SETTLEMENT AND RESCISSION AGREEMENT
This Settlement and Rescission Agreement (the "Agreement") is entered into
this 26th day of September, 2000, by and between Xxxxx Systems, Inc., a Texas
corporation ("Xxxxx"), Way Energy, Inc., a Delaware corporation ("Way"), and
Affiliated Resources Corporation, a Colorado corporation (formerly known as
Synaptix Systems Corporation)("Affiliated"). Each of Xxxxx, Way, and Affiliated
shall be referred to as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Way is a wholly-owned subsidiary of Xxxxx;
WHEREAS, the Parties are each a party to that certain Stock Purchase
Agreement dated October 30, 1998 (the "Purchase Agreement") wherein Affiliated
agreed to purchase from Way all of the common stock of ChemWay Systems, Inc., a
Texas corporation and a wholly-owned subsidiary of Way ("ChemWay");
WHEREAS, in December 1998 the Parties executed Amendment No. 1 to Stock
Purchase Agreement (the "First Amendment"), which amended certain terms of the
Purchase Agreement;
WHEREAS, the Parties executed a letter agreement dated March 11, 1999 and
entitled Waiver and Second Amendment to Stock Purchase Agreement (the "Second
Amendment"), which amended certain terms of the Purchase Agreement;
WHEREAS, the Parties executed a letter agreement dated April 26, 1999 and
entitled Waiver and Third Amendment to Stock Purchase Agreement (the "Third
Amendment" and, together with the Purchase Agreement, First Amendment, and
Second Amendment, known as the "ChemWay Purchase Documents"), which amended
certain terms of the Purchase Agreement;
WHEREAS, Xxxxx and Way claim that Affiliated has breached the terms of the
ChemWay Purchase Documents (the "Dispute"), and have filed a lawsuit against
Affiliated in the 130th Judicial District Court for the County of Matagorda,
State of Texas, Case No. 00JO443-C (the "Lawsuit");
WHEREAS, the Parties desire to resolve the Dispute between them, settle the
Lawsuit, and to unwind the transactions called for in the ChemWay Purchase
Documents (the "Rescission").
NOW, THEREFORE, for good and adequate consideration, the receipt of which
is hereby acknowledged, without admitting or denying any wrongdoing by any Party
hereto, the Parties covenant, promise and agree as follows:
AGREEMENT
1. Obligations of Affiliated. As a material term of this Agreement,
---------------------------
Affiliated agrees to the following:
A. At the Closing (as defined in Section 5 hereof), Affiliated
shall deliver to Xxxxx 65,000 shares of common stock of ChemWay (the "ChemWay
Shares"), representing 100% of the issued and outstanding stock of ChemWay. The
ChemWay Shares shall be fully paid and non-assessable and subject to no liens,
security interests, pledges, encumbrances, charges, restrictions, demands or
claims in any other party whatsoever.
B. At the Closing, Affiliated shall deliver to Xxxxx a promissory
note in the face amount of $625,000, bearing simple interest at the rate of
10.5% per annum, with the principal and interest due twelve months and one day
after the Closing (the "Note"). The Parties hereto agree that the face amount
of the Note was determined based on the agreed-upon decline in value of ChemWay
during the time that Affiliated operated ChemWay as measured, in part, by the
decrease in book value.
C. Effective on the date of this Agreement, Affiliated shall
deliver the written resignations of all the officers and directors of ChemWay;
provided, however, that immediately prior to the their resignations, the
officers and directors of ChemWay shall appoint and elect their successors as
designated by Xxxxx (the "Interim Management"), to serve at the discretion of
the shareholders of ChemWay. The Parties hereto acknowledge and agree that the
Interim Management shall have all the authority and powers of management from
the date of this Agreement until the Closing, at which time Xxxxx, as the then
sole shareholder of ChemWay, shall have the authority to elect and appoint
management of its choosing.
D. At the Closing, Affiliated shall deliver to Xxxxx satisfactory
proof of the approval of this Agreement and the transactions called for herein
by the Board of Directors of Affiliated.
