Exhibit 99.4
IBF Fund Liquidating LLC
c/o Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
February 18, 2005
Xx. Xxxxxxx X. Verde
Ms. Xxxxxxx Xxxxx
U.S. Xxxxx, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000-0000
Dear Xxxxx and Xxxxxxx:
Reference is made to the Acquisition Agreement and Plan of Merger, dated
as of the date hereof, among IBF Fund Liquidating LLC ("IBF"), U.S. Xxxxx, Inc.
(the "Company"), USM Acquisition Sub, Inc. and Sunset Brands, Inc. (the "Merger
Agreement"). Capitalized terms used and not defined herein have the meanings set
forth in the Merger Agreement.
It is acknowledged that you have been essential to the operations of the
Company, and that, in exchange for IBF's agreement to provide appropriate
compensation, upon being apprised that the Company was to be offered for sale,
you agreed to continue your employment with the Company and to provide its
management during the pendency of the efforts to consummate a sale. It is
further acknowledged that your willingness to continue your employment with the
Company during the period when it was offered for sale has been an important
factor in preserving the value of the Company so that a sale could be negotiated
on favorable terms. The payments described in this letter agreement are the
amounts that you have agreed to accept in consideration of your continued
employment during the pendency of a sale and as final payment of bonuses
previously earned but not paid.
In connection with the transactions contemplated by the Merger Agreement,
IBF hereby agrees as follows:
1. Immediately following the Effective Time, IBF shall pay to Xxxxx Verde
an amount in cash equal to $410,000, which represents the amount of bonus
compensation that Mr. Verde is entitled to receive from the Company in respect
of his employment with the Company during 2003 and 2004 and in connection with
the consummation of the Merger.
2. Immediately following the Effective Time, IBF shall pay to Xxxxxxx
Xxxxx an amount in cash equal to $410,000, which represents the amount of bonus
compensation that Xx. Xxxxx is entitled to receive from the Company in respect
of her employment with the Company during 2003 and 2004 and in connection with
the consummation of the Merger.
In addition, pursuant to the Merger Agreement, IBF is entitled to receive
Units consisting of shares of Series B Preferred Stock and related Warrants to
purchase Sunset Common having
an aggregate value equal to $3,000,000, subject to adjustment as provided in the
Merger Agreement. In consideration of facilitating the Merger, IBF hereby agrees
that IBF will pay to each of Mr. Verde and Xx. Xxxxx an amount in cash equal to
7% of the net proceeds IBF receives from time to time in connection with any
sale of such shares of Series B Preferred Stock or the shares of Sunset Common
into which such shares of Series B Preferred Stock are convertible. IBF will
deliver to Mr. Verde and Xx. Xxxxx a statement within five (5) business days of
each sale, redemption or other disposition of any shares of Series B Preferred
Stock or the shares of Sunset Common into which such shares of Series B
Preferred Stock are convertible describing the material terms of such sale,
redemption or other disposition, along with a check payable to Mr. Verde and Xx.
Xxxxx, each in the amount of 7% of the net proceeds received therefrom. It is
understood that the agreement described in this paragraph is meant to qualify as
a deferred compensation arrangement under Section 409A of the Internal Revenue
Code of 1986. The parties hereto agree to work together in good faith to modify
the structure of the payment terms set forth in this paragraph prior to the
Effective Time as reasonably necessary to comply with Section 409A and the
regulations thereunder.
Each of Mr. Verde and Xx. Xxxxx shall be solely responsible for payment of
any and all taxes (whether federal, state, local or foreign) of any kind
whatsoever and any interest, penalty, addition or additional amount thereon
imposed, assessed or collected by or under the authority of any governmental
authority, arising as a result of any amounts received by them hereunder.
In consideration for the receipt of the full amount of the foregoing
consideration, and other good and valuable consideration provided to each of Mr.
Verde and Xx. Xxxxx pursuant to this letter agreement, each of Mr. Verde and Xx.
Xxxxx hereby irrevocably and unconditionally releases, waives and forever
discharges IBF and its past, present and future members, managers, officers,
directors, employees, agents and controlling persons, and the respective heirs,
administrators, successors and assigns of each of the foregoing (each, an "IBF
Releasee"), jointly and individually, from any and all actions, causes of
action, claims, demands, damages, rights, remedies and liabilities of whatsoever
kind or character, in law or equity, suspected or unsuspected, past or present,
that either of them has ever had or may now have against the IBF Releasees (or
any of them), from the beginning of time to the date hereof, arising out of or
related to (i) the employment of Mr. Verde and Xx. Xxxxx by the Company or their
equity interest therein and (ii) any acts or omissions of any IBF Releasee in
any capacity related to the Company (collectively, the "Management Claims") and
from any and all other Management Claims arising out of or related to any
contract, any and all other federal, state or local constitutions, statutes,
rules or regulations, or under any common law right of any kind whatsoever
relating to the employment by Mr. Verde and Xx. Xxxxx by the Company or their
equity interest therein, including, without limitation, any Management Claim for
any kind of tortious conduct, negligent misrepresentation, promissory or
equitable estoppel, unjust enrichment, declaratory judgment, quantum meruit,
fraud, breach of express or implied contract or covenants of good faith and/or
failure to pay in whole or part any compensation (other than salary due and
owing to Mr. Verde or Xx. Xxxxx in the ordinary course of business and not paid
through the date hereof), bonus, incentive compensation, profit sharing, stock
bonus or options, overtime compensation, deferred compensation, severance pay or
benefits or payments of any kind whatsoever, including disability and medical
benefits, back pay, front pay or any compensatory or consequential damages,
punitive or liquidated damages, attorneys' fees, costs,
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disbursements or expenses. Each of Mr. Verde and Xx. Xxxxx shall indemnify and
hold harmless each IBF Releasee from and against all losses, liabilities,
claims, damages and expenses (including costs of investigation and defense and
reasonable attorneys' fees) arising from or in connection with the assertion by
or on behalf of either of them of any Management Claims or other matter released
pursuant to this paragraph.
