SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE
This SETTLEMENT AGREEMENT AND GENERAL RELEASE (this "Agreement") is made
and entered into September 1, 2004 (the "Effective Date") by and between San
Xxxxx Xxxxxx Hills Capital, Inc., a California Corporation with each of its
respective employees, agents, directors, officers, parent companies,
subsidiaries, all current and former predecessors and successors in interest,
affiliates, shareholders, and counsel, ("SDTH" or the "Company") on the one
hand, and Entech Environmental Technologies, Inc., a Nevada Corporation, on
behalf of itself, its successors, predecessors and subsidiaries ("EET"); on the
other hand, which shall be collectively referred to herein as the "Parties."
I. RECITALS
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A. WHEREAS, SDTH entered into a Loan Agreement with EET in the amount
of Two Hundred Thousand Dollars ($200,000). The Loan Agreement also incorporated
a schedule of EET's accounts receivables, a Promissory Note in the amount of Two
Hundred Thousand Dollars ($200,000), an Accounts Receivable Security Agreement,
a Personal Guarantee by Xxxxx Xxxxxxxxx, a Deed of Trust, and a Consulting
Agreement (collectively referred to as the "Loan Agreement"). The Loan Agreement
is attached hereto as Exhibit "A".
B. The Consulting Agreement between SDTH and EET provided that SDTH
would render consulting services for Twenty Thousand Dollars ($20,000) a month,
payable monthly, for a minimum of three months.
C. WHEREAS, the Loan Agreement was secured by an Accounts Receivable
Security Agreement for the accounts receivables of EET and by a Personal
Guarantee from EET's then CEO, Xxxxx Xxxxxxxxx.
D. WHEREAS, EET represented that its accounts receivables as stated in
Schedule 1 of the Loan Agreement were fully collectible in the ordinary course
of business in the aggregate face amounts.
E. WHEREAS, on or before July 10, 2004, pursuant to the Loan Agreement
and the Accounts Security Agreement, EET was to deliver notices to all creditors
owing payments to EET instructing these creditors to make payments to SDTH until
all payment obligations were fulfilled. EET delivered some notices but failed to
deliver notices to all of the creditors listed in Schedule 1 of the Loan
Agreement.
F. WHEREAS, based on the representations by EET in the Loan Agreement
and the Accounts Receivable Security Agreement, SDTH filed a UCC-1 to ensure a
first priority in EET's current and future accounts receivables, SDTH's recorded
UCC-1 is attached herewith as Exhibit "B".
G. WHEREAS, the Loan Agreement provides for EET to pay 10% interest
annually on the Two Hundred Thousand Dollar ($200,000) loan by SDTH on August 8,
2004. The Loan Agreement further provides for a late payment after August 8,
2004 in the amount of 20% annually plus a late charge of an additional 10% of
the principal. The Loan Agreement also
contains a provision for attorney's fees for the prevailing party.
H. WHEREAS, on August 8, 2004, EET failed to make any payment under the
Loan Agreement. EET is now in default of the Loan Agreement in the amount of Two
Hundred Seventy-Seven Thousand Two Hundred Ninety-Three Dollars and Sixty-Nine
Cents ($277,293.69).
H. NOW THEREFORE, the parties hereto hereby resolve and finally
compromise and settle all claims set forth in these Recitals.
II. CONSIDERATION AND OTHER TERMS
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A. Payments under Loan Agreement: In exchange for SDTH's cancellation
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of all amounts due and owing under only EET's obligations under the Loan
Agreement, and any and all claims or potential claims that may exist between EET
and SDTH with regards to only the Loan Agreement, SDTH agrees to accept
consideration from EET valued at Seventy Thousand Dollars ($70,000), consisting
of the following:
1. Xxxxxx Partners LP, a New York limited partnership ("Xxxxxx"), will
provide SDTH, via overnight delivery, with a check in the amount of
Fifty-Five Thousand Dollars ($55,000) in good funds issued to Xxxxxxxxx
Xxxxxx Client Trust Account on or before September 8, 2004.
2. EET will provide SDTH with Five Hundred Thousand (500,000) Shares of its
restricted stock in EET on or before November 8, 2004.
B. EET's Representations and Warranties: EET hereby represents and
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warrants to SDTH as of the Effective Date as follows:
1. Organization and Corporate Authority: EET is a corporation duly
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organized, validly existing and in good standing under the laws of the
State of Florida and has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby, including without limitation, the issuance of the
restricted stock according to the terms and conditions hereof. This
Agreement (and the corporate actions required to effectuate the terms
and conditions set forth in this Agreement) have been (or upon
execution and delivery will have been) duly executed and delivered by
EET on or before November 8, 2004, have been effectively authorized by
all necessary action, corporate or otherwise, and (assuming due
execution and delivery by the other parties thereto) constitute (or
upon execution and delivery by EET will constitute) legal, valid and
binding obligations of EET, except as such enforceability may be
limited by the Bankruptcy Exception.