E. Release. Except as set forth above, effective on the date of
the Closing, Affiliated shall release and discharge Xxxxx and Way, their
affiliates, divisions, predecessors, successors and assigns, and each and all of
their present and former agents, officers, directors, attorneys, and employees,
from and against any and all claims, agreements, contracts, covenants,
representations, obligations, losses, liabilities, demands and causes of action
which Affiliated may now or hereafter have or claim to have against Xxxxx or Way
arising out of or pertaining to the subject matter of the Dispute and the
Lawsuit. This release of claims and defenses shall not alter the prospective
duties between the parties under this Agreement.
2. Obligations of Xxxxx and Way. As a material term of this Agreement,
----------------------------
Xxxxx and Way, and each of them, agree to the following:
A. At the Closing, Xxxxx will deliver to Affiliated an aggregate
of 1,500,000 shares of Affiliated common stock (the "Affiliated Cancelled
Shares"), duly endorsed for cancellation, fully paid and non-assessable and
subject to no liens, security interests, pledges, encumbrances, charges,
restrictions, demands or claims in any other party whatsoever.
B. At the Closing, Xxxxx will deliver to Xxxxx Xxxxxxx of the
Xxxxxxx Law Firm ("Escrow Agent"), to hold as escrow agent under the terms of
this Agreement, an aggregate of 1,000,000 shares of Affiliated common stock (the
"Affiliated Escrow Shares"), duly endorsed for cancellation, fully paid and
non-assessable and subject to no liens, security interests, pledges,
encumbrances, charges, restrictions, demands or claims in any other party
whatsoever.
(i) Upon payment in full of all principal and interest due
and owing under the Note, the Escrow Agent shall deliver the Affiliated Escrow
Shares to Affiliated for cancellation, and all further obligations between the
Parties hereto, on the one hand, and the Escrow Agent, on the other hand, shall
cease.
(ii) In the event that Affiliated defaults in the payment of
the principal and interest due as set forth in the Note, then Xxxxx shall give
written notice of such default in accordance with Section 7 hereof. If such
default is not cured within seven (7) days of receipt of the notice, then the
Escrow Agent shall, upon the receipt of written instructions from Xxxxx to do
so, sell for the account of Xxxxx that number of Affiliated Escrow Shares, at
their fair market value based on the then-current bid price as published on the
Over the Counter Bulletin Board or other recognized exchange on which the
Affiliated common stock then trades, necessary to satisfy Affiliated's
obligations under the Note. In the event that Affiliated common stock does not
trade on the Over the Counter Bulletin Board, the NASDAQ Pink Sheets, or some
other recognized exchange, then the Escrow Agent shall obtain the fair market
value for the Affiliated Escrow Shares to the best of his reasonable ability.
After first applying the proceeds of the sale to the payment of reasonable
expenses of sale, the Escrow Agent shall then apply the proceeds to the unpaid
amounts due and owing under the Note, and thereafter shall deliver any surplus
and any of the Affiliated Escrow Shares not sold to Affiliated. In the event
that the net proceeds from the sale of the Affiliated Escrow Shares is not
sufficient to satisfy Affiliated's obligations under the Note, then Affiliated
shall be liable to Xxxxx for the unpaid balance.
C. The Parties acknowledge the existence of an agency contract by
and between Affiliated and RTB Ventures (the "Kroger Contract") which, when
executed, will be assigned to ChemWay. For a period of three (3) years from the
Closing, Xxxxx shall pay to Affiliated a royalty equal to three percent (3%) of
the gross sales recorded by Xxxxx and/or Way as a result of the Kroger Contract,
accrued on a cash basis as of the last day of each calendar quarter. The
amounts due to Affiliated under this Section 2C may be offset against any
amounts due and owing by Affiliated under the Note, if any.
D. Beginning reasonably upon execution of this Agreement, Xxxxx
and Way, and each of them, agree to designate at least one officer and director
of ChemWay, and to reasonably fulfill the obligations of ChemWay with respect to
certain creditors and claimants, including but not limited to Xxxxxx Oil Co.,
Old World Automotive Products, Inc., Mine Safety Applicance Co., and Xxxx
Industries.
