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Exhibit 10.8
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Settlement Agreement") is made
as of August 17, 2000 ("Effective Date"), by and among Greka Energy Corporation
("Greka") and Xxxxxxx X. Xxxxxx ("Xx. Xxxxxx") and Capco Resources, Ltd. ("Capco
Resources"), Capco Energy, Inc. ("Capco Energy"), and Xxxxx Xxxxxxxxx ("Xx.
Xxxxxxxxx") (collectively, the "Parties"). Greka and Xx. Xxxxxx are referred to
as the "Greka Parties." Capco Resources, Capco Energy, and Xx. Xxxxxxxxx are
referred to as the "Capco Parties."
RECITALS
A. An action is pending in the United States District Court for the
District of Colorado captioned Capco Resources, Ltd. x. Xxxxx Energy Corp., et
al. v. Capco Energy, Inc., et al., Civil Action No. 99-K-2155 (the "Action").
Claims have been asserted in the Action by the Greka Parties against the Capco
Parties and by the Capco Parties against the Greka Parties.
X. Xxxxxxx, Lynch, Pierce, Xxxxxx & Xxxxx, Inc. ("Xxxxxxx Xxxxx")
holds a judgment in the principal amount of four-hundred-sixty-one-thousand-
seven-hundred-and-thirty-nine dollars and seventy-two cents ($461,739.72)
against Capco Resources, which judgment was entered on or about June 8, 2000 in
an action in the Superior Court of the State of California for the County of San
Francisco in an action entitled Merrill, Lynch, Xxxxxx, Xxxxxx & Xxxxx, Inc. x.
Xxxxx Resources Ltd., Case No. 311156 (the "Xxxxxxx Xxxxx Judgment"). Xxxxxxx
Xxxxx has stated its intention to sell a portion of Greka shares represented by
Greka Energy Corporation Stock Certificate No. 3189 ("Certificate 3189") to
satisfy the Xxxxxxx Xxxxx Judgment.
C. While expressly denying and disclaiming wrongdoing or liability
of any kind whatsoever, the Parties desire to enter into this Settlement
Agreement in order to avoid further expense, inconvenience, and the distraction
of litigation and to put to rest all claims among the Parties that were or might
have been alleged in the Action. Execution of this Settlement Agreement is not
an admission by any Party regarding any contentions made by any party to the
Action.
NOW, THEREFORE, for good and valuable consideration, including the
mutual covenants set forth below, the receipt and sufficiency of which the
Parties hereby acknowledge, the Parties hereby agree as follows.
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AGREEMENTS AND RELEASES
1. Greka shall purchase from Capco Resources, and Capco Resources shall
sell to Greka, eight-hundred-thousand (800,000) shares of Greka common stock
(the "Transferred Shares") at a price of six dollars and fifty cents ($6.50) per
share, for a total consideration of five-million-and-two-hundred-thousand
dollars ($5,200,000.00). This consideration shall be paid in three parts: (1)
five-hundred-thousand dollars ($500,000.00) shall be paid by Greka to Capco
Resources not later than August 25, 2000 (At the time of the first payment of
five-hundred-thousand dollars ($500,000), Capco Resources shall deliver and
assign to Greka 76,923 of the Transferred Shares to Greka. This transfer shall
be final and complete at that time, and shall not be reversed.); (2)
five-hundred-thousand dollars ($500,000.00) shall be set off against the
obligation of Capco Resources under Paragraph 2, below; and (3)
four-million-and-two-hundred-thousand dollars ($4,200,000.00) shall be paid by
Greka to Capco Resources at the Closing. The Closing of the sale of the
Transferred Shares shall take place at the time of the payment of
four-million-and-two-hundred-thousand dollars ($4,200,000.00), which payment
shall constitute the final installment of a total payment by Greka to Capco
Resources of five-million-and-two-hundred-thousand dollars ($5,200,000.00) as
provided in this paragraph. Capco Resources shall assign the remaining
Transferred Shares to Greka at the Closing. Within five (5) business days of
receipt of the Transferred Shares by Greka, Greka shall cancel the Transferred
Shares and the Transferred Shares shall become authorized but unissued stock.
