EXHIBIT 4.5
SETTLEMENT AGREEMENT AND GENERAL RELEASE
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THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE ("Agreement") is made as
of the 17th day of May, 2004 between XXXXXX, XXXXXXXXXX & XXXXX, A LAW
CORPORATION ("PRP") and XXXXXXXXXX & XXXXX LLP ("RP LLP"), on the one hand, and
ADVANCED TECHNOLOGY INDUSTRIES, INC. ("ATI"), and LTDnetwork, Inc. ("LTDN"), on
the other hand, all of whom may hereafter be referred to as the "Parties."
RECITALS
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A. PRP claims ATI owes PRP in excess of $720,000 for legal services
rendered, costs advanced, and accrued interest (the "Debt");
B. PRP claims LTDN damaged PRP by interfering with PRP's ability to
collect the Debt from ATI;
C. ATI and LTDN dispute liability arising from the Debt and have
suggested counterclaims may exist against PRP;
D. The parties wish to compromise and forever settle the Debt and all
claims between them pursuant to the terms of this Agreement.
AGREEMENT
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NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the mutual promises,
covenants and conditions herein contained, the Parties agree as follows:
1. SETTLEMENT PAYMENT. ATI shall issue an aggregate of 2,250,000 shares
of its common stock (the "Settlement Shares") on the terms and conditions set
forth herein. The Settlement Shares shall consist of 500,000 shares of
unregistered common stock of ATI (the "Restricted Shares") and 1,750,000 shares
of common stock of ATI registered under an effective Form S-8 Registration
Statement (the "S-8 Shares").
2. DELIVERY OF SHARE CERTIFICATES.
A. RESTRICTED STOCK. The Restricted Shares shall be represented by two
certificates, each in the amount of 250,000 shares, issued in the name of
Xxxxxxxxxx & Xxxxx LLP. Each certificate representing the Restricted Shares and
any other securities issued in respect of the Restricted Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted or unless the shares of common stock evidenced
by such certificate shall have been registered under the Securities Act of 1933
(as amended, the "Securities Act")) be stamped or otherwise imprinted with a
legend substantially in the following form:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THESE SHARES MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION."
The certificates for the Restricted Shares shall be delivered to Attn:
Xxxxxxx Xxxxx, c/o Richardson & Xxxxx LLP, 00000 Xxxxxxxx Xxxx., Xxxxx 000, Xxx
Xxxxxxx, XX 00000 promptly after execution of this Agreement.
B. S-8 STOCK. The S-8 Shares shall be represented by 22
certificates. The certificates representing the S-8 Shares shall not bear a
restrictive legend and shall be free trading at the time of issuance, subject to
the escrow and leak-out provisions set forth below. As soon as possible after
ATI files its Form 10-QSB for the first quarter of 2004, ATI shall file an
appropriate Form S-8 Registration Statement registering the S-8 Shares for
issuance. Thereafter, one certificate representing 100,000 S-8 Shares issued in
the name of Xxxxxxx Xxxxx shall be delivered to Attn: Xxxxxxx Xxxxx, c/x
Xxxxxxxxxx & Xxxxx LLP, 00000 Xxxxxxxx Xxxx., Xxxxx 000, Xxx Xxxxxxx, XX 00000.
The remaining 21 certificates shall be concurrently delivered to the Escrow
Agent for holding and delivery pursuant to the terms of the Escrow Agreement.
The certificates representing S-8 Shares shall be issued to the individuals and
in the amounts as follows: (a) 8 certificates for 100,000 shares each, 1
certificate for 25,000 shares, and 1 certificate for 22,286 shares each in the
name of Xxxxxxx Xxxxx, (b) 7 certificates for 100,000 shares each, 1 certificate
for 25,000 shares, and 1 certificate for 16,250 each in the name of Xxxxx
Xxxxxxxxxx, and (c) 1 certificate for 100,000 shares, 1 certificate for 50,000
shares, and 1 certificate for 11,464 shares each in the name of Xxxxxx Xxxxx.
3. PENALTY SHARES. If all certificates representing the Restricted
Shares issued as set forth in section 2(A) are not received by PRP by June 15,
2004, and all certificates representing the S-8 Shares issued as set forth in
section 2(B) are not received by PRP and the Escrow Agent by July 1, 2004, then
penalty shares shall accrue at the rate of 36% per annum in the case of
Restricted Shares, and 72% per annum in the case of S-8 Shares, and in each case
rounding any fractional share up to a whole share, until the share certificates
are properly issued, delivered and received (the "Penalty Shares"). For example,
if the certificates representing the Restricted Shares are not received by PRP
until June 30, then ATI shall promptly issue an additional stock certificate
representing 7,397 shares (500,000 shares x 36% x 15 days / 365 days). As a
further example, if the certificates representing the S-8 Shares are not
received by PRP and the Escrow Agent until August 10, 2004, then ATI shall
promptly issue an additional stock certificate representing 141,534 shares
(1,750,000 x 72% x 41 days / 365 days). Stock certificates representing Penalty
Shares shall be due immediately on accrual and shall be promptly delivered to
PRP. Penalty Shares arising from a late delivery of certificates representing
the Restricted Shares and S-8 Shares shall be payable in shares of unregistered
common stock of ATI, bearing the restrictive legend set forth in Section 2(A),
issued to Xxxxxxxxxx & Xxxxx LLP.
