SETTLEMENT AGREEMENT AND RELEASE
Exhibit
10.85
SETTLEMENT
AGREEMENT
AND RELEASE
This
SETTLEMENT AGREEMENT AND RELEASE (this “Release”),
dated
as of May 15, 2008 (the “Effective
Date”),
is by
and among NATIONAL INVESTMENT MANAGERS INC., a Florida corporation
(“Buyer”),
XXXXX
X. XXXXXX (“Xxxxxx”)
and
XXXXXXX X. XXXXXXXXX (“Xxxxxxxxx”
and
together with Xxxxxx, “Sellers”
and
each, a “Seller”).
Buyer
and Sellers are sometimes referred to herein collectively as the “Parties”
and
each individually as a “Party”.
Unless
the context otherwise requires, terms used in this Release that are capitalized
and not otherwise defined in context shall have the meanings set forth or
cross-referenced in Exhibit A
attached
hereto.
Background
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A.
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Buyer,
The Pension Alliance, Inc., a Pennsylvania corporation (the “Company”),
and Sellers are parties to that certain Stock Purchase Agreement,
dated as
of February 28, 2007 (the “Purchase
Agreement”),
pursuant to which Buyer acquired the Company from
Sellers.
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B.
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Through
discussions, the Parties have resolved certain issues between them
with
respect to (a) amounts owed by Buyer to Sellers under
Section 2.3(e) of the Purchase Agreement (the “Payment”)
and (b) a dispute regarding the amount of unearned revenues of the
Company as of February 28, 2007, as described in Annex I
hereto (the “Unearned
Revenues”).
Accordingly, the Parties desire to enter into this Release to fully
and
finally resolve all matters and issues existing between them with
respect
to the Payment and the Unearned
Revenues.
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Agreement
In
consideration of the mutual covenants contained in this Release, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
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1.
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Settlement
Amount.
Buyer agrees to pay (or cause to be paid) to Sellers an aggregate
amount
equal to $1,750,000 (in aggregate, the “Settlement
Amount”)
consisting of (a) $1,250,000 in cash payable on or before July 31,
2008 (the “Cash
Payment”),
and (b) $500,000 payable under two promissory notes (one payable
April 30, 2009 and one payable October 31, 2009), each in the amount
of
$250,000 (subject to adjustment as set forth in Section 2
below) and substantially in the form attached hereto as Exhibit B
(collectively, the “Notes”).
Sellers agree that the Settlement Amount (subject to adjustment as
set
forth in Section 2
below) shall be allocated 95% to Xxxxxx and 5% to Xxxxxxxxx. In no
event
will Buyer or any Buyer Party have any responsibility or liability
for the
allocation of such amount between Sellers or the distribution of
such
amount between Sellers. Upon payment of the Cash Payment and issuance
of
the Notes, the Parties shall be deemed to have hereby irrevocably
waived
and released their respective Claims to the extent set forth in
Section 3
below.
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2.
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Adjustment
to Notes.
If Adjusted EBITDA for the Measurement Period is less than $1,500,000,
then the principal amount of the Notes shall decrease pro rata in
an
amount equal to the difference of (A) $1,500,000 minus
(B) such Adjusted EBITDA.
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3.
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Mutual
Releases.
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(a)
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In
exchange for the rights and benefits arising under this Release,
and
except for any failure by Buyer to pay the Settlement Amount in accordance
with Section 1
above (including payment of the Notes, as may have been adjusted),
each
Seller, on his or her own behalf, and on behalf of his or her heirs,
beneficiaries, legal and personal representatives, successors, assigns,
affiliates and anyone else acting on his or her behalf (collectively,
the
“Seller
Parties”)
hereby irrevocably releases and forever discharges Buyer and the
Company
and each of their respective parents, subsidiaries, divisions, affiliates,
predecessors, successors and assigns, and their present and former
directors, officers, shareholders, employees, agents, attorneys,
representatives, successors, beneficiaries, heirs and assigns
(collectively, “Buyer
Parties”)
from, and waives and relinquishes, any and all Claims, whether presently
known or unknown, of any kind or nature arising out of, relating
to or
based upon the Payment or the calculation thereof. Each Seller knowingly
grants such release and discharge notwithstanding that he or she
may
hereafter discover facts in addition to, or different from, those
which he
or she now knows or believes to be true, and without regard to the
subsequent discovery or existence of such different or additional
facts,
and each Seller expressly waives any and all rights that he or she
may
have under any statute or common law principle which would limit
the
effect of the foregoing release and discharge to those Claims actually
known or suspected to exist.
