Exhibit 99.4
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement (the "Agreement") is made as of the
2nd day of December , 2003, by and among 1st Atlantic Guaranty Corporation, a
Maryland corporation ("1st Atlantic"); Geneva Capital Partners LLC, a Maryland
limited liability company ("Geneva"); Xxxxx Xxxxx, LLP, a Texas limited
liability partnership ("Escrow Agent"); SBM Financial, LLC (formerly known as
State Bond & Mortgage, LLC), a Maryland limited liability company ("SBM
Financial"); SBM Certificate Company, a Maryland corporation ("SBM"); Atlantic
Capital Funding Corp., a Maryland corporation ("ACFC"); Xxxx Xxxxxx, Bankruptcy
Trustee, in his personal capacity and in his capacity as representative of the
Xxxxxxxx Bankruptcy Estate as hereinafter defined (the "Trustee"); and the
following individuals, who are hereinafter collectively referred to as the
"Creditors": Xxxxx Xxxxxxx, Xxxx Xxxxxx, Xxxxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxx
Xxxxxx, Xxxxxx Xxxx, and Xxxxxx Xxxxx (collectively, the "Parties"; each, a
"Party").
WHEREAS, the Parties desire to enter into this Agreement to forever settle
all matters between them with respect to the subject matter hereof consistent
with the terms and conditions of that certain Term Sheet agreed to by the
Parties, a copy of which the Trustee filed with the United States Bankruptcy
Court for the District of Maryland ("Court") in furtherance of the settlement
contemplated thereby and by this Agreement.
NOW, THEREFORE, the Parties, based on the consideration set forth herein
the receipt and sufficiency of which they each hereby acknowledge, and intending
to be legally bound, do hereby agree as follows:
1. Geneva Purchase of 1st Atlantic Shares. Geneva hereby agrees to
purchase from the Trustee, and the Trustee hereby agrees to sell to Geneva,
Seven Million Five Hundred Thousand (7,500,000) shares of common stock of 1st
Atlantic currently held in escrow by the Escrow Agent (the "Shares") for a
purchase price in cash in the amount of Two Million Five Hundred Thirty Two
Thousand Nine Hundred Eighty-One Dollars ($2,532,981.00) (the "Stock Purchase
Price"). The Stock Purchase Price shall be paid by Geneva to 1st Atlantic at
Closing (as hereinafter defined) and the Trustee hereby approves that payment of
the Stock Purchase Price to 1st Atlantic in consideration for the full and
complete release by 1st Atlantic and its Affiliates (as hereinafter defined) of
Trustee in his personal capacity and in his capacity as trustee for the
bankruptcy estate of Xxxx Xxxxxxxx, the former Chief Executive Officer of 1st
Atlantic ("Xxxxxxxx"), which bankruptcy estate is referred to herein as the
"Xxxxxxxx Bankruptcy Estate." The Shares shall be sold and transferred by the
Trustee to Geneva in a closing (the "Closing") to be held pursuant to the terms
and conditions of a stock purchase agreement to be executed between Geneva, 1st
Atlantic, and the Trustee prior to the Closing, with such Closing to occur no
later than December 15, 2003 or, if later, promptly after the expiration of any
required notice periods and any hearing required by the Court. The Shares are
currently being held in escrow by the Escrow Agent pursuant to an escrow
agreement, dated November 14, 2002, by and among 1st Atlantic, the Escrow Agent,
and Xxxxxxxx. The Escrow Agent shall release the Shares at the Closing and the
Trustee and Escrow Agent shall take all action necessary or
appropriate to transfer, or cause the transfer of, the Shares to Geneva at the
Closing. The Trustee represents and warrants that the Trustee has full power and
authority to sell the Shares to Geneva. The Trustee, Geneva and all other
Parties to this Agreement agree to cooperate and to promptly take all necessary
or appropriate steps to facilitate the earliest possible date for the Closing.
2. Payment of Funds by Geneva to 1st Atlantic. At the Closing, Geneva
shall pay to 1st Atlantic by wire transfer of funds the aggregate amount of: (a)
the Stock Purchase Price, plus (b) Three Million Two Hundred Thousand Dollars
($3,200,000.00) the amount currently necessary to resolve any question of
reserve compliance by 1st Atlantic..