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4. LEAK-OUT.
A. MONTHLY LOCK-UP. PRP agrees that the S-8 Shares shall not
be Sold in an amount that exceeds in the aggregate 100,000 S-8 Shares per month
beginning June 15, 2004. For example, six months after June 15, 2004, a maximum
of 600,000 S-8 Shares may have been Sold. Subject to Section 4(B), if less than
100,000 shares are Sold in any given month, more than 100,000 S-8 Shares may be
Sold in subsequent months, so long as the foregoing aggregate maximum is not
exceeded. An escrow shall be established with Xxxx Xxxxx as Escrow Agent who
shall deliver to PRP certificate(s) representing 100,000 S-8 Shares on or after
the 15th of each month pursuant to the terms of the Escrow Agreement (with the
last certificate(s) being for 50,000 shares) beginning July 15, 2004, in order
to insure compliance by PRP with this section 4(A). PRP shall advise the Escrow
Agent as to which certificates to send over each month. For purposes of this
Section 4.A., "Sold" shall mean transfer, sell, assign, pledge, hypothecate,
give, create a security interest in or lien on, place in trust (voting trust or
otherwise), or in any other way encumber or dispose of, or, directly or
indirectly, voluntarily or involuntarily, do any of the foregoing.
B. DAILY LEAK-OUT. Beginning June 15, 2004, and ending
December 1, 2005, daily sales on the Over-the-counter Bulletin Board of S-8
Shares shall be limited to the greater of 7,500 shares or 2.5% of the day's
trading volume. The percentage of the day's trading volume shall be calculated
by dividing the number of S-8 Shares sold that day by a number which is equal to
the total reported volume for that day (as shown by a source such as Yahoo!
Finance) less the number of S-8 Shares sold that day.
C. REGISTRATION RIGHTS. The Restricted Shares shall not be
subject to any lockup or leak-out restrictions. If ATI at any time proposes to
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Form S-4 or Form S-8 or
another form not available for registering the Restricted Shares for sale to the
public), it will give written notice at such time to PRP and RP LLP of its
intention to do so (said notice to be provided by fax and US Mail to Attn:
Xxxxxxx Xxxxx, Esq., Xxxxxxxxxx & Xxxxx LLP, 00000 Xxxxxxxx Xxxx., Xxxxx 000,
Xxx Xxxxxxx, XX 00000, Fax (000) 000-0000). Thereafter, ATI will cause the
Restricted Shares to be included in the securities to be covered by the
registration statement proposed to be filed by ATI; PROVIDED that nothing herein
shall prevent ATI from abandoning or delaying such registration at any time;
PROVIDED FURTHER that ATI shall not be required to include such Restricted
Shares on any such registration statement to the extent such Restricted Shares
can then be sold pursuant to Rule 144. As a condition to including the
Restricted Shares in the securities to be covered by the registration statement
proposed to be filed by ATI, ATI may require RP LLP to furnish to ATI such
information and other material and execute such documents as is customary with
respect to public offerings and may require RP LLP to agree to substantially the
same restrictions and procedures with respect to such registration as all other
security holders that are participating in such registration. Furthermore, ATI
agrees to remain a reporting issuer under the Securities Exchange Act of 1934
until the second anniversary of the date of this Agreement, and shall fully
cooperate with any request to allow the sale of the Restricted Shares pursuant
to Rule 144 under the Securities Act to the extent such Restricted Shares are
eligible to be sold pursuant to such Rule.
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5. PRICE PROTECTION. If the closing bid price of ATI common stock is
below $0.12 on a 30 consecutive calendar day average (calculated as a simple
average of the daily closing price of ATI common stock rounded to the nearest
whole xxxxx) (the "Average Price"), then if the product obtained by multiplying
(a) the sum (the "Base Shares") of (i) the Protected Shares and (ii) any
Additional Shares previously required to be issued pursuant to this Section 5 by
(b) the Average Price is less than the product (the "Floor Amount") obtained by
multiplying (x) the Protected Shares by (y) $0.12, then additional shares of
unregistered common stock of ATI (such additional shares being referred to as
"Additional Shares"), bearing the restrictive legend set forth in Section 2(A),
will be issued to Xxxxxxxxxx & Xxxxx LLP, in an amount so that the product
obtained by multiplying (I) the sum of (x) the Base Shares and (y) the
Additional Shares to be issued by (II) the Average Price is equal to the Floor
Amount (i.e., Additional Shares = (Floor Amount / Average Price) - Base Shares).