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(b)
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In
exchange for the rights and benefits arising under this Release,
and
except for any breach of this Release, Buyer hereby irrevocably releases
and forever discharges Sellers from, and waives and relinquishes,
any and
all Claims, whether presently known or unknown, of any kind or nature
arising out of, relating to or based upon the Unearned Revenues or
the
calculation thereof. Buyer knowingly grants such release and discharge
notwithstanding that it may hereafter discover facts in addition
to, or
different from, those which it now knows or believes to be true,
and
without regard to the subsequent discovery or existence of such different
or additional facts, and Buyer expressly waives any and all rights
that it
may have under any statute or common law principle which would limit
the
effect of the foregoing release and discharge to those Claims actually
known or suspected to exist.
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4.
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Lender
Deliveries.
Sellers agree to execute and deliver to Buyer subordination agreements,
certificates and any other documents requested by Buyer’s lenders holding
Senior Indebtedness in connection with this
Release.
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5.
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Covenant
Not to Xxx; Indemnification.
Each Party agrees that it will not at any time hereafter, directly
or
indirectly, initiate, maintain or prosecute, or in any way knowingly
aid
in the initiation, maintenance or prosecution of any Claim with respect
to
any matter as to which a release has been given by such Party under
Section 3
above. If any such Claim is asserted by a Seller Party against a
Buyer
Party, then Sellers shall indemnify and hold harmless such Buyer
Party and
shall reimburse such Buyer Party for any loss, liability, damage
or
expense (including reasonable attorneys’ fees) arising from or in
connection therewith. If any such Claim is asserted by Buyer against
a
Seller Party, then Buyer shall indemnify and hold harmless such Seller
Party and shall reimburse such Seller Party for any loss, liability,
damage or expense (including reasonable attorneys’ fees) arising from or
in connection therewith.
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6.
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No
Admission of Liability.
This Release is the result of the mutual desire of the Parties to
compromise and settle certain disputes rather than engage in the
continued, protracted, expensive and time-consuming efforts of collection,
litigation and related activities, where there may be uncertainties
of
liability and recovery. Nothing in this Release shall in any respect
constitute or be construed as (a) an admission of liability on the
part of any Party, or (b) a breach by any Party of the Purchase
Agreement.
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7.
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Representations
and Warranties.
Buyer hereby represents and warrants to Sellers, and Sellers, jointly
and
severally, hereby represent and warrant to Buyer, as
follows:
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(a)
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This
Release has been duly executed and delivered by such
Party.
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(b)
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This
Release is enforceable against such Party and its successors and
assigns,
and the performance by such Party of its duties and obligations under
this
Release does not: (i) conflict with any contract or agreement binding
upon such Party or its properties; or (ii) violate or conflict with
any order or decree binding upon such Party or its
properties.
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(c)
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Such
Party has reviewed and fully understands this Release and has been
represented by an attorney of its selection in connection with the
negotiation and execution hereof.
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8.
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Governing
Law.
This Release shall be governed, interpreted and enforced in accordance
with the laws of the State of Ohio, without regard to the doctrine
of
conflicts of law.
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9.
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Entire
Agreement.
This Release constitutes the entire agreement among the Parties with
respect to the subject matter hereof, and there are no other written
or
oral agreements, understandings or arrangements except as set forth
herein. The terms of this Release may not be modified or waived except
in
writing signed by the Parties. The invalidation of any provision
contained
in this Release shall not affect the validity of any other provision.
The
waiver of a breach of any of the provisions of this Release shall
not
operate or be construed as a waiver of any other provision of this
Release
or a waiver of any subsequent breach of the same
provision.
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10.
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Counterparts;
Facsimile Signatures.
This Release may be executed in counterparts, with all signed counterparts
constituting one and the same agreement. Delivery of an executed
signature
page to this Release by facsimile or electronic transmission will
be
effective as delivery of a manually executed counterpart to this
Release.
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[Remainder
of Page Intentionally Blank - Signature Page Follows]
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IN
WITNESS WHEREOF, the Parties have duly executed and delivered this Release
as of
the date first written above.
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Buyer:
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Sellers:
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By:
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/s/
Xxxx X. Xxxxx
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/s/
Xxxxx X. Xxxxxx
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Name:
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Xxxx
X. Xxxxx
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Xxxxx
X. Xxxxxx, individually
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Title:
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President
and Chief Operating Officer
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/s/
Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx
X. Xxxxxxxxx, individually
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EXHIBIT
A
Defined
Terms
“Adjusted
EBITDA”
has
the
meaning set forth in the Purchase Agreement.