X. Xxxxx and Way, and each of them, hereby agree to indemnify,
defend, and hold harmless Xxxxx Xxxxxxx from any liability whatsoever inuring to
him with respect to the that certain loan known generally as the Cottonwood
Warehouse Loan and, specifically including, without limitation, Vanucci's
guarantee of the Xxxxxxxxx & Xxxxx loan. In addition, Xxxxx and Way, and each
of them, hereby agree to indemnify, defend, and hold harmless Affiliated from
any liability, obligation, or payable of ChemWay which was disclosed on Exhibits
A and B attached hereto, specifically including but not limited to the IICI
Note.
F. At the Closing, Xxxxx and Way shall deliver to Affiliated
satisfactory proof of the approval of this Agreement and the transactions called
for herein by the Board of Directors of Xxxxx and Way.
G. Release. Except as set forth above, effective on the date of
the Closing, Xxxxx and Way, and each of them, shall release and discharge
Affiliated, their affiliates, divisions, predecessors, successors and assigns,
and each and all of their present and former agents, officers, directors,
attorneys, and employees, from and against any and all claims, agreements,
contracts, covenants, representations, obligations, losses, liabilities, demands
and causes of action which Xxxxx or Way may now or hereafter have or claim to
have against Affiliated arising out of or pertaining to the subject matter of
the Dispute and the Lawsuit. This release of claims and defenses shall not
alter the prospective duties between the parties under this Agreement.
3. Representations and Warranties of Affiliated. In order to induce
-----------------------------------------------
Xxxxx and Way to enter into this Agreement, Affiliated warrants and represents:
A. Affiliated is a business duly organized and existing under the
laws of the State of Colorado, with full authority to enter into this Agreement
and the transactions called for herein.
B. Attached hereto as Exhibit A is a schedule of all lawsuits or
claims, leases, employment contracts, merchandise commitments, informal
arrangements, and other executory obligations of ChemWay as of the date of this
Agreement. Any changes to Exhibit A will be provided as of the date of Closing.
Affiliated agrees that it will not cause ChemWay to incur any additional
obligations between the date of this Agreement and the Closing.
C. Within five (5) business days of the execution of this
Agreement, Affiliated shall deliver to Xxxxx the minute book of ChemWay,
warranted herein to be accurate and to fully reflect all meetings, actions,
proceedings, and bylaws as of the date of its delivery.
D. Affiliated is a fully-reporting issuer under the Securities
Exchange Act of 1934 and is current in all of its filings obligations
thereunder.
E. Affiliated is the sole owner of the ChemWay Shares, which
represent all of the issued and outstanding shares of ChemWay as of the date of
this Agreement. The ChemWay Shares are fully paid and non-assessable, and
Affiliated has the right to sell the shares free of all encumbrances. Xxxxx
shall receive good and marketable title to the ChemWay Shares. Affiliated shall
deliver an opinion of its legal counsel with respect to these matters.
F. Between the date of this Agreement and the Closing,
Affiliated will not modify or reduce ChemWay's authorized shares, will not
consolidate or merge ChemWay with any other business, will not distribute any of
ChemWay's assets or pay or declare any dividends, in cash or in property, on any
of ChemWay's shares, will not redeem any ChemWay's outstanding shares, and will
not sell, mortgage, encumber, or dispose of any of ChemWay's property.
G. Attached hereto as Exhibit B is an unaudited balance sheet of
ChemWay as of August 31, 2000, which has been prepared by Affiliated's
management in accordance with generally accepted accounting principles.
4. Representations and Warranties of Xxxxx and Way. In order to induce
-----------------------------------------------
Affiliated to enter into this Agreement, Xxxxx and Way, and each of them,
warrants and represents:
X. Xxxxx is a business duly organized and existing under the laws
of the State of Texas, with full authority to enter into this Agreement and the
transactions called for herein.
B. Way is a business duly organized and existing under the laws of
the State of Delaware, with full authority to enter into this Agreement and the
transactions called for herein.
X. Xxxxx is a fully-reporting issuer under the Securities Exchange
Act of 1934 and is current in all of its filings obligations thereunder.
X. Xxxxx is the sole owner of the Affiliated Cancelled Shares and
the Affiliated Escrow Shares, which are fully paid and non-assessable, and Xxxxx
has the right to sell the shares free of all encumbrances. Affiliated shall
receive good and marketable title to the Affiliated Cancelled Shares and the
Affiliated Escrow Shares. Xxxxx shall deliver an opinion of its legal counsel
with respect to these matters.
