EXHIBIT 10.3
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release (the "Agreement") is made and entered
into as of this 21st day of December, 1998, by and among Xxxxxxx.xxx, Inc., a
Washington corporation (the "Corporation"), and those parties listed as
Shareholders on the attached Signature Page (the "Shareholders").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in the Merger Agreement (defined below).
RECITALS
WHEREAS, the Corporation, the Shareholders, Surplus Software, Inc. and
North Face Merger Sub, Inc., entered into the Agreement and Plan of Merger dated
April 30, 1997 and amended same on May 23, 1997 (as amended, the "Merger
Agreement");
WHEREAS, Section 4.1(a) of the Merger Agreement provided that a certain
percentage of the Merger Consideration was to be held by and pledged to the
Corporation to secure the Shareholders' indemnification obligations (the
"Holdback Shares"), and Article X of the Merger Agreement authorized retransfer
of some or all of the Holdback Shares to the Corporation in certain
circumstances;
WHEREAS, on August 11, 1998 and August 13, 1998, the Corporation properly
and timely notified the Shareholders' Representative, in accordance with the
claims procedure prescribed in Section 10.6.3 of the Merger Agreement, of
certain claims for indemnification under the Merger Agreement (the
"Corporation's Indemnification Claims");
WHEREAS, the Corporation and the Shareholders' Representative have
discussed the terms on which the parties would resolve the Corporation's
Indemnification Claims and wish to enter into this Agreement to confirm the
terms to be agreed upon;
AGREEMENT
Now, therefore, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. TRANSFERS OF HOLDBACK SHARES
Each of the Shareholders shall execute and deliver to the Corporation a
stock power, in form acceptable to the Corporation, to effect the assignment and
transfer from the Shareholder to the Corporation of that number of Holdback
Shares set forth on Schedule A hereto, which in the aggregate total 100,000
shares. Upon receipt of all of such stock powers, the Corporation shall
promptly:
(a) effect (or cause to be effected) the retransfer from each
Shareholder to the Corporation of that number of Holdback Shares set forth
opposite such Shareholder's name on Schedule A hereto (such retransferred
Holdback Shares, in aggregate, the "Retransferred Shares"), as authorized in
Sections 10.6.2(a) and 10.6.3(d) of the Merger Agreement; and
(b) direct the Corporation's transfer agent to reissue and release to
each Shareholder the number of Holdback Shares set forth opposite such
Shareholder's name on Schedule B hereto (such released Holdback Shares, in
aggregate, the "Remainder Shares").
The Corporation and the Shareholders agree that (a) upon the retransfer in
accordance with Section 1(a) of this Agreement, the Shareholders shall have no
claim or interest of any kind whatsoever in or to the Retransferred Shares, and
(b) upon release of the Remainder Shares in accordance with Section 1(b) of this
Agreement, the Corporation shall have no claim or interest of any kind
whatsoever in or to the Remainder Shares.
2. FULL SATISFACTION OF CLAIMS
The remedies provided by this Agreement are and shall be the exclusive
remedies available to the parties with respect to the Corporation's
Indemnification Claims and to the release of Holdback Shares pursuant to Article
X of the Merger Agreement. This Agreement satisfies in full the requirements of
Section 10.6.3(d) of the Merger Agreement.
3. RELEASE OF THE CORPORATION
As a material inducement to the Corporation to enter into this Agreement,
each Shareholder, on behalf of himself or itself and his respective marital
community, hereby irrevocably and unconditionally releases and acquits the
Corporation, its successors, assigns, subsidiaries, stockholders, directors,
officers, agents and representatives (hereinafter, the "Releasees"), from any
and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and expenses
(including attorneys' fees and costs actually incurred), of any nature
whatsoever, known or unknown, suspected or unsuspected, arising under or in
connection with or attributable to Article X of the Merger Agreement or the
transactions contemplated thereby (including, without limitation, claims based
on the Corporation's exercise of its rights under Section 10.6 of the Merger
Agreement), which any Shareholder (or his marital community) now has, owns or
holds, or claims to have, own or hold, or which any Shareholder (or his marital
community) at any time heretofore had, owned or held, or claimed to have, own or
hold, or which any Shareholder (or his marital community) at any time
hereinafter may have, own or hold, or claim to have, own or hold, against each
or any of the Releasees.
4. RELEASE OF SHAREHOLDERS
As a material inducement to the Shareholders to enter into this Agreement,
the Corporation hereby irrevocably and unconditionally releases and acquits each
of the Shareholders and his marital community, from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs actually
incurred), of any nature whatsoever, known or unknown, suspected or unsuspected,
arising under or in connection with or attributable to Article X of the Merger
Agreement or the transactions contemplated thereby (including without limitation
those related to or arising out of the Corporation's Indemnification Claims)
which the Corporation now has, owns or holds, or claims to have, own or hold, or
which the Corporation at any time heretofore had, owned or held, or claimed to
have, own or hold, or which the Corporation at any time hereinafter may have,
own or hold, or claim to have, own or hold, against each or any of the
Shareholders and his marital community.
