SETTLEMENT AGREEMENT AND RELEASE
Exhibit
10.1 Alpha,
et al 3(a)(10) Settlement
This
Settlement Agreement and Release (the “Agreement”) is dated as of September 15,
2006 and is made by and between Alpha Capital Aktiengesellschaft (“Alpha”),
Bristol Investment Fund, Ltd. (“Bristol”), Whalehaven Capital Fund Limited
(“Whalehaven”), Xxxxx International, Ltd. (“Xxxxx”), Platinum Long Term Growth
II, Inc. (“Platinum”), Chestnut Ridge Partners, LP (“Chestnut”), Grushko &
Xxxxxxx, P.C. (“G&M”), CMS Capital (“CMS”), DKR Soundshore Oasis Holding
Fund, Ltd. (“DKR”) and Osher Capital, Inc. (“Osher”) (collectively, the
“Plaintiffs” and/or “Investors”) and VoIP, Inc. ("VoIP").
BACKGROUND
WHEREAS,
on
January 6, 2006, and in a subsequent amendment adding additional subscribers
dated January 11, 2006, Alpha, Bristol, Whalehaven, Platinum, CMS, DKR, G&M,
Xxxxx, and Chestnut, on one hand, and VoIP, on the other, entered into a
Subscription Agreement wherein Alpha, Bristol, Whalehaven, Platinum, CMS, DKR,
G&M, Xxxxx, and Chestnut paid VoIP the collective amount of $4,685,000 for
discounted convertible promissory notes in the total face amount of $5,331,212,
in which Alpha purchased $910,346 in notes; Bristol purchased $910,346 in notes;
Whalehaven purchased $1,137,932 in notes; Platinum purchased $284,483 in notes;
CMS purchased $113,793 in notes; DKR purchased $568,966 in notes; G&M
purchased $39,828 in notes; Xxxxx purchased $1,081,065 in notes; and Chestnut
purchased $284,483 in notes (the “First Note”);
WHEREAS,
on
February 2, 2006, Alpha, Bristol, Platinum, CMS, DKR, Osher, G&M, and Xxxxx,
on one hand, and VoIP, on the other, entered into a Subscription Agreement
wherein Alpha, Bristol, Platinum, CMS, DKR, Osher, G&M, and Xxxxx paid VoIP
the collective amount of $2,625,000 for discounted convertible promissory notes
in the total face amount of $2,987,072, in which Alpha purchased $227,586 in
notes; Bristol purchased $910,346 in notes; Platinum purchased $284,483 in
notes; CMS purchased $56,897 in notes; DKR purchased $568,966 in notes; Osher
purchased $85,345 in notes; G&M purchased $56,897 in notes; and Xxxxx
purchased $796,552 in notes (the “Second Note”) (the First Note and Second Note
are collectively the “NOTES”);
WHEREAS,
on May
22, 2006, the Investors and VoIP entered into a Modification and Amendment
Agreement wherein the parties thereof restructured the terms of the Subscription
Agreements between the parties dated January 6, 2006 and February 2, 2006 (the
“Subscription Agreements”) relating to the Investors’ purchase of the NOTES (the
Subscription Agreements and the documents and agreements delivered therewith,
together with the aforementioned Modification and Amendment Agreement are
collectively the “Transaction Documents”);
WHEREAS,
on or
about September 15, 2006, Plaintiffs filed an action against VoIP entitled
Alpha
Capital Aktiengesellschaft, Bristol Investment Fund, Ltd., Whalehaven Capital
Fund Limited, Xxxxx International, Ltd., Platinum Long Term Growth II, Inc.,
Chestnut Ridge Partners, LP, Grushko & Xxxxxxx, P.C., CMS Capital, DKR
Soundshore Oasis Holding Fund, Ltd., and Osher Capital, Inc. v. VoIP,
Inc.,
Case
No.: 2006 CA ______NC, (the “Action”) in the Circuit Court of the Twelfth
Judicial Circuit, Sarasota County, Florida (the “Court”), whereby Plaintiffs
asserted claims against VoIP alleging that VoIP was in breach of the NOTES
and
sought compensatory damages in the face amount of notes, $8,318,284, together
with interest due under the NOTES in the amount of $207,957.09, liquidated
damages provided in the NOTES in the amount of $374,322.77, for a total amount
of $9,781,719 (collectively the NOTES Claims”), claims asserted by Alpha in
