SETTLEMENT AND RELEASE AGREEMENT
This
Settlement and Release Agreement (“Agreement”) is entered into and dated
effective as of this 22nd day of August, 2007 by and between Laurus Master
Fund,
Ltd., a Cayman Islands company (“Laurus”) and Catalyst Lighting Group, Inc., a
Delaware corporation (“Catalyst”).
RECITALS
WHEREAS,
Whitco Company, LP, a Texas limited partnership (“Whitco”) was formerly a wholly
owned subsidiary of Catalyst;
WHEREAS,
Laurus and Catalyst are parties to that certain Securities Purchase Agreement
dated September 30, 2004, as amended, modified or supplemented from time to
time
(“Securities Purchase Agreement”);
WHEREAS,
Laurus, Catalyst and Whitco are parties to that certain Security Agreement
dated
September 30, 2004, as amended, modified or supplemented from time to time
(“Security Agreement”);
WHEREAS,
Laurus, Catalyst and Whitco are parties to that certain Master Security
Agreement dated September 30, 2004, as amended, modified or supplemented from
time to time (“Master Security Agreement”);
WHEREAS,
Catalyst and Whitco are jointly and severally liable under a certain Secured
Revolving Note issued by them in favor of Laurus dated September 30, 2004,
as
amended, modified or supplemented from time to time (“Revolving
Note”);
WHEREAS,
Catalyst and Whitco are jointly and severally liable under a certain Secured
Convertible Minimum Borrowing Note issued by them in favor of Laurus dated
September 30, 2004, as amended, modified or supplemented from time to time
(“Minimum Borrowing Note”);
WHEREAS,
Catalyst is liable under a certain Secured Convertible Term Note issued by
it in
favor of Laurus dated September 30, 2004, as amended, modified or supplemented
from time to time (“Term Note”);
WHEREAS,
Laurus and Catalyst are parties to that certain Registration Rights Agreement
dated September 30, 2004, as amended, modified or supplemented from time to
time
(“Registration Rights Agreement”);
WHEREAS,
Laurus and Catalyst are parties to that certain Omnibus Amendment No. 1 dated
December 3, 2004, as amended, modified or supplemented from time to time
(“Omnibus Amendment”);
WHEREAS,
Laurus, Catalyst and Whitco are parties to that certain Amendment and Agreement
dated April 18, 2005, as amended, modified or supplemented from time to time
(“Amendment”);
WHEREAS,
Catalyst has issued a warrant in favor of Laurus to purchase 472,000 shares
of
Catalyst’s common stock, dated September 30, 2004, as amended, modified or
supplemented from time to time (“First Warrant”);
WHEREAS,
Catalyst has issued a warrant in favor of Laurus to purchase 100,000 shares
of
Catalyst’s common stock, dated December 3, 2004, as amended, modified or
supplemented from time to time (“Second Warrant”);
WHEREAS,
the Securities Purchase Agreement, Security Agreement, Master Security
Agreement, Revolving Note, Minimum Borrowing Note, Term Note, Registration
Rights Agreement, Omnibus Amendment, Amendment, First Warrant and Second Warrant
are herein collectively referred to as the “Documents”;
WHEREAS,
the Revolving Note, Minimum Borrowing Note and Term Note are herein collectively
referred to as the “Notes”;
WHEREAS,
the First Warrant and Second Warrant are herein collectively referred to as
the
“Warrants”;
WHEREAS,
on March 15, 2005, Whitco voluntarily filed for protection from its creditors
under Chapter 11 of the U.S. Bankruptcy Code (“Whitco Bankruptcy”);
WHEREAS,
in connection with the Whitco Bankruptcy, all of the assets of Whitco (other
than cash and accounts receivable) were sold to American Technologies Group,
inc. (“ATG”) in consideration of a warrant to acquire certain shares of ATG’s
common stock (“ATG Warrant”);
WHEREAS,
following the sale of assets to ATG, the Whitco Bankruptcy was converted to
a
Chapter 7 liquidation proceeding and the ATG Warrant was issued to
Laurus;