5. ADVICE OF PRIVATE ATTORNEY
Each of the parties represents and agrees that it fully understands its
right to discuss all aspects of this Agreement with its private attorney, that
it has availed itself of this right, that it has carefully read and fully
understands all the provisions of this Agreement, and that it is voluntarily
entering into this Agreement.
6. RELIANCE
Each of the parties represents and acknowledges that in executing this
Agreement, the party does not rely and has not relied upon any representation or
statement not set forth in herein made by any of the other parties or by any of
the
other parties' agents, representatives, or attorneys with regards to the subject
matter, basis or effect of this Agreement or otherwise.
7. NO ADMISSION
Execution of the Agreement shall not constitute an admission by either
party of any liability of any kind.
8. AMENDMENTS
This Agreement may be amended only by an instrument in writing signed by
all parties.
9. ATTORNEYS' FEES
Promptly after the execution of this Agreement, the Corporation shall pay
$15,000 to the Shareholders' legal counsel for attorney fees incurred by the
Shareholders and the Shareholders' Representative in connection with the
investigation of the Corporation's Indemnification Claims, and the negotiation,
preparation, execution, and delivery of this Agreement.
Should any party employ an attorney or attorneys to enforce any of the
provisions hereof or to protect his or its interest in any manner arising under
this Agreement, or to recover damages for the breach of this Agreement, the
nonprevailing party in any action pursued in courts of competent jurisdiction
(the finality of which is not legally contested) shall pay to the prevailing
party all reasonable costs and expenses, including attorneys' fees, expended or
incurred in connection therewith at trial, on appeal, or both.
10. CONSTRUCTION
Each of the parties has reviewed and examined this Agreement and the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments thereto, and the same shall be construed neither for
nor against any of the parties, but shall be given a reasonable interpretation
in accordance with the plain meaning of its terms and the intent of the parties.
11. COUNTERPARTS
This Agreement may be executed in several counterparts, all of which when
executed together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
12. ENTIRE AGREEMENT
This Agreement contains the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous covenants, agreements, and understandings among or
between any of them of any nature whatsoever, written, oral, or otherwise, with
respect to the subject matter hereof.
13. GOVERNING LAW
The validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties shall be governed by the
laws of the State of Washington.
14. HEADINGS
The headings contained herein are for convenience of reference only and are
not intended to define, limit or describe the scope or intent of any provision
of this Agreement.
15. SUCCESSORS AND ASSIGNS; SURVIVAL
This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto and their permitted assigns and successors in
interest.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties set forth below.
XXXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
SHAREHOLDER REPRESENTATIVE:
/s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx, as Shareholder
Representative
SHAREHOLDERS
/s/ Xxxxx X. Xxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxx, on behalf of
himself and his marital community
/s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx, on behalf of
himself and his marital community
/s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx. Trustee
Xxxxx Xxxxxxxx Xxxxxxxx Trust of 1996
/s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx., Trustee
Xxxxxx Xxxxxxx Xxxxxxxx Trust of 1996
/s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx., Trustee
Xxxxx Xxxxxxxxx Xxxxxxxx Trust of 1996
/s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx. Trustee
Grace Xxxx Xxxxxxx Trust of 1996
/s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx., Trustee
Xxxxxxxx Xxxxxxx, Xx. Trust of 1996
/s/ Xxxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxxx Xxxxxxx, on behalf of
himself and his marital community
/s/ Xxxxxx Xxxxxx
-----------------------------------------
Name: Xxxxxx Xxxxxx, on behalf of
himself and his marital community
/s/ Xxx Xxxx
-----------------------------------------
Name: Xxx Xxxx, on behalf of himself
and his marital community
/s/ Xxxx X. Xxxx
-----------------------------------------
Name: Xxxx X. Xxxx, Trustee
Devon Xxxxxxx Xxxx Trust
/s/ Xxxx X. Xxxx
-----------------------------------------
Name: Xxxx X. Xxxx, Trustee
Colby Xxxxxxxx Xxxx Trust
/s/ Xxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxx X. Xxxx, on behalf of
himself and his marital community
/s/ Xxxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxxxxx, on behalf of
himself and his marital community
/s/ Xxxxxx Xxxx
-----------------------------------------
Name: Xxxxxx Xxxx, on behalf of himself
and his marital community
Olympic Venture Partners III, L.P.
By: OVMC III, L.P.
Its: General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Its: General Partner
OVP III Entrepreneurs Fund
By: OVMC III, L.P.
Its: General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Its: General Partner
SV Capital Partners, L.P.
