SETTLEMENT AGREEMENT
Agreement entered into as of September 30, 1999 among Hemagen Diagnostics,
Inc., the following individual directors of Hemagen: Xx. Xxxx Xxxxxxxxx, Xx.
Xxxxxxx xx Xxxxxxxx, Xx. Xxxx X. Xxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxx X. Xxxxx and
Xxxx X. Xxxxxx (collectively referred to sometimes hereafter as the "Hemagen
Directors"); the following Hemagen Officers: Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxxxx
and Xxxxx Xxxxx (collectively referred to sometimes hereafter as the "Hemagen
Officers"); Xxxxxxx X. Xxxxx; Redwood Holdings, Inc. and certain of its
employees including Xxxxx X. Xxxxx, Xxxxxx X. Xxxxxxx and Xxxxxxxxxxx X. Xxxxx
(Xxxxx and the employees of Redwood Holdings, Inc. are collectively referred to
sometimes hereafter as the "Redwood Nominees").
In consideration of the mutual promises and undertakings contained below,
the parties agree as follows:
1. Recitals
1.1 Hemagen is a Delaware corporation, with its address at 00-00 Xxxx
Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000. Its shares are traded on the
Nasdaq Small Cap Market and are registered with the Securities and Exchange
Commission pursuant to Section 12(g) of the Securities Exchange Act of
1934. The Hemagen Directors are all of the duly elected members of the
Board of Directors of Hemagen and are serving as such pursuant to, inter
alia, the Order of the Court of Chancery dated September 24, 1999. Redwood
Holdings, Inc. is an Ohio corporation with its address at 0000 Xxxxxxxxxx
Xxxx, Xxxxxxxxxx, Xxxx 00000.
1.2 The Redwood Nominees solicited written consents of shareholders of
Hemagen seeking several changes to the Bylaws of Hemagen, the removal of
the Hemagen Directors and the election of the Redwood Nominees. The
solicitation commenced July 20, 1999. The Redwood Nominees delivered
affirmative unrevoked consents to Hemagen's statutory agent on September
14, September 15 and September 17, 1999 and as of September 17, 1999 had
delivered consents in quantities sufficient to represent a majority of the
outstanding shares of Hemagen.
1.3 Hemagen and the Hemagen Directors opposed the consent solicitation
of the Redwood Nominees and on July 2, 1999 adopted an amendment to the
Bylaws of Hemagen increasing the percentage of votes necessary to amend the
Bylaws from a majority of outstanding shares to two-thirds of outstanding
shares.
1.4 On September 14, 1999, the Redwood Nominees brought an action in
the Court of Chancery of the State of Delaware captioned as Xxxxx X. Xxxxx,
Plaintiff, v. Xxxx Xxxxxxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxx X. Xxxxx, Xxxx X.
Xxxxxx, Xxxx X. Xxxxx and Hemagen Diagnostics, Inc., a Delaware
corporation, Defendants, and further identified as Case Number C.A. No.
17426. In that action the Redwood Nominees contended, among other things,
that the actions of the Hemagen Board in amending its Bylaws of July 2,
1999 was inequitable and should be enjoined and sought a declaration that
all of their proposals had been duly adopted by virtue of their delivery of
written consents. Defendants answered the complaint, denied its material
allegations and asserted various affirmative defenses. Defendants also
moved to dismiss on various grounds.
1.5 The parties have agreed to settle all outstanding disputes among
them and for that purpose are entering into this Agreement which shall
become effective at the time the last party, other than Xx. xx Xxxxxxxx,
executes and delivers a copy of this Agreement. Xx. xx Xxxxxxxx may join
the Agreement by signing a copy by October 6, 1999.
2. Change in Directors
2.1 Each of the Hemagen Directors other than Xx. Xxxxx and Xx. xx
Xxxxxxxx agree to resign seriatim. Immediately after each resignation, the
remaining Board members agree to elect each of the Redwood Nominees to fill
the vacancy caused by such resignations.
3. Purchase of Shares
3.1 The following individuals ("Sellers") shall sell the numbers of
shares of Common Stock of Hemagen listed below to the individual Redwood
Nominees (the "Buyers") and such individuals hereby agree to purchase all
such shares, for cash, at $1.125 per share cash. Each Seller represents
that he/she owns the shares free and clear and that upon transfer they will
be subject to no restrictions except those which may exist under the
Securities Act of 1933 due to the fact that he/she is an affiliate of
Hemagen and the shares to be sold to the Buyers would, therefore, be
restricted shares as defined in Securities and Exchange Commission Rule
144.