2 No Conflict or Violation: The execution, delivery and performance by
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EET of the shares and the consummation of the transactions
contemplated hereby do not and will not: (i) violate or conflict with
any provision of the charter documents or bylaws of EET; or (ii)
violate any provision or requirement of any domestic or foreign,
national,
state or local law, statute, judgment, order, writ, injunction,
decree, award, rule, or regulation of any Governmental Entity
applicable to EET.
3. Validity of Stock: The shares, when issued, sold and delivered in
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compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable, will be free of any liens or
encumbrances, except as expressly provided herein, and will not be
subject to any preemptive rights, rights of first refusal or
redemption rights, other than as provided herein and in the Articles
of Incorporation of the EET
4. Accuracy of Information: No representation or warranty made by EET
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contained in this Agreement contains or will contain an untrue
statement of a material fact or omits or will omit to state a material
fact required to be stated herein or therein or necessary to make the
statements and facts contained herein or therein, in light of the
circumstances in which they were or are made, not materially false or
misleading.
5. Price Evaluation of Stock: The board of directors of EET is aware that
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the stock in EET was trading at Thirty Cents ($0.30) per share as of
August 26, 2004. The board of directors of EET is also aware that the
trading of EET's shares on the OTC:BB was ceased on August 26, 2004
due to EET's failure to file its Quarterly Report on Form 10-QSB for
the fiscal quarter ended June 30, 2004 with the U.S. Securities
Exchange Commission in a timely manner. As of the date of this
Agreement, the shares of EET are trading on the "pink sheets" with an
approximate price of $.16 per share. The board of directors of EET
acknowledges it is raising capital from Xxxxxx and/or other entities
through issuance of a convertible note with a conversion rate of Three
Cents ($.03) per share of common stock of EET.
6. Issuance of Restricted Securities: The board of directors of EET has
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met all requirements in issuing unregistered restricted stock,
including any and all necessary filings with any and all appropriate
entities including but not limited to the Securities Exchange
Commission and the California Department of Corporations, Securities
Division.
C. Piggy-Back Registration Rights: If at any time from the Effective Date
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through December 31, 2005 EET shall determine to prepare and file with the
Securities Exchange Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of 1933
the ("Act") of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then EET shall send to SDTH written notice of such
determination and, if within fifteen (15) days after receipt of such notice,
SDTH shall so request in writing, the Company shall include in such registration
statement all or any part of such 500,000 shares issued to SDTH as SDTH requests
to be registered, subject to customary underwriter cutbacks applicable to all
holders of registration rights and subject to the consent of any selling
stockholder(s) under such registration statement. EET understands and agrees
that it shall be liable for the registration expenses incurred in connection
with any registration, qualification or compliance with the offering.
D. Removal of UCC-1: Upon receipt of the Fifty-Five Thousand Dollars
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($55,000) and the Five Hundred Thousand Shares (500,000) of restricted stock in
EET, SDTH will remove its UCC-1 by filing a UCC-3 attached herewith as Exhibit
"C".
E. Interest: Interest shall not accrue as long as EET is not in
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default under this Agreement. Should EET default under the terms of this
Agreement, interest shall accrue from the Effective Date at a rate often percent
(10%) per annum.
F. Further Action: EET agrees that in addition to the remedy set
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forth in Section II for any breach or default by EET of its obligations
hereunder, SDTH shall be entitled to seek any and all other remedies (both legal
and equitable) available under the Loan Agreement and applicable law.
G. Attorneys' Fees and Costs. Each Party shall bear his, her or
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its attorneys' fees and costs incurred herein.
III GENERAL RELEASES
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A. Each Party, on behalf of himself, herself or itself and his,
her or its successors, officers, directors, administrators, representatives,
insurers, agents and assigns hereby releases and forever discharges the
remaining Parties, their predecessors, successors, parents, subsidiaries, and
affiliates and all present and former officers, directors, partners, principals,
employees, attorneys, insurers, agents and their respective administrators,
representatives, spouses, heirs, agents and assigns from any and all claims, and
causes of action regarding the Loan Agreement only, whether currently known or
unknown, foreseen or unseen, suspected or unsuspected. NOTWITHSTANDING ANY OTHER
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LANGUAGE SET FORTH HEREIN, THIS AGREEMENT SHALL IN NOW WAY LIMIT OR COMPROMISE
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SDTH'S CLAIMS FOR PAYMENT AGAINST THE ROSENTHALS UNDER THE LOAN AGREEMENT.
