EXHIBIT 10.36
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SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (the "Agreement") is entered
into this 1st day of April, 2003 by and between OneSource Technologies, Inc.
("OneSource") and Xxxxxxx and Xxxxxx Xxxxxxxx ("Xxxxxxxx"or the
"Mallettes")(OneSource and the Mallettes are collectively referred to as the
"Parties").
WITNESSETH
Whereas, OneSource entered into a Stock Exchange Agreement and Plan of
Reorganization (the "Stock Exchange Agreement") on September 1, 1999 with
Xxxxxxxx for the purchase of their entire interest in Cartridge Care, Inc
("Cartridge Care") for the consideration of 943,750 shares of OneSource common
voting stock and the continued employment of Xxxxxxx Xxxxxxxx by Cartridge Care
as its President and Chief Executive Officer and by OneSource as its Executive
Vice President and Director; and
Whereas, pursuant to the Stock Exchange Agreement, the stock of Cartridge
Care was accepted by OneSource subject to certain liabilities, including but not
limited to liabilities to Valley First National Bank, which liabilities were
personally guaranteed by the Mallettes in the amount of $100,000.00; and
Whereas, in the course of his employment with Cartridge Care, Xxxxxxx
Xxxxxxxx personally advanced certain funds to Cartridge Care as expenses and
direct capital infusions, and further claims salary, car expenses, and vacation
pay which have not been paid to the Mallettes by Cartridge Care or OneSource;
and
Whereas, a dispute has arisen concerning the valuation of Cartridge Care,
which dispute resulted in litigation entitled Xxxxxx x. Xxxxxxxx in the Superior
Court of Maricopa County, (the "Litigation") which litigation was subsequently
settled by the Mallettes and Xxxxxx, which litigation resulted in attorneys fees
for which the Mallettes claim reimbursement, and
Whereas, the Mallettes and OneSource entered into a Settlement Agreement
and Mutual Release dated February 15, 2001, including a Promissory Note in the
principal amount of $10,000.00, the terms of which Settlement Agreement have not
been performed by OneSource and no payments have been made on the Promissory
Note; and
Whereas, the Parties hereto desire to settle, compromise, release, and
forever discharge all matters in dispute between them in regard to the Stock
Exchange Agreement, the employment of Xxxxxxx Xxxxxxxx, the Settlement Agreement
and Mutual Release dated February 15, 2001, the Promissory Note and any
agreements related thereto, the Litigation, the claim for attorneys fees related
thereto, and any other claims, cause or causes of action which could have been
asserted therein, or which may have been asserted independently of the
Litigation by either party against the other, arising out of the conduct of
either party at any time through the date of this Agreement, all upon the terms
and conditions appearing in this Agreement;
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Now, Therefore, and in consideration of the foregoing recitals and in
accordance with the following terms and conditions, the Parties hereto agree as
follows:
AGREEMENTS
1. Settlement Of Litigation And Consideration.
The Parties agree for the consideration stated herein, to settle all
claims as between themselves, and to release fully each party except
for the obligations contained in this Agreement. As consideration for
the settlement, release, and the covenants and conditions herein on
the part of Xxxxxxxx, OneSource agrees to pay to Xxxxxxxx the sum of
One hundred and fourteen thousand five hundred ($114,500.00) dollars
which shall be payable as set forth below, and to deliver the other
consideration as stated herein:
a.) OneSource agrees to pay to the Mallettes by company check the sum
of Two thousand five hundred ($2,500.00) dollars upon the execution of
this Agreement. On the first day of May, 2003, and on the first day of
each month thereafter, through the first day of November, 2003
OneSource shall pay by company check to the Mallettes the sum of Two
thousand five hundred ($2,500.00) dollars. On the first day of
December, 2003, and on the first day of each and every month
thereafter, through the first day of July, 2004, OneSource shall pay
to the Mallettes the sum of Three thousand ($3,000.00) dollars. On the
first day of August, 2004, and on the first day of each and every
month thereafter, through the first day of March, 2005, OneSource
shall pay to the Mallettes the sum of Three thousand five hundred
($3,500.00) dollars such that the total of all cash payments to the
Mallettes pursuant to this paragraph is Seventy two thousand
($72,000.00) dollars.
