EXHIBIT 10.58
SETTLEMENT AND MUTUAL RELEASE AGREEMENT
This Settlement and Mutual Release Agreement ("Agreement") is made and entered
into as of this 6th day of December, 1999, by, among and between MULTIMEDIA DISK
DUPLICATORS, a California Limited Partnership ("Multimedia"), STAR MEDIA
PARTNERS, L. P., a California Limited Partnership ("Star Media"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇") and APPLIED DATA COMMUNICATIONS, INC., a
Delaware corporation ("ADC"), with reference to the following facts and
circumstances:
RECITALS
A. On August 20, 1995 Multimedia and Star Media each filed actions against ADC
and ▇▇▇▇ in the Orange County Superior Court.
B. On November 13, 1995, ADC and ▇▇▇▇ executed Stipulations to Judgment in the
Multimedia and Star Media cases which required, among other things, certain
timely payments to avoid entry of the judgments.
C. ADC and ▇▇▇▇ failed to comply with the terms of the Stipulations to Judgment
and on December 13, 1995, Multimedia and Star Media each obtained judgments,
against ▇▇▇▇ and ADC. The Multimedia judgment was in the sure of $733,325.03
and the Star Media judgment was in the sum of $655,122.46.
D. On December 16, 1995, Multimedia, Star Media, ▇▇▇▇ and ADC each entered into
a settlement agreement wherein, among other things, the following occurred: 1)
Multimedia and Star Media collectively received 1,388,447 shares of ADC stock;
and 2) a proxy was delivered to Multimedia and Star Media for voting control of
all of the ADC stock ▇▇▇▇ owned or controlled.
E. A dispute arose regarding the enforcement of the December 16, 1995 agreement.
In or about July 1999, Multimedia and Star Media began executing upon the
judgments they previously obtained in their litigation against ▇▇▇▇ and ADC. A
court hearing has been set to determine the rights of the parties concerning
enforcement of the December 16, 1995 agreement.
F. The parties to this Agreement have decided to resolve their disputes
concerning the above described litigation and the issues surrounding the
December 16, 1995 agreement.
1
TERMS OF AGREEMENT
In consideration of the mutual covenants, the promises herein contained, and the
foregoing recitals, Multimedia, Star Media, ▇▇▇▇▇▇▇, ▇▇▇▇ and ADC agree as
follows:
1. Board of Directors. Star Media and Multimedia shall each be entitled to
appoint one person for election to a seat on ADC's Board of Directors. The
fifth board seat, which is currently vacant, shall be filled by a majority vote
of the four other board members. Star Media and Multimedia shall not nominate
or attempt to elect ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to ADC's Board of Directors, Star Media's
and Multimedia's designated appointees to the Board of Directors shall resign
their seats upon either: 1) public trading of ADC's stock at $1.00, or more, per
share for a period of 30 days; or 2) the sale of Star Media's and Multimedia's
shares of ADC's stock as outlined in paragraphs 5 and 7 below.
2. Blue Sky. For all ADC stock sold under the private placement memorandum
beginning in September 1996, ADC will comply with applicable Blue Sky laws as
soon as is reasonably practical after execution of this Agreement. Confirmation
of the status of ADC's compliance with applicable Blue Sky laws and a timetable
for compliance with applicable Blue Sky laws shall be provided in writing by
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇, or other corporate counsel, within thirty days
from the date of execution of this Agreement. ADC shall indemnify and hold
harmless ▇▇▇▇▇▇▇, Star Media and Multimedia if it is determined that ADC has
violated any Blue Sky laws. Corporate counsel shall provide a current status
report on Blue Sky laws.
3. Board Meeting Minutes. Within ten days from the date of execution of this
Agreement, ADC shall provide to Multimedia and Star Media true and correct
copies of the Minutes of the Board of Directors meetings from January 1997 to
the present.
4. Additional Shares. ADC has issued and delivered 1,388,447 shares of its
stock to Multimedia and Star Media. ADC shall issue an additional 800,000 shares
of stock (in the form of 8,000 shares of ADC's Series B preferred stock which is
convertible to 800,000 shares of ADC's common stock) to be divided between
Multimedia and Star Media as follows: 422,400 shares to Star Media (issued as
4,224 shares of ADC's Series B preferred stock); 377,600 shares to Multimedia
(issued as 3,776 shares ADC's Series B preferred stock). The certificates for
these additional shares of stock shall be delivered to Star Media and Multimedia
within thirty days of execution of this Agreement. Multimedia, Star Media and
▇▇▇▇▇▇▇ agree to cooperate with ADC's investment bankers and underwriters by
entering into a "lock-out," or any other reasonable restrictions applicable to
ADC's insiders, for these 800,000 shares. These shares are in consideration for
Multimedia, Star Media and ▇▇▇▇▇▇▇ waiving their right to past and future
interest on
2
the judgments, cancellation of the December 16, 1995 settlement agreement and
for the other terms of this Agreement.