connection with its exercise of 958,332 warrants to purchase VoIP’s common
stock, claims asserted by Whalehaven in connection with its exercise of 958,332
warrants to purchase VoIP’s common stock, claims asserted by Bristol in
connection with its exercise of 958,332 warrants to purchase VoIP’s common
stock, and claims asserted by Xxxxx in connection with its exercise of 359,396
warrants to purchase VoIP’s common stock (the exercise of warrants by Alpha,
Whalehaven, Bristol, and Xxxxx are hereinafter referred to as the “Warrant
Claims”) (the NOTES Claims and Warrant Claims are collectively, the “Claims” or
“Compromised Amount”);
WHEREAS,
VoIP,
in its Answer, denied any and all wrongdoing and asserted affirmative
defenses;
WHEREAS,
VoIP
denies that it is liable for the amount sought in the Action, but acknowledges
that it does not have sufficient cash to satisfy the claims made in the Action
or to defend the Action, and VoIP seeks to resolve this Action with
Plaintiffs;
WHEREAS,
VoIP
currently only has the means to satisfy payment of the Investors’ bona fide
claims through the issuance of authorized shares to Plaintiffs, pursuant to
Section 3(a)(10) of the Securities Act of 1933 (hereinafter the “Act”) in
exchange for a portion of Plaintiff’s Claims and by agreeing to restructuring
the terms of the Plaintiffs’ investments in VoIP.
WHEREAS,
VoIP
and Plaintiffs desire to resolve, settle, and compromise the Investor’s bona
fide claims that they have asserted against VoIP, which arise out of or relate
to the NOTES - claims which total $9,781,719 that is due and owing to Plaintiffs
(hereinafter the “Compromised Amount”);
With
this
background incorporated herein, the parties hereby agree to the following
settlement:
1
TERMS
OF SETTLEMENT
1. CLAIMS.
The
Investors agrees to resolve their bona fide claims with VoIP for the Compromised
Amount as follows:
| a. |
The
Parties agree that the amount due an owing under the NOTES shall
be reset
to the principal amount due under the NOTES in the amount of $8,318,284,
together with interest due under the NOTES in the amount of $207,957.09,
and liquidated damages provided in the NOTES in the amount of $374,322.77,
for a total amount of $9,781,719, as set forth for the Investors
in Annex
A hereto.
|
| b. |
As
soon as practicable following entry of an order by the Court in accordance
with Paragraph 3 herein, Plaintiffs agree to surrender $4,940,000
of the
NOTES Claims, on a pro rata basis, to VoIP in exchange for 19,000,000
shares of VoIP’s common stock, par value $0.001 per share, through the
issuance of freely trading securities issued pursuant to Section
3(a)(10)
of the Act (the “Debt Shares”) as set forth in Annex A hereto. The
effective conversion rate for the debt exchanged to resolve this
partial
claim is $0.26 per share.
|
| c. |
As
soon as practicable following entry of an order by the Court in accordance
with Paragraph 3 herein, Alpha, Whalehaven, Xxxxx, and Bristol agree
to
surrender their Warrant Claims to VoIP in exchange for 2,500,000
shares of
VoIP’s common stock, par value $0.001 per share, through the issuance
of
freely trading securities issued pursuant to Section 3(a)(10) of
the Act
(the “Warrant Shares”) (the Debt Shares and Warrant Shares are
collectively, the “Settlement
Shares”).
|
| d. |
Plaintiffs
agree to retain the balance of their claims of their NOTES Claims,
on a
pro rata basis, as set forth in Annex A hereto, and VoIP agrees to
reset
the conversion rate for the remaining balance under the NOTES to
$0.26 per
share (the “Retained Notes”), which shall retain all rights
|
| e. |
VoIP
agrees to reduce the exercise price of the un-exercised warrants
purchased
by Plaintiffs in connection with the NOTES to
$0.475.