b.) Concurrently with the execution of this Agreement, OneSource shall
deliver to the Mallettes an originally executed promissory note in the
principal amount of Forty two thousand five hundred ($42,500.00)
dollars, payable in one single sum on April 1, 2005 and convertible at
the option of the Mallettes to shares of One Source Technologies, Inc.
common voting stock in accordance with its provisions. The form of
this Promissory Note is attached hereto as Exhibit "A".
c.) Within thirty (30) days of the execution of this Agreement,
together with the execution and delivery of the Investment Letter by
the Mallettes, in form as set forth as Exhibit "B", OneSource agrees
to deliver to the Mallettes four stock certificates aggregating Eight
hundred and fifty thousand (850,000) shares of OneSource common voting
stock registered in the names of the Mallettes as provided in the
Investment Letter. Three stock certificates shall be in the
denomination of 250,000 shares each and the forth stock certificate
shall be in the denomination of 100,000 shares.
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d.) Within thirty (30) days of the execution of this Agreement,
OneSource agrees to deliver to the Mallettes an additional stock
certificate, replacing certificate number 1367, in the amount of Fifty
eight thousand three hundred and thirty three (58,333) shares, which
were previously purchased by the Mallettes. OneSource additionally
agrees, within the same time frame to issue and deliver to the
Mallettes an additional stock certificate, in the amount of Seventy
five thousand six hundred and ninety four shares (75,694),
representing additional stock due to the Mallettes as the result of
the acquisition of their interest in Cartridge Care from the Mallettes
by Onesource.
2. Mutual Release of Liability.
a.) The Mallettes hereby release and forever discharge, on their
behalf, and on behalf of their heirs, executors, administrators, and
assigns OneSource and any of its subsidiary corporations, and all of
their respective employees, officers, directors, agents, attorneys,
successors, assigns, and representatives from any and all rights,
claims, liabilities, demands or damages of any kind whatsoever,
whether known or unknown, resulting without limitation from the Stock
Exchange Agreement, the employment of Xxxxxxx Xxxxxxxx as President
and Chief Executive Officer of Cartridge Care, and as Executive Vice
President and Director of OneSource, the Settlement Agreement and
Mutual Release dated February 15, 2001, the Promissory Note, and any
agreements related thereto, the Litigation, and any claims for
attorney fees related thereto, and any other claims, cause or causes
of action which could have been asserted therein, or which may have
been asserted independently of the Litigation by either party against
the other, or any other dealings between the Parties, arising at any
time whatsoever prior to the date of this Agreement.
b.) OneSource hereby releases and forever discharges, on behalf of
itself, and on behalf of its successors, administrators, and assigns,
the Mallettes, their heirs, successors, and assigns from any and all
rights, claims, liabilities, demands or damages of any kind, known or
unknown, resulting from the Stock Exchange Agreement, the Employment
Agreement, the employment of Xxxxxxx Xxxxxxxx as President and Chief
Executive Officer of Cartridge Care, and Executive Vice President and
Director of OneSource or any other dealings between the Parties,
arising at any time whatsoever prior to the date of this Agreement,
with the exception of the matters set forth in the indemnity by the
Mallettes in paragraph 3 below.
3. Indemnity.
The Mallettes agree to fully indemnify and hold OneSource harmless
from any and all claims, liabilities, demands, damages or causes of
action of any kind arising out of any claims which they may have or
which may be made by any other creditor relating to any loan or credit
agreements which the Mallettes have signed with a personal guarantee
on behalf of OneSource or Cartridge Care. Except for such matters as
are set forth in the indemnity of the Mallettes, OneSource agrees to
indemnify and defend the Mallettes and to hold them harmless from any
and all claims, demands, or causes of action to the same extent that
OneSource currently indemnifies its officers and directors, which
claims, demands, or causes of action may be brought, threatened, or
pending against it or Cartridge Care by reason of any actions by
OneSource or any of its officers, directors or employees up to the
date of this Agreement.
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4. Securities Provisions.