The shares subject to the price protection will include (a) all of the
Restricted Shares and any Penalty Shares then held by RP LLP, and (b) any S-8
Shares then subject to the monthly lockup provided by Section 4(A)
(collectively, the "Protected Shares"). For example, on February 20, 2005, the
price protection will apply to 850,000 S8 shares (1,750,000 - 900,000) and any
Restricted Shares or Restricted Penalty Shares. Restricted Shares and any
Penalty Shares shall no longer be deemed to be Protected Shares upon the
availability for sale of such shares under Rule 144, PROVIDED, however, if such
Restricted Shares or Penalty Shares shall be registered pursuant to an effective
registration statement under the Securities Act which is declared effective at
any time prior to or within 75 days after the availability for sale of such
shares under Rule 144, then, assuming said registration remains effective and
available for at least 75 days thereafter, then the Protected Share status of
such shares shall lapse 75 days after notice is provided to RP LLP of the
effectiveness of such registration statement. The Additional Shares owing will
be calculated on a daily basis and reconciled no later than as of the 14th day
of each month and issued within 5 business days thereafter.
6. RELEASE BY PRP AND RP LLP. Except for the rights and obligations of
ATI and LTDN arising from this Agreement, PRP and RP LLP hereby, for themselves
and their respective officers, directors, employees, agents, partners, members,
representatives, predecessors, successors, insurers and assigns, as well as for
anyone who may claim by or through any of them or in any way on behalf of any of
them (collectively, the "Attorney Releasors"), discharge and release ATI and
LTDN and their respective past and present employees, officers, directors,
partners, shareholders, agents, executors, administrators, trustees, heirs,
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spouses, attorneys, insurers, representatives, assigns, predecessors, successors
and related entities (the "ATI/LTDN Released Parties"), from any and all claims,
damages, actions, judgments, obligations, attorneys' fees, indemnities,
subrogations, duties, demands, controversies and liabilities of every nature at
law or in equity, liquidated, or unliquidated, known or unknown, matured or
unmatured, foreseeable or unforeseeable, against the ATI/LTDN Released Parties,
which the Attorney Releasors ever had, now have or hereafter can, shall or may,
have for, upon, by reason of, or arising out of any matter whatsoever from the
beginning of the world to the date hereof, including, without limitation, any
circumstance, thing, or event alleged, related or pertaining to nonpayment of
the Debt or interference with PRP's ability to collect the Debt.
7. RELEASE BY ATI AND LTDN. Except for the rights and obligations of
PRP and RP LLP arising from this Agreement, ATI and LTDN hereby, for themselves
and their respective officers, directors, employees, agents, partners, members,
representatives, predecessors, successors, insurers and assigns, discharge and
release PRP and RP LLP, and their respective past and present employees,
officers, directors, affiliates, subsidiaries, partners, shareholders, agents,
executors, administrators, trustees, heirs, spouses, attorneys, insurers,
representatives, assigns, predecessors, successors and related entities (the
"Attorney Released Parties"), from any and all claims, damages, actions,
judgments, obligations, attorneys' fees, indemnities, subrogations, duties,
demands, controversies and liabilities of every nature at law or in equity,
liquidated, or unliquidated, known or unknown, matured or unmatured, foreseeable
or unforeseeable, which they had or have arising out of any circumstance, thing,
or event alleged, related or pertaining to legal services provided by a Attorney
Released Party, or the Debt. This release shall specifically include, but not be
limited to, any claims for legal malpractice, fraud, over-billing, alleged SEC
violations, and any interactions with Xxxxxxx Xxxx, including but not limited to
the alleged theft of shares by Xxxxxxx Xxxxx and/or Xxxxxxx Financial.
8. WAIVER OF UNKNOWN CLAIMS. It is understood and agreed that the
releases set forth hereinabove by PRP, RP LLP, ATI and LTDN extend to all claims
of every kind, nature and description whatsoever, known or unknown, suspected or
unsuspected and any and all rights under the provisions of Section 1542 of the
Civil Code of California or under any comparable statute of any other
jurisdiction. PRP, RP LLP, ATI and LTDN expressly acknowledge that they are
familiar with and expressly waive and relinquish every right or benefit they
have or may have under the provisions of Section 1542 of the Civil Code of
California which reads as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
9. RETURN OF FILES. On or prior to the date the Restricted Shares, S-8
Shares and any Penalty Shares are delivered to Xxxxxxx Xxxxx and Xxxx Xxxxx in
accordance with Sections 2(A) and (B) and Section 3, PRP shall deliver, or cause
to be delivered, to Xxx Xxxxxxxxx, all hard client files and papers of ATI and
its subsidiaries in the possession, or control, of PRP or RP LLP, including,
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without limitation, all memoranda, drafts, court filings, due diligence files,
correspondence and any other materials produced, created, received, sent or
stored on behalf of ATI or any of its subsidiaries, but not including soft
client files such as electronic documents or emails.