The Parties shall use their best efforts to have the Closing by September 30,
2000, but in no event shall the Closing take place later than October 30, 2000,
at 10:30 a.m. (Denver time), at the law offices of Xxxxxxx Xxxxx Xxxxxxx &
Xxxxxxxxx, LLP, 0000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx.
2. Capco Resources shall pay to Greka the sum of five-hundred-thousand
dollars ($500,000.00) as consideration for the releases being given in paragraph
8 to the persons and entities listed in Exhibit A. This sum will be paid by
setting it off against the sum of five-million-and-two-hundred-thousand dollars
($5,200,000.00) to be paid by Greka to Capco Resources under paragraph 1, above.
3. At the time of the Closing of the sale of the Transferred Shares,
Capco Resources shall satisfy the Xxxxxxx Xxxxx Judgment with funds from the
payment from Greka to Capco Resources in the amount of
four-million-and-two-hundred-thousand dollars ($4,200,000.00), and Capco
Resources shall keep title to the seventy-five thousand (75,000) shares
represented by Certificate 3189.
4. Capco Resources shall retain the four-hundred-and-ninety-thousand
(490,000) shares of Greka common stock that Capco Resources acquired pursuant to
the Stock Exchange Agreement dated November 23, 1998, between Horizontal
Ventures, Inc. and Saba Acquisub, Inc. and the shareholders of Saba Acquisub,
Inc. that remain after subtracting the eight-hundred-thousand (800,000)
Transferred Shares to be sold to Greka pursuant to paragraph 1 above; however,
if Greka breaches this Settlement Agreement, then Greka shall register
five-hundred -and-ninety-thousand (590,000) shares and purchase only
seven-hundred-thousand (700,000)
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shares, as reflected in the Stipulated Judgment attached as Exhibit D. These
four-hundred-ninety-thousand (490,000) shares, or five-hundred-ninety-thousand
(590,000) shares in the event of Greka's breach, shall be called the "Registered
Shares." Greka shall make all reasonable best efforts to file at its sole
expense with the United States Securities and Exchange Commission, by October 1,
2000, but in no event later than November 1, 2000, a registration statement on
Form S-3, or such other form which may be available to Greka if Form S-3 is not
available for any reason, to register the Registered Shares (and no others on
this registration statement) for resale without any restrictions, to have said
registration statement declared effective at the earliest possible date after
filing and maintain the effectiveness of the registration statement. In no event
shall Greka file a registration statement at any time after the Effective Date
that does not include registration of the Registered Shares for resale without
any restrictions, except those imposed by state and federal laws, rules, or
regulations.
At its expense, Greka will keep such registration continuously
effective until December 31, 2002, or for a period of two years after the date
on which the registration statement becomes effective with the SEC, or until
Capco Resources has completed the distribution of all the Registered Shares,
whichever first occurs. Greka shall make all reasonable best efforts to cause,
at Greka's sole expense, the registration or qualification of the Registered
Shares under the state securities laws of all states reasonably requested by
Capco Resources, including but not limited to California, Colorado and New York.
Greka shall use its reasonable best efforts to cause its Common Stock to remain
listed on the NASDAQ National Market system so long as Capco Resources holds the
Registered Shares.