“Buyer”
has
the
meaning set forth in the Preamble.
“Buyer
Parties”
has
the
meaning set forth in Section 3(a).
“Cash
Payment”
has
the
meaning set forth in Section 1.
“Claims”
means
claims, causes of action, demands, damages, costs, expenses, liabilities,
obligations, compensation or other losses of every kind.
“Closing”
means
the closing of the transactions contemplated by the Purchase
Agreement
“Company”
has
the
meaning set forth in Background Paragraph A.
“Xxxxxx”
has
the
meaning set forth in the Preamble.
“Effective
Date”
has
the
meaning set forth in the Preamble.
“Measurement
Period”
means
the period beginning on March 1, 2008 and ending on February 28,
2009.
“Notes”
has
the
meaning set forth in Section 1.
“Party”
and
“Parties”
has
the
meaning set forth in the Preamble.
“Payment”
has
the
meaning set forth in Background Paragraph B.
“Purchase
Agreement”
has
the
meaning set forth in Background Paragraph A.
“Release”
has
the
meaning set forth in the Preamble.
“Xxxxxxxxx”
has
the
meaning set forth in the Preamble.
“Seller”
and
“Sellers”
has
the
meaning set forth in the Preamble.
“Seller
Parties”
has
the
meaning set forth in Section 3(a).
“Senior
Indebtedness”
has
the
meaning set forth in the Notes.
“Settlement
Amount”
has
the
meaning set forth in Section 1.
“Unearned
Revenues”
has
the
meaning set forth in Background Paragraph B.
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EXHIBIT
B
Form
of Notes
PROMISSORY
NOTE
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$250,000
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Columbus,
Ohio
May
[__],
2008
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FOR
VALUE
RECEIVED,
National Investment Managers Inc., a Florida corporation (“Maker”),
hereby promises to pay to Xxxxx X. Xxxxxx, an individual resident of the
Commonwealth of Pennsylvania (“Xxxxxx”),
and
Xxxxxxx X. Xxxxxxxxx, an individual resident of the Commonwealth of Pennsylvania
(together with Xxxxxx, and considered as a group, the “Holders”),
the
principal amount of Two Hundred Fifty Thousand Dollars ($250,000) or such other
amount as adjusted pursuant to Section 2 of that certain Settlement
Agreement and Release, dated as of May 15, 2008, by and among Maker and the
Holders. All principal and unpaid interest under this Promissory Note shall
be
due on or before [_________] [___],
200[_].
Maker
further promises to pay to the Holders on the unpaid principal balance from
time
to time outstanding, as follows: Interest shall accrue and be paid concurrently
with the payment of principal hereunder at a rate per annum equal to 6%,
computed on the basis of a 360-day year for the actual number of days the unpaid
principal amount hereof is outstanding. Notwithstanding anything contained
herein to the contrary, in no event shall the interest charged hereunder exceed
the maximum permitted under the laws of the State of Ohio.
Principal,
interest and other sums payable under this Promissory Note shall be payable
in
lawful money of the United States of America at the place designated in writing
by the Holders and delivered to the Maker.
The
indebtedness evidenced hereby may be prepaid in whole or in part at any time
without penalty.
At
the
option of the Holders, the entire unpaid principal balance of this Promissory
Note, together with all accrued interest, shall be immediately due and payable
upon the occurrence of any of the following (each, an “Event
of Default”):
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1.
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Application
for, or consent to, the appointment of a receiver, trustee or liquidator
for Maker or of its property;
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2.
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Admission
in writing of Maker’s inability to pay its debts as they
mature;
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3.
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Maker
makes any assignment for the benefit of
creditors;
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4.
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Filing
by Maker of a voluntary petition in bankruptcy seeking liquidation
or
reorganization;
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5.
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Entering
against Maker of a court order approving a petition filed against
it under
the federal bankruptcy laws, which order shall not have been vacated,
set
aside or otherwise terminated within 60 days of such entry against
Maker;
or
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6.
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Maker
fails to pay any installment of interest or any other sum payable
in
accordance with this Promissory Note when due, and such failure is
not
cured within 30 days of the Holders notifying Maker in writing of
such
failure.
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Upon
the
occurrence of any Event of Default, Maker will pay to the Holders reasonable
attorneys’ fees, court costs and expenses incurred by the Holders in connection
with the Holders’ efforts to collect the indebtedness evidenced
hereby.
This
Promissory Note is unsecured.
