Exhibit 99.3
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 Anzona1 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 "I RS") 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 to Seller, in connection with the
Approved Sale, aggregating $73,355.75 (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.
2. Continuing Liens - All liens in favor of the IRS, ADOR and or Seller
in any or all of the assets included within the Approve 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 Judgement 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 from Buyer of no less than $15,000.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
$150,000.00 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 an annual
rate of 12 percent., until such time as the default is cured, at which
time the interest rate shall revert to six percent.
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 will
immediately be 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 the Xxxxxx Judgement, to negotiate in
good faith the amount of a Revised Xxxxxx Judgement 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.
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 pn'ncipal
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 B.uyer'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 J udgement or the Xxxxxx
Judgement shall term inate5 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 Jursdiction- Any disputes which arise under this Settlement
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 it parents, subsidiaries,
affiliated companies, a and/or successor companies, their directors1
officers, managers, employees, attorneys, agents, and other
representatives, hereby irrevocably and unconditionally release Seller
and any and all of it 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 it 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 reason, 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.
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:
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By:
Its: ---------------------------
---------------------------- Xxxxx X. Xxxxxx, Estate
Administrator
Xxxx Xxxxxx, personally
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