5. This paragraph shall constitute a voting agreement between the
Parties, which voting agreement and any proxy granted pursuant to the voting
agreement shall be effective only during periods of time when Greka is in
compliance with all terms of the Settlement Agreement. For such time, not to
extend beyond Midnight EST on December 31, 2002, as the Capco Parties or any
entity or person affiliated with any of the Capco Parties holds any of the
Registered Shares, the Capco Parties agree, on behalf of themselves and on
behalf of all existing or future entities affiliated with any Capco Party, that
they will execute at Closing, and thereafter within five (5) business days after
the reasonable written request of Greka, written proxies to vote the Registered
Shares as directed by Greka's management, which proxies shall be in the form of
Exhibit B. The Capco Parties acknowledge that they may be required to execute
more than one proxy during the term of this voting agreement. To further
facilitate the Capco Parties' timely compliance with this voting agreement, the
Capco Parties or any entity or person affiliated with any of the Capco Parties
that holds any of the Registered Shares, hereby agree to execute and deliver at
the Closing, a Limited Power of Attorney in the form attached hereto as Exhibit
B. Such Limited Power of Attorney shall appoint the Chief Executive Officer of
Greka as attorney-in-fact to execute any and all proxies to vote the Registered
Shares. The Parties acknowledge that this voting agreement was separately
bargained for and is a material term to and forms a substantial part of the
basis for the consideration being paid by Greka under this Settlement Agreement.
The Parties further acknowledge that a failure to execute any proxy requested
hereunder, a revocation or attempted revocation of any proxy granted hereunder,
a failure to execute the Limited Power of Attorney, or a revocation or attempted
revocation of the Limited Power of Attorney would cause substantial, immediate,
and irreparable damage to Greka. The
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Parties further acknowledge that it would be difficult in light of the
anticipated or actual harm caused by a breach of this voting agreement to
determine or prove the losses suffered by Greka and impossible for Greka to
obtain an adequate, timely remedy. Therefore, the Parties agree that in the
event of any breach of this voting agreement, Greka shall be entitled to
immediate equitable relief in the form of temporary, preliminary, and permanent
injunctive relief, which shall include an injunction requiring the Capco Parties
to execute any proxy to vote the shares as directed by Greka management. The
Parties further agree that this voting agreement shall be binding on any entity
that is affiliated with any Capco Party and that receives any of the Registered
Shares from any Capco Party or affiliated entity, as defined in Rule 405
promulgated under the Securities Act of 1933, as amended. The Parties further
agree that this voting agreement terminates as to any Registered Shares that are
transferred to any entity not affiliated with any of the Capco Parties at such
time as those shares are transferred for fair value in compliance with the
registration statement provided in paragraph 3 above, except that this voting
agreement will be revived as to any Registered Shares that are subsequently
acquired by any Capco Party or entity affiliated with any Capco Party. Under no
circumstances does this voting agreement, or any proxy executed under this
voting agreement, extend beyond Midnight EST on December 31, 2002.
6. The Parties shall file a stipulation of dismissal, pursuant to
Federal Rule of Civil Procedure 41(a)(1)(ii), dismissing with prejudice all
claims that the Parties asserted or that they could have asserted in the Action.
The Parties shall execute the form of the stipulation of dismissal attached
hereto as Exhibit C, and any Party, after written notice to all parties, may
file the executed stipulation of dismissal after the Parties comply fully with
paragraphs 1-5, above. Upon execution of this Settlement Agreement, counsel for
the Parties shall file with the Court in the Action a joint motion that will
inform the Court of the fact of this settlement and that the Parties will file a
stipulation of dismissal, and that will request that the Court extend all
deadlines by sixty (60) days, unless otherwise agreed by the Parties in writing.
The Court shall retain jurisdiction until the Parties comply fully with
paragraphs 1-5 so either Party may enforce this Settlement Agreement.
Specifically, should any Greka Party fail to comply with any of its or his
respective obligations on or before the deadlines specified in paragraphs 1-5,
any Capco Party may seek entry of judgment pursuant to the Stipulated Judgment
attached as Exhibit D, or should any Capco Party fail to comply with its or his
respective obligations on or before the deadlines specified in paragraphs 1-5,
any Greka Party may seek entry of judgment pursuant to the Stipulated Judgment
attached as Exhibit E.
7. Each Party shall be solely responsible for its own legal fees and
expenses in connection with the Action, including legal fees and expenses
incurred in the dismissal of the Action and the negotiation and execution of
this Settlement Agreement.
