Plaintiff a total settlement amount of $180,000 less the value
Plaintiff realizes from the sale of the shares of Winsonic common
stock
referenced
in paragraph 1(a)(i) below. Winsonic is obligated to pay this total
settlement amount by no later than March 15, 2008.
(i) No
later
than December 17, 2007, Winsonic shall fax an instruction letter to its stock
transfer agent instructing it to issue and deliver to Plaintiff 600,000 shares
of restricted Winsonic common stock (the “Shares”), on the terms and in the
manner described in the instruction letter attached hereto as Exhibit
A.
(ii) Plaintiff
will deposit by December 27, 2008 and hold the Shares as security in an account
in his name and for his benefit with a broker-dealer of his choosing
(the “DL Account”).
In
addition, from now until March 15,
2008, plaintiff will forebear from trading the Shares, and Winsonic and Xxxxxxx
will have the opportunity to sell the Shares, with any and all proceeds of
the
sale of each and every one of the Shares to be paid over to the DL
Account. DL shall cooperate in the sale of the Shares by Winsonic and
Xxxxxxx until March 15, 2008, and Winsonic and Xxxxxxx shall cooperate in
the
transfer of proceeds from those sales over to the DL Account.
Winsonic
and Xxxxxxx will not sell, and
DL will not approve of the sale of any more than 50,000 of the Shares until
all
of the proceeds from any prior sales of the Shares have been deposited into
the
DL Account. Any failure by Winsonic and Xxxxxxx to abide by these
provisions will constitute a breach of the Agreement, which will relieve
DL of
any further obligations under this Agreement and will entitle DL to retain,
transfer, and/or sell any and all of the remaining Shares, with no
restrictionsor
interference from, or offset owing to, Winsonic or Xxxxxxx.
The
minimum trading price for the sale
of each of the Shares by Winsonic shall be no less than $.30 per
share. Any failure by Winsonic and Xxxxxxx to abide by this minimum
price provision will constitute a breach of the Agreement, which will relieve
DL
of any further obligations under this Agreement and will entitle DL to retain,
transfer, and/or sell any and all of the remaining Shares, with no restrictions
or interference from, or offset owing to, Winsonic or Xxxxxxx.
If,
by March 15, 2008, a total of
$180,000 is deposited in the DL Account from Winsonic’s and/or Xxxxxxx’x sale of
the Shares, then DL shall return any remaining Shares in the DL Account promptly
to Winsonic. If a total of less than $180,000 is deposited into the
DL Account by March 15, 2008, DL is permitted to retain all of the Shares
thereafter, and will have the unconditional right to transfer and/or sell
any
and all of the Shares, subject to no restrictions by, or offset in favor
of,
Winsonic or any of its agents.
After
March 15, 2008, Winsonic and
Xxxxxxx will cooperate with Plaintiff in any and all ways possible for the
removal of any restrictions on the Shares and any efforts by DL to transfer
and/or sell the Shares. For example, and without limitation, Winsonic
and Xxxxxxx will instruct its transfer agent to permit DL to transfer and/or
sell the Shares, both verbally and in writing, and they will refrain from
taking
any action which will interfere with the removal of any restrictions on the
Shares and the transfer of the Shares by DL, including but not limited to,
refraining from taking any action (legal or otherwise), writing any letter,
and/or making any comment to anyone,
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including
its stock transfer agent, which restricts, interferes with, discourages,
undermines, or undercuts in any way DL’s attempts
to
remove the restrictions on the Shares and/or sell and/or transfer the
Shares.
The
parties agree that after March 15,
2008, DL will have the full, absolute, unconditional, and unrestricted right
to
transfer and sell any and all of the Shares, and Winsonic will accept and
approve from counsel of DL’s choosing any legal opinion which it or its transfer
agent (or anyone else) may require regarding Rule 144 and related matters
to
remove the restrictions from the Shares and/or permit or facilitate the sale
and/or transfer of the Shares. It specifically, and without
limitation, approves the opinion and instruction letter from Wilshire Palisades
Law Group, P.C. to Pacific Stock Transfer, which is attached hereto as Exhibit
B. Upon
execution of this Agreement, Winsonic and Xxxxxxx will execute and deliver
Exhibit B to DL, to hold in trust until March 16, 2008, and Winsonic and
Xxxxxxx agree that DL may submit Exhibit B to Pacific Stock Transfer
or any other stock transfer agent for Winsonic on March 16, 2008 if $180,000
is
not transferred into the DL Account by March 15, 2008.
Winsonic
and Xxxxxxx further agree that
the tacking date for the Shares pursuant to Rule 144 is March 15, 2007, the
Rule
144 1-year holding period for the Shares shall expire on March 15, 2008,
and
they agree to support any such legal opinion presented to WDMG’s transfer agent
to that effect, such that DL’s shares will be fully, absolutely and
unconditionally freely transferable as of March 16, 2008.
