Exhibit 10.1
SETTLEMENT AGREEMENT
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This Settlement Agreement is entered into this _____ day of March, 2004, by
and between Xxxxxxxx Aviation, Inc. ("Seller") and Xxxxxxxx Aerospace
Technologies, Inc. ("buyer," and, together with Seller, the "Parties"), but will
become effective and binding as of such date as an Order of the United States
Bankruptcy Court for the District of Arizona, Tucson division (the "Court")
enters upon the docket in Seller's Chapter 11 case, no. 4-02- 02219-TUC-EWH, an
Order Approving Settlement Agreement, which approves this Settlement Agreement.
Subject only to such approval by the Court, the Parties agree to the following
terms and conditions:
RECITALS
A. Seller filed its Voluntary Petition under chapter 11 on May 9, 2002, and
operated as a debtor in possession from that point forward, until its Plan
of Confirmation (the "Plan") was approved by Court Order dated February 10,
2003.
B. Pursuant to the terms of the Plan, Xxxxx Xxxxxx was named as the Estate
Administrator, and authorized to take certain actions on behalf of Seller,
including both the selling of estate assets and control over Seller's
interests in litigation.
C. Also pursuant to the terms of the Plan, the sale of the majority of
Seller's assets to Buyer was approved, on the terms and conditions set
forth therein, including a purchase price of $1,500,000.00 (the "Approved
Sale").
D. The Approved Sale provided that the liens of the United States Internal
Revenue Service the ("IRS") and the Arizona Department of Revenue ("ADOR")
would remain attached to the assets sold by Seller to Buyer until payment
in full had been made.
E. Buyer has previously made payments of Seller, in connection with the
Approved Sale, aggregating $73,365.75 (the "Paid Funds").
F. Buyer has disputed its obligation to close on the Approved Sale. Seller
believes that Buyer remains obligated to do so.
G. The Parties wish to avoid litigation regarding the question of Buyer's
obligation to close on the Approved Sale, and enter into this Settlement
Agreement in an effort to resolve these matters.
OPERATIVE PROVISIONS
1 Recitals - The Parties incorporate all of the foregoing Recitals into these
Operative Provisions as though fully set forth hereat.
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2 Continuing Liens - All liens in favor of the IRS< ADOR and or Seller in any
or all of the assets included within the Approved Sale shall remain in
place, and are, through this Settlement Agreement, ratified by Buyer. Buyer
agrees that such liens are senior to all other liens in such assets, that
such liens are all duly perfected, and that Buyer has no basis in law or in
fact under which it could contest such liens. Buyer agrees to take such
actions as are reasonably required by Seller, the IRS, and/or ADOR to
document, record, or otherwise memorialize such liens.
3 The HAT Judgment - Buyer agrees to execute a Stipulated Judgement (the "HAT
Judgement") in the amount of $1,500,000.00 in favor of Seller.
4 The Xxxxxx Judgement - Xxxx Xxxxxx agrees to execute a Stipulated Judgement
(the "Xxxxxx Judgement") in the amount of $200,000.00 in favor of Seller.
5 Forebearance - Seller agrees to take no action to enforce either the HAT
Judgement or the Xxxxxx Judgement so long as each and every of the terms of
this Settlement Agreement are met, including without limitation, all of the
following:
5.1 The outstanding principal balance owed by Buyer to Seller shall accrue
interest at an annual rate of six per cent.
5.2 Upon execution of this Settlement Agreement, Buyer shall make payment
of $26,634.25, which, together with the Paid Funds, shall result in
total credit to Buyer of $100,000.00.
5.3 Monthly payments Buyer of no less than $15,000.00 shall commence on
the date of entry of the Court's Order approving this Settlement
Agreement (the "Entry Date"), and continue thereafter on the same date
of each successive month until Buyer's obligation to Seller is
released in accordance with the terms of this Settlement Agreement, or
until all amounts due under this Settlement Agreement and/or the HAT
Judgement are paid in full.
5.4 An additional lump sum payment from Buyer of no less than $150,000.00
shall be paid to Seller no later than 60 days next following the Entry
Date.
5.5 Additional Lump sum payments from Buyer of no less than $50,000.00
shall be paid to Seller on or before each annual anniversary of the
Entry Date, until Buyer's obligation to Seller is released in
accordance with the terms of this Settlement Agreement, or until all
amounts due under this Settlement Agreement and/or the HAT Judgement
are paid in full.
6 Payment Default - Buyer will be in default of this Settlement Agreement on
the fifth business day next following the day upon which any payment
required under this Settlement Agreement is due and remains unpaid. Upon
such a default, all amounts outstanding owed by Buyer to Seller, including
without limitation, principal, accrued but unpaid interest, late fees,
etc., shall accrue interest at any annual rate of 12 percent, until such
time as the default is cured, at which time, the interest rate shall revert
to six percent.
