Exhibit 10.7
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Settlement Agreement") is entered into as of
the 22nd day of May, 2002, by and between Xxxxxx X. Xxxxx., Jr., a Virginia
resident, and Preferred Systems Solutions, Inc., a Virginia corporation,
(sometimes hereinafter collectively referred to as "Xxxxx" or a "Party" or
"Parties"), and The NetPlex Group, Inc., a New York corporation with offices at
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxxx Xxxxx, Xxxxxx, Xxxxxxxx and The PSS Group,
Inc., a Virginia corporation, which is a subsidiary of The NetPlex Group Inc.
(sometimes hereinafter collectively referred to as "NetPlex" or a "Party" or
"Parties") with reference to the following:
WHEREAS, Xxxxx and NetPlex entered into an Acquisition Agreement effective
as of January 3, 1998; and
WHEREAS, Xxxxx and NetPlex entered into an Amendment to Acquisition
Agreement ("Amendment") dated as of December 31, 1998; and
WHEREAS, the Amendment amended certain provisions of the Acquisition
Agreement and contained various terms and provisions, including but not by way
of limitation, that NetPlex pay the premiums on a life insurance policy for
Xxxxx in exchange for Xxxxx'x agreement to certain non-competition provisions;
and
WHEREAS, in Section 7 of the Amendment NetPlex is obligated to pay four
annual $425,000.00 premiums toward the life insurance premiums in favor of Xxxxx
and NetPlex paid the first two premiums; and
WHEREAS, the last date for timely payment of the third premium was no later
than March 9, 2001, and NetPlex did not pay it; and
WHEREAS, NetPlex did not pay the third payment and Xxxxx thereafter
demanded binding arbitration ("Arbitration") pursuant to Section 3.2 of the
Amendment; and
WHEREAS, NetPlex denied the majority of the material allegations of Xxxxx
and asserted a Counterclaim alleging a variety of allegations in multiple counts
in the Arbitration; and
WHEREAS, after the Arbitration, the arbitrator rendered his award ("Award")
dated January 30, 2002, which resulted in a net sum in favor of Xxxxx against
NetPlex in the amount of $298,249.00 plus interest in the amount of $38,250.00
to be paid within thirty (30) days of the Award date; and
WHEREAS, to date no portion of the Award has been paid by NetPlex; and
WHEREAS, the last date for timely completion of the fourth premium payment
in the amount of $425,000.00 was no later than March 9, 2002, and NetPlex did
not pay it and continues to refuse to pay it; and
WHEREAS, Xxxxx filed suit to enforce, among other things, the Award and the
payment of the fourth premium payment in the Circuit Court of Fairfax County, At
Law Xx. 000000 ("Xxxxx Xxxxx Xxxxxxxxxx"), which is pending; and
WHEREAS, NetPlex although served has not yet answered the State Court
Proceeding, but disputes Xxxxx'x allegations and represents it would assert,
among other things, that the Arbitration resolved all matters between the
parties including but not limited to the fourth insurance payment under, among
other things, the doctrine of anticipatory breach; and
WHEREAS, certain disputes have arisen between Xxxxx and NetPlex; and
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WHEREAS, Xxxxx and NetPlex desire to enter into this Settlement Agreement
in order to resolve any and all differences between them concerning the
foregoing and to provide a mutual release of claims relating thereto.
NOW, THEREFORE, in consideration of the foregoing, the respective covenants
and agreements herein contained, and in consideration of other good and valuable
consideration, each to the other, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree, covenant and consent as follows:
1. Release of Claims.
(a) Except with respect to the matters, rights and obligations specified in
this Settlement Agreement, upon dismissal with prejudice of the State Court
Proceeding as elsewhere specified herein, the Parties, for themselves and on
behalf of their administrators, heirs, executors, and assigns, hereby release
and forever discharge each other and each of their respective past, present and
future officers, directors, shareholders, administrators, affiliated companies,
agents, servants, employees, executors, heirs and assigns (collectively, the
"Released Parties"), from all past, present and future claims, demands,
obligations, and causes of action of any nature whatsoever, whether in tort
(including, without limitation, acts of active negligence), contract or any
other theory of recovery in law or equity, whether for compensatory or punitive
damages, equitable relief or otherwise, and whether known or unknown, suspected
or unsuspected, which are based upon or arise out of or in connection with any
matter, cause or thing existing at any time prior to the date hereof or anything
done, omitted or suffered to be done or omitted at any time prior to the date
hereof (collectively, the "Released Matters").