5. Option to Buy Shares. ADC shall have both the right of first refusal and the
option to buy any and all shares of stock issued to Multimedia and Star Media
for the purchase price of one dollar ($1.00) per share. This right of first
refusal and option to buy shall expire two years from the date of the execution
of this Agreement. Each of the 1,388,447 shares purchased for one dollar per
share (or if by a third party after ADC has declined its right of first refusal,
by the actual purchase price per share) shall set off and reduce the
$1,388,447.00 amount owed under Multimedia's and Star Media's judgments
against ADC and ▇▇▇▇. ADC may purchase the additional 800,000 shares of stock
(issued as 8,000 shares of ADC's Series B preferred convertible stock) to be
issued in accordance with the terms of this Agreement at the same price of one
dollar per share (after adjusting for the conversion from preferred to common
stock), however, satisfaction of the judgments and the other obligations of
paragraph 7 are not conditioned upon the purchase of the additional 800,000
shares (issued as 8,000 shares of ADC's Series B preferred convertible stock).
6. Attorneys' Fees. ADC shall pay to Multimedia, Star Media and/or ▇▇▇▇▇▇▇ up
to $70,000.00 in attorneys' fees and costs, subject to verification with true
and correct copies of invoices and/or canceled checks, upon execution of this
Agreement and within two days of ADC's receipt of funds already executed upon by
Multimedia. Upon execution of this Agreement, Multimedia shall instruct the
Orange County Marshal, or other appropriate authorities, to return to ADC any
and all money executed upon in its litigation against ADC and ▇▇▇▇.
7. Satisfaction of Judgment. Multimedia and Star Media shall immediately
prepare and file with the court complete satisfactions of judgment and releases
of all liens in their litigation against ADC and ▇▇▇ ▇▇▇▇ in accordance with the
following schedule for the purchase of the 1,388,447 shares of stock to satisfy
these judgments:
a. 25% payoff of $1,388,447.00 judgments - remove lien on ▇▇▇▇'▇ house.
b. 50% payoff of S 1,388,447.00 judgments - file full satisfaction of judgment
in Star Media litigation and release all liens related thereto, resign one seat
on board of directors and amend ▇▇▇▇'▇ proxy so that its only effect is to
provide Multimedia with sufficient votes to elect one member to the board of
directors.
c. 75% payoff of $1,388,447.00 judgments - file full satisfaction of judgment in
Multimedia litigation and release all liens related thereto.
3
d. 100% payoff of $1,388,447.00 judgments - resign remaining board of directors
seat and revoke ▇▇▇▇'▇ proxy completely.
Provided that ADC and ▇▇▇▇ are in compliance with the terms of the new
settlement agreement, Multimedia, Star Media and ▇▇▇▇▇▇▇ agree to refrain from
and forebear any and all of their rights to execute or levy upon the judgments
they have obtained against ADC and ▇▇▇▇ until after the end of the two year
first right of refusal and stock purchase option period described in paragraph
5.
8. Default. In the event of a default by any party or parties to this
Agreement, the non-defaulting party or parties shall give written notice of the
default to the defaulting party or parties. The defaulting party or parties
shall have seven days from the date of mailing of said written notice to cure
the default. A copy of the written notice of default shall be faxed on the date
of mailing to the defaulting party's or parties' counsel of record. Should the
defaulting party or parties fail to cure the default within seven days of the
date of mailing of the written notice of default, the parties hereto agree that
the non defaulting party or parties may seek enforcement of the terms of this
Agreement through the provisions of Code of Civil Procedure section 664.6.
9. Return of Proxy. As part of the December 16, 1995 settlement agreement, ▇▇▇▇
delivered to Multimedia and Star Media a proxy for voting control of the shares
of ADC stock he owned or controlled. This proxy shall remain in effect unless
it is modified in accordance with paragraph 7b upon the 50% payoff of the
judgments and/or revoked in its entirety in accordance with paragraph 7d above
upon the 100% payoff of the judgments.
10. Cooperation During Refinance. ▇▇▇▇ is attempting to refinance the loan on
his personal residence. In obtaining this refinance loan, Multimedia and Star
Media agree to temporarily remove their liens on his residence to accommodate
this refinance. ▇▇▇▇ will not obtain money from this refinance loan which
reduces the equity in the property, other than $10,000.00 to pay off credit card
debt and to pay for loan costs, points and fees related to the refinance loan,
nor ▇▇▇▇ ▇▇▇▇ sell, transfer, lease, assign, or otherwise encumber his personal
residence beyond the terms of the refinance loan. ▇▇▇▇ will notify Star Media's
and Multimedia's counsel of record within five days of completion of the
refinancing of his personal residence at which time the subject liens shall be
reinstated.