3. Issuance of Notes by SBM Financial to the Creditors. At the Closing,
SBM Financial shall issue secured debt instruments in the form attached as
Exhibit A hereto ("Notes") to the following Creditors:
Principal Annual
Individual Amount Term Rate
---------- ------ ---- ----
Xxxxx Xxxxxxx $ 990,000.00 10 Years 1.50%
Xxxx Xxxxxx $ 84,699.95 10 Years 1.50%
Xxxx and Xxxxxxxxx Xxxxxx $ 18,707.38 10 Years 1.50%
Xxxxx Xxxxxx $ 22,310.27 10 Years 1.50%
Xxxxxx Xxxxxx $ 137,754.06 10 Years 1.50%
Xxxxxx Xxxx $ 67,821.74 10 Years 1.50%
Xxxxxx Xxxx $ 3,438.85 10 Years 1.50%
Xxxxxx Xxxxx $ 241,805.68 10 Years 1.50%
Xxxxxxxxx Xxxxxx $ 50,233.96 10 Years 1.50%
-------------
Total: $1,616,771.89
The Notes shall be secured by a first priority interest in compliance with the
Uniform Commercial Code in all of the stock of SBM, which is a wholly-owned
subsidiary of SBM Financial, pursuant to the terms of a security agreement in
the form attached as Exhibit B hereto ("Security Agreement"); provided, however,
that Geneva shall have the right to substitute collateral for the release of
100% of the SBM shares remaining in escrow at any time in accordance with the
terms of the Security Agreement. Geneva shall have the right to sell or pledge
the SBM shares held in escrow without the consent of the Noteholders as long as
the Notes are paid off in connection with such transaction. The first payment on
the Notes shall occur in accordance with Schedule A to the Notes . On each
payment date under the Notes, the escrow agent for the Notes shall be required
to release five percent (5%) of the SBM shares held in escrow, provided SBM
Financial has paid the amounts then due under the Notes, and provided further
that the aggregate amount of SBM shares released pursuant to this provision
shall not exceed 49% of all SBM shares placed in escrow. At the request of each
Creditor, the Notes may be issued to a qualified retirement plan identified by
the Creditor.
4. Payment of Additional Funds by Geneva to Third-Parties. At the Closing,
Geneva shall pay cash in the following amounts to the following persons: (i) Ten
Thousand Dollars ($10,000.00) to Venable, the legal counsel for Xxxxx Xxxxxxx,
(ii) Ten Thousand Dollars ($10,000.00) to Shulman, Rogers, Gandal, Pordy &
Xxxxx, P.A., the legal counsel for
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Xxxxxx Xxxxx and Xxxxxx Xxxxxx, and (iii) One Hundred Five Thousand Dollars
($105,000.00) for payment of administrative expenses, including the fees of the
Trustee, and for the legal costs of the Trustee and its counsel, with such fees
being subject to approval by the Court after the filing of appropriate
applications therefore; provided, however, that in the event the Court approves
less than such $105,000 amount to be paid to the Trustee and its counsel
pursuant to this Section 4(iii), then the remaining amount thereof, if any,
shall be retained by or promptly repaid to Geneva, as the case may be.
5. Release by Trustee. The Trustee, on his behalf and on behalf of the
Xxxxxxxx Bankruptcy Estate, hereby fully releases the Xxxxxx Xxxxx, 0xx
Xxxxxxxx, SBM, SBM Financial, ACFC and Geneva, and, any affiliated entity of the
foregoing and their respective directors, officers, employees, attorneys,
accountants, and agents other than Xxxxxxxx or Xxxxx Xxxxx (collectively,
"Affiliates") from any and all claims or liability relating to any matters
between or among them, including, without limitation, the matters described in
the Cases (defined below).
