MUTUAL RELEASE, SETTLEMENT, STANDSTILL
AND NON-DISPARAGEMENT AGREEMENT
This Mutual Release, Settlement, Standstill and Non-Disparagement
Agreement (this "Agreement") is dated as of April 11, 2002, by and among Surge
Components, Inc., a New York corporation ("Surge"), and each of Equilink Capital
Partners, LLC ("Equilink"), Xxxxxx XxXxxx ("XxXxxx"), Old Oak Fund Inc. ("Old
Oak") and Xxxxxxx Xxx ("Xxx") (collectively the "Investors").
WHEREAS, the Investors currently hold 252,000 shares of common stock
issued by Surge ("Common Stock") which represents all of the debt and equity
securities of Surge held by the Investors or their family members, associates or
affiliates (as such terms are used in Rule 12b-2 of the Securities Exchange Act
of 1934 (the "Exchange Act"), these terms to have such meaning throughout this
Agreement);
WHEREAS, the Investors have already transferred to the possession of
Surge 19,300 shares of preferred stock issued by Surge ("Preferred Stock");
WHEREAS, Surge and the Investors desire and intend to resolve any and
all issues and/or disputes arising from or relating to their relationship,
including but not limited to, any and all claims that the Investors allege to
have against Surge, on the terms and conditions set forth in this Agreement, and
without any admission by any party of any liability;
WHEREAS, the Investors desire to assign, transfer and convey the Common
Stock and Preferred Stock (collectively "Securities") to Surge in exchange for
the payment by Surge of an aggregate of $225,000 in accordance with the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Mutual Release. (a) Effective upon the transfer of the Securities
referred to in Section 2 and the making of the final payment referred to in
Section 3, Surge, on the one hand, and each of the Investors, on the other hand,
hereby releases and forever discharges the other, the other's shareholders and
subsidiaries, and the respective directors, officers, employees, agents,
representatives and affiliates of each, the other's heirs and estate, and each
of the above's successors and assigns, absolutely and forever, of and from any
and all demands, actions, claims, acts, damages, fines, penalties, benefits,
accounts, liabilities, obligations, debts, liens, costs, covenants, contracts,
agreements, rights of action, claims for relief and causes of action, of every
kind and nature, known or unknown, both at law and in equity which each party
had, now has or in the future might have against the other by reason of any
matter, cause or thing whatsoever from the beginning of the world to the date of
this Agreement (collectively, "Claims").
(b) Notwithstanding the foregoing, there is expressly reserved from the
effect of the mutual release contained in this Section 1 any and all Claims that
any party may now have or might in the future have against another party and its
successors and assigns in connection with the other party's breach of any of the
terms or failure to perform any of its obligations set forth in this Agreement.
2. Transfer of Stock to Surge. Upon the receipt of the final payment
described in Section 3 the Investors shall assign, transfer and convey to Surge
the Securities and any and all shares of stock or other securities of Surge held
by the Investors. The foregoing transfers shall be evidenced by delivery of
certificates representing the Securities (252,000 Common Shares of Surge,
represented by Certificate # 0420, I/N/O Old Oak Fund, Inc. ("Certificate")) and
Stock Powers in the forms set forth in Exhibit A attached hereto. Simultaneously
with the execution of this Agreement, the Investors shall immediately deliver to
Xxxxxx, Xxxxxxx & Xxxxxxx the securities and Stock Powers referred to above,
which Xxxxxx, Xxxxxxx & Xxxxxxx will hold in escrow pending the final payment
referred to in Section 3. Within five days of the receipt of the final payment
described in Section 3, Xxxxxx, Xxxxxxx & Xxxxxxx will release the securities
and Stock Powers from escrow, and deliver them to Xxx Xxxx, Esq., Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., Chrysler Center, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 as counsel for Surge.
3. Payment Schedule. (a) Surge shall pay the Investors an aggregate of
$225,000 in installments as follows:
(i) Upon execution of this Agreement and the delivery of the
certificates representing the Securities and the Stock Powers pursuant
to Section 2 hereof, $10.00 to XxXxxx and $99,990 to Old Oak Fund, Inc.
(ii) On or before July 1, 2002, $62,500 to Old Oak Fund, Inc.
(iii) On or before November 1, 2002, $62,500 to Old Oak Fund, Inc.
(b) The payment described in Section 3 (a)(i) shall be sent in good
funds by wire to:
Bank: XX Xxxxxx/Chase
ABA # : 000000000
Acct Name: Xxxxxx, Xxxxxxx & Xxxxxxx
Acct # : 001013513
Ref.: Old Oak Fund, Inc.
(c) The payments described in Section 3(a)(ii) and (iii) shall be sent
in good funds by overnight mail to Old Oak Funds, Inc., 000 Xxxxxxx Xxxxx,
Xxxxxxx, X.X. 00000, Attn: Xxxxxxx Xxx.
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4. Representations and Warranties of the Investors. The Investors,
jointly and severally, represent and warrant to Surge as set forth in this
Section 4.
