Exhibit 10.1
SETTLEMENT AND RELEASE AGREEMENT
This Settlement and Release Agreement ("Settlement
Agreement") is made and entered into this 13th day of
February, 2001 (the "Effective Date"), between and among
California Software Corporation, a corporation organized
under the laws of the state of Nevada (the "Company"), Xxxxx
Xxxxxx, Xxxxx Xxxxxx, and NevWest Securities Corporation a
corporation organized under the laws of the state of Nevada
including its officers, directors, employees and agents
("NevWest"), on the one hand (collectively, the "Released
Parties"), and certain of the subscribers (the
"Subscribers") to the Company's Private Placement Memorandum
dated February 14, 2000 (the "PPM"). All the above-
described individuals and entities are sometimes referred to
herein as "the Parties."
W I T N E S S E T H:
WHEREAS, California Software Corporation conducted a
private placement (the "Private Placement") pursuant to a
private placement memorandum (PPM) which memorandum
contained certain representations made in good faith
pertaining to the financial condition and/or performance of
the Company;
WHEREAS, the Subscribers purchased shares in
conjunction with the Private Placement;
WHEREAS, subsequent to the completion of the Private
Placement, the Company caused to be filed a material
restatement of the financial condition and/or performance of
the Company, which restatement may have, or is alleged to
have, affected implied terms and conditions contained in the
PPM;
WHEREAS, the Company, in light of these issues, desires
to resolve any potential dispute or claim which may arise as
a result of these circumstances;
WHEREAS, the Subscribers desire to reach an equitable
settlement of this matter without resorting to further legal
recourse including but not limited to potential litigation
related to any and all claims they may allege against any of
the Released Parties as a consequence of these
circumstances;
NOW, THEREFORE, in consideration of the payments,
releases, covenants, warrants and undertakings hereinafter
set forth, the Released Parties and Subscribers agree as
follows:
A G R E E M E N T:
1. Any and All Alleged Claims. This settlement
relates to all claims of the Subscribers against the
Released Parties, including but not limited to individual or
derivative claims based on any alleged inaccuracy in the
Company's financial statements, PPM, or filings with the
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Securities & Exchange Commission; claims for fraud,
including without limitation claims concerning the
misstatement of facts or the omission of facts, gross
negligence, or mismanagement arising from the alleged
failure of the Company or its officers or directors properly
to manage or oversee the Company's outside auditors; any
claims that the Released Parties breached their fiduciary
duties, if any, to the Subscribers; and such other claims of
any sort arising from the circumstances contemplated herein.
2. No Admission. This settlement is not an admission
of any liability by any of the Released Parties or their
officers, directors, or representatives, which liability is
expressly denied, and is intended solely to resolve the un-
liquidated and disputed claims of the Subscribers against
the Released Parties. This Settlement Agreement shall not
be admissible as evidence against any party hereto or its
Affiliates in any proceeding other than in a proceeding to
enforce an obligation of a party hereunder or as proof of
Settlement.
3. Conditions to Settlement. This Settlement
Agreement shall have no force or effect absent satisfaction
of each and all of the following conditions, which
conditions are for the benefit of the Company and may be
waived in writing in the Company's sole and unfettered
discretion:
3.1. Execution of the Settlement Agreement by
Subscribers representing no less than ninety percent (90%)
of all common shares sold through the PPM (the "Required
Number of Subscribers"), all of which Subscribers shall
participate to the full extent of the Subscriber's
shareholdings in the Company, whether those shares are held
in the Subscriber's name, in trust, or in a related name or
entity (Those Subscribers who execute the Settlement
Agreement and thereby agree to participate are referred to
herein as the "Participating Subscribers"); and
3.2. Delivery to the Company's representative, Xxxxx &
Xxxxxx, on or before December 4, 2000, of Settlement
Agreements executed by all Subscribers electing to
participate in the Settlement Agreement. (The date of such
delivery shall be referred to herein as the Effective Date.)
4. Absolute Rescission and Settlement. This
Agreement makes null and void any and all previous
agreements as between the Released Parties, or any of them,
and the Subscribers whether written or oral.
5. Released Parties Consideration. The Released
Parties shall provide consideration in exchange for the
releases, covenants, warrants and undertakings executed by
the Participating Subscribers as follows:
5.1. Cash Compensation. The Company shall
compensate the participating Subscribers in the form of cash
on a pro-rata basis related to their investment
participation in the PPM, in the maximum aggregate amount of
Two Million Five Hundred Thousand Dollars ($2,500,000.00).
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The terms of such monetary based compensation shall include:
5.1.1. A maximum aggregate amount of One
Million Five Hundred Thousand Dollars
($1,500,000.00) shall be made available to
Participating Subscribers within forty-five
days of the Effective Date. The Company
shall be solely and exclusively responsible
for such payment and shall effectuate such
payment by paying the Participating
Subscribers 56.5 cents ($0.565) for each
share of the Company's common stock purchased
through the PPM. Should all Subscribers
execute the Settlement Agreement, this amount
reflects an aggregate payment of
approximately $1.5 million.