|
| f. |
VoIP
agrees to amend its Certificate of Incorporation and take all steps
necessary, including obtaining shareholder approval, to authorize
at least
an additional 18,621,997 shares of common stock, as well as sufficient
shares to cover the un-exercised warrants issued to the Investors
under
the Transaction Documents and hold such shares in reserve for Plaintiffs’
benefit in connection with the balance of the Retained Notes retained
by
Plaintiffs herein on or before November 30, 2006. Further, if at
any time
after the date hereof the VoIP shall determine to file with the Securities
and Exchange Commission (the "SEC") a registration statement relating
to
an offering for its own account or the account of others under the
Securities Act of 1933, as amended, of any of its equity securities
(other
than on Form S-4 or Form S-8 or their then equivalents relating to
equity
securities to be issued solely in connection with any acquisition
of any
entity or business or equity securities issuable in connection with
stock
option or other bona fide, employee benefit plans), the VoIP shall
send to
each Investor written notice of such determination and, the Company
shall
include in such registration statement 100% of the shares underlying
the
Retained Notes and unexercised warrants purchased by the Investors
under
the Transaction Documents. In addition to the foregoing, VoIP shall
file a
registration statement, which includes 100% of the shares underlying
the
Retained Notes and unexercised warrants purchased by the Investors
under
the Transaction Documents within thirty (30) days from the effectiveness
of the proxy statement to authorize additional shares of the Company
or by
December 31, 2006, whichever is earlier. Further, VoIP shall use
its best
reasonable efforts to have such registration statement be declared
effective by the SEC within one hundred and twenty (120) days from
the
effectiveness of the proxy statement to authorize additional shares
of the
Company or by March 30, 2007, whichever is
earlier.
|
2. INVESTORS’
LEAK-OUT.
Each of
the Investors receiving Debt Shares agrees, by and among themselves, that no
Investor shall sell more than their pro-rata allocation of thirty percent (30%)
of the daily trading volume in VoIP’s common stock, as set forth in Annex A
hereto; provided however, any Investor may cumulate the daily trading volume
in
any given calendar week to compute their leak-out amount; provided further,
that
the aforementioned cumulative trading volume resets every Monday. This
Investors’ Leak-Out provision does not apply to any sale of VoIP’s common stock
at a price above $0.75 per share.
3. INVESTORS’
RETAINED RIGHTS IN REMAINING NOTES.
With
respect to the balance of the CLAIMS retained by Plaintiffs under the NOTES
retained by Plaintiffs, as set forth in Annex A hereto, Plaintiffs retain all
rights granted to them in the Transaction Documents that are not specifically
waived in this Settlement Agreement and Release for the NOTES being retained
by
Plaintiffs including, but not limited to, security interests, indemnification,
anti-dilution rights, registration rights, reservation of rights, the survival
of VoIP’s representations, warranties, and undertakings.
4. FAIRNESS
HEARING.
Upon
execution hereof, the Investors and VoIP agree, pursuant to 15 U.S.C.
§77(a)(10), to immediately submit the terms and conditions of this Agreement
to
the Court for a hearing on the fairness of such terms and conditions, for the
issuance of an exemption from registration of the Settlement Shares and an
Order
approving the Agreement. VoIP avers it is a “reporting issuer” that files
reports with the SEC under Section 13 of the Securities and Exchange Act of
1934
(the “Exchange Act”); VoIP avers it is current in all its filing required under
the Exchange Act; and the Investors aver they have access to, and have accessed
all such filings. In connection with such a fairness hearing, VoIP, the issuer
of the securities, and the Investors, the proposed persons to whom the
securities are to be issued, agree that the value of the Settlement Shares
utilized to partially satisfy the Claims as set forth herein is fair and
reasonable. This Agreement shall become binding upon the parties only upon
entry
of an order by the Court substantially in the form annexed hereto as Exhibit
A
(the “Order”).