(a) Each of the Investors has the power and authority to accept,
execute and deliver this Agreement and to carry out its obligations hereunder;
and the execution, delivery and performance by each of the Investors of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action on the part of such Investor and this
Agreement constitutes the valid and legally binding obligations of each of the
Investors enforceable against each of the Investors in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally now or hereafter in effect and subject to the application of equitable
principles and the availability of equitable remedies.
(b) None of the Investors is a party or subject to nor bound by any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge any of the Securities, other than pursuant to this Agreement.
(c) Each of the Investors is the lawful owner of each of the Securities
to be assigned, transferred and conveyed to Surge by the Investor pursuant to
Section 2 above and has the full right, power, and authority to assign, transfer
and convey to Surge such Securities in accordance with the terms of this
Agreement; and the sale, assignment, transfer and conveyance of such Securities
in accordance with the terms of this Agreement will transfer good, valid and
marketable title to such Securities free and clear of all liens, encumbrances,
claims or rights of every kind and nature whatsoever.
(d) Each of the Securities to be assigned, transferred and conveyed to
Surge pursuant to Section 2 above is owned by the Investors free and clear of
any and all restrictions, liens, claims, or encumbrances or rights of third
parties of any nature whatsoever, with the exception of the legend that appears
on the reverse side of the Certificate. The Securities assigned, transferred and
conveyed to Surge pursuant to this Agreement represent all of the shares of
stock, warrants or other debt or equity securities of Surge held by the
Investors, their family members, associates and affiliates.
(e) The Investors never received certificates representing warrants
(the "Warrants") to purchase shares of common stock of Surge as reflected in
Surge's financial statements in its Annual Report on Form 10-KSB for the year
ended November 30, 2001; such Investors never transferred or otherwise disposed
of their rights to such Warrants and such Warrants are specifically included in
the equity securities of Surge to which the Investors have released their rights
hereunder.
(f) The Investors are not aware of any contract, agreement, or
obligation, oral or written, between Surge (including the related parties
released by the Investors) and the Investors' family members, associates and
affiliates, other than this agreement.
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5. Standstill Agreement by Investors. Each Investor agrees that
following the date of this Agreement, each Investor will not, nor will it permit
or cause any of its affiliates or associates, from and after the date that such
person becomes an affiliate or associate, to:
(a) acquire, announce an intention to acquire, offer or
propose to acquire, solicit an offer to sell or agree to acquire by purchase, by
gift, by joining a partnership, limited partnership, syndicate or other "group"
(as such term is used in Section 13(d)(3) of the Exchange Act, such term to have
such meaning throughout this Agreement) or otherwise, any (i) assets, businesses
or properties of Surge or (ii) shares of Surge common stock or any Surge
securities convertible into, exchangeable for or exercisable for common stock
(all such securities and Surge common stock, collectively, "Voting Securities");
(b) participate in the formation or encourage the formation
of, or join or in any way participate with, any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act and Section 2(2) of the Securities Act
of 1933 (the "Securities Act"), such term to have such meaning throughout this
Agreement) which owns or seeks to acquire beneficial ownership of the Voting
Securities;
(c) solicit, or participate in any "solicitation" of "proxies"
or become a "participant" in any "election contest" (as such terms are defined
or used in Regulation 14A under the Exchange Act, these terms to have such
meaning throughout this Agreement) with respect to Surge;
(d) initiate, propose or otherwise solicit stockholders for
the approval of one or more stockholder proposals with respect to Surge or
induce any other person to initiate any stockholder proposal;
(e) seek to place any representative on the Board of Directors
of Surge or seek to have called any meeting of the stockholders of Surge;
(f) otherwise act, alone or in concert with others, to seek to
control the management, Board of Directors, policies or affairs of Surge or
solicit, propose, seek to effect or negotiate with any other person (including,
without limitation, Surge) with respect to any form of business combination or
other extraordinary transaction with Surge or any of its subsidiaries or any
restructuring, recapitalization, similar transaction or other transaction not in
the ordinary course of business with respect to Surge or any of its
subsidiaries, solicit, make or propose or negotiate with any other person with
respect to, or announce an intent to make, any tender offer or exchange offer
for any securities of Surge or any of its subsidiaries, or publicly disclose an
intent, purpose, plan or proposal with respect to Surge, any of its subsidiaries
or any securities or assets of Surge or any of its subsidiaries, that would
violate the provisions of this Section 5, or assist, participate in, facilitate
or solicit any effort or attempt by any person to do so or seek to do any of the
foregoing; or
(g) otherwise act, alone or in concert with others, to encourage,
facilitate, incite or seek to cause others to instigate legal proceedings
against Surge or any of its officers, directors or employees.