8. Subject solely to the requirements of this Settlement Agreement, the
Greka Parties release and forever discharge the Capco Parties and their
predecessors, successors, assigns, and each of them, and each past or present,
direct or indirect, partner, subsidiary, division, or affiliated entity or
corporation, and each past or present employee, agent, representative, attorney,
accountant, officer, director, stockholder, and all persons acting by, through,
under, or in concert with them, or any of them, including, but not limited to,
all entities
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or persons listed in the schedule attached to this Settlement Agreement as
Exhibit A, from any and all claims asserted in the Action or referred to in
Exhibit A, or related to any claim asserted in the Action, or referred to in
Exhibit A. Any release accruing to any entity or person who is not a Party shall
be effective only upon execution by that entity or person of a reciprocal
release that releases all entities released pursuant to Paragraph 9, below.
9. Subject solely to the requirements of this Settlement Agreement, the
Capco Parties release and forever discharge the Greka Parties and their
predecessors, successors, assigns, and each of them, and each past or present,
direct or indirect, partner, subsidiary, division, or affiliated entity or
corporation, and each past or present employee, agent, representative, attorney,
accountant, officer, director, stockholder, and all persons acting by, through,
under, or in concert with them, or any of them, from any and all claims asserted
in the Action or referred to in Exhibit A, or related to any claim asserted in
the Action or referred to in Exhibit A. Any release accruing to any entity or
person who is not a Party shall be effective only upon execution by that entity
or person of a reciprocal release that releases all entities released pursuant
to Paragraph 8, above.
10. The Parties acknowledge that each has had the benefit and advice of
independent legal counsel in connection with this Settlement Agreement, and each
Party understands the meaning of each term of this Settlement Agreement and the
consequences of signing this Settlement Agreement. This Settlement Agreement is
the result of negotiation between the Parties, each of whom has participated in
the drafting of this Settlement Agreement, through its respective attorneys.
Each Party has freely and voluntarily entered into this Settlement Agreement.
11. Each Party further declares and represents that it has reviewed
this Settlement Agreement in its entirety and that in making this Settlement
Agreement each Party has relied wholly upon its own judgment, belief, knowledge,
investigation, independent legal advice, and research as to the advisability of
entering into this Settlement Agreement. Each Party, together with its
attorneys, has made such investigation of the facts and the law pertaining to
the Action and this Settlement Agreement, and of all the matters pertaining
thereto, as it deems necessary. Each Party forever waives all rights to assert
that this Settlement Agreement resulted from a mistake in law or in fact. Each
Party also declares and represents that it has not been influenced to any extent
whatsoever in entering into this Settlement Agreement by any representations or
statements regarding the same by any other Party, or by anyone representing or
acting for any other Party.
12. This instrument, including the exhibits, contains the entire
agreement between the Parties to this Settlement Agreement. With the sole
exception of the Protective Order entered in the Action, all previous
understandings, agreements, and communications prior to the Effective Date,
whether express or implied, oral or written, relating to the subject matter of
this Settlement Agreement are fully and completely extinguished and superseded
by this Settlement Agreement. Within sixty (60) days of dismissal of the Action,
the Parties and their counsel shall destroy any copies of documents produced in
the Action and designated as "Confidential."
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13. This Settlement Agreement shall not be altered, amended, modified,
or otherwise changed except by a writing duly signed by all the Parties.
14. Each Party covenants and represents that it has not assigned to any
other persons or entities any of its claims herein settled and released and that
it is fully entitled to enter into this Settlement Agreement. Each Party shall
indemnify, defend, and hold harmless the other Party from and against any Claims
based upon or arising in connection with any such prior assignment, transfer,
lien, or right.
