EXHIBIT 10.3
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SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is dated as of this 31st
day of December, 2002 between XXXxxx.xxx, Inc., a Delaware corporation ("CDK")
and Diversified Capital Holdings, LLC, a New York limited liability company
("Diversified", and together with CDK, the "Purchasers") and JWZ Holdings, Inc.,
a New York corporation ("JWZ"), and Adelphia Holdings, LLC, a New York limited
liability company ("Adelphia" and, together with JWZ , the "Sellers").
1. Diversified entered into a Stock Purchase Agreement dated May 15,
2002 with JWZ and Adelphia (the "Stock Purchase Agreement"). CDK
agreed to issue an aggregate of 69,500 shares of its Series A
Preferred Stock to JWZ and Adelphia and Diversified delivered a
promissory note in the principal amount of $17,500 to Adelphia
(the "Adelphia Note") and a promissory note in the principal
amount of $12,500 to JWZ (the "JWZ Note") in exchange for all of
the outstanding capital stock of Crossover Advisors, Inc., the
successor by merger to Crossover Advisors LLC pursuant to the
Stock Purchase Agreement.
2. Certain aspects of the Stock Purchase Agreement have not been
fully performed and the parties wish to settle their respective
obligations under the Stock Purchase Agreement, the Adelphia Note
and the JWZ Note in the manner set forth herein.
NOW, THEREFORE, for good and valuable consideration, the Parties,
intending to be legally bound, agree as follows:
1. SETTLEMENT TERMS.
1.1 Settlement Consideration. Subject to the terms and
conditions herein stated, the parties respective obligations shall be
settled on the Closing Date, as described in Section 1.5 of this
Agreement, by CDK and Diversified delivering to Adelphia and JWZ
consideration consisting of 69,500 shares of CDK Series A Preferred
Stock and the delivery to Adelphia the sum of $12,500 (the "Settlement
Consideration").
1.2 Payment of the Settlement Consideration.
(a) In full consideration of Sellers' settlement and
release of the Purchasers from their obligations under the
Stock Purchase Agreement and the JWZ Note, CDK shall issue and
deliver to Sellers on the Closing Date 69,500 shares of its
Series A Preferred Stock (the "Series A Shares") in the
following names and amounts:
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Name Amount
---- ------
Adelphia Holdings, LLC 23,250
Adelphia Holdings, LLC 11,500
JWZ Holdings, Inc. 23,250
JWZ Holdings, Inc. 11,500
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69,500
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[Note: As a result of amendments to the designation setting
forth the relative rights and preferences of the Series A
Shares and, after giving effect to an amendment to CDK's
certificate of incorporation which has been approved by
shareholders but is not effective, each Series A Share will be
convertible into 2 common shares of CDK.]
(b) Certificates representing 23,000 Series A Shares,
together with stock powers duly endorsed in blank by Adelphia
and JWZ shall be held in escrow by Xxxxxx & Xxxxxxxxx LLP,
pursuant to an escrow agreement in the form annexed hereto as
Exhibit A (the "Escrow Agreement"). The Escrow Agreement shall
provide that:
(i) In the event CDK has not engaged in
a change of control merger or
acquired operating assets that
accomplishes the same effect (each a
"Trigger Transaction") by May 15,
2003, the escrowed Series A Shares
will be released to Adelphia and
JWZ.
(ii) In the event and at such time as CDK
consummates a Trigger Transaction,
the escrowed Series A Shares will be
returned to CDK for cancellation.
(c) In full consideration of Adelphia's settlement
and release of Diversified from the Adelphia Note, CDK will,
on the Closing Date, pay $12,500 to Adelphia.
1.3 Closing. The Closing shall take place upon the
satisfaction or waiver of the conditions set forth in Section 2 at
10:00 a.m. at the offices of Xxxxxx & Xxxxxxxxx LLP, 000 Xxxxxxx
Xxxxxx, Xxxxx 000, Xxxxxx Xxxx, Xxx Xxxx 00000, (and may be by delivery
of documents by overnight courier) not later than January 17, 2003, or
at such other time and date as Sellers and Purchasers shall agree in
writing. Such time and date are herein referred to as the "Closing
Date."