By: SV Capital Management, Inc.
Its: General Partner
By: /s/ A. Xxxxxx Xxxxxx
-------------------------------------
Name: A. Xxxxxx Xxxxxx
Its: Director
SCHEDULE "A"
------------
SETTLEMENT AGREEMENT AND RELEASE ("AGREEMENT")
NUMBER OF HOLDBACK
SHARES TO BE
NAME OF SHAREHOLDER RETRANSFERRED TO
CORPORATION PURSUANT TO
SECTION 1(A) OF AGREEMENT
-----------------------------------------------------------------------
Xxxxx X. Xxxxxx 1,695
-----------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 31,554
-----------------------------------------------------------------------
Xxxxxx X. Xxxxxxx Xx. Trustee, 779
Xxxxx Xxxxxxxx Xxxxxxxx Trust
of 1996
-----------------------------------------------------------------------
Xxxxxx X. Xxxxxxx Xx. Trustee, 779
Xxxxxx Xxxxxxx Xxxxxxxx Trust
of 1996
-----------------------------------------------------------------------
Xxxxxx X. Xxxxxxx Xx. Trustee, 779
Xxxxx Xxxxxxxxx Xxxxxxxx Trust
of 1996
-----------------------------------------------------------------------
Xxxxxx X. Xxxxxxx Xx. Trustee, 390
Grace Xxxx Xxxxxxx Trust of 1996
-----------------------------------------------------------------------
Xxxxxx X. Xxxxxxx Xx. Trustee, 390
Xxxxxxxx Xxxxxxx Xx. Trust of
1996
-----------------------------------------------------------------------
Xxxxxxxx Xxxxxxx 5,999
-----------------------------------------------------------------------
Xxxxxx Xxxxxx 974
-----------------------------------------------------------------------
Xxx Xxxx 277
-----------------------------------------------------------------------
Xxxx X. Xxxx Trustee, 779
Devon Xxxxxxx Xxxx Trust
-----------------------------------------------------------------------
Xxxx X. Xxxx Trustee, 779
Colby Xxxxxxxx Xxxx Trust
-----------------------------------------------------------------------
Xxxxxx X. Xxxx 32,333
-----------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx 2,104
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Xxxxxx Xxxx 6
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Olympic Venture Partners III LP 11,324
-----------------------------------------------------------------------
NUMBER OF HOLDBACK
SHARES TO BE
NAME OF SHAREHOLDER RETRANSFERRED TO
CORPORATION PURSUANT TO
SECTION 1(a) OF AGREEMENT
-----------------------------------------------------------------------
Olympic Venture Partners III 566
Entrepreneurs Fund
-----------------------------------------------------------------------
SV Capital Partners 8,493
-----------------------------------------------------------------------
SCHEDULE "B"
------------
SETTLEMENT AGREEMENT AND RELEASE ("AGREEMENT")
NUMBER OF HOLDBACK SHARES TO BE
RELEASED BY CORPORATION TO THE
NAME OF SHAREHOLDER SHAREHOLDER PURSUANT TO SECTION 1(a) OF
AGREEMENT
------------------------------------------------------------------------------
Xxxxx X. Xxxxxx 7,305
------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx 136,028
------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx, Xx., 3,359
Trustee for Xxxxx Xxxxxxxx
Xxxxxxxx Trust of 1996
------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx, Xx., 3,359
Trustee for Xxxxxx Xxxxxxx
Xxxxxxxx Trust of 1996
------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx, Xx., 3,359
Trustee for Xxxxx Xxxxxxxxx
Xxxxxxxx Trust of 1996
------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx, Xx., 1,679
Trustee for Grace Xxxx Xxxxxxx
Trust of 1996
------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx, Xx., 1,679
Trustee for Xxxxxxxx Xxxxxxx, Xx.
Trust of 1996
------------------------------------------------------------------------------
Xxxxxxxx Xxxxxxx 25,862
------------------------------------------------------------------------------
Xxxxxx Xxxxxx 4,198
------------------------------------------------------------------------------
Xxx Xxxx 1,192
------------------------------------------------------------------------------
Xxxx X. Xxxx, Trustee for Devon 3,359
Xxxxxxx Xxxx Trust
------------------------------------------------------------------------------
Xxxx X. Xxxx, Trustee for Colby 3,359
Xxxxxxx Xxxx Trust
------------------------------------------------------------------------------
Xxxxxx X. Xxxx 139,387
------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx 9,068
------------------------------------------------------------------------------
Xxxxxx Xxxx 26
------------------------------------------------------------------------------
Olympic Venture Partners III, LP 48,817
-----------------------------------------------------------------------------
Olympic Venture Partners III 2,441
Entrepreneurs Fund
-----------------------------------------------------------------------------
SV Capital Partners 36,613
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