10. ENTIRE AGREEMENT. This Agreement contains the sole, complete and
entire agreement and understanding of the Parties concerning the matters
contained herein and may not be altered, modified, or changed in any manner
except by a writing duly executed by the Parties. No Party is relying on any
representations other than those expressly set forth herein. No conditions
precedent to the effectiveness of this Agreement exist, other than as expressly
provided for herein. There are no oral or written collateral agreements other
than the Escrow Agreement with Xxxx Xxxxx of even date herewith. All prior
discussions and negotiations have been and are merged, integrated into and
superseded by this Agreement and the Escrow Agreement.
11. WAIVER. The delay or failure of a Party to exercise any right,
power or privilege hereunder, or failure to strictly enforce any breach or
default shall not constitute a waiver with respect thereto; and no waiver of any
such right, power, privilege, breach or default on any one occasion shall
constitute a waiver thereof on subsequent occasion unless clear and express
notice thereof in writing is provided.
12. ATTORNEYS' FEES UPON BREACH. If any action at law or in equity, or
any motion, is brought to enforce this Agreement, the prevailing Party shall be
entitled to all of its costs in bringing and prosecuting said action or motion,
including reasonable attorneys' fees.
13. APPLICABLE LAW. This Agreement shall be construed according to the
laws of the State of California in effect as of the date of execution.
14. ADVICE OF COUNSEL. The Parties represent that prior to the
execution of this Agreement they had the opportunity to seek the benefit of
independent legal counsel of their own selection regarding the substance of this
Agreement.
15. COSTS. The Parties to this Agreement agree to bear their own costs
and attorneys' fees in connection with negotiating this settlement.
16. NO LIABILITY. This Agreement is executed by the Parties hereto for
the sole purpose of settling the matters involved in the dispute, and it is
expressly understood and agreed, as a condition hereof, that this Agreement
should not constitute nor be construed to be an admission of the truth or
correctness of any claim asserted.
17. WARRANTIES. The Parties, and each of them, warrant, severally and
not jointly: (i) that no other person or entity had or has or claims, any
interest in any of the claims, demands, causes of action, or damages covered in
this Agreement; (ii) that they, and each of them, have the sole right and
exclusive authority to execute and perform this Agreement; (iii) that they have
not sold, assigned, transferred, conveyed or otherwise disposed of any claim,
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demand, cause of action, obligation, damage or liability covered in this
Agreement; and (iv) that they have not filed any complaints, charges or other
actions against any other Party with any local, state or federal agency or
court, or any other forum.
18. REPRESENTATION OF AUTHORITY. Each individual executing this
Agreement on behalf of any Party expressly represents and warrants that he has
authority to execute and thereby bind the Party on behalf of which he executes
this Agreement to the terms of this Agreement and agrees to indemnify and hold
harmless each other party from any claim that such authority did not exist.
19. HEADINGS. The headings included in this Agreement are for
convenience only and do not limit, alter, or affect the matters contained in
this Agreement or the paragraphs they encaption.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which together constitute one single document.
21. TELEFACSIMILE SIGNATURES. This Agreement and any documents relating
to it may be executed and transmitted to any other Party by telefacsimile, which
telefacsimile shall be deemed to be, and utilized in all respects as, an
original, wet-inked document.
22. DATE OF EXECUTION. The Parties execute this Agreement as of the
date first above set forth.
23. FURTHER COOPERATION. The Parties agree to cooperate with one
another to accomplish the purposes of this Settlement Agreement. In the event of
a stock split, reverse stock-split, stock dividend, or other similar share
reorganization, the numbers in this Agreement shall be adjusted accordingly to
carry out the intent of the parties.
24. NO ASSIGNMENT. The Parties agree that neither this Agreement, nor
any rights or obligations created hereunder, may be assigned or transferred
without the prior written consent of the Party or Parties affected, and any
attempt to do so without such consent shall be null and void.
XXXXXX, XXXXXXXXXX & XXXXX,
A LAW CORPORATION
By: /S/ Xxxxx Xxxxxxxxxx
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Xxxxx Xxxxxxxxxx
XXXXXXXXXX & XXXXX, LLP
By: /S/ Xxxxx Xxxxxxxxxx
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Xxxxx Xxxxxxxxxx
ADVANCED TECHNOLOGY INDUSTRIES, INC.
By: /S/ Xxxx Xxxxxxxxx
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Xxxx Xxxxxxxxx, CEO
LTDNETWORK, INC.
By: /S/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx, CEO
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