2. Conditions to Closing.
2.1 Purchasers. The Purchasers obligations under this
agreement and CDK's obligations to issue and deliver the Series A
Shares are subject to:
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(a) Sellers' delivery to Purchaser the original JWZ
Note and Adelphia Note, marked "cancelled;"
(b) the execution and delivery of the Escrow
Agreement;
(c) Xxxxx Xxxxxxx having executed the Separation and
Release Agreement in the form annexed hereto as Exhibit B (the
"Separation Agreement"); and
(d) The representation and warranties of Sellers set
forth in this Agreement shall be true and correct in all
material respects.
2.2 Sellers. The Sellers obligation under this Agreement shall
be subject to the representations and warranties of Purchasers set
forth in this Agreement being true and correct in all material
respects.
3. MUTUAL RELEASES. On the Closing Date, subject to the performance of
Purchasers of their obligation set forth in Section 1.2 of this
Agreement, each party hereto, such party's heirs, assigns and agents,
do hereby fully and forever, release, waive and discharge each of the
parties hereto, and their respective officers, directors, shareholders,
agents, employees, successors and assigns, (hereinafter collectively
referred to as the "Releasees") from and against each and every claim,
demand, cause of action, obligation, damage, complaint, expense or
action of any kind, description or nature whatsoever, known or unknown,
suspected or unsuspected, that each party has or may hereafter have,
against the Releasees arising out of the Stock Purchase Agreement, the
Adelphia Note and the JWZ Note. This mutual release specifically
excludes the rights and obligations of the parties under this
Agreement, the Escrow Agreement, the Separation Agreement and paragraph
7.18 of the Stock Purchase Agreement.
4. REPRESENTATIONS OF SELLERS. The Sellers, individually, represent,
warrant and agree as follows:
4.1 Authority to Execute and Perform Agreement; No Breach.
Each Seller has the full legal right and power and all authority and
approval required to enter into, execute and deliver this Agreement and
to perform fully their respective obligations hereunder. This Agreement
has been duly executed and delivered by such Seller and, assuming due
execution and delivery by, and enforceability against, Purchasers,
constitutes the valid and binding obligation of such Seller enforceable
in accordance with its terms, subject to the qualifications that
enforcement of the rights and remedies created hereby is subject to (i)
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors, and
(ii) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law). No
approval or consent of, or filing with, any governmental or regulatory
body, and no approval or consent of, or filing with, any other person
is required to be obtained by such Sellers or in connection with the
execution and delivery by such Sellers of this Agreement and
consummation and performance by them of the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by
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such Sellers and the consummation of the transactions contemplated
hereby in accordance with the terms and conditions hereof by such
Sellers will not:
(a) knowingly violate, conflict with or result in the
breach of any of the material terms of, or constitute (or with
notice or lapse of time or both would constitute) a material
default under, any contract, lease, agreement or other
instrument or obligation to which such Sellers is a party or
by or to which any of the properties and assets of such
Sellers may be bound or subject;
(b) violate any order, judgment, injunction, award or
decree of any court, arbitrator, governmental or regulatory
body, by which either such Sellers or the securities, assets,
properties or business of such Sellers is bound; or
(c) knowingly violate any statute, law or regulation.
4.2 Securities Acknowledgements.
---------------------------
Sellers hereby acknowledges that:
(a) Neither the Series A Shares nor the shares of
common stock underlying the Series A Shares have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities act in reliance on
exemptions therefrom.
(b) In connection with the purchase of the Series A
Shares, that no representation has been made by
representatives of CDK regarding its business, assets or
prospects other than that set forth herein and as set forth in
the filings made by CDK pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended and such other
representations and warranties as set forth in this Agreement.
(c) The certificate or certificates representing the
Series A Shares will bear the following legend:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933. The
securities have been acquired for investment and may not
be sold, transferred assigned in the absence of an
effective registration statement for these securities
under the Securities Act of 1933 or an opinion of CDK's
counsel, that registration is not required under said
Act."