5. NECESSARY
ACTION.
At all
times after the execution of this Agreement and entry of the Order by the Court,
each party hereto agrees to take or cause to be taken all such necessary action
including, without limitation, the execution and delivery of such further
instruments and documents, as may be reasonably requested by any party for
such
purposes or otherwise necessary to complete or perfect the transaction
contemplated hereby.
2
6. RELEASES.
Upon
delivery of the Settlement Shares to the Investors and in consideration of
the
terms and conditions of this Agreement, and except for the obligations and
representations arising or made hereunder or a breach hereof, the parties hereby
release, acquit and forever discharge the other and each, every, and, all of
their current and past officers, directors, shareholders, affiliated
corporations, subsidiaries, agents, employees, representatives, attorneys,
predecessors, successors and assigns (the “Released Parties”), of and from any
and all claims, damages, causes of action, suits and costs, of whatever nature,
character or description, whether known or unknown, anticipated or
unanticipated, which the parties may now have or may hereafter have or claim
to
have against each other with respect to the partial claims satisfied herein
through the issuance of the Debt Shares and Warrant Shares, except that this
Release specifically excludes third-party indemnification rights set forth
in
the Transaction Documents. Nothing herein shall be deemed to negate or affect
the Investor's right and title to any securities heretofore issued to it by
VoIP.
7. CONTINUING
JURISDICTION.
Simultaneously with the execution of this Agreement, the attorneys representing
the parties hereto will execute a stipulation of dismissal substantially in
the
form annexed hereto as Exhibit B (the “Stipulation of Dismissal”), which shall
be held by the Investors' counsel and filed with the Court after VoIP’s delivery
of the Settlement Shares in accordance with paragraph 1 herein. In order to
enable the Court to grant specific enforcement and other equitable relief in
connection with this Agreement, (a) the parties consent to the jurisdiction
of
the Court for purposes of enforcing this Agreement and (b) each party to this
Agreement expressly waives any contention that there is an adequate remedy
at
law or any like doctrine that might otherwise preclude injunctive relief to
enforce this Agreement.
8. CONTINUING
OBLIGATION.
Both
parties agree to use their best efforts to cooperate with the Court to cause
the
Order to be timely entered and agree that delays caused due to Court calendars
shall not constitute a valid reason to void this Agreement.
9. INFORMATION.
The
Investors and VoIP each represent that prior to the execution of this Agreement,
they have had the advice of counsel, namely, Xxxxxx X. Xxxxxx, Esq. of Xxxxxx
X.
Xxxxxx, P.A. for Plaintiffs and Xxxxxxx X. Xxxxxxxx, Esq. of Xxxxxxx X.
Xxxxxxxx, P.A. for VoIP, they fully informed themselves of its terms, contents,
conditions and effects, and that no promise or representation of any kind has
been made to them except as expressly stated in this Agreement.
10. OWNERSHIP
AND AUTHORITY.
The
Investors and VoIP represent and warrant that they have not sold, assigned,
transferred, conveyed or otherwise disposed of any or all of any claim, demand,
right or cause of action, relating to any matter which is covered by this
Agreement, that each is the sole owner of such claim, demand, right or cause
of
action, and each has the power and authority and has been duly authorized to
enter into and perform this Agreement and that this Agreement is a binding
obligation of each, enforceable in accordance with its terms.
11. BINDING
NATURE.
This
Agreement shall be binding on all parties executing this Agreement and their
respective successors, assigns and heirs.
12. AUTHORITY
TO BIND.
Each
party to this Agreement represents and warrants that the execution, delivery
and
performance of this Agreement and the consummation of the transaction provided
in this Agreement have been duly authorized by all necessary action of the
respective entity and that the person executing this Agreement on its behalf
has
the full capacity to bind that entity. Each party further represents and
warrants that it has been represented by independent counsel of its choice
with
the negotiation and execution of this Agreement and that counsel has reviewed
this Agreement.
