EXHIBIT 99.1
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release (the "Settlement") is made as of October
24, 2003 by and among (i) AUSPEX SYSTEMS, INC. (the "Debtor") and (ii) WAL-MART
STORES, INCORPORATED ("Wal-Mart"; together with the Debtor, the "Parties" and
such, separately, a "Party") in full and final settlement of certain claims and
objections as set forth below:
RECITALS
A. On April 22, 2003 (the "Petition Date"), the Debtor filed a
voluntary petition under Chapter 11 of Title 11 of
the United States Code, case number 03-52596mm
("Bankruptcy Case");
B. On or about September 26, 2002, Wal-Mart issued to the Debtor
a purchase order ("PO") for (i) two pairs of Auspex
proprietary servers (which servers included Debtor's
embedded proprietary software) ( "Hardware"), (ii)
Auspex professional services to assist in data
migration, training and related travel (collectively,
"Professional Services") and (iii) pre-paid
maintenance and support on the new system and
maintenance and support on older Auspex equipment and
software (NS8000) (collectively, "Maintenance");
C. Under the terms of the PO, the Debtor was required to provide
Maintenance for a total of 5 years from the date of
installation as follows: (i) With regard to the new
Hardware, the first three years of Maintenance (1095
days) were pre-paid at a cost of $277,224, and the
remaining two years of Maintenance were free; and
(ii) Maintenance for the old Wal-Mart systems was
pre-paid in full for a 5 year period at a cost of
$100,000. Prior to the Petition Date, the Debtor
delivered to Wal-Mart the Hardware, performed the
Professional Services and began providing
Maintenance. Wal-Mart accepted the Hardware and paid
the Debtor a total of $1,643,400, plus taxes;
D. Pursuant to an order of the Bankruptcy Court dated June 19,
2003, the Debtor sold its "Service Business" to
GlassHouse Technologies, Inc. ("GlassHouse"). The
sale to GlassHouse closed on June 20, 2003. Although
GlassHouse was assigned virtually all of the Debtor's
pre-paid service contracts, it did not take an
assignment of the Debtor's Maintenance obligations to
Wal-Mart. On July 25, 2003, the Bankruptcy Court
granted the Debtor's motion to reject the Debtor's
agreement with Wal-Mart, effective June 20, 2003, and
established August 25, 2003 as the last day for
Wal-Mart to file a claim ("Rejection Order").
Wal-Mart is working with GlassHouse to mitigate its
damages caused by the Debtor's rejection of its
agreement;
E. On August 13, 2003, Wal-Mart filed a non-priority, general
unsecured claim for rejection damages in the amount
of $1,233,900 ("Claim");
F. In order to comply with certain accounting rules and
regulations, the Debtor scheduled its obligation to
Wal-Mart as a contested, unliquidated, non-priority
unsecured claim in the amount of $936,232.57
("Scheduled Claim");
G. On or about September 17, 2003, the Debtor, through its
counsel, filed an objection to the Claim asserting,
inter alia, that Wal-Mart's damages related to the
rejection related only to the pre-paid, unused
Maintenance that had a remaining value of $338,643 as
of the effective date of the Rejection Order ("Claim
Objection");
H. Wal-Mart responded to the Claim Objection by directly
contacting Debtor's counsel in early October 2003;
4
I. On or about October 10, 2003, the Debtor caused to be served
on all creditors and interest holders its (i) First
Amended Disclosure Statement For Plan of Liquidation,
and (ii) First Amended Plan of Liquidation ("Plan");
J. In order to avoid the costs and risks of litigation, and to
resolve the disputes between the Parties, the Parties
have determined to resolve their disputes with regard
to the (i) the Hardware, Maintenance and Professional
Services; (ii) the Claim; (iii) the Scheduled Claim;
(iv) the Claim Objection; and (v) the Bankruptcy
Case, upon the terms, provisions and conditions of
this Agreement; and
K. The Parties have carefully considered the terms of this
Settlement and, after having had the opportunity to
consult with their respective attorneys are satisfied
that it is fair and reasonable.