4.3 Securities Representations.
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Sellers hereby represent, warrant and agree as
follows:
(a) The Series A Shares are being acquired solely for
such Seller's own account, for investment and are not being
acquired with a view to or for the resale or distribution
thereof, Sellers have no present plans to enter into any such
contract, undertaking, agreement or arrangement and Sellers
further understand that the Series A Shares and the Shares of
Common Stock underlying such Series A Shares, may only be
resold pursuant to a registration statement under the
Securities Act, or pursuant to some other available exemption;
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(b) Each Seller is an "accredited investor" as that
term is defined in Regulation D of the Securities Act and
through its officers and directors has sufficient knowledge
and experience in financial and business matters to be capable
of evaluating the merits and the risks of its investment in
the Series A Shares and is able to bear the economic risk of
its investment in the Series A Shares;
5. REPRESENTATIONS OF PURCHASERS. Each Purchaser represents, warrants
and agrees as follows:
5.1 Authorization. Each Purchaser has full power, legal
capacity and authority to enter into this Agreement, to execute all
attendant documents and instruments necessary to consummate the
transaction herein contemplated, and, as to CDK, to issue and sell the
Series A Shares to Sellers, and to perform all of its obligations
hereunder. This Agreement and all other agreements, documents and
instruments to be executed in connection herewith have been effectively
authorized by all necessary action, corporate or otherwise, on the part
of the Purchasers, which authorizations remain in full force and
effect, have been duly executed and delivered by the Purchasers, and no
other corporate proceedings on the part of the Purchasers are required
to authorize this Agreement and the transactions contemplated hereby,
except as specifically set forth herein. This Agreement constitutes the
legal, valid and binding obligation of the Purchasers and is
enforceable with respect to the Purchasers in accordance with its
terms, except as enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, priority or other laws of court decisions
relating to or affecting generally the enforcements of creditors'
rights or affecting generally the availability of equitable remedies.
Neither the execution and delivery of this Agreement, nor the
consummation by the Purchasers of any of the transactions contemplated
hereby, or compliance with any of the provisions hereof, will (i)
conflict with or result in a breach or, violation of, or default under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, lease, credit agreement or other agreement,
document, instrument or obligation (including, without limitation, any
of its charter documents) to which the Purchasers is a party or by
which the Purchasers or any of its assets or properties may be bound,
or (ii) violate any judgment, order, injunction, decree, statute or
rule applicable to any Purchaser. No authorization, consent or approval
of any public body of authority or any third party is necessary for the
consummation by the Purchasers of the transactions contemplated by this
Agreement.
5.2 Shares. The Series A Shares to be issued and delivered to
Sellers shall be fully paid, non-assessable and free and clear of any
lien, claim, charge or encumbrance.
5.3 Holding Period. CDK acknowledges that the consideration
for the Series A Shares described in Section 1.2(a) was received May
15, 2002 and accordingly May 15, 2002 is the date at which the Sellers
holding period for the purposes of Rule 144 under the Securities Act
commences.
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6. NO ADMISSION. The parties agree that the execution of this Agreement
is not an admission by any of them of liability with respect to
damages, except as set forth in this Agreement.
7. MISCELLANEOUS PROVISIONS.
7.1 Severability. In the event that any provision of this
Agreement is found to be illegal or unenforceable by any court or
tribunal of competent jurisdiction, then to the extent that such
provision may be made enforceable by amendment to or modification
thereof, the Parties agree to make such amendment or modification so
that the same shall be made valid and enforceable to the fullest extent
permissible under existing law and public policies in the jurisdiction
where enforcement is sought, and in the event that the Parties cannot
so agree, such provision shall be modified by such court or tribunal to
conform, to the fullest extent permissible under applicable law, to the
intent of the Parties in a valid and enforceable manner, if possible
and if not possible, then be stricken entirely from the Agreement by
such court or tribunal and the remainder of this Agreement shall remain
binding on the parties hereto.
7.2 Amendment. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and
signed by the party or parties to be bound thereby.
7.3 Governing Law. This Agreement shall be interpreted,
construed, governed and enforced according to the internal laws of the
State of New York without regard to conflict or choice of law
principles of New York or any other jurisdiction. This Agreement shall
be executed in New York and is intended to be performed in New York. In
the event of litigation arising out of this Agreement, the parties
hereto consent to the personal jurisdiction of the State of New York,
and agree to exclusively litigate said actions.