Under no circumstances is Winsonic permitted to any offset whatsoever, in
any
context whatsoever, with regard to any shares of Winsonic stock which DL
previously has received from Winsonic.
(iii) Should
there come a time when cash deposits from the sale of the Shares equal $180,000,
Plaintiff shall sell to Winsonic any remaining unsold shares for a total
amount
of $1.00 immediately upon written demand by Winsonic.
(iv) Winsonic
shall deliver to Plaintiff the Shares on or before December 20, 2007: 000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxxxxx, XX 00000.
(v) If
the
Shares are not delivered in compliance with paragraph 1.a.iv, above, this
entire
agreement and settlement is null and void as if never entered into.
b. The
Parties and their counsel will sign this Agreement and the Stipulation for
Judgment.
2. Stipulation
for
Judgment.
Winsonic
shall deliver to Plaintiff’s counsel, Xxxx Xxxxxx, a fully executed Stipulation
for Judgment that conforms to Exhibit B attached hereto, in favor of Plaintiff,
in the amount of $180,000. Plaintiff’s counsel will not file the
Stipulation for Judgment; he will hold the Stipulation for Judgment unless
and
until Winsonic defaults on any obligation set forth in this
Agreement. If such a Default occurs, Plaintiff’s counsel may file, on
an ex parte basis, the
Stipulation for Judgment and commence an enforcement action against Winsonic
for
entry of
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judgment
calculated in conformance with the terms of the Stipulation for
Judgment. If no such Default occurs and all obligations set forth
herein are performed, Plaintiff’s counsel shall return the Stipulation for
Judgment to Winsonic’s counsel, Xxxxxxx X. Xxxxxxx, within seven (7) days after
demand in writing for same by Xxxxxxx. This is not an exclusive
remedy; the remedy is cumulative and supplemental to all other
remedies.
3.
Dismissal with
Prejudice by Plaintiff
Within
seven (7) days of Plaintiff’s
receipt of the Shares pursuant to paragraph 1(a)(i) above, Plaintiff agrees
to
dismiss, with prejudice, the Lawsuit and any other pending claims, charges
or
complaints against Defendants. Plaintiff agrees to have his counsel,
Xxxx Xxxxxx, execute and deliver for filing such dismissal of the
Lawsuit to Xxxxxxx X. Xxxxxxx of Paul, Hastings, Xxxxxxxx & Xxxxxx
LLP.
4.
Mutual General
Releases.
a. Plaintiff’s
Release: As a
material inducement to Defendants to enter into this Agreement, Plaintiff
and
his successors, assigns, agents, employees, representatives, attorneys and
accountants, irrevocably and unconditionally release, acquit and forever
discharge Defendants, and each of them, as well as each of Defendants’
successors, assigns, agents, employees, representatives, attorneys and
accountants (hereafter collectively, “Defendants and their Releasees”), and the
corporate defendants named in the Lawsuit from any and all charges, claims,
liabilities, obligations, promises, agreements, damages, actions, causes
of
action, suits, demands, costs, losses, debts and expenses (including attorneys’
fees and costs actually incurred) of any nature whatsoever, known or unknown,
suspected or unsuspected (collectively, “Claims”), including, but not limited
to, all Claims arising from or relating to (a) Lawsuit; (b) Defendants’
dealings with or contacts with Plaintiff and his heirs, assigns, agents,
employees, representatives, attorneys and accountants; and (c) any matters
which
are or could have been asserted by Plaintiff and his heirs, assigns, agents,
employees, representatives, attorneys and accountants in the
Lawsuit. Nothing contained in this paragraph or anywhere in this
Agreement, however, shall be deemed to release Defendants, or either of them,
from any breach of this Agreement, default under the Agreement, prosecution
of
the Stipulation for Judgment as set forth herein, or any material
misrepresentation or omission made in this Agreement.
b. Defendants’
Release: As
a
material inducement to Plaintiff to enter into this Agreement, Defendants
and
their respective successors, assigns, agents, employees, representatives,
attorneys and accountants, irrevocably and unconditionally release, acquit
and
forever discharge Plaintiff, as well as each of Plaintiff’s agents, attorneys
and accountants (hereafter collectively, “Plaintiff and his Releasees”), from
any and all charges, claims, liabilities, obligations, promises, agreements,
damages, actions, causes of action, suits, demands, costs, losses, debts
and
expenses (including attorneys’ fees and costs actually incurred) of any nature
whatsoever, known or unknown, suspected or unsuspected (collectively, “Claims”),
including, but not limited to, all Claims arising from or relating to any
matters which are or could have been asserted by Defendants and their respective
successors, assigns, agents, employees, representatives, attorneys and
accountants, arising out of or related to (a) the Lawsuit; (b) Plaintiff’s
dealings with or contacts with Defendants and their respective
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successors,
assigns, agents, employees, representatives, attorneys and accountants; and
(c)
any matters which are or could have been asserted by Defendants and their
respective successors, assigns, agents, employees, representatives, attorneys
and accountants in the Lawsuit. Nothing contained herein, however,
shall be deemed to release Plaintiff from any breach of this Agreement or
any
material misrepresentation or omission in this Agreement.