6. Release by Creditors. The Creditors hereby fully release the Trustee,
in his personal capacity and his capacity as representative of the Xxxxxxxx
Bankruptcy Estate, the Xxxxxx Xxxxx, 0xx Xxxxxxxx, SBM, SBM Financial, ACFC,
Geneva, and their respective Affiliates from any and all claims or liability
relating to any matters between or among them, including, without limitation,
the matters described in the Cases (defined below); provided, however, that the
foregoing releases shall not preclude any Creditor from objecting to the
discharge of Xxxxxxxx in the pending Chapter 11 case or in any converted or
subsequent bankruptcy case, or from asserting claims against Xxxxx Xxxxx.
7. Release by 1st Atlantic et al. 1st Atlantic, SBM Financial, SBM, and
ACFC hereby fully release the Trustee, in his personal capacity and his capacity
as representative of the Xxxxxxxx Bankruptcy Estate, Geneva, Escrow Agent, and
the Creditors, and their respective Affiliates from any and all claims or
liability relating to any matters between or among them, including, without
limitation, the matters described in the Cases (defined below); provided,
however, that the foregoing releases shall not preclude any Creditor from
objecting to the discharge of Xxxxxxxx in the pending Chapter 11 case or in any
converted or subsequent bankruptcy case, or from asserting claims against Xxxxx
Xxxxx.
8. Release by Geneva. Geneva hereby fully releases the Trustee, in his
personal capacity and his capacity as representative of the Xxxxxxxx Bankruptcy
Estate, 1st Atlantic, the Creditors, the Escrow Agent, and their respective
Affiliates from any and all claims or liability relating to any matters between
or among them, including, without limitation, the matters described in the Cases
(defined below); provided, however, that the foregoing releases shall not
preclude any Creditor from objecting to the discharge of Xxxxxxxx in the pending
Chapter 11 case or in any converted or subsequent bankruptcy case, or from
asserting claims against Xxxxx Xxxxx.
9. Settlement with SEC by 1st Atlantic. After the Closing, 1st Atlantic
shall promptly do all acts necessary to settle its case with the Securities and
Exchange Commission ("SEC"); provided, however, that 1st Atlantic's settlement
with the SEC must be satisfactory to Geneva.
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10. The Cases. Each Party to this Agreement hereby agrees to take all
action necessary or appropriate to dismiss the Cases (defined below), any
pending motions in the Cases (defined below), or any appeals of the Cases
(defined below), and in effecting the terms of this Agreement. The releases set
forth in this Agreement represent material consideration for each other and
represent material consideration for the Parties entering into this Agreement
and are only intended to have effect if the releases are mutual. The Parties
mutually agree that the Parties would not have entered into this Agreement
except upon their receiving the mutual releases set forth herein.
Notwithstanding anything contained in this Agreement to the contrary, no release
contained in this Agreement shall release Xxxxxxxx nor any family members of
Xxxxxxxx nor Xxxxx Xxxxx from any claims that may arise after the dismissal of
the Cases, or any claim objecting to Xxxxxxxx'x discharge in a bankruptcy case,
or any claims against Xxxxxxxx if no discharge is granted to him. For purposes
of this Agreement, the term "Cases" shall mean each of the following legal
actions:
o In re Xxxx Xxxxxxxx, Bankruptcy Case No. 03-16060, U.S.
Bankruptcy Court, District of Maryland (the "Bankruptcy
Case"). With respect to the Bankruptcy Case, each Party agrees
that the dismissal of this case shall be requested promptly
upon disposition of the fee motions in such case and such
other motions necessary to carry out the intent of the
provisions hereof.
o 1st Atlantic Guaranty Corp. x. Xxxxxxxx, Civil Action No.
00-0000, X.X. Xxxxxxxx Xxxxx, Xxxxxxxx of Maryland (this case
was originally commenced as Adversary Proceeding No. 03-3041
in the U.S. Bankruptcy Court for the District of Maryland).
o Xxxx X. Xxxxxx, Chapter 11 Trustee to the Estate of Xxxx
Xxxxxxxx v. Xxxxxxx X. Xxxxx, As Escrow Agent, Adversary
Proceeding No. 03-3111, U.S. Bankruptcy Court, District of
Maryland.
o Xxxx X. Xxxxxx, Chapter 11 Trustee to the Estate of Xxxx
Xxxxxxxx v. 1st Atlantic Guaranty Corp. x. Xxxxxxxx, Adversary
Proceeding No. 03-3115, U.S. Bankruptcy Court, District of
Maryland.
o Unfiled claims of the Creditors against the Parties, excluding
claims against Xxxxxxxx, individually, or Xxxxx Xxxxx.