(b) Except with respect to obligations created by or arising out of this
Settlement Agreement upon dismissal with prejudice of the State Court Proceeding
as elsewhere specified herein, the Released Parties covenant and agree never to
commence, aid in any way, prosecute or cause to be commenced or prosecuted any
action or other proceeding against one another,
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based upon any claims, demands, causes of action, obligations, damages or
liabilities which are the subject of this Settlement Agreement.
2. Conditions.
(a) On or before the earlier of the date of (i) sale of any substantial
tangible or intangible assets of NetPlex and/or The PSS Group, Inc. or (ii) June
30, 2002, NetPlex shall deliver and transfer cash or certified funds in the
amount of $90,000.00 payable to "BIRCH, STEWART, KOLASCH & BIRCH, LLP trust
account". The parties agree that this amount payable under this section of this
Agreement is in settlement of Xxxxx'x right of action relative to the Award of
$298,249.00 plus the $38,250.00 interest thereon and any additional interest
accrued thereon. It is further understood that this payment will be held in
escrow pending a resolution of the dispute and lien, if any, for fees asserted
by Xxxx Xxxxx LLP pursuant to Code of Virginia, Section 54.1-3932 and that
Birch, Stewart, Kolasch & Birch, LLP shall not have the right to release such
funds from escrow unless and until such dispute and lien is resolved or unless
Netplex otherwise consents in writing.
(b) On or before the earlier of the date of (i) sale of any substantial
tangible or intangible assets of NetPlex and/or the PSS Group, Inc. or (ii) June
30, 2002, NetPlex shall deliver and transfer cash or certified funds in the
amount of $125,000.00 payable to "The Xxxxxx X. Xxxxx, Xx. Irrevocable Trust".
The parties agree that this amount payable under this section of this Agreement
is in partial consideration and settlement of Xxxxx'x right(s) of action
relative to the fourth insurance payment due ("Fourth Payment"), as elsewhere
referenced herein.
(c) In further consideration and settlement of the Fourth Payment, upon
dismissal with prejudice of the State Court Proceeding as elsewhere specified
herein, NetPlex including but not limited to any of its subsidiaries or
affiliates hereby terminates all obligations of Preferred Systems Solutions,
Inc. and/or any of its affiliates under any agreements between Preferred Systems
Solutions, Inc. and The NetPlex Group, Inc. and/or The PSS Group, Inc.,
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including but not limited to, the collateral assignment agreement, the split
dollar life insurance policy restrictions, and any other related agreements, any
non-competition provisions, any no-hire provisions, and any staffing
restrictions or agreements.
(d) In further consideration and settlement of the Fourth Payment, upon
dismissal with prejudice of the State Court Proceeding as elsewhere specified
herein, NetPlex and The PSS Group, Inc. agree that any and all of the rights of
NetPlex and/or The PSS Group, Inc. including without limitation the goodwill
each or both may have in the names "The PSS Group", "PSS", and "PSS Group" or
any combination or derivation thereof and the goodwill of The PSS Group, Inc.
shall be and become the sole property of Preferred System Solutions, Inc. and
effective upon dismissal with prejudice of the State Court Proceeding as
elsewhere specified herein, NetPlex and The PSS Group, Inc. hereby agree to
transfer to Preferred Systems Solutions, Inc. or its designee any and all rights
including but not limited to goodwill either or both may have or claim to have
in The PSS Group, Inc. and/or the names "The PSS Group", "PSS", and "PSS Group."