The Mallettes agree to accept the stock set forth in paragraph 1(c)
above in unregistered form with standard legends currently used by
OneSource for similar securities transactions in accordance with the
provisions set forth in the Subscription Agreement. The shares, when
issued, shall be fully paid and non-assessable. The Mallettes agree to
execute OneSource's standard Subscription Agreement as provided above,
and in form as attached hereto. OneSource agrees to register the
shares set forth in paragraph 1 (c) above, together with any shares
acquired by the Mallettes through the exercise of the conversion of
the promissory note in accordance with the Statement of Registration
Rights as set forth in Exhibit "C" attached hereto, to which both
parties hereby subscribe. OneSource shall, during the performance of
any obligation set forth in this Agreement, file quarterly financial
statements with the Securities and Exchange Commission. In the event
that such statements are not filed, OneSource will, during the
performance of any obligation set forth in this Agreement, supply to
the Mallettes a quarterly financial statement, which shall be in
audited or reviewed form if available. If audited or reviewed
statements are not available, such unaudited financial statements as
are used by management shall be supplied.
5. Warranties and Representations of the Parties:
a.) The Parties represent, warrant, and agree that they are the sole
owners of all right, title, and interest in and to every claim or
matter released herein, and have not assigned or transferred to any
person or entity any claim or other matter released herein.
b.) Each of the Parties represents, warrants, and agrees that the
recitals as set forth in the preamble to this Agreement are true and
correct as to themselves and that there are no undisclosed liabilities
which, based upon personal guarantees of the Mallettes, could be
asserted against OneSource and each Party agrees that the recitals are
true and correct and are incorporated herein as if fully set forth in
the text of this Agreement.
c.) Each of the Parties represents and warrants that the person
signing this Agreement on its behalf is duly authorized to execute
this Agreement on behalf of the Party and that this Agreement
constitutes a valid and binding obligation.
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d.) Each Party acknowledges that this Agreement has been entered into
for the sole purpose of avoiding the expense, uncertainty, and
inconvenience associated with prospective litigation. Each Party
further agrees that this Agreement shall not constitute an admission
of liability and may not be used by any other Party or person
including creditors of the Mallettes, Cartridge Care or OneSource as
evidence of an admission of liability by any Party or anyone claiming
in the right of any party in any subsequent dispute between the
Parties or otherwise other than in an action for breach of this
Agreement or seeking enforcement of this Agreement.
6. Notices.
Notices and other communications required or permitted hereunder shall
be effective only if they are in writing and sent by certified mail
postage prepaid addressed as follows:
If to OneSource, to:
OneSource Technologies, Inc.
0000 X. Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxxx
With a copy to:
Xxxxx X. Deer
0000 Xxxx Xxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
If to Mallettes:
Xxxxxxx and Xxxxxx Xxxxxxxx
00000 Xxxx Xxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
With a copy to:
Xxxxxxxxxxx Xxxx
Xxxx Xxxxxxx & Xxxx, P.L.C.
Suite 1500
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
7. Construction.
In preparing and executing this Agreement, each Party was represented
by counsel. The terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary
meanings and each Party specifically waives any rule of law which
would cause this Agreement to be interpreted against any Party whose
attorney prepared the Agreement.
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8. Entire Agreement.
Except for such Exhibits as are attached hereto, this Agreement
represents the entire agreement between the parties with respect to
the subject matter hereof and supercedes any prior agreement,
understanding, negotiation, or representation regarding the
transactions contemplated by this Agreement.
9. Attorneys Fees.
In the event of a breach of this Agreement, which results in the
commencement of any subsequent legal action or arbitration proceeding,
the prevailing party in such dispute shall be entitled to
reimbursement of reasonable attorney's fees and court costs.
10. Counterparts.
This Agreement maybe executed in two counterparts, each of which, when
executed and delivered, shall be deemed an original, and all such
counterparts shall constitute one and the same instrument. Transmittal
by facsimile of a signed counterpart shall be deemed to constitute the
delivery of a fully executed counterpart to the recipient.
11. Cooperation.
Each of the Parties further agrees that it or they shall execute and
deliver to the other Party all instruments and do such further acts
and things as the other Party may reasonably request when such things
are necessary to effectuate the purpose of this Agreement.
12. Jurisdiction, Venue, and Choice of Law.
Each party hereto consents to the jurisdiction of the Maricopa County
Superior Court of the State of Arizona and agrees that all actions and
proceedings arising out of or relating to this Agreement will be
litigated exclusively in such court. The parties further agree that
this Agreement shall be interpreted in accordance with the laws of the
State of Arizona.