11. Headings; Construction. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require.
12. Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the Parties
hereto shall negotiate in
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good faith to modify this Agreement so as to effect the original intent of the
Parties hereto as closely as possible in an acceptable manner to the end that
the transactions contemplated hereby are fulfilled to the extent possible.
13. Entire Agreement; Modification; Expenses. This Agreement and the
Exhibits attached hereto, all of which are incorporated as if fully set forth
herein, constitutes the entire agreement of the Parties and supersedes all prior
agreements and undertakings, both written and oral, between the Parties, or any
of them, with respect to the subject matter hereof. This Agreement may not be
amended except by a written agreement executed by all the Parties hereto. Except
as other wise provided herein, each party hereto shall be solely liable for all
legal, accounting and other fees and expenses incurred by him or it with respect
to the subject matter hereof.
14. Effectiveness; Assignment. This Agreement and all obligations and
rights hereunder shall not be effective until the Closing. When effective, this
Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors and permitted assigns; provided, however, that no
Party may assign this Agreement without the prior written approval of all the
other Parties.
15. Waiver; Remedies Cumulative. No failure or delay on the part of any
Party in the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred to in this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
16. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
17. Litigation. The Parties agree and consent to subject matter
jurisdiction, personal jurisdiction and venue solely in the Circuit Court for
Xxxxxxxxxx County, Maryland for any controversy or claim arising out of this
Agreement. All costs, expense and fees (including attorney's fees) incurred in
connection with such litigation shall be paid by the non-prevailing party as
determined by the court and included in the judgment.
18. Counterparts. The Parties may execute this Agreement individually, by
duly authorized officers, or by attorney-in-fact, as the case may be, in one or
more counterparts, and by the different Parties in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[Signatures appear on the following page]
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IN WITNESS WHEREOF, the undersigned Parties have duly executed or caused
this Agreement to be executed as of the date first written above:
1st ATLANTIC GUARANTY CORPORATION GENEVA CAPITAL PARTNERS LLC
By: /s/ Xxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxxxxx
----------------------------------- -------------------------------
Name: Xxxx Xxxxxxxx Name: Xxxx X. Xxxxxxxx
Title: Vice President Title: Managing Member
SBM FINANCIAL, LLC SBM CERTIFICATE COMPANY
By: /s/ Xxxx Xxxxxxxx By: /s/ Xxxx Xxxxxxxx
----------------------------------- -------------------------------
Name: Xxxx Xxxxxxxx Name: Xxxx Xxxxxxxx
Title: CFO Title: CFO
XXXX XXXXXX, Bankruptcy Trustee, ATLANTIC CAPITAL FUNDING CORP.
in his personal capacity and in his
capacity as representative of the Xxxxxxxx
Bankruptcy Estate
/s/ Xxxx Xxxxxx By: /s/ Xxxx Xxxxxxxx
-------------------------------------- -------------------------------
Xxxx Xxxxxx Name: Xxxx Xxxxxxxx
Title: CFO
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx Xxxx
-------------------------------------- -----------------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxx
/s/ Xxxx Xxxxxx /s/ Xxxxx Xxxxxx
-------------------------------------- -----------------------------------
Xxxx Xxxxxx Xxxxx Xxxxxx
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxxxxx Xxxxxx
-------------------------------------- -----------------------------------
Xxxxxx Xxxxx Xxxxxxxxx Xxxxxx
XXXXX XXXXX, LLP
/s/ Xxxxx Xxxxxxx by Xxxxx Xxxxxxx POA By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------- --------------------------------
Xxxxx Xxxxxxx Name: Xxxxxxx X. Xxxxx
Title: Partner
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EXHIBIT A
Form of Promissory Note
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EXHIBIT B
Form of Security Agreement
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