SETTLEMENT
NOW, THEREFORE, the Parties agree as follows:
1. The foregoing Recitals are hereby incorporated into
this Settlement.
2. Except as otherwise noted herein, subject to the
entry of an order from the Bankruptcy Court approving
this Settlement ("Order"), Wal-Mart shall have an
allowed, non-priority, general unsecured claim
against the Debtor's estate in the amount of SEVEN
HUNDRED THOUSAND DOLLARS ($700,000) ("Allowed
Claim"). The Allowed Claim shall be subject to the
identical treatment accorded to all allowed
non-priority, general unsecured claimants under the
Plan.
3. If this Settlement is not approved by the Court or
the Order is reversed by a higher court, the
Settlement shall be deemed null and void.
4. In the event that this Settlement shall become null
and void pursuant to paragraph 3 herein, neither the
terms nor statements contained in this Settlement,
any motion or motions filed seeking an order from the
Court approving this Settlement, nor correspondence
related to the negotiation, drafting or approval of
this Settlement, shall be argued, admitted into
evidence, nor deemed to be an admission against any
Party's interest in any litigation by and between the
Parties.
5. Except for obligations arising out of the terms of
this Settlement and the Plan, and further conditioned
upon entry of the Order, Wal-Mart on the one hand,
and the Debtor on the other hand, in respect of the
mutual promises and other consideration recited in
this Settlement, hereby release their respective
successors, assigns, and past and present attorneys,
accountants, agents, principals, members,
representatives, affiliates, parents, subsidiaries,
officers, directors, partners, employees, employers,
sureties, and stockholders, jointly and severally
from any and all claims, demands, claims for relief,
causes of action, debts, losses and liabilities, or
any combination of the same, whether known or
unknown, whether suspected or unsuspected, whether at
law or in equity, whether fixed or contingent,
whether liquidated or unliquidated, whether matured
or unmatured, whether direct, indirect or
consequential, and whether asserted or unasserted,
which the releasing parties under this paragraph or
the persons or entities on whose behalf they release
under this paragraph had, now have, or may, shall, or
can hereafter have, arising out of, by reason of, or
relating in any way whatsoever to the (i) Hardware,
Maintenance and Professional Services; (ii) the
Claim; (iii) the Scheduled Claim; (iv) the Claim
Objection; and (v) the Bankruptcy Case.
6. Each of the Parties has read and understands the
contents of section 1542 of the Civil Code of the
State of California, and, to the extent of the
releases provided herein, Wal-
5
Mart and the Debtor each hereby expressly waive that
section and the benefits thereof. Section 1542 reads
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 BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
IN CONNECTION WITH THE PARTIES' WAIVER OF THEIR RESPECTIVE RIGHTS UNDER SECTION
1542, THE PARTIES ACKNOWLEDGE THAT THEY ARE AWARE THAT THEY MAY HEREAFTER
DISCOVER CLAIMS PRESENTLY UNKNOWN OR UNSUSPECTED, OR FACTS IN ADDITION TO OR
DIFFERENT FROM THOSE THAT THEY NOW KNOW OR BELIEVE TO BE TRUE. NEVERTHELESS, IT
IS THE INTENTION OF THE PARTIES HERETO, AND EACH OF THEM, TO RELEASE ALL MATTERS
THAT ARE SUBJECT TO THIS AGREEMENT, AND ALL CLAIMS RELATIVE THERETO, WHICH NOW
EXIST, MAY EXIST, OR HERETOFORE HAVE EXISTED.
7. Wal-Mart and the Debtor acknowledge that this
Settlement is a compromise of disputed claims and
that neither admits, and each expressly denies, any
liability on its part.
8. This Agreement, to the extent that it provides for
releases of claims or liabilities to persons other
than the actual parties to this Agreement, is
intended for and shall be enforceable for the benefit
of or by any such persons, as well as the successors
and permitted assignees of such persons.
9. Each person signing this Settlement represents and
warrants that he/she has been duly authorized and has
the requisite authority to execute and deliver this
Settlement on behalf of such Party and to bind
his/her respective Party(s) to the terms and
conditions of the Settlement.