15. All notices and demands given under the terms of this Settlement
Agreement shall be in writing and may be effected by personal delivery,
including by any commercial courier or overnight delivery service, or by United
States registered or certified mail, return receipt requested, with all postage
and fees fully prepaid. Notices shall be effective upon receipt by the Party
being given notice, as indicated by the return receipt if mailed, except that if
a Party has relocated without providing the other party with its new address for
service of notices, or if a Party refuses delivery of a notice upon its tender,
the notice shall be effective upon the attempt to serve the notice at the last
address given for service of a notice upon that Party. Alternatively, notices
may be served by facsimile transmission, in which case service shall be deemed
effective only upon receipt by the Party serving the notice of telephonic or
return facsimile transmission confirmation that the Party to whom the notice is
directed has received a complete and legible copy of the notice. Notices shall
be addressed as follows:
If to Greka and/or Xx. Xxxxxx:
Greka Energy Corporation
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
With a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Ingersoll, LLP
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
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If to Capco Energy, Inc., Capco Resources, Ltd. and/or Xxxxx Xxxxxxxxx:
Capco Energy, Inc.
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
Capco Resources, Ltd.
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxx Xxxxx
With a copy to:
White & Case LLP
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
The address(es) for service of notice on any Party may be changed by that Party
serving a notice upon the others of the new address, except that any change of
address to a post office box shall not be effective unless a street address is
also specified for use in effectuating personal service.
16. Time is strictly of the essence in this Settlement Agreement. All
dates, deadlines, and time periods set forth herein have been specifically
negotiated between the Parties and shall be strictly adhered to without any
extension for any length of time whatsoever.
17. Each Party covenants and represents that he or it is fully
authorized to enter into this Settlement Agreement and to carry out the
obligations provided for in this Settlement Agreement. Where a person has
executed this Settlement Agreement on behalf of a Party, that person covenants,
warrants, and represents that he is or has been authorized to do so by that
Party.
18. The consummation of the transactions contemplated by this Agreement
will not result in or constitute any of the following: (i) a breach of any term
or provision of any agreement to which any Party is a party, including but not
limited to the Party's credit agreements; (ii) a default or an event that, with
notice of lapse of time or both, would be a default, breach, or violation of the
Articles Of Incorporation or Bylaws of any Party or of any lease, license,
promissory note, conditional sales contract, commitment, indenture, mortgage,
deed of trust, or other agreement, instrument, or arrangement to which any Party
is a party or by
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which any Party is bound; or (iii) a violation of any law or any rule or
regulation of any administrative agency or governmental body, of any order,
writ, injunction or decree of any court, administrative agency or governmental
body to which any Party may be subject.
19. This Settlement Agreement shall be governed by Colorado law,
without regard to principles of conflicts of laws. Any action for breach of this
Settlement Agreement shall be brought in the State of Colorado. The prevailing
party in any action for a breach of this Settlement Agreement, or to enforce a
judgment obtained as a result of a breach of this Settlement Agreement, shall be
entitled to recover its reasonable attorney fees and costs. As used in this
paragraph, attorney fees shall be deemed to mean the full and actual cost of any
legal services performed in connection with the matters involved, calculated on
the basis of the usual fees charged by the attorneys performing such services
and shall not be limited to "reasonable attorney fees" as defined in any
statute, rule of court, or case law.
20. In the event that any provision of this Settlement Agreement should
be held to be void, voidable, or unenforceable, the remaining portions hereof
shall remain in full force and effect.
21. This Settlement Agreement shall be binding upon and inure to the
benefit of the Parties' successors, assigns, executors, personal
representatives, heirs, and devisees.
22. This Settlement Agreement may be executed in counterparts and by
facsimile. Each counterpart shall constitute an original.
23. This Settlement Agreement shall be effective immediately upon all
Parties' execution of the counterparts.
GREKA ENERGY CORP.
Date: August 18, 2000 By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Chief Executive Officer and
Chairman
XXXXXXX X. XXXXXX
Date: August 18, 2000 By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
CAPCO RESOURCES, LTD.
Date: August 18, 2000 By: /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
President
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CAPCO ENERGY, INC.
Date: August 18, 2000 By: /s/ Xxxxx Xxxxxxxxx
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lyas Chaudhary
President
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XXXXX XXXXXXXXX
Date: August 18, 2000 By: /s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
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