Dated this 1st day of April, 2003.
OneSource Technologies, Inc. Xxxxxxx Xxxxxxxx
By: /s/ Xxxxxxx Xxxxxxxx
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Its: Xxxxxx Xxxxxxxx
----------------------------
/s/ Xxxxxx Xxxxxxxx
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A
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THIS SECURITY AND THE SECURITY INTO WHICH IT MAY BE CONVERTIBLE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED OTHER THAN TO AFFILIATES
OF HOLDER HEREOF UNLESS AND UNTIL REGISTERED UNDER THE ACT OR IN AN OPINION OF
COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE FOR SUCH
OFFER, SALE, OR TRANSFER, PLEDGE OR HYPOTHECATION
Promissory Note
(Convertible to Common Stock)
Principal Amount: $42,500
Date of Note Agreement: April 1, 2003
Parties: The Maker is OneSource Technologies, Inc. The Holders are Xxxxxxx and
Xxxxxx Xxxxxxxx (the "Mallettes").
Loan Agreement: In consideration for the settlement of litigation, and the
promises as set forth in the Settlement Agreement and Release executed
concurrently herewith, Maker promises to pay to the Mallettes (Holders), or
order, in lawful money of the United States of America, the principal amount of
Forty two thousand five hundred ($42,500) dollars and no cents, without
interest, on the payment date as set forth herein.
Payments: Maker will pay the principal of this Note in one single sum payment
due April 1, 2005. All payments under this Note shall be made to Holder, as
Xxxxxxx and Xxxxxx Xxxxxxxx, 00000 Xxxx Xxxx Xxxxx Xxxx, Xxxxxxxxxx, Xxxxxxx
00000 or to such other address as Holder shall provide to Maker in writing.
Conversion Option: On or prior to the payment due date as set forth above,
Holders may convert all or any portion of the outstanding principal balance of
this Note to shares of common voting stock of OneSource Technologies, Inc. at a
conversion price of Ten cents ($.10) per common share. This option may be
exercised by written notice specifying the amount of the principal to be
converted addressed to the President or Secretary of Maker and mailed or sent so
that it is received at Makers office on or before 5:00 p.m., Mountain Standard
Time on or before April 1, 2005. The Holders agree to execute an investment
letter for the shares in the form commonly used by the Maker. Holders agree to
receive the shares in unregistered form subject to the standard legend for
unregistered securities used by the Maker on similar sales of unregistered
securities.
Adjustments: In the event of any capital adjustment resulting from a stock
split, reverse stock split, stock dividend, reorganization, merger,
consolidation, or a combination, reclassification, or exchange of shares of
common stock or any other increase or decrease in the number of issued shares of
of common stock, the number and kind of shares into which this Note may be
converted and the conversion price per share shall not be adjusted, provided
that, should holders of the common voting shares of the Maker be accorded any
anti-dilution protection, the Holders shall be entitled to the same protection
for their option to convert, the conversion price, and any shares into which the
principal of the Note is converted.
Default: Maker will be in default if:
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a) Maker fails to make any payment due hereunder within ten (10) days of
the date of written notice by Holder to Maker to make any late
payment;
b) Maker fails to perform when due any other term, obligation, covenant
or condition contained in this Note;
c) Maker becomes insolvent, a receiver is appointed for any part of
Maker's property, Maker makes an assignment for the benefit of
creditors, or any proceeding is commenced by Maker or against Maker
under any bankruptcy or insolvency laws.
Default Notices: Default notices shall be effective only if they are in writing
and sent by facsimile and certified mail to:
OneSource Technologies, Inc.
0000 X. Xxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxx Xxxxxxxx
Facsimile: (480) 889- 1166
With a copy to:
Xxxxx X. Deer
0000 Xxxx Xxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Holder's Rights: Upon default, Holder may declare the entire unpaid principal
balance on this Note and all accrued and unpaid interest immediately due and
payable. Holder may increase the interest rate to a default rate of seven
percent (7%).. Holder may exercise any remedy or remedies provided in this Note
or under Arizona law in any order.