WHEREAS,
in connection with the Whitco Bankruptcy, Laurus and Catalyst agreed that
certain accounts receivable collections and the issuance of the ATG Warrant
would be applied against payment of the Notes balances as follows:
Principal
and Interest Balances:
|
|||||||
Revolving
Note - Principal Balance at March 14, 2006
|
$
|
920,421
|
|||||
Revolving
Note - Accrued Interest at March 15, 2006
|
3,854
|
||||||
Minimum
Borrowing Note - Principal Balance at March 14, 2006
|
997,000
|
||||||
Minimum
Borrowing Note - Accrued Interest at March 15, 2006
|
3,947
|
||||||
Total
Balance - Revolving Note and Minimum Borrowing Note
|
$
|
1,925,232
|
|||||
Collections,
Payments and Charges:
|
|||||||
Agreed
Value of ATG Warrant
|
($1,500,000
|
)
|
|||||
Accounts
Receivable Balance at March 15, 2006
|
(1,404,295
|
)
|
|||||
Agreed
Uncollectible Accounts Receivable
|
300,000
|
||||||
Debtor-in-Possession
Collections by Laurus
|
(85,556
|
)
|
|||||
Laurus
Fees and Expenses
|
35,000
|
||||||
Total
Collections, Payments and Charges
|
($2,654,851
|
)
|
|||||
Term
Note Balance:
|
|||||||
Excess
Payments and Collections Applied to Term Note
|
($729,619
|
)
|
|||||
Term
Note - Principal Balance at March 14, 2006
|
1,549,654
|
||||||
Term
Note - Accrued Interest at March 15, 2006
|
6,134
|
||||||
Balance
- Term Note
|
$
|
826,169
|
2
WHEREAS,
Catalyst has insufficient financial resources to pay Laurus the balance of
the
Term Note;
WHEREAS,
Catalyst intends to file with the U.S. Securities and Exchange Commission
(“SEC”) to become a reporting company under the Securities Exchange Act of 1934,
as amended (“Exchange Act”) after the audit of Catalyst’s financial statements
is completed;
WHEREAS,
after becoming a reporting company under the Exchange Act, Catalyst intends
to
seek to effect a business combination with a corporation or other business
entity with current business operations in a reverse merger or reverse takeover
transaction (“Reverse Merger”);
WHEREAS,
in order to pursue a Reverse Merger, Catalyst needs to pay, settle and/or
satisfy all of its liabilities and obligations;
WHEREAS,
Laurus and Catalyst desire to settle and satisfy all claims, liabilities and
obligations under the Documents, Notes and Warrants pursuant to the terms and
conditions hereof;
WHEREAS,
Laurus and Catalyst further desire to terminate and cancel all contracts and
agreements between them, whether oral or written, without further liability
or
obligation on behalf of either of them, pursuant to the terms and conditions
of
this Agreement; and
WHEREAS,
Laurus and Catalyst further desire to release each other from any and all
liabilities and obligations of any kind or nature, whether known or unknown,
pursuant to the terms and conditions of this Agreement;
AGREEMENTS
Now,
Therefore,
in
consideration of the above recitals, the following representations, warranties,
covenants and conditions, and other good and valuable consideration, the receipt
of which is acknowledged, the parties agree as follows:
1. Termination
of Agreements.
With
effect from and after the receipt of securities issued by Catalyst to Laurus
as
set forth in Section 3 hereof and the consummation of the transactions
contemplated by this Agreement, Catalyst, on the one hand, and Laurus, on the
other hand, each hereby: (i) mutually terminate and cancel any and all
agreements and contracts (whether oral or written) between Catalyst and/or
Whitco, on the one hand, and Laurus, on the other hand, pertaining to any
matters between such parties including, without limitation, the Documents,
Notes
and Warrants (collectively, the “Loan Agreements”), and (ii) release each other
from any further liability and obligations under the Loan Agreements including
all principal, interest, fees, expenses and penalties thereunder.
2. Waiver
and Release.
