SETTLEMENT AGREEMENT
THIS AGREEMENT is made this 16th day of March, 2000 by and between 3Si HOLDINGS,
Inc., a Wyoming corporation, hereinafter referred to as "HOLDINGS", 3Si, Inc., a
Colorado corporation, hereinafter referred to as "3Si," and STORAGE AREA
NETWORK, INC., a Colorado corporation, hereinafter referred to as "SAN".
RECITALS:
A. 3Si is a wholly owned subsidiary of HOLDINGS;
B. SAN and 3Si are currently involved in a lawsuit filed by SAN against
3Si on or about May 15, 1999 in the District Court, Arapahoe County,
Colorado, Civil Action No. 99 CV 1784, Courtroom 5.
C. SAN and 3Si have agreed to settle the lawsuit on the terms and
conditions set forth herein.
D. 3Si has certain funds due from third parties, resulting from sale of
its commercial computer reseller business to TIG (which funds include
quarterly profits) and certain contract renewal payments on contracts
known as the U.S. Postal Contract and the New Mexico State Contracts,
hereinafter collectively referred to as "TIG EARN-OUT"
E. 3Si has executed a promissory note in favor of STORAGE TECH in the
amount of $535,105.26 with a present outstanding balance of
$321,063.14 and presently requiring monthly payments of $53,510.53
(the "STK Note").
NOW THEREFORE, the parties agree as follows:
1. Agreed Debt. The parties stipulate that the amount of
$2,211,047.88 is owed by 3Si to SAN, hereinafter called
(the "Agreed Debt"). This includes $50,000.00 of current
3Si cash holdings that will be placed in escrow within ten
business days for 3Si to use in registering SAN shares per
paragraph 8 herein.
2. Conversion of Agreed Debt to Equity. The Agreed Debt shall
be discharged and paid by 3Si to SAN on the following
terms.
2.1 3Si, within fifteen (15) days after execution of
this Agreement by all parties, shall arrange for
the issuance to SAN of 6,460,137 shares of common
stock of HOLDINGS, (hereinafter called the "SAN
Shares"), valued for the purposes of this
Agreement at $0.35 per share.
2.2 The SAN Shares shall be restricted stock, subject
to the terms of Section 6 below.
3. Payment of 3Si Debt to Storage Tech.
3.1 3Si is paying a minimum of $53,510.53 per month in
settlement of the STK Note. In addition, 3Si
agrees to accelerate the payment of the note with
the TIG EARN-OUT. 3Si will provide documentation
to SAN of all payments made on the STK note within
three days thereof. In addition, 3Si will provide
documentation to SAN of all funds received on the
TIG EARN-OUT within three days of the receipt
thereof.
4. Stock Redemption of SAN Shares.
4.1 Upon payment of the STK Note in full pursuant to
paragraph 3.1 hereof or otherwise, 3Si shall pay
to SAN under the terms of the stock redemption
provisions set forth below all TIG EARN-OUT
monies, including but not limited to all quart-
erly profits received from TIG and all contract
renewal fees received from TIG, within fifteen
(15) days of such receipt. In addition, 3Si shall
pay to SAN 50% of any capital contributions
(investment or loan from any source) made to
Holdings or 3Si and 50% of all net income to
Holdings or 3Si (other than the TIG payments
above-referenced). Such payments shall be made
within 15 days of the receipt of payment until
the Agreed Debt is paid in full.
4.2 For all redemption payments made by 3Si pursuant
to this agreement, within six months of the date
the SAN shares are received by SAN, SAN shall
transfer the SAN Shares back to Holdings at $0.35
per share.
4.3 For all redemption payments made by 3Si pursuant
to this agreement after six months of the date the
SAN shares are received by SAN, SAN shall transfer
the SAN Shares back to Holdings at $.52, or the
then current market price, per share, whichever is
higher.
4.3 At the point SAN has received redemption payments
totaling $2,211,047.88, 3Si will have the right,
but not the obligation, to continue purchasing the
SAN shares based on the redemption price schedule
detailed in paragraphs 4.2 and 4.3 above.
4.4 For the purposes of these stock redemption
provisions, market price shall be fixed as of the
date of receipt by SAN of payments made by 3Si
under paragraphs 3.2 and shall be the mean between
the high bid and low asked price quoted in the
pink sheets on that date.
5. Sale of Shares by SAN; Application of Proceeds to Reduction
of Debt. SAN shall have the right, subject to applicable
federal and state securities laws, and the terms hereof, to
sell the SAN Shares to third parties. The net proceeds to
SAN of such sales, if any, shall be reported by SAN to 3Si
on a monthly basis and shall reduce the amount payable under
the redemption provisions.
