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Exhibit 10.9
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is entered into as of
January 23rd, 1998 (the "Effective Date") by and between Demeter
BioTechnologies, Ltd., a Colorado corporation (the "Company") and Xxxxxx Xxxxx,
an individual residing in the State of Oklahoma ("Sears" and collectively with
the Company, the "Parties").
PREAMBLE
A. In December 1996, Sears filed a complaint against the Company and
Xxxxxxx Xxxxxxx, an individual residing in the Commonwealth of Pennsylvania
("Xxxxxxx") in the United States District Court of the Western District of
Oklahoma (the "District Court"), Docket No. Civ-96-2056-A (the "Litigation").
B. The Litigation was stayed by the District Court pending resolution
of certain issues between the Company, Xxxxxxx and Sears through an American
Arbitration Association proceeding which had been commenced by the Company in
the State of North Carolina (the "Arbitration Proceeding") pursuant to a Demand
for Arbitration requesting, among other things, for a determination that Sears
had breached the terms of the Employment Agreement, and awarding damages to the
Company.
C. Each of the Company and Xxxxxxx denies that either of them has any
liability to Sears, and Sears denies that he has any liability to the Company or
to Xxxxxxx.
D. In order to avoid the time, expense and distraction of the
Litigation and the Arbitration Proceeding, the Parties now wish to resolve each
and every dispute on the terms and conditions set forth in this Agreement.
THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and intending to be legally bound by this Agreement,
each of the Parties agrees as follows:
1. CASH CONSIDERATION. The Company shall pay Sears the sum of $35,000
(the "Cash Consideration") at the Closing (as defined in Section 5).
2. STOCK. The Company shall deliver to Sears at Closing (a) a
certificate for 1,675,000 shares of the Company's restricted (Rule 144) common
stock (the "Restricted Stock"), and (b) a certificate for 300,000 shares of the
Company's free trading common stock (the "Free Trading Stock" and collectively
with the Restricted Stock, the "Stock").
3. RESTRICTED STOCK LEGEND. The certificate evidencing the Restricted
Stock shall bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ISSUED UPON RELIANCE OF
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AN EXEMPTION FROM REGISTRATION UNDER SECTION 4(2) OF THE ACT AND UPON RELIANCE
OF AN EXEMPTION FROM REGISTRATION UNDER SECTION 401(b)(10) OF THE OKLAHOMA
SECURITIES ACT (THE "OKLAHOMA ACT"). THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND/OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT AND THE OKLAHOMA ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED BY
DELIVERY OF AN OPINION OF COUNSEL WHICH IS SATISFACTORY TO THE COMPANY AND ITS
COUNSEL.
4. PIGGY BACK REGISTRATION RIGHTS. If within three years of the
Effective Date, the Company elects to file one or more Registration Statements
with the Securities and Exchange Commission to register its common stock (each
such registration, a "Registration"), Sears shall have the right to request that
the Restricted Stock be included in each such Registration, and the Company
shall use its best efforts to cause the Restricted Stock to be included each
such Registration. Notwithstanding the foregoing, if any such Registration is an
underwritten registration on behalf of the Company or any other shareholders of
the Company who have been granted "demand" registration rights (collectively the
"Registration Rights Holders"), and the managing underwriters advise the Company
in writing that in their opinion all or a number of the shares of Restricted
Stock requested to be included in the Registration by Sears exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company and/or the Registration Rights Holders, the Company
shall include in the Registration (i) first, the securities the Company and/or
the Registration Rights Holders propose to sell and (ii) second, any shares
requested to be included in the Registration by Sears. The Company shall bear
all the costs and expense of the registration of the Restricted Stock; provided,
however, Sears shall pay his proportionate share of all transfer taxes and
brokerage commissions which are incurred as a result of the sale of any of the
Restricted Stock.
5. THE CLOSING. This transaction shall close on or before February 16,
1998 (the "Closing" or "Closing Date"), and shall be held in the offices of the
Company's Oklahoma City legal counsel.
A. COMPANY OBLIGATIONS. On the Closing Date, the Company shall
deliver to Sears' counsel the following: (a) the Cash Consideration in the form
of a cashier's check, (b) the Stock, and (c) an original letter to Xxxxx Xxxxxx,
X.X. of the American Arbitration Association ("AAA") in Charlotte, North
Carolina dismissing the Arbitration Proceeding with prejudice signed by the
Company and Xx. Xxxxxxx for actual delivery by Sears to the AAA. In addition the
Company shall on or before the Closing Date obtain and deliver at Closing an
executed original copy of the Mutual Release in the form of Exhibit A to this
Agreement (the "Mutual Release") signed by Xxxxxxx.
X. XXXXX OBLIGATIONS. On the Closing Date, Sears shall deliver
to the Company's Oklahoma City legal counsel the following: (a) three Company
Promissory Notes made in his favor dated September 30, 1995 marked "Paid," and
(b) all of the files (including all Company files formerly in the possession of
Zrenda Xxxx and Xxxxx, the Company's former counsel which are now in his
possession), letterhead, furniture, equipment, and other records and documents
which belong to the Company that are in his possession; provided, however, the
Parties agree that Xx. Xxxxxx Xxxxxx, III, a director of the Company, or his
designee, shall pick up all materials to be delivered under this paragraph B at
Sears' residence on, or promptly after,
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the Closing Date.