11. Releases. Excepting only their respective rights to enforce the terms of
this Agreement, Multimedia, Star Media, ▇▇▇▇▇▇▇, on the one hand, and ADC and
▇▇▇▇, on the other hand, fully and forever release and discharge each other, and
their respective assignees, subsidiaries, transferees, predecessors and
successors in interest, employees, servants, agents, representatives, officers,
directors, and Parent corporations, from and
4
against all actions, proceedings, causes of action, claims for relief, demands,
rights, titles, interests, damages, losses, costs, expenses, disbursements
attorneys' fees), obligations, liabilities and other claims of every nature
whatsoever (collectively "Claims") arising from or otherwise relating in any way
to (a) the Multimedia litigation against ▇▇▇▇ and ADC, which is Orange County
Superior Court case number 752044; (b) the Star Media litigation against ▇▇▇▇
and ADC, which is Orange County Superior Court case number 752046.
12. Binding Effect The releases in this Agreement shall be binding upon, extend
to and inure to the benefit of the undersigned parties, and any and all of their
respective past, present, and future agents, employees, relatives, officers,
directors, shareholders, servants, heirs, beneficiaries, devisees, independent
contractors, partners, successors, predecessors, assignors, assignees,
transferors, transferees, guarantors, sureties, insurers, attorneys',
investigators, accountants, joint venturers and other representatives, and any
and all other persons and entities acting or purporting to act on their
respective behalf, and any and all firms, corporations, associations,
partnerships and other entities affiliated with, controlled by or otherwise
related to any of the undersigned parties.
13. Parties in Interest. Except as expressly stated in this Agreement, nothing
in this Agreement, whether express or implied, is intended to confer third-party
beneficiary status or to confer otherwise any rights or remedies on any person
or entity (hereinafter collectively "third party"), other than the undersigned
parties and their predecessors, successors, assigns, affiliates and
representatives as described in 12 hereof. Nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third party
to any undersigned party to this Agreement. Nor shall any provision hereof
afford any third party any right of subrogation, indemnity, contribution, set-
off or action over or against any party to this Agreement.
14. No Other Proceedings. The undersigned parties hereby represent and warrant
to each other that none of the undersigned parties will or has initiated, or
will be or has been a party to or has any knowledge of any actions,
investigations or proceedings, whether judicial, governmental or administrative,
involving the subject matter of this Agreement.
15. Compromise. This Agreement is a compromise of disputed claims and shall not
be construed or deemed to be an admission of liability or wrongdoing by any
party to any other party. The undersigned parties further expressly agree that
nothing in this Agreement shall be construed as an admission or acceptance of
the validity of any claims, causes of action or contentions which may be made by
any party to this Agreement. Neither this settlement nor any documents or
agreements made pursuant thereto shall be
5
admissible as evidence in any subsequent proceeding for any purpose whatsoever,
except in accordance with Evidence Code section 1123 and any proceedings for
enforcement of this Agreement pursuant to Code of Civil Procedure section 664.6.
This settlement has been made to avoid the expense, inconvenience and burden of
trial and of possible litigation proceedings, and so that the parties can
resolve their disputes and business relations in a mutually agreeable manner
rather than through court adjudication.
16. Full Authority. Each of the parties to this Agreement hereby represents,
covenants and warrants that said party, and the signatory of said party, has the
full right, power and authority to execute this Agreement on behalf of said
party, and to execute any and all documents as may be necessary to effectuate
the terms of this Agreement, and that neither party, nor any signatory for said
party has sold, assigned, transferred, conveyed, hypothecated, encumbered or
otherwise disposed of any rights, titles, interests, causes of action or other
claims which said party may have or have had in relation to the transactions or
other matters described in this Agreement or which are related in any way to the
matter.
17. Informed Consent. Each undersigned party hereby declares that said party
has received sufficient information, either through said party's own legal
counsel or other sources of said party's own selection, so as to be able to make
an intelligent and informed judgment whether to enter into this Agreement. Each
undersigned party further states that each has read this Agreement in its
entirety prior to executing this document, and that each has executed this
Agreement voluntarily, with competence and capacity to contract and with
knowledge of the terms, significance and legal effect of this Agreement. By
executing this Agreement, it is understood by each party that substantial rights
may be compromised and/or waived in their entirety.
18. Attorneys' Fees, if any action, motion or proceeding at law or in equity is
instituted to enforce or interpret the terms of this Agreement, the undersigned
parties agree that the prevailing party or parties therein shall be entitled to
an award of reasonable attorneys' fees, costs, and necessary disbursements, as
determined by a court of competent jurisdiction, in addition to any other relief
to which said party or parties may be entitled.
19. Further Assurances. The undersigned parties each agree to execute all
documents and perform all acts necessary or appropriate to effectuate the
performance of this Agreement.