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B. It is understood and agreed that this Agreement shall constitute a
release by the Parties as to the Loan Agreement only, against the others and
shall be effective as a full and final accord and satisfaction, and as a bar to
all actions, causes of action, costs, expenses, claims for sanctions, attorneys'
fees, and damages, including claims now pending in any action, indemnity or
contribution by any Party, or their counsel, or any other claims or liabilities
whatsoever, whether or not now known, suspected, claimed or concealed that are
related only to the Loan Agreement. It is the intention of all Parties to fully
discharge and release the remaining Parties with respect to any and all matters,
claims, causes of action, contracts or expenses arising from only the Loan
Agreement. Each Party acknowledges that it is familiar with Section 1542 of the
California Civil Code which 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.
C. The Parties expressly waive and relinquish any and all rights
and benefits which it may have under, or which may be conferred upon him by the
provisions of Section 1542 of the California Civil Code, as well as under any
other similar state or federal statute or common law principle, to the fullest
extent that they may lawfully waive such rights or benefits related to the Loan
Agreement.
D. In connection with their waiver and relinquishment set forth in
the previous paragraphs, the Parties acknowledge that it is aware that it may
hereafter discover claims or facts in addition to or different from those which
it now knows or believes to exist with respect to the Loan Agreement, but it is
its intention to fully, finally and forever settle and release all of the
disputes and differences known or unknown, suspected or unsuspected which do now
exist, may exist in the future or have ever existed between the Parties
regarding the Loan Agreement only. In furtherance of such intention, the Parties
agree that this Agreement shall remain in effect as a MI and complete
settlement.
E. The Parties acknowledge that the foregoing waiver of California
Civil Code Section 1542 was separately bargained for and is a key element of the
Agreement.
F. EET agrees that it will forever refrain and forbear from commencing,
instituting, or prosecuting any lawsuit, proceeding or action against the other
Parties, its predecessors, successors, parents, subsidiaries and/or affiliates,
any of its present and former officers, directors, partners, principals,
employees, attorneys, insurers and agents, its respective administrators,
shareholders, representatives, agents and assigns with respect to any matter,
cause or thing whatsoever arising out of the Loan Agreement, relating to, or
existing, by reason of the transactions, events, occurrences, acts, omissions,
or failures to act, related to the Loan Agreement that arose prior to the date
of this Agreement.
G. SDTH agrees that it will forever refrain and forbear from commencing,
instituting, or prosecuting any lawsuit, proceeding or action against EET with
respect to any matter arising out the Loan Agreement, based in whole or in part
upon, relating to, or existing, by reason of the transactions, events,
occurrences, acts, omissions, or failures to act, related to the Loan Agreement
that arose prior to the date of this Agreement.
IV. INDEMNIFICATION.
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A. EET agrees to hold harmless, defend, and indemnify SDTH against any
and all claims, judgments, costs, awards, expenses (including reasonable
attorneys' fees), and liabilities of every kind arising from any claim brought
against SDTH in its capacity as creditor of EET.
B. SDTH agrees to hold harmless, defend, and indemnify EET against any
and all claims, judgments, costs, awards, expenses (including reasonable
attorneys' fees), and liabilities of every kind arising from any claim brought
against EET in its capacity under the Loan Agreement only.
V. NO ASSIGNMENT OF INTEREST
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The Parties hereto represent and warrant to each other Party that he, she
or it has not encumbered, assigned or transferred or purported to encumber,
assign or transfer, in whole or in part, to any person, firm or corporation
whatsoever, any claim, debt, liability, demand, obligation, cost, expense,
damage, action or cause of action herein released, settled or dismissed.
VI. ENTIRE AGREEMENT AMD BINDING EFFECT
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A. This Agreement, and the attached exhibits, constitute the complete and
entire written agreement of compromise, settlement and release between the
Parties and constitutes the complete expression of the terms of the settlement.
Al1 prior and contemporaneous agreements, representations, and negotiations with
respect to the subject matter herein are superseded and merged herein.
B. The terms of this Agreement can only be amended or modified by a
writing, signed by duly authorized representatives of all Parties expressly
stating that such modification or amendment is intended.
C. This Agreement shall inure to the benefit of and shall be binding upon
the PARTIES hereto and their respective heirs, executors, successors and
assigns.
VI. FUTURE ACTIONS
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The Parties agree that, for their respective selves, heirs, executors,
assigns, and successors, they will abide by this Agreement, which terms are
meant to be contractual, and further agree that they will do such acts and
prepare, execute and deliver such documents as may reasonably be required in
order to carry out the purposes and intent of this Agreement.
