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EXHIBIT 10.17
SETTLEMENT AGREEMENT AND GENERAL RELEASE
In consideration of (i) the sum of $25,000.00 full and complete receipt
of which is hereby acknowledged, and (ii) the execution and delivery by
Recovery Network, Inc. of a Warrant Agreement in the form attached hereto as
Exhibit "A", the receipt of which is hereby acknowledged, XXXXXXX XXXXXX
("Releasor") hereby releases and discharges RECOVERYNET INTERACTIVE, LLC
("RNI") and RNI's members, directors, officers, employees, attorneys,
designees, successors and assigns (collectively, "Releasees") from any and all
claims, demands and causes of action of whatever kind or nature, whether known
or unknown, or suspected or unsuspected by Releasor which Releasor ever had,
now has, or hereafter may have, against Releases arising out of or connected
with that certain Shadow Equity Agreement dated May 14, 1998 between Releasor
and RNI ("Shadow Equity Agreement").
It is the intention of Releasor in executing this Release, that this
Release shall be effective as a bar to each and every claim, demand or cause of
action described above to be so barred. In furtherance of this intention,
Releasor hereby expressly waives any and all rights and benefits conferred upon
her by the provisions of Section 1542 of the California Civil Code, which are 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
to him must have materially affected his settlement with
the debtor."
Releasor hereby acknowledges the foregoing waiver of the provisions of Section
1542 of the California Civil Code was separately bargained for.
Nothing herein is intended to, nor shall it be deemed to, cancel or change
in any way any party's obligations under (i) that certain Settlement Agreement
and Release dated May 14, 1998 between Releasor and RNI ("First 1998 Settlement
Agreement") other than those relating to the Shadow Equity Agreement, or (ii)
that certain Non-Qualified Stock Option Agreement dated March 21, 1996 between
Releasor and Recovery Network, Inc. The Shadow Equity Agreement is, by virtue
of this Settlement Agreement and Release, terminated and of no force or effect,
ab initio. Releasor acknowledges and agrees that all sums due to Releasor under
the First Settlement Agreement to the date of this Release have been paid in
full.
This Release may be executed in two or more counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument. This Release shall be binding upon and inure to the benefit of
Releasor, Releasees, and their respective heirs, representatives, successors
and assigns. This Release shall be governed by the law of the State of
California without regard to California's conflicts of law principles.
This Release shall be effective immediately upon the receipt by Releasor
of the payment set forth at the beginning of this Release.
IN WITNESS WHEREOF, Releasor has executed this General Release this ____
day of February, 1999.
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Name: Xxxxxxx Xxxxxx
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAW.
THE RECOVERY NETWORK, INC.
COMMON STOCK PURCHASE WARRANT
1. Issuance. For good and valuable consideration, the receipt of which
is hereby acknowledged by the RECOVERY NETWORK, INC., a Colorado corporation
(the "Company"), XXXXXXX XXXXXX ("Xxxxxx") is hereby granted the right to
purchase at any time commencing two (2) days following the date hereof and
until 5:00 P.M., New York City time, on May 15, 2003 (the "Expiration Date"),
Thirty Five Thousand (35,000) duly issued, fully-paid and nonassessable shares
of the Company's Common Stock, par value $.01 per share (the "Common Stock"),
free of all taxes, liens and other encumbrances (other than whatever
encumbrances encumber the publicly traded shares of Common Stock, if any), and
without issuance tax. The exercise price for such shares shall be $2.125
("Exercise Price"). The shares of the Company's Common Stock which are the
subject of this Warrant are hereinafter referred to as "the Shares". The
Company shall register the Shares (at the Company's cost) and shall use its
best efforts to register the Shares within ninety (90) days following the
issuance of this Warrant. Upon such registration, the Shares shall be
publicly-tradeable by the holder of this Warrant on the exchange where the
Common Stock of the Company is normally traded. Lennon shall be deemed a record
holder of the Shares as to which he exercises his right hereunder as of the
date he exercises such rights and pays for the Shares.
2. Exercise of Warrant. This Warrant is exercisable, in a maximum of
three exercises only, as to any or all of the Shares at the Exercise Price per
Share payable hereunder, payable only in cash or by certified or official bank
check or such other form of payment as may be acceptable to the Company, in its
sole discretion. Upon surrender of this Warrant Certificate with the annexed
Notice of Exercise Form duly executed, together with payment of the Exercise
Price for the Shares of Common Stock purchased, Lennon shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased.