Number of
Name Shares
------------------ ----------
Xxxx Xxxxxxxxx 334,510
Xxxxx Xxxxxxxxx 314,511
Xxxxxxx Xxxxxxxxx 64,390
Xxxxx Xxxxx and/or
Xxxxxx Xxxxx 64,390
The sale of shares shall be closed within one business day after
execution of this Agreement.
In addition to the foregoing, the Redwood Nominees will use their best
efforts to locate buyers for Hemagen Common Stock that other departing
Hemagen Directors and Hemagen Officers desire to sell at market prices. In
no event, however, will any such departing Hemagen Director or Hemagen
Officer be required to sell shares, and the Redwood Nominees shall not be
entitled to compensation for locating buyers for such shares.
4. Directors' and Officers' Liability Insurance
Hemagen shall maintain the current officers' and directors' coverage
amounts and limitations now contained in its officers' and directors' liability
insurance policy until September 27, 2002. Hemagen shall also maintain the
indemnification provisions (Article VII), adopted by the Hemagen Directors on
July 2, 1999 contained in Hemagen's Bylaws that apply to the Hemagen Directors
and the Hemagen Officers. The parties agree that such bylaw shall not be amended
or eliminated.
5. Employment Arrangements
5.1 Xx.Xxxx Xxxxxxxxx hereby resigns as an officer of Hemagen, and
all employment agreements between Hemagen and Xx. Xxxx Xxxxxxxxx are
terminated and of no further effect. Contemporaneously with the execution
of this Agreement, and in consideration of such resignation, Hemagen shall
enter into a new consulting contract which shall require Xx. Xxxxxxxxx to
devote no more than ten hours per week during reasonable business hours
until December 16, 1999 and up to four hours per week thereafter for the
sum of $26,500 per month from October 1, 1999 until March 31, 2000. Xx.
Xxxxxxxxx shall also enter into confidentiality and non-competition
agreements covering the period from September 29, 1999 through September
30, 2000, with such other terms and conditions as are usual and customary
to such agreements. Under no circumstances, however, shall such agreements
include any right of termination of consultant in the Company or its Board.
Hemagen shall maintain the current lease of a company car for the benefit
of Xx. Xxxxxxxxx through June 18, 2000.
5.2 Xxxxxxx Xxxxxxxxx hereby resigns as an officer of Hemagen, and all
employment agreements between Hemagen and Xxxxxxx Xxxxxxxxx are terminated
and of no further effect. Contemporaneously with the execution of this
Agreement, and in consideration of such resignation, Hemagen shall enter
into a new agreement with Xxxxxxx Xxxxxxxxx which shall require him to
devote the time set forth therein during reasonable business hours for a
sum of $10,833 per month from October 1, 1999 until the date on which
Hemagen's audit committee approves Hemagen's year-end financial statements
for fiscal 1999 and Hemagen files its Annual Report on Form 10-K for fiscal
1999, at which time Xxxxxxx Xxxxxxxxx shall resign as an employee. The
agreement will provide that after the conclusion of the employment
arrangement with Xxxxxxx Xxxxxxxxx and through Xxxxx 00, 0000 Xxxxxxx
Xxxxxxxxx will remain with Hemagen in a consulting capacity. Xxxxxxx
Xxxxxxxxx shall also enter into confidentiality and non-competition
agreements covering the period from September 29, 1999 through September
30, 2000, with such other terms and conditions as are usual and customary
to such agreements. Under no circumstances, however, shall such agreements
include any right of termination of consultant in the Company or its Board.
5.3 Xxxxx Xxxxxxxxx and Xxxxx Xxxxx hereby resign as officers of
Hemagen and all employment agreements between them and Hemagen are
terminated and of no further effect. Contemporaneously with the execution
of this Agreement, and in consideration of such resignation, Hemagen shall
employ each of them under new agreements calling for employment during
reasonable business hours until October 13, 1999, at which time they shall
each resign as employees, and thereafter enter into contracts retaining
each on a consulting basis until December 31, 1999 for the sum of $8,750
and $10,833, respectively, per month. Each of them shall enter into
confidentiality and non-competition agreements covering the period from
September 29, 1999 through September 30, 2000, with such other terms and
conditions as are usual and customary to such agreements. Under no
circumstances, however, shall such agreements include any right of
termination of consultant in the Company or its Board.