10. Both prior to and after the date hereof, and without
any further consideration, each Party hereto shall
do, execute, acknowledge and deliver all and every
further acts, assurances, documents and instruments
as may be reasonably requested by the other to effect
the purpose and intent of this Agreement.
11. The Parties represent and acknowledge in executing
this Settlement, they do not rely and have not relied
upon any representation or statement made by any
Party or any of their agents, shareholders,
representatives or attorneys, with regard to the
subject matter, basis or effect of this Settlement or
otherwise, other than as specifically stated in this
Settlement.
12. The Parties further declare in making this
Settlement, they have relied entirely upon their own
judgment, beliefs and interest and the advice of
their counsel (for whose expense each shall be solely
responsible) and that they have had a reasonable
period of time to consider this Settlement.
13. The Parties acknowledge that each Party and its
counsel have reviewed this Settlement, and that each
fully understands and voluntarily accepts all the
provisions contained in this Agreement. The Parties
further agree that this Settlement was the product of
negotiations between the Parties and that any rule of
construction that ambiguities are to be resolved
against the drafting party shall not apply in the
interpretation of this Settlement.
14. The language of all parts of this Settlement shall in
all cases be construed as a whole, according to its
fair meaning and not strictly for or against any of
the Parties.
15. Should any provision of this Settlement be declared
or be determined by any court of competent
jurisdiction to be illegal, invalid or unenforceable,
the legality, validity and
6
enforceability of the remaining parts, terms or
provisions shall not be affected thereby and said
illegal, unenforceable or invalid part, term or
provision shall be deemed not to be a part of this
Settlement.
16. This Settlement sets forth the entire agreement
between the Parties and fully supercedes any and all
prior agreements and understandings, written or oral,
between the Parties pertaining to the subject matter
hereof.
17. No modification of this Settlement shall be binding
or enforceable unless in writing and signed by the
Parties.
18. This Settlement shall be binding upon and inure to
the benefit of the Parties, their respective heirs,
executors, successors, administrators and assigns.
19. This Settlement shall be interpreted and construed in
accordance with the provisions of the Bankruptcy Code
and, where not inconsistent, the laws of the State of
California, without regard to the conflict of laws of
the State of California. Each of the Parties hereby
irrevocably consents to the jurisdiction of the
Bankruptcy Court with respect to any action to
enforce the terms and provisions of this Settlement
and expressly waives any right to commence any such
action in any other forum.
20. The Parties hereto represent and warrant to each
other that they have not assigned, encumbered or
transferred, or purported to assign, encumber or
transfer, to any person, firm or entity whatsoever
any claim, debt, liability, demand, obligation, cost,
expense, damage, action, cause of action, or right to
be released hereunder, and that no other person or
entity of any kind has or has had an interest in any
claim, debt, liability, demand, obligation, cost,
expense, damage, action, cause of action, or right
referenced herein.
7
21. This Agreement may be executed in one or more
counterparts, all of which together shall comprise
one and the same instrument. Each of the parties
hereto understands and agrees that this document (and
any other document required herein) may be delivered
by any party thereto either in the form of an
executed original or an executed original sent by
facsimile transmission to be followed promptly by the
mailing of a hard copy original, and that receipt by
a party of a facsimile transmitted document
purportedly bearing the signature of a party shall
bind such party with the same force and effect as the
delivery of a hard copy original. Any failure by the
party to receive the hard copy executed original of
such document shall not diminish the binding effect
of receipt of the facsimile transmitted executed
original of such document of the party whose hard
copy page was not received by the party assembling
the document(s).
AUSPEX SYSTEMS, INC.
By /s/ Xxxxx Xxxxxxx
--------------------------------------------------
Xxxxx Xxxxxxx, Chief Financial Officer
WAL-MART STORES, INCORPORATED
By /s/ Xxxxx Xxxxxxx
-----------------------------------------
-----------------------------------------
(Print Name)
Title Senior Assistant General Counsel,
Logistics Wal-Mart Legal Department
--------------------------------------
(Print Title)
8