6.
Unknown
Claims.
Plaintiff
and Defendants each acknowledge and agree that, as a condition of this
Agreement, they expressly release all claims that they know about as well
as
those they may not know about. Plaintiff and Defendants expressly
waive all rights under Section 1542 of the Civil Code of the State of
California, 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.
Notwithstanding
the provisions of Section 1542, and for the purpose of implementing a full
and
complete release and discharge of Defendants and their Releasees, Plaintiff
expressly acknowledges that this Agreement is intended to include, and does
include, in its effect, without limitation, all claims which Plaintiff and
his
heirs, assigns, agents, employees, representatives, attorneys and accountants
do
not know or suspect to exist in their favor against Defendants and their
Releasees at the time Plaintiff executes this Agreement; and that this
settlement expressly contemplates the extinguishment of all such
claims.
Notwithstanding
the provisions of Section 1542, and for the purpose of implementing a full
and
complete release and discharge of Plaintiff and his Releasees, Defendants,
and
each of them, expressly acknowledge that this Agreement is intended to include
and does include in its effect, without limitation, all Claims which Defendants
and their successors, assigns, agents, employees, representatives, attorneys
and
accountants do not know or suspect to exist in their favor against Plaintiff
and
his Releasees at the time they each execute this Agreement; and that this
settlement expressly contemplates the extinguishment of all such
claims.
7.
Non-Admission
of
Liability or Wrongdoing.
The
execution of this Agreement will not constitute, nor should it be construed
as,
an admission by any Party hereto that such Party has engaged in any wrongful
conduct toward the other Party or any other person. The Parties
specifically deny any liability to or any wrongful conduct against the other
Party, or any other person, on the part of themselves or their attorneys,
employees, or agents.
8.
No
Representations.
The
Parties represent and agree that no promises, statements or inducements have
been made to them which caused them to execute this Agreement, other than
those
expressly stated in this Agreement.
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9.
Adequate Time to Review Agreement
and
Consult with Counsel.
The
Parties each acknowledge that (a) he or it has been given a reasonable period
of
time to review and consider this Agreement; (b) he or it has been encouraged
to
consult with an attorney of his or its choice concerning his rights and this
Agreement, (c) he or it has thoroughly discussed all aspects of this Agreement
and his or its rights with his or its own attorneys to the full extent he
or it
wanted to do so, (d) he or it understands he or it is waiving legal rights
and
claims by executing this Agreement, (e) he or it has carefully read and fully
understands this Agreement, and (f) he or it is voluntarily executing this
Agreement.
10.
Ownership of
Claims.
The
Parties each represent and agree that he or it has not assigned or transferred,
or attempted to have assigned or transferred, to any person or entity, any
of
the Claims that are being released in this Agreement.
11.
Successors.
This
Agreement shall be binding upon the Parties, and upon their respective
successors, administrators, representatives, executors, successors and
assigns.
12.
Governing Law
and
Venue.
This
Agreement is made and entered into in the State of California and shall in
all
respects be interpreted, enforced and governed under the laws of the State
of
California Any legal action relating to this Agreement or between the
parties hereto shall be in Los Angeles County, California.
13.
Further Necessary
Actions.
The
Parties each agree, without further consideration, to sign or cause to be
signed, and to deliver to the other’s respective counsel any other documents,
and to take any other action, as may be necessary to fulfill their respective
obligations under this Agreement.
14.
Severability.
Should
any of the provisions in this Agreement be declared or be determined to be
illegal or invalid, all remaining parts, terms or provisions shall be valid,
and
the illegal or invalid part, term or provision shall be deemed not to be
a part
of this Agreement.
15.
Proper
Construction.
The
language of all parts of this Agreement shall in all cases be construed as
a
whole according to its fair meaning, and not strictly for or against any
of the
Parties.
As
used
in this Agreement, the term “or” shall be deemed to include the term “and/or”
and the singular or plural number shall be deemed to include the other whenever
the context so indicates or requires.
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The
paragraph headings used in this Agreement are intended solely for convenience
of
reference and shall not in any manner amplify, limit, modify or otherwise
be
used in the interpretation of any of the provisions hereof.