Holder's Expenses: In the event Holder utilizes the services of an attorney in
attempting to collect the amounts due hereunder or to enforce the terms hereof
or of any agreements related to this indebtedness, Maker shall pay to Holder, on
demand, all costs and expenses so incurred, including reasonable attorney's
fees, including those costs, expenses and attorney's fees incurred after the
entry of judgement herein or the filing by or against Maker of any proceeding
under any chapter of the Bankruptcy Code, or similar federal or state statutes,
and whether incurred in connection with the involvement of any Holder hereof as
creditor in such proceedings or otherwise.
A-2
Law Applicable: This Note shall be construed under the laws of the State of
Arizona
General Provisions: Holder may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Maker, to the extent permitted by
law, waives presentment, demand for payment, protest, or notice of dishonor.
Holder may renew or extend this loan, release any party or collateral, or fail
to realize upon or perfect a Holder's security interest in any collateral, and
to take any action deemed necessary by Holder without consent or notice to
anyone except as provided herein.
Jurisdiction, Venue, and Choice of Law: Maker and Holder consent to the
jurisdiction of the Maricopa County Superior Court of the State of Arizona and
agree that all actions and proceedings arising out of or related to this Note
will be litigated exclusively in such court. The Maker and Holder further agree
that this Note shall be interpreted in accordance with the laws of the State of
Arizona.
Assignment. This Note shall be non-assignable.
IN WITNESS WHEREOF, the Maker has caused this Note to be signed in its name this
1st day of April, 2003.
Maker
OneSource Technologies, Inc.
By:
---------------------------------
Its:
---------------------------------
A-3
B
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OneSource Technologies, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx Xxxxxxxx
Re: Purchase of 850,000 Shares of One Source Technologies, Inc. Common Stock
Gentlemen:
In connection with the issuance of the referenced stock as partial consideration
for the settlement of the claims as between OneSource Technologies, Inc. (the "
Company") and Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx (the "Purchasers" or the
Undersigned") the Purchasers hereby represent and warrant to the Company and to
each officer, director, controlling person, and agent of the foregoing as
follows:
A. REPRESENTATION OF THE INVESTOR
1. The undersigned understands the risks of, and other considerations
relating to the purchase of and holding of the Shares of the Company's
Common Stock (the "Shares").
2. The undersigned is purchasing the shares for the undersigned's own
account, with the intention of holding the Shares for investment, with
no present intention of dividing or allowing others to participate in
this investment, or of reselling or otherwise participating directly
or indirectly, in a distribution of the Shares. The undersigned agrees
not to transfer any of the Shares unless they are registered under the
provisions of the Securities Act of 1933 and any applicable securities
laws of any state, unless an exemption from registration is available
under those laws.
3. The undersigned has knowledge of the business affairs of the Company
and has made an independent evaluation of the merits of the securities
and acknowledges the high risk of the securities.
4. The undersigned understands that the provisions of Rule 144
promulgated under the Act are not available to permit the resale of
the Shares, until the prescribed waiting period has expired and
routine sales made in reliance on its provisions could be made only in
limited amounts and in accordance with the terms and conditions of the
Rule. The undersigned further understands that in connection with
sales of Shares for which Rule 144 is not available, registration or
compliance with some other registration exemption will be required.
Rights to registration of the Shares are as provided in the Settlement
Agreement and Mutual Release.
5. The undersigned understands and agrees that stop transfer instructions
will be given to the Company's transfer agent and agrees that a legend
will be placed on the certificates for the Shares or any substitutions
therefore, the legend stating as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THESE SHARES MAY
NOT BE TRANSFERRED NOR WILL ANY ASSIGNEE OR ENDORSEE HEREOF BE
RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSES, EXCEPT
IN TRANSACTIONS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS
WITH RESEPCT TO ANY PROPOSED TRANSFER OR DISPOSITION OF SUCH SHARES
SHALL BE ESTABLISHED TO THE SATISFACTION OF COUNSEL TO THE ISSUER."
The undersigned understands and agrees that the Company may refuse to
permit the transfer of Shares out of the investors name and that the
Shares must be held indefinitely in the absence of compliance with the
terms of such legend.
6. The undersigned represents, if an individual, that the undersigned is
at least 21 years of age.