5.1.2. Within forty-five days of the Effective
Date, by Promissory Note, a maximum aggregate
amount of One Million Dollars ($1,000,000.00)
shall be made available to Participating
Subscribers by the Company. The Company
shall be solely and exclusively responsible
for such payment and shall effectuate such
payment via Promissory Note, which Promissory
Note shall take the form of the sample note
attached hereto as Exhibit "A". This Note
shall obligate the Company to pay the
Participating Subscribers 36.5 cents ($0.365)
for each share of the Company's stock
obtained through the PPM within thirty-six
(36) months pursuant to the terms of a
Promissory Note (the "Promissory Note").
Should all Subscribers execute the Settlement
Agreement, the aggregate payment to be made
under the Promissory Note totals
approximately $1 million.
5.2 Securities Based Compensation.
5.2.1 Within forty-five days of the Effective
Date, Xxxxx Xxxxxx and Xxxxx Xxxxxx shall
each transfer to the Participating
Subscribers, on a pro rata basis, based on
the number of shares purchased through the
PPM by all Participating Subscribers, up to
600,000 shares (the "Xxxxxx/Xxxxxx Shares")
of their individual holdings in the Company's
common stock, or such lesser sum equal to the
percentage of all common shares sold through
the PPM represented by the Participating
Subscribers. [By way of example, should the
Participating Subscribers represent only 95%
of the shares sold through the PPM, the
number of shares each would transfer would
total 570,000 shares.]
5.2.2 Within forty-five days of the Effective
Date, NevWest shall transfer to the
Participating Subscribers, on a pro rata
basis, based on the number of shares
purchased through the PPM by all
Participating Subscribers, up to 500,000
shares (the "NevWest Shares") of NevWest's
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holdings in the Company's common stock, or
such lesser sum equal to the percentage of
all common shares sold through the PPM
represented by the Participating Subscribers.
[By way of example, should the Participating
Subscribers represent only 95% of the shares
sold through the PPM, the number of shares
NevWest would transfer would total 475,000
shares.] NevWest shall be solely and
exclusively responsible for transferring the
shares referenced in this sub-paragraph.
5.2.3 The Participating Shareholders
acknowledge that the common shares of the
Company's stock held by Xxxxx Xxxxxx, Xxxxx
Xxxxxx, and NevWest are or may be restricted
securities, as described in Rules 144 and
144A of the Securities Act of 1933, and are
or may be subject to the provisions thereof.
The Company warrants however, that it shall
cause to be filed with the Securities and
Exchange Commission a Registration Statement
registering these shares along with those
shares initially purchased by the Subscribers
through the Private Placement. The
Registration Rights referred to in this
section are embodied in the Registration
Rights Agreement substantially in the form
attached hereto as Exhibit "B".
5.2.4 Within forty-five days of the Effective
Date, the Company shall issue each of the
Participating Subscribers a warrant (the
"Warrant") exercisable into one share of the
Company's common stock for each share
purchased by the Participating Subscribers
through the Private Placement. The Warrant
shall have a term of two (2) years and an
exercise price equal to the higher of (a)
$2.00 or (b) the average of the closing bid
and ask prices of the Company's common stock
on the OTCBB on the date immediately prior to
the date the Settlement Agreement is executed
and exchanged by the Released Parties and by
the Required Number of Subscribers. The form
of the Warrant is attached hereto as Exhibit
"C".
5.2.5 Issuance of the Xxxxxx/Xxxxxx Shares,
NevWest Shares, and the Warrants shall be
subject to qualification of the issuance
thereof for exemption from the registration
requirements of Federal and applicable state
securities laws. In order to ensure such
exemption, each Participating Subscriber
shall execute an Investor Certificate in a
form acceptable to counsel to the Company
certifying that such Participating Subscriber
continues to be an "accredited investor" as
defined in Rule 501(a) of the Securities Act
of 1933, as amended, as represented by such
Participating Subscriber in the Private
Placement.
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6. Tax Consequences. The Released Parties shall not
be responsible for the tax consequences, if any, to the
Participating Shareholders in the transactions contemplated
by the Settlement Agreement.
7. Covenant of Cooperation. The Participating
Subscribers shall reasonably cooperate with the Released
Parties in connection with pursuit of any claims by the
Released Parties against the Company's prior accountant,
Xxxxx X. Xxxxxxx, and in the defense of any claims asserted
by non-signatories to the Settlement Agreement against the
Released Parties (collectively, the "Cooperation Claims").