13. SIGNATURES.
This
Agreement may be signed in counterparts and the Agreement, together with its
counterpart signature pages, shall be deemed valid and binding on each party
when duly executed by all parties. Facsimile signatures shall be deemed valid
and binding for all purposes.
14. CHOICE
OF LAW, ETC.
Notwithstanding the place where this Agreement may be executed by either of
the
parties, or any other factor, all terms and provisions hereof shall be governed
by and construed in accordance with the laws of the State of Florida, applicable
to agreements made and to be fully performed in that State and without regard
to
principles of conflicts of law thereof. Any action brought to enforce, or
otherwise arising out of this Agreement shall be brought only in the Circuit
Court of the Twelfth Judicial Circuit sitting in the State of Florida, County
of
Sarasota.
15. INCONSISTENCY.
In the
event of any inconsistency between the terms of this Agreement and any other
document executed in connection herewith, the terms of this Agreement shall
control to the extent necessary to resolve such inconsistency.
3
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first indicated above.
| By: | ||
|
Alpha Capital Aktiengesellschaft, |
||
| By: | ||
|
Bristol Investment Fund, Ltd. |
||
| By: | ||
|
Whalehaven Capital Fund Limited |
||
| By: | ||
|
Xxxxx
International, Ltd.
|
||
| By: | ||
|
Platinum Long Term Growth II, Inc. |
||
| By: | ||
|
Chestnut Ridge Partners, LP |
||
| By: | ||
|
Grushko & Xxxxxxx, P.C. |
||
| By: | ||
|
CMS Capital |
||
| By: | ||
|
DKR Soundshore Oasis Holding Fund, Ltd. |
||
| By: | ||
|
Osher Capital, Inc. |
||
| VOIP, INCORPORATED | ||
| |
|
|
| By: | ||
| Its: |
Chief Executive Officer |
|
4
EXHIBIT
A
IN
THE CIRCUIT COURT OF THE
TWELFTH
JUDICIAL CIRCUIT IN AND
FOR
SARASOTA COUNTY, FLORIDA
ALPHA
CAPITAL
AKTIENGESELLSCHAFT,
BRISTOL
INVESTMENT CASE
NO.:
FUND,
LTD, WHALEHAVEN
CAPITAL
FUND LIMITED,
XXXXX
INTERNATIONAL, LTD,
PLATINUM
LONG TERM
GROWTH
II, INC., CHESTNUT
RIDGE
PARTNERS, LP,
GRUSHKO
& XXXXXXX, P.C.,
CMS
CAPITAL, DKR
SOUNDSHORE
OASIS HOLDING
FUND,
LTD
and OSHER
CAPITAL,
INC.
Plaintiffs,
v.
VOIP,
INCORPORATED,
Defendant.
___________________________/
[PROPOSED]
ORDER GRANTING APPROVAL OF SETTLEMENT AGREEMENT
This
matter having come on a hearing on the 15th day of September, 2006, to approve
the Settlement Agreement and Release entered into as of September 15, 2006
(the
“Settlement Agreement”) between Plaintiffs Alpha Capital Aktiengesellschaft,
Bristol Investment Fund, Ltd., Whalehaven Capital Fund Limited, Xxxxx
International, Ltd., Platinum Long Term Growth II, Inc., Chestnut Ridge
Partners, LP, Grushko & Xxxxxxx, P.C., CMS Capital, DKR Soundshore Oasis
Holding Fund, Ltd., and Osher Capital, Inc. (“Plaintiff”) and Defendant VoIP,
Inc. (“VoIP” and, collectively with Plaintiffs, the “Parties”), and the Court
having held a hearing as to the fairness of the terms and conditions of the
Settlement Agreement and being otherwise fully advised in the premises, the
Court hereby finds as follows:
1. The
Court
has been advised that the parties intended that the sale of the Settlement
Shares (as defined by the Settlement Agreement, and hereinafter, the “Settlement
Shares”) to, and the resale of the Settlement Shares by, Plaintiffs within the
United States of America, assuming satisfaction of all other applicable
securities laws and regulations, will be exempt from registration under the
Securities Act of 1933 (the “Securities Act”) in reliance upon Section 3(a)(10)
of the Securities Act based upon this Court’s finding herein that the terms and
conditions of the issuance of the Settlement Shares by VoIP to Plaintiffs are
fair to Plaintiffs;
2. The
hearing having been scheduled upon the consent of Plaintiffs and VoIP.