16.
Final and Binding
Agreement.
The
Parties understand that this Agreement is final and binding when executed
by
each of them, and the Parties each agree not to thereafter challenge its
enforceability.
17.
The Parties Are
Responsible for their Own Attorneys’ Fees and Costs.
The
Parties and their attorneys acknowledge and agree that the Parties are solely
responsible for paying their attorneys’ fees and costs, if any, that they have
incurred with respect to preparing and executing this Agreement.
18.
Consequences of
Violating Promises Made in this Agreement.
a. If
Plaintiff pursues any legal action
against the Defendants and their Releasees, or any of them, with respect
to any
claim released by this Agreement; or if Plaintiff breaches any other promises
made in this Agreement; or if Plaintiff has made any representation in this
Agreement that was false when made, or for which there was no reasonable
basis,
then, in addition to any other remedies or relief that may be available to
Defendants, then Plaintiff agrees to pay the reasonable attorneys’ fees, costs
and any other damages that Defendants and their Releasees, or any of them,
may
incur in responding to Plaintiff’s actions.
b. If
Defendants, or either of them,
pursue any legal action against the Plaintiff and his Releasees, or any of
them,
with respect to any claim released by this Agreement; or if Defendants, or
either of them, breach any other promises made in this Agreement; or if
Defendants, or either of them, has made any representation in this Agreement
that was false when made, or for which there was no reasonable basis, then,
in
addition to any other remedies or relief that may be available to Plaintiff,
then Defendants, and each of them, agree to pay the reasonable attorneys’ fees,
costs and any other damages that Plaintiff and his Releasees, or any of them,
may incur in responding to Defendants’ actions.
19.
Entire
Agreement.
This
is
the entire agreement between Plaintiff and Defendants. It includes
all of the terms, promises, representations and understandings made by Plaintiff
and Defendants, and it fully supersedes any earlier written, oral or implied
understandings or agreements between the Parties pertaining to its subject
matter.
20.
Execution in
Counterparts.
The
Parties to this Agreement agree that this Agreement may be executed in
counterparts, each one of which will be either an original or a facsimile
signature, and the sum of each counterpart will constitute a single
agreement. The Parties hereto further agree that a facsimile
signature on a copy of this Agreement sent by facsimile shall be accepted
as
binding on the Parties signing by facsimile copy. The Parties also
agree, however, that they shall execute
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three
original copies of this Agreement and provide an executed original copy to
each
of the Parties.
21.
Notice
Email
notice contemplated by this
agreement shall be made as
follows: Xxxxxxx/Winsonic: xxxxxxxx@xxxxxxxxxxxx.xxx;
Xxxxxxxxx/Xxxxxx: xx@xxxxxxxxxx.xxx.
Facsimile
notice shall be made as
follows: Xxxxxxx/Winsonic: (000) 000-0000; Xxxxxxxxx/Sunkin: (000)
000-0000. Any mailed notice shall be made as follows:
To
Xxxxxxx/Winsonic: Xxxxxxx
X Xxxxxxx, c/o Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, 000 Xxxxxxxxx Xxxxxx,
X.X., Xxxxxx-Xxxxxx Xxxxx, Xxxxxxx, XX 00000
To
Xxxxxxxxx/Sunkin: Xxxxx
X. Xxxxxxxxx, Wilshire Palisades Law Group, P.C., 000 Xxxxxxxx Xxxxxxxxx,
Xxxxx
000, Xxxxx Xxxxxx, XX 00000.
PLEASE
READ CAREFULLY BEFORE SIGNING. THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE
INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Executed
at Santa Monica, California, on this 28th day of December, 2007
Xxxxx
X.
Xxxxxxxxx
/s/
Xxxxx X.
Xxxxxxxxx
Executed
at Los Angeles, CA, on this 27th day of December, 0000
Xxxxxxx
Xxxxxxx
/s/
Xxxxxxx
Xxxxxxx
Executed
at Los Angeles, CA, on this 27th day of December, 2007
Winsonic
Digital Media Group, Ltd.
By:
/s/
Xxxxxxx
Xxxxxxx
Title:
Chairman and
CEO
Name:
Xxxxxxx
Xxxxxxx
APPROVED
AS TO FORM AND
CONTENT:
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| /s/ Xxxxxxx X Xxxxxxx | /s/ Xxxx Xxxxxx |
| Xxxxxxx X Xxxxxxx | Xxxx Xxxxxx |
| Paul, Hastings, Xxxxxxxx & Xxxxxx, LLP | Law Offices of Xxxx Xxxxxx |
| Attorney for Defendants | Attorney for Plaintiff |
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