Subject
only to the issuance of securities by Catalyst to Laurus as set forth in Section
3 hereof, Catalyst and Whitco, on the one hand, and Laurus, on the other hand,
each hereby waive, and forever and irrevocably release and discharge the other
party and its respective successors and assigns, and their respective past
and
present officers and directors, employees, shareholders, members, consultants,
attorneys, accountants, other professionals, insurers, agents and all other
related entities, including, but not limited to, assigns, predecessors,
successors, controlling corporations, subsidiaries or other affiliates, from
all
liabilities and obligations owed by either party to the other party, and from
any and all claims, demands, and causes of action of every kind and nature,
including, without limitation, those relating to or arising out of any federal,
state or local laws, and common law, claims for advances or other loans, claims
for unpaid fees, interest, penalties, expense reimbursement or other
compensation under the Loan Agreements or otherwise; provided, however, that
nothing contained herein shall be construed to limit in any way the rights
of
either party, and their successors and assigns, to enforce the terms of this
Agreement. Further, each party irrevocably
agrees to refrain from directly or indirectly asserting any claim or demand
or
commencing (or causing to be commenced) any suit, action, or proceeding of
any
kind, in any court or before any tribunal, against the other party based upon
any released claim.
3
3. Issuance
of Securities.
In full
satisfaction of all obligations and liabilities of Catalyst and Whitco owed
to
Laurus under the Loan Agreements, Catalyst hereby agrees to issue to Laurus
a
total of 10,831,718 shares of Catalyst’s common stock (“Shares”). The Shares
shall be issued pursuant to an exemption from registration under the Securities
Act of 1933, as amended (“Securities Act”), and the certificates representing
the Shares shall contain the restrictive legend under the Securities Act. Prior
to the issuance of the Shares, Laurus shall deliver to Catalyst a representation
letter with respect to the issuance of the Shares, which shall be in the form
attached hereto as Exhibit A. The Shares will be entitled to registration rights
as set forth in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit B (“Registration Rights Agreement”). The closing of the
transactions contemplated hereunder are contingent the closing of that certain
securities purchase agreement by and between Catalyst and KIG Investors I,
LLC
(“KIG”) dated August 22, 2007 (“Purchase Agreement”). Pursuant to the Purchase
Agreement, (i) Catalyst will issue a total of 1,572,770 shares of Series A
Convertible Preferred Stock, par value $0.01 per share (“Preferred
Shares”)
to KIG
for a purchase price of $157,277 (“Purchase Price”), (ii) the Preferred Shares
will be convertible into 25,620,147 shares of Catalyst’s common stock
(“Conversion Shares”), (iii) the Purchase Price will be used to pay liabilities
and obligations of Catalyst and costs and expenses to become, and maintain
its
status as, a reporting company under the Exchange Act, and (iv) the Conversion
Shares will be entitled to registration rights under terms and conditions
substantially identical to those afforded to the Shares to be issued to Laurus
under the Registration Rights Agreement. The Shares to be issued to Laurus
hereunder will be issued at the closing of the Purchase Agreement.
Without
the prior written consent of Laurus, Catalyst shall not issue any securities
if,
as a result of such issuance, the Shares issued to Laurus under this Section
3
will represent less than 25% of the outstanding shares of Catalyst’s common
stock on a fully diluted basis; provided, however, that this restriction and
limitation on the issuance of securities by Catalyst shall not apply to the
issuance of Catalyst’s securities in connection with the Reverse Merger or any
capital raise being conducted as part of the Reverse Merger. The provisions
of
this paragraph shall terminate and be of no full force and effect immediately
following the closing of the Reverse Merger.
Catalyst
has disclosed to Laurus its intention to take such actions as are necessary
to
effect a one-for-ten reverse stock split (“Reverse Split”) following the closing
of the transactions contemplated hereunder, and Laurus hereby agrees and
consents to such Reverse Split.
4. Representations
and Warranties of Catalyst.
Catalyst represents and warrants to Laurus that: (i) on the date of this
Agreement, Catalyst has all necessary authority to execute this Agreement;
(ii)
there is no claim, action, suit or other proceeding pending, threatened or
known, which, if decided adversely, would interfere with the consummation of
the
transaction contemplated hereby; (iii) no approval or consent of any
governmental authority or third party is required for Catalyst to enter into
or
perform this Agreement; (iv) this Agreement is enforceable in accordance with
its terms, subject to the laws of insolvency and general principles of equity;
and (v) this Agreement has been duly authorized and adopted by
Catalyst.