VII. GOVERNING LAW AND JURISDICTION
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This Agreement shall be construed and enforced according to the laws of the
State of California. Any breach of this Agreement shall be resolved pursuant to
the exclusive jurisdiction of San Diego County, California.
VII. WAIVER
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Waiver of any one breach of the provisions of this Agreement shall not be
deemed a waiver of any other breach of any provision of this Agreement.
IX. CONSTRUCTION OF AGREEMENT
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The Parties to this Agreement and their counsel have reviewed and revised
this Agreement, and the normal rule of construction to the effect that any
ambiguities in an agreement are to be resolved against the drafting Party shall
not be employed in the interpretation of this Agreement.
X. REPRESENTATION AGREEMENT REVIEWED BY INDEPENDENT COUNSEL
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The parties hereto represent and warrant to the other that they have had
the opportunity to review this Agreement with independent counsel or have the
requisite experience in which to understand the meaning of the terms set forth
herein. SDTH specifically recommends that EET retain independent counsel to
assist them in the drafting and review of the Agreement and attachments hereto.
XI. SEVERANCE
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If any portion or paragraph of this Agreement is declared by a court of
competent jurisdiction to be illegal, void, voidable, invalid or unenforceable,
that portion or paragraph shall be deemed to be severed and deleted from this
Agreement, and the remainder of the Agreement will remain in full force and
effect as if no invalid, or illegal or unenforceable portion had been part of
this Agreement. Further, if a court of competent jurisdiction determines that
any portion of this Agreement is illegal, void, voidable, invalid, or
unenforceable as written, such court may interpret, construe, rewrite or revise
such provision to the fullest extent allowed by law, so as to make it valid and
enforceable consistent with the intent of the Parties.
XII. VOLUNTARY EXECUTION AND CAPACITY
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A. Each Party acknowledges that no other Party, nor any agent nor any
attorney of my other Party has made any promise, representation or warranty
whatsoever, express or implied, not contained herein concerning the subject
matter hereof, or any other matter whatsoever to induce said Party to execute or
authorize the execution of this Agreement. Each Party acknowledges that said
Party has not executed or authorized the execution of this instrument in
reliance upon any such promise, representation or warranty not contained herein.
B. Each of the Parties to this Agreement states that they have not relied
upon nor are they relying upon any statements of any other Party to this
Agreement and that no representations or warranties of any kind have been made
to any other Party concerning any matter that has been resolved other than as
are set forth in this Agreement. No Party is relying on any representations not
set forth expressly in this Agreement. Each Party hereto is relying exclusively
upon their own legal counsel and not on any statement or representation made by
any other Party or counsel for any other Party.
C. Each individual executing this Agreement directly and expressly
warrants that he has been given and has received and accepted authority to so
sign and execute the documents on behalf of the Party for whom it is indicated
they have signed, and further has been expressly given and received and accepted
authority to enter into a binding agreement on behalf of such Party with respect
to the matters contained herein and as stated herein.
XIII. NO ADMISSION OF LIABILITY
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By entering into this Agreement no Party is making any admission of
liability, nor admitting the sufficiency of any other Party's allegations.
Instead, the Parties have entered into this Agreement to compromise disputed
claims and to avoid the further expense and burden of litigation. No Party
admits liability, wrongdoing, or any sort of malfeasance.
XIV. COUNTERPARTS
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This Agreement may be executed in counterparts and, if so executed, each
counterpart shall have the full force and effect of an original. Further, a
telecopied signature page by any signatory shall constitute an original for all
purposes.
IN WITNESS WHEREOF, the PARTIES hereto have voluntarily entered into this
AGREEMENT as of the EFFECTIVE DATE.
San Xxxxx Xxxxxx Hills Capital, Inc.
/s/ Xxxxx Xxxxxxxxxx
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By: Xxxxx Xxxxxxxxxx
Its: Chief Environmental Technologies
Entech Environmental Technologies
/s/ Xxxx Xxxxxxxx, President
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By: Xxxx Xxxxxxxx
Its:
APPROVED AS TO FORM:
XXXXXXXXX & XXXXXX
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx, Esq. Attorneys
for San Xxxxx Xxxxxx Hills Captial, Inc.
By: /s/ Xxxxxx X. Xxxxxxxx, Esq.
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Xxxxxx X. Xxxxxxxx, Esq. Attorney for
Entech Environmental Technologies
EXHIBIT "A"
THE LOAN AGREEMENT DATED JULY 9, 2004
EXHIBIT "B"
UCC-L RECORDED ON JULY 15, 2004
EXHIBIT "C"
UCC-3