To the fullest extent permitted by law, each of Mr. Verde and Xx. Xxxxx
represents, warrants and agrees not to lodge any complaint in court, with any
federal, state or local agency or any other forum, including, without
limitation, arbitration, in any jurisdiction or any country, arising out of or
related to any Management Claims or such person's employment by or performance
of services to or on behalf of the Company or any of the IBF Releasees or the
termination of that employment or those services, or for any other Management
Claim. Each of Mr. Verde and Xx. Xxxxx hereby represents and warrants that
neither he nor she has brought any complaint, claim, charge, action or
proceeding against any of the IBF Releasees in any jurisdiction or forum nor
assisted or encouraged any other person or persons in doing do. Each of Mr.
Verde and Xx. Xxxxx further represents and warrants that neither he nor she has
in the past or will in the future assign any Management Claim to any person,
corporation or other entity.
Execution of this letter agreement by Mr. Verde and Xx. Xxxxx operates as
a complete bar and defense against any and all of the Management Claims against
any of the IBF Releasees. If either of Mr. Verde or Xx. Xxxxx should hereafter
make any Management Claim in any charge, complaint, action, claim or proceeding
against any of the IBF Releasees, this letter agreement may be raised as and
shall constitute a complete bar to any such charge, complaint, action, claim or
proceeding, and the IBF Releasees, or any of them, shall be entitled to and
shall recover from Mr. Verde and Xx. Xxxxx all costs incurred, including
attorneys' fees, in defending against any such charge, complaint, action, claim
or proceeding.
IBF hereby irrevocably and unconditionally releases, waives and forever
discharges each of Mr. Verde and Xx. Xxxxx and their heirs and successors (each,
a "Manager Releasee"), jointly and individually, from any and all actions,
causes of action, claims, demands, damages, rights, remedies and liabilities of
whatsoever kind or character, in law or equity, suspected or unsuspected, past
or present, that IBF has ever had or may now have against the Manager Releasees
(or any of them), from the beginning of time to the date hereof, arising out of
or related to (i) the employment of Mr. Verde and Xx. Xxxxx by the Company and
(ii) any acts or omissions of any Manager Releasee in any capacity related to
the Company (collectively, the "IBF Claims") and from any and all other IBF
Claims arising out of any kind of tortious conduct, negligent misrepresentation,
promissory or equitable estoppel, unjust enrichment, declaratory judgment,
quantum meruit, fraud, breach of express or implied contract or covenants of
good faith. IBF shall indemnify and hold harmless each Manager Releasee from and
against all losses, liabilities, claims, damages and expenses (including costs
of investigation and defense and reasonable attorneys' fees) arising from or in
connection with the assertion by or on behalf of IBF of any IBF Claims or other
matter released pursuant to this paragraph.
To the fullest extent permitted by law, IBF represents, warrants and
agrees not to lodge any complaint in court, with any federal, state or local
agency or any other forum, including,
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without limitation, arbitration, in any jurisdiction or any country, arising out
of or related to any IBF Claims. IBF further represents and warrants that it has
not in the past and will not in the future assign any IBF Claim to any person,
corporation or other entity.
Execution of this letter agreement by the IBF operates as a complete bar
and defense against any and all of the IBF Claims against any of the Manager
Releasees. If IBF should hereafter make any IBF Claim in any charge, complaint,
action, claim or proceeding against any of the Manager Releasees, this letter
agreement may be raised as and shall constitute a complete bar to any such
charge, complaint, action, claim or proceeding, and the Manager Releasees, or
any of them, shall be entitled to and shall recover from IBF and any all costs
incurred, including attorneys' fees, in defending against any such charge,
complaint, action, claim or proceeding.
This letter agreement was drafted by IBF and its counsel solely as a
matter of convenience to the parties, and shall not be construed for or against
any party for that reason. The parties acknowledge that they each have been
afforded ample opportunity to review and evaluate this letter agreement prior to
subscribing hereto and that they have been represented and assisted by counsel
chosen by them for that purpose. Mr. Verde and Xx. Xxxxx each further
acknowledges that he or she has been advised in writing to consult counsel
concerning this letter agreement and each has consulted with counsel of his or
her choice. The parties acknowledge and agree that they enter into this letter
agreement freely and voluntarily, without duress or coercion of any kind, and as
an informed and well-reasoned exercise of their respective business judgments.
Each of Mr. Verde and Xx. Xxxxx acknowledges that he or she was offered at least
21 days to consider the terms of this letter agreement, and each of Mr. Verde
and Xx. Xxxxx hereby waives the benefit of such review period.
* * * * *
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Please indicate your agreement with the foregoing by your signature below.
IBF FUND LIQUIDATING LLC
By /s/ Xxxxxx X. Xxxxxxxxx
------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Manager
AGREED AND ACCEPTED
This 22nd day of February, 2005
/s/ Xxxxxxx X. Verde
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Xxxxxxx X. Verde
/s/ Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx
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