4
5. Representations
and Warranties of Laurus.
Laurus
represents and warrants to Catalyst that: (i) on the date of this Agreement,
Laurus has all necessary authority to execute this Agreement; (ii) there is
no
claim, action, suit or other proceeding pending, threatened or known, which,
if
decided adversely, would interfere with the consummation of the transaction
contemplated hereby; (iii) no approval or consent of any governmental authority
or third party is required for Laurus to enter into or perform this Agreement;
and (iv) this Agreement is enforceable against Laurus in accordance with its
terms, subject to the laws of insolvency and general principles of equity.
6. Delivery
and Cooperation.
If
either party requires any further documentation (including, without limitation,
any UCC termination filings), the other party will promptly respond to any
reasonable requests for additional documentation.
7. Miscellaneous.
(a) Successors
and Assigns.
This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
(b) Survival
of Covenants and Representations.
All
agreements, covenants, representations and warranties made by the parties herein
shall survive the delivery of this Agreement.
(c) Severability.
Should
any part of this Agreement for any reason be declared invalid or unenforceable,
such decision will not affect the validity or enforceability of any remaining
portion, which remaining portion will remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated, and
it
is hereby declared as the intention of the parties hereto that the parties
would
have executed the remaining portion of this Agreement without including therein
any such part or portion that may, for any reason, be hereafter declared invalid
or unenforceable.
(d) Governing
Law and Venue.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, without reference to choice of law principles.
(e) Captions.
The
descriptive headings of the various Sections or parts of this Agreement are
for
convenience only and shall not affect the meaning or construction of any of
the
provisions hereof.
(f) Entire
Agreement.
This
Agreement constitutes the entire agreement among the parties hereto concerning
the subject matter contained herein, and supersedes all prior agreements or
understanding of the parties. No provision of this Agreement may be waived
or
amended except in a writing signed by both parties. A waiver or amendment of
any
term or provision of this Agreement shall not be construed as a waiver or
amendment of any other term or provision.
(g) Counterparts.
This
Agreement may be executed by facsimile or electronic signatures and in multiple
counterparts, each of which shall be deemed an original. It shall not be
necessary that each party executes each counterpart, or that any one counterpart
be executed by more than one party so long as each party executes at least
one
counterpart.
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(h) Arbitration.
All
disputes, controversies or claims (“Disputes”)
arising out of or relating to this Agreement shall in the first instance be
the
subject of a meeting between a representative of each party who has
decision-making authority with respect to the matter in question. Should the
meeting either not take place or not result in a resolution of the Dispute
within twenty (20) business days following notice of the Dispute to the other
party, then the Dispute shall be resolved in a binding arbitration proceeding
to
be held in New York, New York in accordance with the international rules of
the
American Arbitration Association. The arbitrators may award attorneys’ fees and
other related arbitration expenses, as well as pre- and post-judgment interest
on any award of damages, to the prevailing party or parties, in their sole
discretion. The parties agree that a panel of three arbitrators shall be
required, all of whom shall be fluent in the English language, and that the
arbitration proceeding shall be conducted entirely in the English language.
Any
award of the arbitrators shall be deemed confidential information for a minimum
period of five years.
[Remainder
of this page intentionally left blank.]
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IN
WITNESS WHEREOF, this Agreement has been executed as of the date first written
above.
CATALYST LIGHTING GROUP, INC. | ||
|
|
|
By: | /s/ Xxxxxx Xxxxxxxxxx | |
Xxxxxx Xxxxxxxxxx, CEO |
LAURUS MASTER FUND, LTD. | ||
|
|
|
By: | /s/ Xxxxx Grin | |
Name:
Xxxxx Grin
Title:
Director
|
7
Exhibit
A
- Laurus Investor Representation Letter
Exhibit
B
- Registration Rights Agreement
8