Plaintiffs has had adequate notice of the hearing and Plaintiffs are the only
parties to whom Settlement Shares will be issued pursuant to the Settlement
Agreement;
3. The
terms
and conditions of the issuance of the Settlement Shares in exchange for the
release of certain claims as set forth in the Settlement Agreement are fair
to
Plaintiffs, the only parties to whom the Settlement Shares will be
issued;
4. The
fairness hearing was open to Plaintiffs. Plaintiffs were represented by counsel
at the hearing who acknowledged that adequate notice of the hearing was given
and consented to the entry of this order.
It
is
therefore ORDERED AND ADJUDGED that the Settlement Agreement is hereby approved
as fair to the party to whom the Settlement Shares will be issued, within the
meaning of Section 3(a)(10) of the Securities Act and that the sale of the
Settlement Shares to, and the resale of the Settlement Shares in the United
States of America by, Plaintiffs, assuming satisfaction of all other applicable
securities laws and regulations, will be exempt from registration under the
Securities Act.
SO
ORDERED, this____________day
of
September, 2006.
________________________________
The
Honorable_____________
5
EXHIBIT
B
IN
THE CIRCUIT COURT OF THE
TWELFTH
JUDICIAL CIRCUIT IN AND
FOR
SARASOTA COUNTY, FLORIDA
ALPHA
CAPITAL
AKTIENGESELLSCHAFT,
BRISTOL
INVESTMENT CASE
NO.:
FUND,
LTD, WHALEHAVEN
CAPITAL
FUND LIMITED,
XXXXX
INTERNATIONAL, LTD,
PLATINUM
LONG TERM
GROWTH
II, INC., CHESTNUT
RIDGE
PARTNERS, LP,
GRUSHKO
& XXXXXXX, P.C.,
CMS
CAPITAL, DKR
SOUNDSHORE
OASIS HOLDING
FUND,
LTD
and OSHER
CAPITAL,
INC.
Plaintiffs,
v.
VOIP,
INCORPORATED,
Defendant.
___________________________/
STIPULATION
OF DISMISSAL
IT
IS HEREBY STIPULATED AND AGREED,
by and
between the undersigned, the attorneys of record for all parties to the
above-entitled action, pursuant to the Florida Rules of Civil Practice and
Procedure, that whereas no party hereto is an infant of incompetent person
for
whom a committee has been appointed or conservatee and no person not a party
has
an interest in the subject matter of the action, the above-entitled action
be,
and the same hereby is, discontinued with prejudice, each party to bear its
own
costs.
This
Stipulation may be filed without further notice with the Clerk of the
Court.
Dated:
September ____, 2006
| XXXXXX X. XXXXXX, P.A. | XXXXXXX X. XXXXXXXX, P.A. | |||
| By: | By: | |||
|
Xxxxxx X. Xxxxxx, Esq.
0000 Xxxxx Xxxxxx, Xxxxx X
Xxxxxxxx, Xxxxxxx 00000
(941) 316-0111
|
Xxxxxxx X. Xxxxxxxx, Xxx.
Xxxxx X0, X.X. Xxx 00
0000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000-0000
(000) 000-0000
|
|||
|
Attorneys for Plaintiff
Alpha Capital Aktiengesellschaft
Bristol Investment Fund, Ltd.
Whalehaven Capital Fund Limited
Xxxxx International, Ltd.
Platinum Long Term Growth II, Inc.
Chestnut Ridge Partners, XX
Xxxxxxx & Xxxxxxx, P.C.
CMS Capital
DKR Soundshore Oasis Holding Fund, Ltd., and
Osher
Capital, Inc.
|
Attorneys for Defendant
VoIP,
Incorporated
|
|||
6