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6. Covenants Against Non-Disparagement. Each of the Investors hereby
agrees that it will not make any statements (publicly or privately, oral or
written) that are professionally or personally disparaging about, or adverse to,
the interests of Surge (including its officers, directors and employees)
including, but not limited to, any statements that disparage any person,
product, service, finances, financial condition, capability or any other aspect
of Surge's business, and that each such Investor will not engage in any conduct
which is intended to harm professionally or personally the reputation of Surge
(including its respective officers, directors and employees).
7. Specific Performance. The parties hereto acknowledge that any breach
of this Agreement would cause severe and immediate harm to the non-breaching
party or parties. Accordingly, the parties hereto agree that, in the case of
such breach or threatened breach of this Agreement, the non-breaching party or
parties shall, in addition to and not in lieu of any other rights and remedies
available under law or in equity, have the right and remedy to have the relevant
provisions of this Agreement specifically enforced by injunctive relief in any
court of competent jurisdiction.
8. Attorneys' Fees. In the event of any dispute arising out of the
performance by any party or any of its obligations under the terms of this
Agreement, a party which, in a court of competent jurisdiction, obtains a
judgment or award which is not subject to further appeal, shall be entitled to
recover its reasonable attorneys' fees and costs incurred therein.
9. Acknowledgement. Each party to this Agreement separately
acknowledges that he, she or it has read this Agreement and the agreements and
instruments contemplated hereby, has been advised by counsel with respect to
them, and fully understands their provisions, and that no representation or
promise not expressly contained in this Agreement or the instruments
contemplated hereby has been made to him, her or it. Each party hereto further
acknowledges that he, she or it is not entering into this Agreement on the basis
of any promise or representation, express or implied, that is not contained
herein.
10. Successors and Assigns. Each party hereto agrees that this
Agreement is binding upon and inures to the benefit of such party's respective
heirs, successors and assigns.
11. Entire Agreement; Governing Law. This Agreement constitutes
the entire agreement between the parties relating to the
subject matter hereof and thereof, and together supersede all
previous understandings, negotiations, agreements, and other
communications, whether oral or written, relating thereto. In
the event that any one or more of the provisions contained in
this Agreement, or any application thereof, shall be deemed
invalid, illegal or unenforceable in any respect, the
validity, legality and unenforceability of the remaining
provisions of this Agreement, and any other applications
thereof, shall not in any way be affected or impaired. This
Agreement may not be modified in any way except in a writing
signed by all parties. This Agreement shall be governed by and
construed in accordance with the law of the State of New York
for all purposes shall be construed in accordance with the law
of such State without giving effect to the principles of
conflict of laws thereof. This Agreement may be signed in
counterpart and each executed copy shall be a counterpart and
each executed copy shall be a counterpart original, of full
force and effect, and enforceable against the party executing
the counterpart, but all counterparts, together, shall
constitute one and the same instrument.
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12. Arbitration. Any controversy arising out of or relating to this
agreement, or the construction, performance or breach thereof, shall be settled
by arbitration pursuant to the rules of the American Arbitration Association.
Judgment upon any award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
13. This Agreement shall, upon satisfaction of the conditions specified
in Section 1 hereof, take effect as a document under seal as of the date first
written above.
SURGE COMPONENTS, INC.
By: /s/ Xxx Xxxx
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Name: Xxx Xxxx
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Title: President
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EQUILINK CAPITAL PARTNERS, LLC
By: /s/ Xxxxxx XxXxxx
-----------------------------------------
Name: Xxxxxx XxXxxx
Title: Chief Executive Officer
/s/ Xxxxxx XxXxxx
---------------------------------------------
Xxxxxx XxXxxx
OLD OAK FUND, INC.
By: /s/ Xxxxxxx Xxx
--------------------------------------
Name: Xxxxxxx X. Xxx
Title: Assistant Secretary
/s/ Xxxxxxx Xxx
-------------------------------------------
Xxxxxxx Xxx
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Exhibit A
STOCK POWER
For value received, OLD OAK FUND INC. hereby assigns and transfers unto
SURGE COMPONENTS, INC., 252,000 Shares of the Common Stock and 13,300 Shares of
the Preferred Stock of SURGE COMPONENTS, INC. (the "Corporation"), represented
by Certificate Nos.0420 and 2, respectively, herewith, and do hereby irrevocably
constitute and appoint the Corporation's attorney to transfer the said stock on
the books of the within named Corporation with full power of substitution in the
premises.
Dated: April 12, 0000 XXX XXX FUND INC.
By: /s/ Xxxxxxx X. Xxx
----------------------------------
Name: Xxxxxxx X. Xxx
Title: Assistant Secretary
In presence of:
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STOCK POWER
For value received, XXXXXX XXXXXX hereby assigns, and transfers unto
SURGE COMPONENTS, INC., 6000 Shares of the Preferred Stock of SURGE COMPONENTS,
INC. (the "Corporation"), represented by Certificate No.15 herewith, and do
hereby irrevocably constitute and appoint the Corporation's attorney to transfer
the said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated: April 12, 2002
/s/ Xxxxxx XxXxxx
--------------------------------
Xxxxxx XxXxxx
In presence of:
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