(e) In further consideration and settlement of the Fourth Payment,
Preferred Systems Solutions, Inc. assumes all responsibility and obligations for
the future performance of any and all staffing contracts that NetPlex, The PSS
Group, Inc. and/or any of each of their affiliates or subsidiaries thereof may
have in the Tampa, Florida area and any personnel associated with such contract
or contracts shall become employee(s) of Preferred Systems Solutions, Inc. All
existing obligations with respect to such employee(s) including but not limited
to benefits, salary, commissions, and reimbursement of expenses shall be and
remain with NetPlex , The PSS Group, Inc. and/or any of each of their affiliates
or subsidiaries thereof and Preferred Systems Solutions, Inc. shall not be
obligated at any time for obligations arising prior to the date of dismissal
with prejudice of the State Court Proceeding as elsewhere specified herein, and
shall become liable only for future obligations if and when NetPlex and The PSS
Group, Inc. provide to Xxxxx within five (5) calendar days after the effective
date of this Agreement a list of pertinent information for all staffing
contracts and personnel for the Tampa, Florida area which is current, complete
and accurate, in all material respects. Netplex
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and the PSS Group, Inc. also agree to and effective upon dismissal with
prejudice of the State Court Proceeding as elsewhere specified herein, hereby
assign all such staffing contracts for the Tampa, Florida area to Preferred
Systems Solutions, Inc.
(f) Upon receipt and clearance of the payments referred to on (a) and (b)
hereinabove , Xxxxx will immediately authorize and instruct its attorney to
execute an Order dismissing with prejudice the State Court Proceeding.
THIS SETTLEMENT AGREEMENT IS SECURED BY THE ASSETS OF NETPLEX AND/OR THE
PSS GROUP, INC. AND/OR BY THE PLEDGE OF THE PROCEEDS OF ANY SALE OF NETPLEX
ASSETS OR FINANCING AND/OR ANY ASSETS THAT NETPLEX MAY ACQUIRE IN THE FUTURE AND
PREFERRED SYSTEMS SOLUTIONS, INC. IS HEREBY GRANTED A SECURITY INTEREST IN ALL
OF THE ASSETS WHICH NETPLEX NOW OWNS OR LATER ACQUIRES AND/OR ANY PROCEEDS FROM
THE SALE OF SAID ASSETS. UPON DEFAULT IN PAYMENT, XXXXX MAY PROCEED AGAINST SUCH
ASSETS. IN ADDITION, NETPLEX HAS REPRESENTED THAT IT IS ENTERING INTO AN ASSET
SALE TRANSACTION AND AGREES TO DIRECT THE CLOSING AGENT OR ATTORNEYS TO PAY THE
AMOUNTS DUE XXXXX HEREUNDER AT THE CLOSING OF ANY SUCH SALE TRANSACTION AND
NETPLEX AUTHORIZES XXXXX TO PRESENT THIS SETTLEMENT AGREEMENT TO ANY SUCH
CLOSING AGENT OR ATTORNEY OR REPRESENTATIVE OF THE BUYER OF SAID ASSETS AND
NETPLEX HEREBY DIRECTS SUCH CLOSING AGENT, ATTORNEY OR REPRESENTATIVE TO PAY TO
XXXXX ALL AMOUNTS DUE IN ACCORDANCE WITH SECTION 2(a) AND SECTION 2(b).