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3. Reservation of Shares. The Company hereby agrees that at all times
during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant. The Company shall use its
best efforts and all due diligence to increase the number of shares of Common
Stock so reserved to cure any deficiencies, and, if necessary, to obtain
approval of its stockholders therefor, including authorization of such
additional number of shares of Common Stock as may be required in excess of the
number so reserved.
4. Mutilation or Loss of Warrant. Upon receipt by the Company of a
sworn affidavit of Lennon of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) receipt of reasonably
satisfactory indemnification, and (in the case of mutilation) upon surrender
and cancellation of this Warrant the Company, at the Company's expense, will
execute and deliver a new Warrant of like tenor and date and any such lost,
stolen, destroyed or mutilated Warrant shall thereupon become void.
5. Rights of Lennon. Lennon shall not, by virtue hereof, be entitled to
any rights of a stockholder in the Company, either at law or equity, and the
rights of Lennon are limited to those expressed in this Warrant and are not
enforceable against the Company except to the extent set forth herein.
6. Adjustments of Exercise Price and Number of Shares.
6.1 Adjustment Mechanism. If an adjustment of the Exercise Price is
required pursuant to this Section 6, Lennon shall be entitled to purchase such
number of shares of Common Stock as will cause (i) the total number of shares
of Common Stock Lennon is entitled to purchase pursuant to this Warrant (after
such adjustment) multiplied by the adjusted Exercise Price to equal (ii) the
total number of shares of Common Stock Lennon was entitled to purchase before
such adjustment multiplied by the Exercise Price before the adjustment.
6.2 Capital Adjustments. In case of any stock split or combination,
stock dividend, reclassification of the Common Stock, recapitalization, or like
capital adjustment affecting the Common Stock of the Company, the Exercise
Price shall be proportionately adjusted in a fair, equitable and reasonable
manner so as to give effect, as nearly as reasonably practicable to the
purposes hereof.
6.3 Merger, Sale of Assets, Etc. If at any time while this Warrant,
or any portion hereof, is outstanding and unexpired there shall be (i) a
reorganization (other than a stock split or combination, stock dividend,
reclassification, or like capital adjustment of shares otherwise provided for
herein), (ii) a merger or consolidation of the Company with or into another
corporation or other entity including a merger or consolidation in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are
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converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, or (iii) a sale or transfer of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then as a part of such reorganization, merger, consolidation, sale or transfer
lawful provision shall be made so that the holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and payment of the Exercise Price then in effect, the
number of shares of stock or other securities or property resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 6. The foregoing provisions of this Section 6 shall similarly
apply to successive reorganization, consolidations, mergers, sales and transfers
and to the stock or securities of any other corporation or other entity that are
at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable for shares in connection with any such transactions is in
a form other than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith
by the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant with respect to the rights and interests of Lennon
after the transaction, to the end that the provisions of this Warrant shall be
applicable after that event, as near as reasonably practicable, in relation to
any shares or other property deliverable after that event upon exercise of this
Warrant.
6.4 Merger with End of Company's Existence. In case of any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another entity (including any exchange effectuated
in connection with a merger of any other corporation with the Company other than
a merger in which the Company is the continuing corporation) Lennon shall have
the right thereafter to exercise such Warrant for the kind and amount of
securities, cash or other property which he would have owned or have been
entitled to receive immediately after such consolidation, merger, statutory
exchange, sale or conveyance had this Warrant been exercised immediately prior
to the effective date of such consolidation, merger, statutory exchange, sale or
conveyance and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 6 with
respect to the rights and interests thereafter of Lennon to the end that the
provisions set forth in this Section 6 shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares of stock
or other securities or property thereafter deliverable on the exercise of this
Warrant. The above provisions of this Subsection 6.4 shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or conveyances of
property as an entirety or substantially as an entirety. Notice or any
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such consolidation, merger, statutory exchange, sale or conveyance, and of said
provisions so proposed to be made, shall be mailed to Lennon not less than 20
days prior to such event. A sale of all or substantially all of the assets of
the Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
6.5 DeMinimus Adjustment. No adjustment in the Exercise Price shall
be required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock, provided, however, that any adjustments
which by reason of this Subsection 6.5 are not required to be made shall be
carried forward and taken into account in any subsequent adjustments and
provided further, however, that adjustments shall be required and made in
accordance with the provisions of this Section 6 (other than this Subsection
6.5) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to Lennon of Common Stock. All calculations
under this Section 6 shall be made to the nearest cent or the nearest 1/100th of
a share, as the case may be. Anything in this Section 6 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
per share Exercise Price, in addition to those required by this Section 6, as it
in its discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.