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7 Late Charge - If any payment due hereunder is not received by Seller by the
fifth business day next following the day upon which such payment required
under this Settlement Agreement is due, Buyer shall be immediately liable
for a late charge equal to five per cent of the amount of such payment.
Interest at the then- applicable interest rate on Buyer's outstanding
obligations under this Settlement Agreement shall accrue on such late
charge from the first day such late charge is incurred until such late
charge is paid in full.
8 Application of Payments - All payments received by Seller from Buyer
hereunder shall be applied first to interest, then to costs of collection,
then to principal
9 The Profit Payment - An additional payment (the "Profit Payment") shall be
made by Buyer to Seller based upon HAT's cumulative profitability over the
five-year period commencing on the Entry Date. Such payment shall be equal
to one-half of Buyer's net profits in excess of 12 per cent, but shall be
limited so as to provide no more than a total of all payments due hereunder
of $1,500,000.00 plus applicable interest and fees as set forth in this
Settlement Agreement. The Profit Payment shall be due on or before the day
30 days next following Buyer's filing of its 10Q or 10K report (whichever
is earlier filed) with the United States Securities and Exchange Commission
("SEC") for the period including the date upon which the fifth anniversary
of the Entry Date occurs. Buyer shall provide to Seller, at Buyer's sole
cost and expense, copies of all of Buyer's SEC filings.
10 The Reduced Payoff - If, on or before the fifth anniversary of the Entry
Date, Buyer has paid to Seller an amount of no less than $1,000,000.00 plus
interest accrued thereupon in accordance with the terms of this Settlement
Agreement and any late or other fees charged in accordance with the terms
of this Settlement Agreement, not including any Profit Payment (the
"Reduced Payoff"), Seller shall release Buyer from any further obligation
due under this Settlement Agreement; provided, however, that such release
shall not apply to any Profit Payment to which Seller may otherwise become
entitled under the terms of this Settlement Agreement.
11 The Revised Xxxxxx Judgement - Despite his voluntary execution of the
Xxxxxx Judgement, Xxxxxx believes the agreed amount exceeds his actual
liability to Seller, and has retained professionals to assist him in
preparing to negotiate a lower amount with seller. Seller agrees, if
Xxxxxx'x professionals conclude that his liability should actually be less
than the agreed amount of Xxxxxx Judgement, to negotiate in good faith the
amount of a Revised Xxxxxx Judgment with Xxxxxx and/or his professionals.
Should Xxxxxx and Seller be unable to negotiate a mutually acceptable
resolution, either party may, at any time, declare an impasse in the
negotiations, and Xxxxxx shall have 30 calendar days thereafter to file a
motion with the Court seeking to have the amount of the Xxxxxx Judgement
reduced.
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12 The Xxxxxx Judgement Release - If Buyer makes a Reduced Payoff pursuant to
Paragraph 10 above, the Xxxxxx Judgement, or, if applicable, the Revised
Xxxxxx Judgement, shall be released by Seller.
13 The Reduced Xxxxxx Judgement Release - If, at any time during the term of
Buyer's payments to Seller under this Settlement Agreement, Buyer's
payments to Seller result in a reduction of buyer's indebtedness to Seller
of at least $500,000.00, the Xxxxxx Judgement, or, if applicable, the
Revised Xxxxxx Judgement, shall be reduced in amount by a percentage equal
to the percentage by which Buyer's principal obligation to Seller has been
reduced.
14 Events of Default - The Parties agree that the following constitute events
of default ("Events of Default"):
14.1 Failure of Buyer to abide by any term or condition of this Settlement
Agreement, including nonperformance of any obligation imposed by this
Settlement Agreement, specifically including without limitation such
default as is described in Paragraph 6 above;
14.2 The commencement by any other party of any action or other efforts to
proceed against any or all of buyer's property that is subject to lien
in favor of Seller, the IRS, and/or ADOR; or
14.3 A sale of all or substantially all of Buyer's assets without the
specific written prior consent of Seller, such consent not to be
unreasonably withheld.
15 Cure - Upon an Event of Default, in addition to any remedies included
elsewhere in this Settlement Agreement, Seller shall have the right to
provide to Buyer written Notice of Default, and 20 calendar days thereafter
in case of a monetary default, or 30 calendar days thereafter in case of a
nonmonetary default, the Seller's agreement to take no action to enforce
either the HAT Judgement or the Xxxxxx Judgement shall terminate, and the
Seller shall be free to enforce either the HAT Judgement or the Xxxxxx
Judgement at its sole and absolute discretion; provided, however, that in
the case of a nonmonetary default, if, at the end of the 30 calendar day
period, Buyer is in the process of diligently curing such nonmonetary
default, Buyer shall continue to forebear from enforcing either the HAT
Judgement or the Xxxxxx Judgement for the lesser of the period during which
Buyer continues to diligently cure such nonmonetary default or 30
additional days.