20. Severability and Gender. It is intended that each paragraph of this
Agreement shall be treated as separate and divisible, and in the event that any
paragraphs are deemed unenforceable the remainder shall continue to be in full
force and effect so long as the
6
primary purpose of this Agreement is unaffected. The masculine, as used herein,
includes the neuter and feminine. The plural includes the singular, including
the references to "parties." The term "parties" used herein encompasses each and
all persons and entities described herein.
21. Complete Instrument. This Agreement contains the complete understanding
made between or among the parties with respect to the Action and any other
claims being settled and released by this Agreement. This Agreement cannot be
amended or modified in any manner except by a writing executed by each of the
undersigned parties or by their valid successor(s). All undersigned parties
agree and acknowledge that no representations, warranties, covenants, assurances
or other promises not specifically set forth in this Agreement have been made by
any party in connection with the subject matter of this Agreement. Nor is any
party relying on any such conduct in entering into this Agreement. Any
negotiations or other communications between the parties relating to the subject
matter of this Agreement are superseded by this document and of no force or
effect. By entering into this Agreement, the parties hereby cancel the terms of
the December 16, 1995 agreement. This Agreement has been negotiated and
prepared by and for all undersigned parties equally and shall not be construed
as having been drafted by any particular party or parties.
22. Counterparts. This Agreement may be signed in counterparts, and each
counterpart shall have the same force and effect as though the signatures were
contained in a single document.
23. Applicable Law. This Agreement is made under and shall be interpreted and
enforced by the laws of the State of California.
24. Facsimile and Photocopy Signatures. So as to expedite the resolution of
this dispute, the parties hereto agree that a facsimile or photocopy of a
signature on this Agreement shall have the same binding effect as an original
signature.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
effective as of the date and year first above written.
Applied Data Communications, Inc.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇ 12/6/99
7
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇ 12/6/99
▇▇▇▇▇▇ ▇. ▇▇▇▇
MultiMedia Disk Duplicators,
a California Limited Partnership
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
MultiMedia Finance Corporation
General Partner
Star Media Partners, L.P.,
a California Limited Partnership
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Media Capital Associates, Inc.
General Partner
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
8
Approved as to form and Content.
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Attorneys for Multimedia Disk
Duplicators, Star Media Partners,
L.P. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Darling & ▇▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Attorneys for ▇▇▇▇▇▇ ▇. ▇▇▇▇
and Applied Data Communications,
Inc.
9
LAW OFFICES OF
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
A PARTNERSHIP INCLUDING A PROFESSIONAL LAW CORPORATION
PLAZA TOWER LAGUNA BEACH OFFICE
TELEPHONE ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ (949) 497-5415
(▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FACSIMILE
(▇▇▇) ▇▇▇-▇▇▇▇
FILE NO.
REPLY TO
COSTA MESA OFFICE
December 15, 1999
VIA TELECOPIER & U.S. MAIL
(▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇
APPLIED DATA COMMUNICATIONS, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Multimedia Disk Duplicators v. Applied Data Communications, Inc.
Dear ▇▇▇:
With the signing of the December 6, 1999 Settlement Agreement entered into,
between and among Multimedia Disk Duplicators, Star Media Partners, ▇▇▇▇▇▇
▇▇▇▇▇▇▇, Applied Data Communications, Inc. and you individually, the above-
captioned litigation and the Star Media Partners litigation are each settled.
Provided that Applied Data Communications, Inc. complies with the terms of the
settlement agreement, it has two years within which to purchase Multimedia Disk
Duplicators' and Star Media Partner's 2,188,447 shares of Applied Data
Communications, Inc. stock at one dollar per share of common stock. During this
two year period, Multimedia, Star Media and ▇▇▇▇▇▇▇ agree to cooperate with
ADC's investment bankers and underwriters by entering into a "lock-out," or any
other reasonable restrictions applicable to ADC's insiders, for 800,000 of these
shares.
Applied Data Communications, Inc.'s cumulative purchase of 694,223.5 shares of
Multimedia Disk Duplicators' and Star Media Partner's stock shall result in the
complete satisfaction of Star Media Partners' judgment and requires those two
entities to resign one of their seats on the Board of Directors. The cumulative
purchase of 1,041,335.5 shares of common stock from Multimedia Disk Duplicators
and Star Media Partners shall result in the complete satisfaction of Multimedia
Disk Duplicators' judgment. The cumulative
10
▇▇. ▇▇▇▇
December 15, 1999
Page Two
purchase of 1,388,447 shares of common stock from Multimedia Disk Duplicators
and Star Media Partners shall require those two entities to relinquish their
proxy over your individual stock and they must resign their remaining seat on
the Board of Directors.
Congratulations on the resolution of these matters!
Very truly yours,
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
JRR: vs
1110/kane01
11