(g) In the event NetPlex fails to make timely payment of the amounts due
under this Agreement and the payment remains unpaid for a period of Ten (10)
days or NetPlex fails to fulfill their other obligations under this Settlement
Agreement then NetPlex and The PSS Group, Inc. hereby appoint and designate
Xxxxxxx X. Xxxxxx or any attorney licensed to practice
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in Virginia, as each of their attorney-in-fact to confess judgment in the
Circuit Court of Fairfax County for the unpaid balance due and owing under this
Settlement Agreement and Xxxxx shall be entitled to (i) keep any payments made,
and (ii) take a confessed judgment as to NetPlex and The PSS Group, Inc.,
jointly and severally, for the remaining payment(s) due under this Settlement
Agreement under subparagraphs (a) and (b) and in addition the confessed judgment
shall include attorney's fees in the amount of 20% of the remaining payment(s)
due, plus pre-judgment interest from the date said payment was due at the annual
rate of eight percent, and interest on the judgment at the legal rate from the
date of entry of the confessed judgment. NetPlex and The PSS Group, Inc. hereby
agree that each of their Attorney-in-Fact under section (h) hereunder shall
confess judgment for the amount he is directed to confess by Xxxxx or its
attorney. The said attorney in fact is hereby authorized and empowered for and
in the principal's name place and stead, to do the following:
1. To present to the Clerk's office of the appropriate Court in this
Commonwealth, whether a suit, motion, or action be pending therefore, or
not, a signed and acknowledged "Confession of Judgment" for the outstanding
balance of due under this Agreement, resulting from a failure to pay in
accordance with this Agreement.
2. To direct the Clerk in whose office it is confessed to forthwith
enter said judgment on the Clerk's record, in the proper Order book of his
Court, and the lien of such judgment or Decree shall run from the time such
judgment is recorded in the Clerk's record.
3. The principal hereby ratifies and confirms all the said
attorney-in-fact shall do, or cause to be done, by virtue hereof and all
documents of any kind executed and/or delivered by said distributees, legal
representatives, successors and assigns.
4. This power of attorney shall be governed by the laws of Virginia in
all respects, including its validity, construction, interpretations and
termination. Should
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any provision hereto be held invalid, such invalidity shall not affect the
other provisions which shall remain in full force and effect.
5. This power of attorney shall not be affected by any disability,
incompetence, or incapacity which principal may suffer at any future time
or times, whether or not the same shall be adjudicated by any court, it
being the principal's intent that the authorizations and powers granted
herein shall remain exercisable notwithstanding any such subsequent
occurrence.
There shall be no offsets of the obligation set forth above, except for
payments made pursuant to the terms of this Agreement.
IMPORTANT NOTICE:
THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH CONSTITUTES A
WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE CREDITOR TO
OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.
(h) TO THE CLERK OF THE CIRCUIT COURT OF FAIRFAX COUNTY, VIRGINIA OR ANY
COURT OF COMPETENT JURISDICTION:
Be it known to you that The NetPlex Group, Inc. and The PSS Group, Inc.,
severally and jointly, constitute and appoint Xxxxxxx X. Xxxxxx or any attorney
licensed to practice in Virginia, as each of their true and lawful Attorney in
Fact, with full power and authority hereby given to appear before you in said
office and to confess judgment before you against The NetPlex Group, Inc. and
The PSS Group, Inc., jointly and severally, in favor of Xxxxx, or its successors
or assigns, for the unpaid balance under this Settlement Agreement, together
with the costs of confession, and entering up said judgment for any unpaid
principal, interest and
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reasonable attorney's fees, for which The NetPlex Group, Inc. and The PSS Group,
Inc., authorizes said Attorney in Fact to confess judgment against it.
3. Representation and Warranties.
Each of the Parties hereto represents and warrants with respect to the
other party as follows:
(a) Due Authority. The Party has all requisite power and authority to
execute, deliver and perform its obligations under this Settlement Agreement,
and no other proceedings are necessary for the execution and delivery of this
Settlement Agreement or the performance of its obligations contemplated hereby.
(b) Consents. No authorization, consent, approval, waiver, license,
qualification or exemption from, nor any filing, declaration, qualification or
registration with any court, government agency or regulatory authority is
required in connection with the execution, delivery or performance of this
Settlement Agreement.
(c) Professional Advice. Each Party has had the opportunity to obtain, and
in its sole judgment if necessary, has obtained competent independent
professional business, legal and financial advice in connection with the
negotiation, execution, delivery, and performance of this Settlement Agreement.
(d) Conflicting Agreements. Neither the execution and delivery of this
Settlement Agreement, nor the performance of the Party's obligations hereunder,
will violate or conflict with any term or condition of any other agreement or
obligation.