C. JOINT OBLIGATIONS. At the Closing, the Parties shall
deliver to each other in duplicate originals the following: (a) the Mutual
Release executed by the parties thereto, and (b) a Stipulation of Dismissal with
Prejudice signed by the Parties and Xxxxxxx pursuant to Rule 41(a) of the
F.R.C.P. dismissing the Litigation for filing with the District Court.
6. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
A. The Company represents and warrants to Sears that the execution and
performance of this Agreement and the issuance and delivery by the Company of
the Stock to Sears has been duly authorized and all necessary corporate action
has been taken.
X. Xxxxx represents and warrants to the Company as follows:
1. He is an "accredited investor" as defined by Rule 501(a) promulgated
by the Securities and Exchange Commission ("SEC"), and that he has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that he is capable of
evaluating the merits and risks of the his investment in the Company and has the
capacity to protect his own interests.
2. He is acquiring the Restricted Stock for investment for his own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. He understands that the Restricted
Stock has not been, and will not be, registered under the Securities Act or the
securities laws of any state by reason of a specific exemption from the
registration provisions of the Act and the applicable state securities laws, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of his representations as expressed
herein.
3. He acknowledges that the Restricted Stock must be held indefinitely
unless subsequently registered under the Act or unless an exemption from such
registration is available. He is aware of the current provisions of Rule 144
promulgated under the Act which permit limited resale of shares acquired in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being effected through a "broker's transaction" or
in transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations. He
acknowledges that, except as specifically set forth in this Agreement, he is not
relying on the Company in any way to satisfy the conditions precedent for
limited resale of shares pursuant to Rule 144 under the Act.
4. He understands that no public market now exists for any of the
Restricted Stock to be issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Restricted Stock.
5. He has had an opportunity to discuss the Company's business,
management and
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financial affairs with one or more of the directors and officers of the Company,
and any questions he has asked were answered to his satisfaction.
C. The Company and Sears (the "Indemnifying Party") agree to indemnify
and hold the other Party (the "Indemnified Party") harmless from and against any
and claims, losses, costs or other expenses (including reasonable attorneys'
fees) incurred by the Indemnified Party in the event the representations and
warranties of the Indemnifying Party set forth above are not true.
7. ADVICE OF COUNSEL; NO PRESUMPTIONS. The Parties acknowledge that
they have had the benefit of the advice of separate counsel in the negotiation
of this Agreement. The Parties therefore agree that no presumptions shall arise
favoring either party by virtue of the authorship of any of the provisions of
this Agreement.
8. CONSTRUCTION AND VENUE. The Parties agree (i) that this Agreement
will be construed and governed by the laws of the State of North Carolina and
(ii) that any and all disputes between them relating in any way to this
Agreement shall be resolved by an arbitration proceeding conducted by, and in
accordance with the Commercial Rules of Arbitration of the American Arbitration
Association in Charlotte, North Carolina, which resolution shall be final and
binding upon the Parties.
9. ENTIRE AGREEMENT; AMENDMENT; ACKNOWLEDGEMENT. This Agreement
contains the entire agreement between the Parties, supersedes all previous
agreements, whether oral or written, between the Parties, and cannot be changed,
modified, amended or supplemented except by a written agreement signed by both
Parties.
IN WITNESS WHEREOF, the Parties have duly signed this Settlement
Agreement as of the Effective Date.
Demeter BioTechnologies, Ltd.
/s/ Xxxxxx Xxxxx By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxx Xxxxx President
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EXHIBIT A TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., XXXXXXX XXXXXXX AND XXXXXX XXXXX
DATED FEBRUARY 16, 1998
MUTUAL RELEASE
COME NOW Demeter BioTechnologies, Ltd., a Colorado corporation with its
principal executive offices at Brightleaf Square, 000 Xxxx Xxxx Xxxxxx, Xxxxxx,
Xxxxx Xxxxxxxx, 00000 (the "Company"), Xxxxxx Xxxxx, who address is 0000
Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxx, 00000 ("Sears"), and Xxxxxxx Xxxxxxx,
whose address is 0000 Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxxxxx, 00000
("Xxxxxxx"), and for good and valuable consideration, the receipt of which is
hereby acknowledged and intending to be legally bound, do hereby release each
other from any and all obligations, claims or causes of action which they might
have against one other arising out or relating in any way to (i) any and all
Promissory Notes given by the Company to Sears (collectively, the "Notes"); (ii)
the Employment Agreement between the Company and Sears dated January 1, 1995
(the "Employment Agreement"); (iii) any amendments to the Notes or the
Employment Agreement; (iv) any claims that were or could have been brought by
any of them in the Litigation and/or the Arbitration Proceeding (as such terms
are defined in the Settlement Agreement dated January 23, 1998 among the Company
and Sears (the "Settlement Agreement")); (v) any other understandings,
agreements, letter agreements or arrangements between the Company and Sears,
whether written or oral; (vi) the Litigation and/or the Arbitration Proceeding;
and (vii) any and all other transactions, matters and relationships of whatever
nature between the Company and Sears, all from the beginning of time to the date
of this Mutual Release (collectively, the "Transactions"). For purposes of this
Mutual Release, Sears acknowledges this the release given by him to the Company
herein includes a release not only of the Company, but also of its directors,
officers, employees and agents in any way arising out of or related to the
Transactions.
Dated this 16 day of February, 1998.
Demeter BioTechnologies, Ltd.
/s/ Xxxxxx Xxxxx By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxx Xxxxx President
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx Xxxxxxx, individually