5.4 The payment obligations of Hemagen set forth above in this Section
5 are intended to be absolute obligations. All of the payments called for
shall be accelerated and all become due and payable on demand should any of
them remain unpaid for a period of five business days or more. Should the
obligations then not be paid upon demand, the employees named in Section 5
will be entitled to a further payment of 10% of the amount then due as
liquidated damages. In the event of any non-payment and upon demand,
Hemagen shall advance attorneys fees for the purpose of enforcing payment
of this obligation including all amounts accelerated and all fees incurred
in enforcing payment obligations hereunder shall be paid by the Company.
6. Mutual Releases
The parties further do hereby release and forever discharge each other and
their respective agents, representatives, employees, and any other related
entities from any and all debts, claims, demands, damages, losses, liabilities,
rights, actions, causes of actions, expenses, contracts, promises, judgments,
awards, and suits of any kind whatsoever, accrued or contingent, liquidated or
unliquidated, known or unknown, and foreseen and unforeseen (except any action
relative to the parties' performance of their obligation under this Agreement),
which they have or could have asserted against each other, which they may now
have or may hereafter have by reason of any matter, act, omission, cause or
event whatsoever which has occurred or which has been done or suffered to be
done, pertaining to Hemagen or the written consent procedure initiated by
Redwood Holdings and the Redwood Nominees prior to the date hereof. Each of the
parties hereto undertakes not to denigrate, disparage or make any negative
comment regarding any other party hereto with respect to activities involving
Hemagen.
7. Dismissal of Litigation
All existing litigation among the parties, including, but not limited to,
the above-referred to case in the Court of Chancery of the State of Delaware and
a case now pending in the Commonwealth of Massachusetts entitled Hemagen
Diagnostics, Inc. vs. Redwood Holdings, et al. and further identified as Civil
Action No. 99CV11860MEL, shall be dismissed with prejudice immediately following
execution and delivery of this Agreement.
8. Stock Options
Existing options granted by Hemagen to Xxxx Xxxxxxxxx to purchase 20,000
shares of Common Stock, to Xxxxxxx Xxxxxxxxx to purchase 30,500 shares of Common
Stock, to Xxxxx Xxxxxxxxx to purchase 40,000 shares of Common Stock and to Xxxxx
Xxxxx to purchase 41,500 shares of Common Stock as per Exhibit A will each be
extended so that, notwithstanding their current terms, they will expire on
September 27, 2002 regardless of employment status and any necessary plan
amendments are hereby made. The terms of such options will not be amended in any
other manner prior to September 27, 2002.
9. Miscellaneous
This Agreement shall be governed by the laws of the State of Delaware
(except with respect to conflicts of laws principles) and may be signed in
several counterparts, all of which may be deemed part of an original. The
addresses to which notice may be given to the parties are as set forth above for
Hemagen and Redwood Holdings, Inc. and for the other parties are as follows:
----------------------------- --------------------------------------------------
Name Address
----------------------------- --------------------------------------------------
Xx. Xxxx Xxxxxxxxx and 000 Xxxxxxxx Xxxx
Xxxxx Xxxxxxxxx Xxxxxx, Xxxxxxxxxxxxx 00000
----------------------------- --------------------------------------------------
Xx. Xxxxxxx xx Xxxxxxxx, Hemagen Diagnosticos Comercio, Importacao Ltda.
Rua Xxxxxxx Xxxxxx
185 Pinheiros - CEP 00000-000
X. Xxxxx - XX, Xxxxxx
----------------------------- --------------------------------------------------
Xx. Xxxx X. Xxxxx 00 Xxxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------- --------------------------------------------------
Xx. Xxxxxxxx Xxxxxxx California Institute of Technology
0000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Mail Code 210-85
Xxxxxxxx, XX 00000
----------------------------- --------------------------------------------------
Xx. Xxxxxxx X. Xxxxx 0000 Xxxx Xxxxxx Xxxxx, X000
Xxxx Xxxx Xxxxx, XX 00000
----------------------------- --------------------------------------------------
Xx. Xxxx X. Xxxxxx 00 Xxxx Xxxxx Xxxx
Xxxxxx, XX 00000
----------------------------- --------------------------------------------------
Xx. Xxxxxxx Xxxxxxxxx 0 Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
----------------------------- --------------------------------------------------
----------------------------- --------------------------------------------------
Mr. Xxxxx Xxxxx 0 Xxxxxxx Xxxx
Xxxxxx, XX 00000
----------------------------- --------------------------------------------------
Xx. Xxxxxxx X. Xxxxx 000 X. 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
----------------------------- --------------------------------------------------
Xx. Xxxxx X. Xxxxx c/o Redwood Holdings, Inc.