(e) Due Execution. This Settlement Agreement constitutes the legal, valid
and binding obligation of each Party hereto, fully enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally.
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(f) Assignment. Each Party has not assigned or transferred, or purported to
assign or transfer, to any person or entity, all or part of or any interest in
any claim of any nature, whatsoever which is or which purports to be released or
discharged hereunder and has not filed or asserted in any arbitration, state or
federal court, administrative agency, or other tribunal any claim released by
such Party pursuant to this Settlement Agreement.
(g) No Oral Representations. In executing and delivering this Settlement
Agreement, the Parties are not relying, and have not relied upon, any
representation, promise or statement made by anyone which is not recited,
contained or embodied in this Settlement Agreement. The Parties hereto expressly
understand, agree and assume the risk that any fact not recited, contained or
embodied in this Settlement Agreement hereafter may turn out to be other than,
different from or contrary to the facts now known to such party or believed by
such party to be true, and each further agrees that this Settlement Agreement
shall be effective in all respects notwithstanding, and shall not be subject to
termination, modification or rescission by reason of any such difference in
facts, regardless of any allegation of misrepresentation, fraud, mistake of law
of fact, or any other circumstance whatsoever.
4. Indemnification.
(a) The Parties agree to indemnify and hold each other harmless from and
against any and all claims, including court costs and attorneys' fees, from or
in connection with any action or other proceeding brought, assisted, or
prosecuted contrary to the provisions of this Settlement Agreement. In addition
Xxxxx agrees to indemnify and hold Netplex harmless from and against any claims,
including court costs and attorneys' fees, for attorneys fees by Xxxx, Xxxxx. It
is further agreed that this covenant of indemnity shall be deemed breached and a
cause of action accrued thereon immediately upon the commencement of any action
contrary to this Settlement Agreement and may be pleaded (a) as the basis for an
injunction against the breaching party, judicially admitting thereby for all
purposes that damages for such breach are inadequate and that a multiplicity of
actions would otherwise be required to remedy such breach; and (b) as a defense
and as a counterclaim or cross-claim in such action.
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5. Miscellaneous.
(a) Modification. This Settlement Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all prior or proposed agreements, understandings or negotiations,
whether oral or written. Each Party acknowledges that no other Party or person,
agent or representative whomsoever has made any promise, representation or
warranty whatever, express or implied, not contained herein, concerning the
subject matter hereof which has induced the Party to execute this Settlement
Agreement. Each Party further acknowledges that he is not executing this
Settlement Agreement in reliance on any promise, representation or warranty not
expressly set forth herein.
(b) Assignment. This Settlement Agreement may not be assigned, in whole or
in part. Except otherwise provided, this Settlement Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, and permitted assigns.
(c) Integration, Construction. This Settlement Agreement contains the
entire agreement and understanding of the Parties concerning the subject matter
hereof and supersedes all prior or proposed agreements, understandings or
negotiations, whether oral or written. Each Party acknowledges that no other
Party or person, agent or representative whomsoever has made any promises,
representation or warranty whatever, express or implied, not contained herein,
concerning the subject matter hereof which has induced the Party to execute this
Settlement Agreement. Each Party further acknowledges that he is not executing
this Settlement Agreement in reliance of any promise, representation or warranty
not expressly set forth herein. The Parties jointly participated in the drafting
of this Settlement Agreement, which shall not be construed in favor of one over
the other due to its drafting.
(d) Section Headings. The headings of the several sections in this
Settlement Agreement are inserted solely for the convenience of the parties and
are not a part of and are not intended to govern, limit or aid in the
construction of any term or provision hereof.
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(e) Notice. All notices and other communications required or permitted
under this Settlement Agreement shall be in writing and shall be served
personally on, or mailed by certified or registered United States mail to, the
Party to be charged with receipt thereof. Notices and other communications
served by mail shall be deemed given hereunder 72 hours after deposit of such
notice or communication in the United States Post Office as certified or
registered mail with postage prepaid an duly addressed to whom such notice or
communication is to be given, as follows:
If to Xx. Xxxxxx X. Xxxxx, Xx.: If to NetPlex:
Preferred Systems Solutions, Inc. The NetPlex Group, Inc.