7.4 No Waiver. If any party to this Agreement fails to, or
elects not to enforce any right or remedy to which it may be entitled
hereunder or by law, such right or remedy shall not be waived, nor
shall such nonaction be construed to confer a waiver as to any
continued or future acts, nor shall any other right or remedy be waived
as a result thereof. No right under this Agreement shall be waived
except as evidenced by a written document signed by the party waiving
such right, and any such waiver shall apply only to the act or acts
expressly waived in said document.
7.5 Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart will, for all purposes, be
deemed an original instrument, but all such counterparts together will
constitute but one and the same Agreement.
7.6 Binding Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, and upon their
respective heirs, successors, assigns and legal representatives.
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7.7 Counsel. Each of the parties hereto represents that it,
she or he has consulted legal counsel in connection with this
Agreement, or has been given full opportunity to review this Agreement
with counsel of his, her or its choice prior to execution thereof and
has elected not to seek such counsel. The parties hereto waive all
claims that they were not adequately represented in connection with the
negotiation, drafting and execution of this Agreement. Each party
further agrees to bear its own costs and expenses, including attorneys'
fees, in connection with the Action and this Agreement. If any Party
initiates any legal action arising out of or in connection with
enforcement of this Agreement, the prevailing Party in such legal
action shall be entitled to recover from the other Party all reasonable
attorneys' fees, expert witness fees and expenses incurred by the
prevailing Party in connection therewith.
7.8 Notices. All notices and demands permitted, required or
provided for by this Agreement shall be made in writing, and shall be
deemed adequately delivered if delivered by hand or by mailing the same
via the United States Mail, prepaid certified or registered mail,
return receipt requested, or by priority overnight courier for next
business day delivery by a nationally recognized overnight courier
service that regularly maintains records of its pick-ups and deliveries
and has daily deliveries to the area to which the notice is sent,
addressed to the parties at their respective addresses as shown below:
Name Address
---- -------
To Purchasers: XXXxxx.Xxx, Inc.
000 Xxxxx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxx, President
Facsimile: (000) 000-0000
With a Copy To: Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
To Adelphia: Adelphia Holdings, LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, President
Facsimile: (000) 000-0000
To JWZ: JWZ Holdings, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, President
Facsimile: (000) 000-0000
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Notices delivered personally shall be deemed communicated as
of the date of actual receipt. Notices mailed as set forth above shall
be deemed communicated as of the date three (3) business days after
mailing, and notices sent by overnight courier shall be deemed
communicated as of the date one (1) business day after sending.
7.9 Entire Agreement. This Agreement and the Exhibits hereto
set forth the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein, and supersedes all
prior agreements, promises, understandings, letters of intent,
covenants, arrangements, communications, representations or warranties,
whether oral or written, by any party hereto or by any related or
unrelated third party. All exhibits attached hereto, and all
certificates, documents and other instruments delivered or to be
delivered pursuant to the terms hereof are hereby expressly made a part
of this Agreement, and all references herein to the terms "this
Agreement", "hereunder", "herein", "hereby" or "hereto" shall be deemed
to refer to this Agreement and to all such writings.
7.10 Successors and Assigns. As used herein the term "the
Parties" shall include their respective successors in interest,
licensees or assigns.
7.11 Documents. At the conclusion of the Action, each Party
shall return to the other all documents and papers produced by the
other in connection with the Action.
7.12 Execution. Each person who signs this Agreement on behalf
of a corporate entity represents and warrants that he has full and
complete authority to execute this Agreement on behalf of such entity.
Each party shall bear the fees and expenses of its counsel and its own
out-of-pocket costs in connection with this Agreement.
7.13 Captions. The captions appearing in this Agreement are
for convenience only, and shall have no effect on the construction or
interpretation of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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Executed by the Parties on this ___ day of _____________, 2003.
PURCHASERS:
DIVERSIFIED CAPITAL HOLDINGS, LLC
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: Chief Executive Officer
XXXXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
Title: President and Chief Operating Officer
SELLERS:
JWZ HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: President
ADELPHIA HOLDINGS, LLC
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
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