This duty to cooperate shall include, but not be limited to,
the duty to voluntarily: (a) provide all documentation in
their control relating to the Company or their investment;
(b) appear as reasonably required in any administrative,
judicial, or other proceeding relating to the Cooperation
Claims; (c) execute such documents reasonably necessary to
assist the Released Parties in connection with the
Cooperation Claims; (d) notify Released Parties if served
with any subpoenas or other legal process relating to the
Cooperation Claims or if contacted by any third party
requesting information concerning the Cooperation Claims;
(e) cooperate in any application of the Released Parties to
obtain any determination that the sums agreed upon herein
constitute a reasonable settlement; and (f) otherwise
cooperate as reasonably necessary to effectuate the terms of
this Settlement Agreement.
8. Corporate Governance. To the extent director or
shareholder approval may be required to consummate the
transactions in the Settlement Agreement, the Parties agree
to act in good faith to accomplish such approvals.
9. Timely Performance. In the event that the Released
Parties fail timely to provide the consideration described
in this Agreement, the Subscribers shall have the option of
either (i) terminating this Agreement and treating it as
null and void or (ii) treating the Agreement as effective
and suing the Released Parties in the County of Orange,
State of California for breach of contract and/or to
specifically enforce the Released Parties payment and other
obligations hereunder. In the event of such suit, the
Released Parties consent to the jurisdiction and venue
identified herein.
10. Subscriber Consideration.
10.1 Release by the Participating Subscribers. Except
for Claims for breach of this Settlement Agreement, the
Participating Subscribers, on behalf of themselves and their
respective officers, directors, employees, representatives,
predecessors, successors, agents, assigns and attorneys
(together, the "Releasors"), do hereby forever release and
discharge the Released Parties and their respective
officers, directors, employees, representatives,
predecessors, successors, agents, assigns and attorneys
(together, the "Releasees"), from any and all actions,
causes of actions, suits, debts, sums of money, accounts,
reckonings, bonds, bills, contracts, controversies,
agreements, promises, damages, judgments, awards,
executions, claims and demands whatsoever, including without
limitation costs and attorneys' fees, in law, admiralty or
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equity, or as a result of any arbitration, whether known or
unknown to any of the Releasors (collectively, "Claims"),
which the Releasors, or any of them, ever had, now have or
hereafter can, shall, or may have, whether in their own
right or by assignment, transfer or grant from any other
person, upon or by reason of any matter, cause or thing
whatsoever, from the beginning of the world to the Effective
Date. This release extends to, but is not limited to, any
individual or derivative claims that the Releasors might
have based on any alleged inaccuracy in the Company's
financial statements, PPM, or filings with the Securities &
Exchange Commission; claims for fraud including, without
limitations, claims concerning the misstatement of facts or
the omission fo facts, gross negligence, or mismanagement
arising from the alleged failure of the Company or its
officers or directors properly to manage or oversee the
Company's outside auditors; and any claims that the Released
Parties breached their fiduciary duties, if any, to the
Subscribers.
10.2 Waiver of Civil Code Section 1542 and Similar
Provisions. It is the intention of the Releasors, and each
of them, that this instrument shall be effective as a full
and final accord and satisfaction and final release covering
and including all claims of any kind or nature, past,
present, or future, known or unknown, suspected or
unsuspected, against the Released Parties. In entering into
this Settlement Agreement, the Releasors, and each of them,
waive and relinquish to the fullest extent permitted by law
the provisions, rights, and benefits of California Civil
Code section 1542 and any similar, comparable, or equivalent
law of any state or territory of the Unitd States or
principle of common law. Section 1542 of the California
Civil Code provides 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 this connection, the Participating Subscribers and
Releasors acknowledge that claims and facts in addition to
or different from those which are now known or believed to
exist may hereafter be discovered with respect to the
subject matter of this instrument or the other parties
hereto.
10.3 Covenant Not to Xxx. The Participating Subscribers
hereby covenant never to xxx or threaten to xxx the Released
Parties over matters directly or indirectly contemplated
herein.
11. Notices. Any notice given pursuant to this
Settlement Agreement shall be in writing and, except as
otherwise expressly provided herein, shall be deemed to have
been duly delivered if delivered in person or by certified
or registered or overnight express mail, postage and mailing
expense prepaid, or by facsimile transmission. Electronic
signatures or signature facsimiles shall be deemed to
evidence due execution. Any such notice, if given or
rendered to the Company or its Affiliates shall be addressed
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to: California Software Corporation, 0000 XxXxxx Xxx, Xxxxxx
Xxxxxxxxxx 00000 Attention: Chief Executive Officer or shall
be transmitted via facsimile to: (000)-000-0000. Any such
notice, if given or rendered to NevWest or its Affiliates
shall be addressed to: NevWest Securities Corporation 0000
X. Xxxxxxx Xxxxx Xxxxxxx Xxxxx X-0, Xxxxxxxxx, Xxxxxx, 00000
Attention: Chief Executive Officer or shall be transmitted
via facsimile to: (000)-000-0000. Either party may specify a
different address by notifying the other in writing of such
different address.