6.6 Notice. Whenever the Exercise Price is adjusted as provided in
this Section 6 and upon any modification of the rights of Lennon in accordance
with this Section 6, the Company shall, at its own expense, within ten (10) days
of such adjustment or modification, deliver to the holder of this Warrant a
certificate of the Principal Financial Officer of the Company setting forth the
unaudited Exercise Price and the number of Warrant Shares after such adjustment
or the effect of such modification, a brief statement of the facts requiring
such adjustment or modification and the manner of computing the same. If the
Board of Directors of the Company shall declare any dividend or other
distribution in cash with respect to the Common Stock, other than out of earned
surplus, the Company shall mail notice thereof of Lennon not less than 10 days
prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution.
6.7 Payment Deferment. In the event of the exercise of all or part
of this Warrant after the record date for any event described in Subsection 6.2
or 6.3 but prior to the effective date therefor, the Company may defer until the
effective or payment date issuing (and, in case of any stock combination or
reclassification that would result in Lennon being entitled to fewer shares of
Common Stock, the Company need not issue) to Lennon any shares or property in
addition to (or in excess of) that which Lennon would be entitled to own prior
to such payment or effective date had Lennon exercised this Warrant (or portion
thereof exercised) immediately prior to such record date.
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6.8 Form of Consideration. If the consideration received or to be
received by the Company with respect to any Common Stock, rights, options,
warrants or securities convertible into Common Stock (including any future
consideration which may be received): (i) is cash, the amount thereof shall be
the amount of cash to be received and/or (ii) is a consideration other than
cash, the amount of such other consideration shall be deemed to be the fair
market value of such consideration as determined by the Board of Directors of
the Company, in the case of (i) and/or (ii) without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or concessions paid
or allowed by the Company.
7. Transfer to Comply with the Securities Act. This Warrant has not been
registered under the Securities Act and has been issued to Lennon for investment
purposes and not with a view to the distribution of either the Warrant or the
Shares. Neither this Warrant nor any of the Shares or any other security issued
or issuable upon exercise of this Warrant may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under the
Securities Act relating to such security or an opinion of counsel reasonably
satisfactory to the Company that registration is not required under the
Securities Act. Each certificate for the Warrant, the Shares and any other
security issued or issuable upon exercise of this Warrant shall contain a legend
on the fact thereof, in form and substance satisfactory to counsel for the
Company, setting forth the restrictions on transfer contained in this Section.
8. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon confirmed delivery by a standard
overnight carrier or when delivered by hand, addressed at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Company, to:
The Recovery Network, Inc.
0000 0xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx
With a copy to:
Xxxxxxx Xxxxxx, Esq.
Greenberg, Glusker, Fields, Claman & Machtinger, LLP
1900 Avenue of the Stars
Xxx Xxxxxxx, Xxxxxxxxxx 00000
(b) if to Lennon, to:
Xxxxxxx Xxxxxx
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00000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxx, Esq.
Fitelson, Xxxxx & Xxxxx
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
7. Supplements and Amendments: Whole Agreement. This Warrant may be
amended or supplemented only by an instrument in writing signed by the Company
and Lennon. This Warrant contains the full understanding of the parties hereto
with respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understanding of the parties hereto
with respect to the subject matter hereof and thereof and there are no
representations, warranties, agreements or understandings other than expressly
contained herein and therein.
8. Governing Law. This Warrant shall be governed by, and construed
in accordance with, the laws of the State of Colorado without regard to
principles of conflicts or choice of law (or any other law that would make any
substantive laws of any state other than the State of Colorado applicable
hereto).
9. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, THE RECOVERY NETWORK, INC. has caused this
Warrant to be signed by its President and its corporate seal to be hereunto
affixed and attested by its Secretary as of the ____ day of January, 1999.
THE RECOVERY NETWORK, INC.
By: /s/ XXXX XXXXXXXX
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Name: Xxxx Xxxxxxxx
Title: President & Chief Executive Officer
Attest: /s/ [SIGNATURE]
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