16 Severability - The provisions of this Settlement Agreement are severable,
and if any part of it is found to be unenforceable, the other provisions
shall remain fully valid and enforceable.
17 Continuing Jurisdiction - Any disputes which arise under this Settlement
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Agreement shall be determined in the Court, which shall specifically retain
jurisdiction for such purpose, and in no other judicial forum, and the state law
which governs this Settlement Agreement and shall govern any legal proceedings,
shall be the law of the State of Arizona. The prevailing party in any such
action shall be entitled to recover from the other party its reasonable
attorney's fees and costs incurred in enforcing its rights hereunder. If any
provision of this Agreement is held to be invalid, void, or unenforceable for
whatever reason, the remaining provisions not so declared shall nevertheless
continue in full force and effect without being impaired in any manner
whatsoever.
18 Release of Seller - Buyer and any and all of its parents, subsidiaries,
affiliated companies, and/or successor companies, their directors,
officers, managers, employees, attorneys, agents, and other
representatives, hereby irrevocably and unconditionally release Seller and
any and all of its subsidiaries, affiliated companies, and/or successor
companies, their directors, officers, managers, employees, attorneys,
agents, and other representatives, specifically including without
limitation the Estate Administrator, from any and all claims and causes of
action, known or unknown, arising in any way out of the sale or attempted
sale of Seller's assets, and agrees not to xxx Seller or any and all of its
subsidiaries, affiliated companies, and/or successor companies, their
directors, officers, managers, employees, attorneys, agents, and other
representatives, specifically including without limitation the Estate
Administrator for any reasons, except to enforce Buyer's rights under this
Agreement.
19 Sellers Release of Xxxxxx Xxxxxxxx - Seller, solely with regard to claims
held by the chapter 11 estate of Xxxxxxxx Aviation, Inc. and/or the
post-confirmation estate being administered by the Estate Administrator,
releases Xxxxxx "Dito" Xxxxxxxx from all such claims and causes of action,
and agrees not to xxx Xxxxxx "Dito" Xxxxxxxx based upon any such claim or
cause of action.
20 Neutral Construction - This Settlement Agreement is a product of
negotiation among the parties hereto and represents the jointly conceived,
bargained-for, and agreed-upon language mutually determined by the parties
to express their intentions in entering into this Settlement Agreement. Any
ambiguity or uncertainty in this Settlement Agreement shall be deemed to be
caused by or attributable to the parties hereto collectively. In any action
to enforce or interpret this Settlement Agreement, the Settlement Agreement
shall be construed in a neutral manner, and no term or provision of this
Settlement Agreement, or the SEttlement Agreement as a whole, shall be
construed more or less favorably to any one party to this Settlement
Agreement.
21 Representations and Warranties - The Parties further represent and warrant
to each other as follows:
21.1 Each party hereto has received independent legal advice from attorneys
of that party's choice with respect to the advisability of entering
into this Settlement Agreement, and prior to the execution of this
Settlement Agreement, that party's attorney reviewed this Settlement
Agreement and discussed the agreement with the party, and the party
has made all desired changes.
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21.2 Except as expressly stated in this Settlement Agreement, no party
hereto has made any statement or representation to any other party
hereto regarding the facts relied upon by said party in entering into
this Settlement Agreement, and each party hereto specifically does not
rely upon any statement, representation, or promise of any other party
hereto in executing this Settlement Agreement, except as expressly
stated in this Settlement Agreement.
22 Headings - The headings set forth herein are inserted for convenience of
the parties only, and shall not be used to interpret or construe or in any
way affect the meaning of the terms and provisions of this Settlement
Agreement.
23 Integration - Except as expressly provided in this Settlement Agreement,
this Settlement Agreement is the final written expression and complete and
exclusive statement of all the agreements, conditions, promises and
covenants among the parties with respect to the subject matter hereof and
supersedes all prior or contemporaneous agreements, negotiations,
representations, understandings and discussions among the parties and/or
their respective counsel with respect to the subject matter conveyed
hereby. Any amendment or modification of this Settlement Agreement, in
order to be legally binding, must be in writing specifically referring to
the SEttlement Agreement and signed by duly authorized representatives of
all parties hereto.
24 Counterpart Signatures - This Settlement Agreement may be signed in
counterpart.
25 Court Order - This Settlement Agreement shall be submitted forthwith to the
Court for approval and, in that regard, Seller shall give such notice and
opportunity to be heard as is required under Rule 2002, Local Bankruptcy
Rule 2002-1 or other applicable law.
Xxxxxxxx Aerospace Technologies, Inc. Xxxxxxxx Aviation, Inc.
By: /s/ Xxxx Xxxxxx By:
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Its: President Xxxxx X. Xxxxxx
Estate Administrator
Xxxx Xxxxxx, personally
/s/ Xxxx Xxxxxx
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