5. Closing.
-------
A. The Closing shall occur (i) on the first business day
immediately following the day that Affiliated closes its acquisition of Modular
Processing Technologies, Inc., a Nevada corporation, or (ii) upon obtaining
shareholder approval for the transactions called for herein. In the event that
neither (i) nor (ii) identified above occur on or before November 26, 2000, then
except as set forth in Section 11 hereof this Agreement and the transactions
contemplated hereby shall automatically terminate (the "Automatic Termination").
B. In the event of an Automatic Termination, Affiliated agrees to
recognize and acknowledge the existence of Way's Put (as that term is defined in
the ChemWay Purchase Documents and specifically the First Amendment). In
addition, Affiliated agrees to execute, simultaneously with the execution of
this Agreement, a Stipulated Judgment (the "Judgment") and Deed In Lieu of
Foreclosure (the "Deed") in an amount equal to the amount Xxxxx and/or Way is
entitled to receive under the Put, and which provides for automatic deed in lieu
of foreclosure of the ChemWay assets which are identified as security for the
Put, which Judgment and Deed shall be held in escrow by the Escrow Agent. The
Parties hereto agree that the Judgment and Deed may be abstracted or entered
only in the event that events (i) and (ii), described above, do not occur by
November 26, 2000. The Parties further agree that if the Judgment and Deed are
entered, and the ChemWay assets are deeded, then Xxxxx and Way shall consider
the receipt of the ChemWay assets as full satisfaction for all obligations of
Affiliated under the ChemWay Purchase Agreements, and Xxxxx and Way further
agree to return to Affiliated the Affiliated Cancelled Shares and the Affiliated
Escrow Shares for cancellation. If, however, either of events (i) or (ii) occur
on or before November 26, 2000, then the Judgment and Deed will be released and
neither abstracted, entered, nor recorded.
6. Confidentiality. Each Party hereto will hold and will cause its
----------------
agents, officers, directors, attorneys, employees, consultants and advisors to
hold in strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law, all documents and information concerning any other Party furnished it by
such other Party or its representatives in connection with the subject matter of
the Dispute and the Lawsuit (except to the extent that such information can be
shown to have been (i) previously known by the Party to which it was furnished,
(ii) in the public domain through no fault of such Party, or (iii) later
lawfully acquired from other sources by the Party to which it was furnished),
and each Party will not release or disclose such information to any other
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with this Agreement. Each Party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other Party if it exercises the same care as it
takes to preserve confidentiality for its own similar information.
7. Notices. Any notice, request, instruction or other document
-------
required by the terms of this Agreement, or deemed by any of the parties hereto
to be desirable, to be given to any other party hereto shall be in writing and
shall be given by prepaid telegram or delivered or mailed by registered or
certified mail, postage prepaid, with return receipt requested, to the following
addresses:
To Affiliated:
Affiliated Resources Corporation
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: President or CEO
Facsimile (000) 000-0000
with a copy to:
Xxxxxx Law Group
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Facsimile (000) 000-0000
with an additional copy to:
Short & Ketchand, LLP
Summit Tower, Suite 1520
00 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Facsimile (000) 000-0000
To Xxxxx and Way:
Xxxxx Systems, Inc.
______________________
______________________
Attn: X.X. Xxxxx
Facsimile (____) ________
with a copy to:
Xxxxxxx Law Firm
0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, Esq.
Facsimile (000) 000-0000
The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid. If notice is given by hand delivery in
accordance with the provisions of this Section, said notice shall be
conclusively deemed given at the time of such delivery. If notice is given by
mail in accordance with the provisions of this Section, such notice shall be
conclusively deemed given forty-eight (48) hours after deposit thereof in the
United States mail. If notice is given by telegraph in accordance with the
provisions of this Section, such notice shall be conclusively deemed given at
the time that the telegraphic agency shall confirm delivery thereof to the
addressee.
8. No Representations. Each Party acknowledges and represents that, in
------------------
executing this Agreement, such Party has not relied on any inducements,
promises, or representations made by any Party or any party representing or
serving such Party, unless expressly set forth herein.