Xx. Xxxxxxxxxxx X. Xxxxx 0000 Xxxxxxxxxx Xxxx
Xx. Xxxxxx X. Xxxxxxx Xxxxxxxxxx, Xxxx 00000
----------------------------- --------------------------------------------------
10. Limitation of Remedies
The provisions of this Agreement will be the sole basis upon which any
party, or the assignee of any party may assert any claims against or seek to
impose any liability whatsoever against the Hemagen Directors or Hemagen
Officers in connection with this Agreement and the transactions contemplated
hereby, whether based on contract, tort, statute, regulation (including Rule
10b-5 of the Rules of the Securities and Exchange Commission), or otherwise.
Notwithstanding the foregoing sentence, the provisions of the Stock Purchase and
Sale Agreements executed as of the date hereof between various Sellers and
Purchasers shall continue by their terms, and provide an additional basis upon
which the Purchaser Parties may assert liability, based solely upon breach of
contract, against their respective Seller Parties; and the provisions of the
Transition Consulting Agreements between Hemagen and various of its former
employees shall also be an additional basis upon which the consultants under
such Agreements may assert liability against the Company.
IN WITNESS WHEREOF, each of the parties have executed this Agreement on the
date set forth hereafter.
HEMAGEN DIAGNOSTICS, INC.
Date: September 30, 1999 BY: /s/Xxxxx X. Xxxxx
_________________________________
Date: September 30, 1999 /s/Xxxx Xxxxxxxxx
_____________________________________
Xx. Xxxx Xxxxxxxxx
Date: September 30, 1999 /s/Xxxxxxx xx Xxxxxxxx
_____________________________________
Xx. Xxxxxxx xx Xxxxxxxx
Date: September 30, 1999 /s/Xxxx X. Xxxxx
_____________________________________
Xx. Xxxx X. Xxxxx
Date: September 30, 1999 /s/Xxxxxxxx Xxxxxxx
_____________________________________
Xxxxxxxx Xxxxxxx
Date: September 30, 1999 /s/Xxxxxxx X. Xxxxx
_____________________________________
Xxxxxxx X. Xxxxx
Date: September 30, 1999 /s/Xxxx X. Xxxxxx
_____________________________________
Xxxx X. Xxxxxx
Date: September 30, 1999 /s/Xxxxx Xxxxxxxxx
_____________________________________
Xxxxx Xxxxxxxxx
Date: September 30, 1999 /s/Xxxxxxx Xxxxxxxxx
_____________________________________
Xxxxxxx Xxxxxxxxx
Date: September 30, 1999 /s/Xxxxx Xxxxx
_____________________________________
Xxxxx Xxxxx
REDWOOD HOLDINGS, INC.
Date: September 30, 1999 BY: /s/Xxxxxx X. Xxxxxxx
__________________________________
, President
Date: September 30, 1999 /s/Xxxxxxx X. Xxxxx
_____________________________________
Xxxxxxx X. Xxxxx
Date: September 30, 1999 /s/Xxxxx X. Xxxxx
_____________________________________
Xxxxx X. Xxxxx
Date: September 30, 1999 /s/Xxxxxxxxxxx X. Xxxxx
_____________________________________
Xxxxxxxxxxx X. Xxxxx
Date: September 30, 1999 /s/Xxxxxx X. Xxxxxxx
_____________________________________
Xxxxxx X. Xxxxxxx
Sheet 1
Stock Options Extended to Xxxx Xxxxxxxxx, Xxxxx Xxxxxxxxx,
Xxxxxxx Xxxxxxxxx and Xxxxx Xxxxx
No./Shares Price/Share
---------- -----------
Xxxx Xxxxxxxxx 10,000 $2.19
10,000 $1.20
Xxxxx Xxxxxxxxx 10,000 $1.75
10,000 $2.19
10,000 $1.20
10,000 $1.20
Xxxxxxx Xxxxxxxxx 500 $2.00
10,000 $1.75
10,000 $2.19
10,000 $1.20
Xxxxx Xxxxx 1,000 $1.75
500 $2.00
10,000 $1.75
10,000 $2.19
20,000 $1.20