12. Severability. If any provision of this
Settlement Agreement, or the application of such provision
to any person or circumstance, shall be held to be invalid
or unenforceable, the remainder of this Settlement
Agreement, or the application of such provision to such
persons or circumstances other than those to which it is
held invalid or unenforceable, shall not be affected
thereby, provided that such invalid or unenforceable
provisions shall be replaced by valid and enforceable
provisions which will achieve as far as possible the
economic and business intentions of the parties to this
Settlement Agreement.
13. Participating Subscribers' Acknowledgement. The
Participating Subscribers hereby warrant and represent that
(a) they have read and understood the terms of this
Settlement Agreement; (b) they have the full right and
authority (i) to enter into this Settlement Agreement, (ii)
to grant the releases, covenants and undertakings recited
herein on their own behalf and on behalf of each of their
Affiliate(s) if any, and (iii) to enter into the agreements
received herein on their own behalf and on behalf of each of
their Affiliate(s) if any; (c) there are no outstanding
agreements, assignments, or encumbrances inconsistent with
the provisions set forth in this Settlement Agreement; (d)
no other party or agent or attorney of any other party has
made any promise, representation, or warranty whatsoever,
express or implied, not contained herein, concerning the
subject matter hereof, to induce them to execute this
Agreement, and the Participating Subscribers acknowledge
that they have not executed this Agreement in reliance upon
any such promise, representation, or warranty not contained
herein; and (e) this Settlement Agreement has been executed
with the consent and upon the advice of the Participating
Subscribers' counsel or with an opportunity of the
Participating Subscribers to obtain advice of counsel.
14. Released Parties Acknowledgment. The
Released Parties hereby warrant and represent that (a) they
have read and understood the terms of this Settlement
Agreement; (b) they have the full right and authority (i) to
enter into this Settlement Agreement, (ii) to grant the
releases, covenants and undertakings recited herein on their
own behalf and on behalf of each of their Affiliate(s), and
(iii) to enter into the agreements recited herein on their
own behalf and on behalf of each of their Affiliate; and (c)
there are no outstanding agreements, assignments, or
encumbrances inconsistent with the provisions set forth in
this Settlement Agreement
15. Integration. Except as otherwise specifically
set forth herein, this Settlement Agreement, together with
its Exhibits, represents the entire agreement and
understanding between and among the parties hereto with
respect to the subject matter hereof and supersedes any and
all prior or contemporaneous discussions, agreements and
understandings relating thereto.
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16. Strict Performance. The failure by any party
to insist upon the strict performance of any covenant, duty,
agreement or condition of this Settlement Agreement or to
exercise any right or remedy consequent upon a breach
thereof shall not constitute waiver of any such breach or
any other covenant, duty, agreement or condition.
17. No Agency. Nothing in this Settlement
Agreement shall be deemed to appoint or authorize any party
to act as an agent of the other party or to assume or incur
any liability or obligation in the name or on behalf of the
other party.
18. Governing Law and Jurisdiction. This Agreement
is made and entered into in the State of California and
shall in all respects be interpreted, enforced, and governed
by and under the laws of the State of California. Any
dispute concerning the interpretation, enforcement, or
performance of this Settlement Agreement shall be resolved
in any court of competent jurisdiction in the County of
Orange, State of California. . All Parties hereto
acknowledge and submit to jurisdiction of such courts within
the State of California.
19. Counterparts. This Settlement and
Dissolution Agreement may be executed in separate
counterparts, each of which shall be considered an original
but all of which shall constitute one agreement.
20. Drafting of Agreement. This Agreement is a
negotiated document and shall be deemed to have been drafted
jointly by the parties. This Agreement shall be interpreted
and construed on the express assumption that all parties
participated equally in its drafting.
21. Time of the Essence. Time is of the essence of
this Settlement Agreement, and of each term and condition
hereof.
WHEREFORE, the parties hereto, having been duly authorized
to do so, have caused this Settlement Agreement to be
executed as of the date first above written.
CALIFORNIA SOFTWARE CORPORATION
/s/ Xxxxx Xxxxxx
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By Xxxxx Xxxxxx, its CEO
/s/ Xxxxx Xxxxxx
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By Xxxxx Xxxxxx, its President
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NEVWEST SECURITIES CORPORATION
/s/ Xxxxxxx X. Xxxxx, III
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By Xxxxxxx X. Xxxxx, III, its authorized representative
/s/ Xxxxxx X. Xxxxxx
-------------------------------
By Xxxxxx X. Xxxxxx, its authorized representative
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
SUBSCRIBER(S)
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