0000 Xxxxxx Xxxx Xxxx, Xxxxx 000 c/o Xx. Xxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000 0000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxxx, Esquire
BIRCH, STEWART, KOLASCH & BIRCH, LLP
0000 Xxxxxxxxx Xxxx, Xxxxx 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Any such party may change said Party's address for purposes of this Section by
giving to the party intended to be bound thereby, in the manner provided herein,
a written notice of such changed.
(f) Severability. All sections, clauses hereof and covenants contained in
this Settlement Agreement are severable, and in the event any of them shall be
held to be invalid by any court, this Settlement Agreement shall be interpreted
as if such invalid sections, clauses or covenants were not contained herein.
(g) Applicable Law, Consent to Jurisdiction. This Settlement Agreement is
made with reference to and shall be governed and construed in accordance with
the laws of the Commonwealth of Virginia, without reference to the conflicts of
law provisions of that or any
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other state. Each party hereto by signing below, consents to the jurisdiction of
the federal and state courts of Virginia and venue in any such courts located
within the federal Eastern District of Virginia.
(h) Compromise Agreement. This Settlement Agreement is a compromise and
settlement of claims and is not intended to be, nor shall be construed as, any
admission of liability or wrongdoing by any party hereto or any other person or
entity.
(i) Remedies. It is understood and agreed that damages shall be an
inadequate remedy in the event of breach by any Party of this Settlement
Agreement and that any breach will cause such Party and/or its assignees great
and irreparable injury and damage. Accordingly, the Parties agree that each
Party and/or its assignees shall be entitled, without waiving any additional
rights or remedies otherwise available to the Party and/or its assignees at law
or in equity or by state, to injunctive and other equitable relief in the event
of a breach or intended breach by any Party. It is further understood and agreed
that the liability in a breach of this Settlement Agreement shall include not
only the monetary amount of any judgment which may be awarded in an action or
proceeding commenced in breach of this Settlement Agreement, but also all other
damages, costs and expenses sustained by the Party claiming a breach on account
of such action including the amounts billed for attorneys' fees and all other
costs and expenses paid, whether taxable or otherwise, in preparing the defense
of and defending such actin or proceeding, and establishing and maintaining the
application or validity of this Settlement Agreement or any provision thereof,
and in prosecuting any counterclaim, cross-claim or injunction provided for
herein.
(j) Waiver. The failure of either party hereto at any time to enforce
performance by the other Party of any provision of this Settlement Agreement
shall in no way affect such party's rights thereafter to enforce the same, nor
shall the waiver by either party of any breach of any provision hereof be deemed
to be a waiver by such party of any other breach of the same or any other
provision hereof.
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(k) Counterparts. This Settlement Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
(l) Further Assurances. Each Party shall take and do all acts and things
and shall execute all documents and instruments as reasonably necessary to give
effect to this Settlement Agreement.
(m) Survival of Obligations. The obligations of the Parties with respect to
this Settlement Agreement shall survive ts termination.
IN WITNESS WHEREOF, the parties hereto have caused this Settlement
Agreement to be duly executed as of the date first set for the above.
Xxxxxx X. Xxxxx, Xx. The NetPlex Group, Inc.
--------------------------------- By:
-------------------------------
Name:
------------------------------
Title:
------------------------------
Preferred Systems Solutions, Inc. The PSS Group, Inc.
By: By:
----------------------------- -------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
The undersigned, Birch, Stewart, Kolasch & Birch are executing this Agreement
solely to evidence its agreement to serve as escrow agent and to hold the
escrowed amounts in accordance with Section 2(a).
BIRCH, STEWART, KOLASCH & BIRCH
By:
-----------------------------
Name:
---------------------------
Title:
---------------------------
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