6. Restricted Shares. SAN acknowledges that the SAN Shares
which it receives hereunder have not been registered under
the Securities Act of 1933 (the "Act"), that they are
restricted shares, that they will bear a legend to that
effect, and that
they can be traded only in strict accordance with the Act,
and with the applicable rules and regulations issued by the
Securities and Exchange Commission (the "SEC") under the
Act. Holdings agrees that it will take all steps necessary
to keep HOLDINGS current in its SEC filings so long as SAN
holds the SAN Shares in order that SAN will be able to
utilize the provisions of Rule 144 once the one year holding
period has expired.
7. Settlement. Upon execution of this Agreement and delivery of
the SAN Shares, SAN shall deliver to 3Si a Stipulation For
Dismissal With Prejudice of the lawsuit referred to herein,
in a form which are acceptable to counsel for 3Si and
counsel for SAN.
8. Registration Rights. In the event that HOLDINGS has not
redeemed at least $750,000 of the SAN Shares by 185 days
after the date of the issuance of such shares, HOLDINGS
agrees to file a registration statement with the Securities
and Exchange Commission to cover the resale of the remaining
SAN Shares. HOLDINGS agrees that it will be responsible for
the expenses of such registration statement and that it will
use its best efforts to have such registration statement
cleared by the SEC as soon as practicable.
9. SEC Disclosure. SAN and 3Si agree that 3Si will, upon
execution of this Agreement and pursuant to applicable SEC
rules and requirements, file a Form 8(K) Disclosure with the
SEC regarding this transaction.
10. Interpretation. Both SAN and 3Si agree that in interpreting
this Agreement, a court, arbitrator or mediator should not
interpret it against the party who initially drafted it,
since the Agreement has been carefully reviewed, with full
opportunity for revision, by counsel for all parties.
11. Intent. SAN agrees (a) to acquire no further shares in 3Si,
other than the SAN Shares as set forth herein, and (b) to
take no action to initiate, or to participate in any way in,
a hostile tender offer or takeover of 3Si.
12. Acknowledgment; Representations. SAN acknowledges and
represents that:
12.1 It has had a reasonable opportunity to ask
questions of and receive answers from 3Si concerning
3Si, HOLDINGS, and the SAN Shares, and all such
questions have been answered to the full satisfaction
of SAN. No oral representations have been made or
oral information furnished to SAN or its advisor(s)
in connection with the SAN Shares which are
inconsistent with the public filings made with the
SEC by 3Si and available to SAN;
12.2 Because of SAN's pre-existing business with 3Si,
and by reason of SAN's prior investment experience,
SAN has the capacity to protect its own interests in
connection with the SAN Shares. SAN has had access to
all material and relevant information, including, but
not limited to the SEC filings made by 3Si, necessary
to enable SAN to make an informed investment
decision, prior to entering into this Agreement. All
information requested by SAN from 3Si concerning the
business and financial condition of 3Si and HOLDINGS
has been furnished to the extent 3Si possessed the
information or could acquire it without unreasonable
effort or expense.
12.3 SAN understands that it may not sell, offer for
sale, assign, pledge, hypothecate or otherwise
transfer or encumber all or any part of its interest
in the SAN Shares in the absence of either (i) an
effective registration statement covering such
transaction under the Securities Act of 1933 (the
"Securities Act") and effective qualification or
registration under all applicable state securities
laws and regulations, or, (ii) an opinion of counsel
satisfactory to counsel for 3Si to the effect that
registration under the Securities Act is not required
and qualification or registration under any such
state securities laws and regulations is not required
(or that any applicable state qualification or
registration requirements have been satisfied in
full).
12.4 The SAN Shares are being acquired solely for
SAN's own account and not for the account of any
other person, and not for distribution, assignment or
resale to others, except in strict accordance with
the restrictions set forth herein. No other person
has, or will have, a direct or indirect beneficial
interest in such SAN Shares.
13. SAN Representation on 3Si Board. 3Si agrees that, within
fifteen days of the date of this agreement, it will cause an
independent third party director designated by SAN (but not
a director, officer, shareholder or employee of SAN) and
approved by 3Si (which approval shall not be unreasonably
withheld) to be nominated for and elected to the Board of
Directors of 3Si. Such outside director shall continue to
serve as a director of 3Si, subject to the Bylaws of 3Si,
until such time as 3Si has redeemed $2,261,047.88 worth of
shares.
14. Attorneys' Fees. If any legal action is commenced in
connection with this agreement for the enforcement of any of
the terms hereof, the prevailing party shall be entitled to
an award of its reasonable attorneys' fees and costs. The
phrase "prevailing party" shall include a party who receives
substantially the relief requested, whether by dismissal,
summary judgement, judgement, settlement, or otherwise.
15. Entire Agreement This Agreement contains the entire
agreement between the parties and may not be altered or
amended except by a writing signed by all parties.
16. Governing Law; Binding Effect. This Agreement is made and
entered into in the state of Colorado, and shall be
construed and enforced in accordance with the laws thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on this
16th day of March, 2000.
3Si HOLDINGS, INC.
By:_________________________
3Si, INC.
By:_________________________
STORAGE AREA NETWORK, INC.
By:_________________________