9. Disputed Claim. This Agreement pertains to a disputed claim and
---------------
does not constitute an admission of liability by any Party for any purpose,
except as otherwise provided herein.
10. Covenant Re: Assignment. The Parties hereto, and each of them,
-------------------------
represent and warrant to each other that each is the sole and lawful owner of
all right, title and interest in and to every claim and other matter which each
purports to release herein, and that they have not heretofore assigned or
transferred, or purported to assign or transfer, to any person, firm,
association, corporation or other entity, any right, title or interest in any
such claim or other matter. In the event that such representation is false,
and any such claim or matter is asserted against any Party hereto (and/or the
successor of such Party) by any Party or entity who is the assignee or
transferee of such claim or matter shall fully indemnify, defend and hold
harmless the Party against who such claim or matter is asserted (and its
successors) from and against such claim or matter and from all actual costs,
fees, expenses, liabilities, and damages which that Party (and/or its
successors) incurs as a result of the assertion of such claim or matter.
11. Survival of Warranties. The representations and warranties, as
------------------------
well as the provisions of Section 5, contained in this Agreement are deemed to
and do survive the execution hereof.
12. Modifications. This Agreement may not be amended, canceled,
-------------
revoked or otherwise modified except by written agreement subscribed by all of
the Parties to be charged with such modification.
13. Agreement Binding on Successors. This Agreement shall be binding
---------------------------------
upon and shall inure to the benefit of the Parties hereto and their respective
partners, employees, agents, servants, heirs, administrators, executors,
successors, representatives and assigns.
14. Attorney's Fees. All Parties hereto agree to pay their own costs
----------------
and attorneys' fees except as follows:
(a) In the event of any action, suit or other proceeding
instituted to remedy, prevent or obtain relief from a breach of this Agreement,
arising out of a breach of this Agreement, involving claims within the scope of
the releases contained in this Agreement, or pertaining to a declaration of
rights under this Agreement, the prevailing Party shall recover all of such
Party's attorneys' fees and costs incurred in each and every such action, suit
or other proceeding, including any and all appeals or petitions therefrom.
(b) As used herein, attorneys' fees shall be deemed to mean the
full and actual costs of any legal services actually performed in connection
with the matters involved, calculated on the basis of the usual fee charged by
the attorneys performing such services.
15. Choice of Law; Venue. This Agreement and the rights of the parties
--------------------
hereunder shall be governed by and construed in accordance with the laws of the
State of Texas including all matters of construction, validity, performance, and
enforcement and without giving effect to the principles of conflict of laws.
16. Terms and Conditions. The Parties agree and stipulate that each
--------------------
and every term and condition contained in this Agreement is material, and that
each and every term and condition may be reasonably accomplished within the time
limitations, and in the manner set forth in this Agreement.
17. Time is of the Essence. The Parties agree and stipulate that time
------------------------
is of the essence with respect to compliance with each and every item set forth
in this Agreement.
18. Entire Agreement. This Agreement, along with the Note and any
------------------
exhibits attached hereto, sets forth the entire agreement and understanding of
the Parties hereto and supersedes any and all prior agreements, arrangements and
understandings related to the subject matter hereof. No understanding, promise,
inducement, statement of intention, representation, warranty, covenant or
condition, written or oral, express or implied, whether by statute or otherwise,
has been made by any party hereto which is not embodied in this Agreement or the
written statements, certificates, or other documents delivered pursuant hereto
or in connection with the transactions contemplated hereby, and no Party hereto
shall be bound by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so set forth.
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which when executed and delivered shall be an original,
and all of which when executed shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto, agreeing to be bound hereby,
execute this Agreement upon the date first set forth above.
"Xxxxx" "Way"
Xxxxx Systems, Inc., Way Energy, Inc.,
a Texas corporation A Delaware corporation
/s/ X.X. Xxxxx /s/ X.X. Xxxxx
________________________________ ________________________________
By: X.X. Xxxxx By: X.X. Xxxxx
Its: CEO Its: CEO
"Affiliated"
Affiliated Resources Corporation,
a Colorado corporation
/s/ Xxxxx Xxxxxxx
_________________________________
By: Xxxxx Xxxxxxx
Its: Chairman and CEO