All
rights and remedies available to the Holders pursuant to the provisions of
applicable law and otherwise are cumulative, not exclusive and enforceable
alternatively, successively and/or concurrently during an Event of Default
by
Maker pursuant to the provisions of this Promissory Note.
This
Promissory Note may not be changed, modified or terminated orally, but only
by
an agreement in writing, signed by Maker and the Holders.
This
Promissory Note is subordinate to all Senior Indebtedness. Notwithstanding
anything to the contrary in this Promissory Note, the Holders agree that the
indebtedness represented by this Promissory Note and the payment of principal
of
and interest, including any interest accruing during the existence of an Event
of Default, and other amounts owed by Maker are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of
all
Senior Indebtedness, and any fees, costs, enforcement expenses (including legal
fees and disbursements), collateral protection expenses and other reimbursement
or indemnity obligations related to such Senior Indebtedness. As used herein,
“Senior
Indebtedness”
means
the principal of (and premium, if any) and interest on (i) all indebtedness
of Maker for money borrowed from any bank, merchant bank, savings and loan,
insurance company, finance company, credit union, investment bank,
broker-dealer, or other financial institution of any nature whatsoever, or
any
affiliate thereof, whether outstanding on the date of execution of this
Promissory Note or thereafter created, assumed or incurred (including, without
limitation, all indebtedness evidenced by that certain (A) Revolving Line
of Credit and Term Loan Agreement, dated as of November 30, 2007, between Maker
and RBS Citizens, National Association, and (B) Securities
Purchase and Loan Agreement, dated November 30, 2007, by and among Maker,
Woodside Capital Partners IV, LLC, Woodside Capital Partners IV QP, LLC, Xxxxxx
Brothers Commercial Bank and Woodside Agency Services, LLC, as collateral
agent);
and
(ii) any deferrals, renewals, increases, extensions or refinancings of any
such Senior Indebtedness referred to in clause (i) above. As used herein,
“indebtedness
of Maker for money borrowed”
means
any obligation of, or any obligation guaranteed by, Maker for the repayment
of
money borrowed, whether or not evidenced by bonds, debentures, notes or other
written instruments, any capitalized lease obligation and any deferred
obligation for payment of the purchase price of any property or assets. The
Holders agree to furnish any holder of Senior Indebtedness upon request a
subordination agreement that contains reasonably customary subordination
provisions, consistent with the provisions of this Promissory Note, which
subordination agreement may, without limitation (x) set forth the priority
rights of the Holders and the holder of the Senior Indebtedness, and
(y) prohibit payments to the Holders that would cause a default under the
Senior Indebtedness. In the event of and during the continuation of any default
or event of default under any Senior Indebtedness beyond any applicable grace
period with respect thereto, no payment shall be made by or on behalf of Maker,
or demand made by or on behalf of the Holders, on this Promissory Note until
the
date, if any, on which such default or event of default is waived by the holders
of such Senior Indebtedness or otherwise cured or has ceased to exist or the
Senior Indebtedness to which such default or event of default relates is
discharged by payment in full in cash. Nothing contained in this Paragraph
or
elsewhere in this Promissory Note shall prevent Maker, at any time except under
the circumstances described in this Paragraph, from making regularly scheduled
payments at any time of principal of or interest on this Promissory
Note.
This
Promissory Note and all rights and obligations hereunder shall be governed
by
and construed under the local laws of the State of Ohio without regard to any
conflicts of law doctrine and shall be binding upon the successors, endorsees
or
assigns of Maker and inure to the benefit of the Holders, its successors,
endorsees and permitted assigns. If any provision hereof is or becomes invalid
or unenforceable under any law of mandatory application, it is the intent of
Maker and the Holders that such provision will be deemed severed and omitted
herefrom, the remaining portions hereof to remain in full force and effect
as
written.
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IN
WITNESS WHEREOF, Maker has duly executed this Promissory Note as of the day
and
year first above written.
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By:
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Name:
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Title:
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ANNEX I
Unearned
Revenues
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Sellers’
Method
(as
of February 28, 2007)
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Revised
Method
(as
of February 28, 2007)
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2006
Unearned Revenue
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$77,736.68
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2006
Unearned Revenue
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$1,158,788.64
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2007
Unearned Revenue
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$418,623.18
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2007
Unearned Revenue
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$351,864.78
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Total
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$496,359.86
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Total
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$1,510,653.42
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Unearned
Revenues Calculation
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Revised
Method Total Unearned Revenue
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$1,510,653.42
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LESS:
Sellers’ Method Total Unearned Revenue
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$496,359.86
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Unearned
Revenues
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$1,014,293.56
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