7. The undersigned is not subscribing to the Shares as a result of or
subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not
previously known to the undersigned in connection with investments in
Shares generally.
B-2
B. INDEMNIFICATION
The undersigned agrees to indemnify and hold harmless the Company, its
officers, directors, agents and shareholders and any other person who
may be deemed to control the Company from any loss, liability, claim,
damage or expense, arising out of the inaccuracy of any of the above
representations, warranties or statements or the breach of the
agreements contained herein.
C. GENERAL
This Investment Letter (i) shall be binding upon the undersigned and the
heirs, legal representatives, successors, and assigns of the undersigned,
(ii) shall be governed, construed and enforced in accordance with the laws
of the State of Arizona applicable to contracts entered into and wholly to
be performed in Arizona by Arizona residents (except insofar as affected by
the state securities or "Blue Sky" laws), and (iii) shall survive the sale
of the Shares.
Sincerely yours,
-------------------------------
--------------------------------
Please register my shares as follows:
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Name or Names of Purchasers
------------------------------
EIN Number
-----------------------------
Xxxxxx Xxxxxxx
-----------------------------
Xxxx, Xxxxx and Zip Code
B-3
C
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STATEMENT OF REGISTRATION RIGHTS
THIS STATEMENT OF REGISTRATION RIGHTS (the "Statement"), is dated as of the
___ day of _______________, 2003.
WHEREAS, In connection with the provisions of a Settlement Agreement and
Mutual Release (the "Settlement Agreement"), Ahlawyss Xxxxxx and Xxxxxx Xxxxxx,
husband and wife (collectively the "Shareholders") have acquired One Million
(1,000,000) shares of the common stock, $0.001 par value (the "Common Stock") of
OneSource Technologies, Inc., a Delaware corporation (the "Company" or
"OneSource"), and have the right to acquire up to an additional Seven Hundred
Thousand (700,000) shares of Common Stock upon the conversion of a Convertible
Promissory Note (the "Note") of the Company delivered pursuant to the Settlement
Agreement.
WHEREAS, the Company desires to grant to the Shareholders the registration
rights set forth herein with respect to the Common Stock that the Shareholders
have acquired or may acquire upon conversion of the Note.
NOW, THEREFORE, the OneSource hereby grants to the Shareholders the
following registration rights:
Section 1. Registration Rights.
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(a) The Company shall be obligated to the Shareholders to file a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act") covering the shares of Common Stock as amended (the
"Securities Act") covering the shares of Common Stock held by the
Shareholders only as follows:
(i) Registration rights shall apply only during the period commencing
upon the date of this Statement and continuing until the earlier of
(a) the disposition by the Shareholders of all the shares of the
Common Stock acquired pursuant to the Settlement Agreement, or (b)
June 30, 2006 (the "Rights Period").
(ii) Whenever, during the Rights Period, the Company proposes to file
with the Securities and Exchange Commission (the "Commission") a
Registration Statement (other than a Form S-4 or S-8, or an S-3 used
in conjunction with an S-8 which S-3 is filed solely to facilitate
resales by affiliates of the Company of Shares issued under employee
stock incentive plans, or comparable registration statements) of its
Common Stock, it shall, at least 30 days prior to such filing, give
written notice of such proposed filing to the Shareholders at their
address appearing on the records of the Company, and shall offer to
include and shall include in such filing all or a portion of the
Shareholders' Common stock upon receipt by the Company, not less than
10 days prior to the proposed filing date, of a request therefore,
subject to the right of the managing underwriter, in any such offering
that is underwritten, to limit or eliminate entirely the number of
securities that may be included in such offering on a pro rata basis
with any other person on whose behalf securities are being registered.
(b) The Company will maintain any Registration Statement or
post-effective amendment filed under this Section 1 hereof current under
the Securities Act until the earlier of (1) the sale of all of the Common
Stock subject to such Registration Statement, or (2) nine months from the
effective date thereof. If the Company fails to keep such Registration
Statement current for the period specified above, and the selling
Shareholders do not sell at least one-half of the shares of Common Stock
which are the subject of the offering, such registration shall not be
deemed an exercise of any of the rights provided under this Section 1
hereof.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of
any Registration Statement under Section 1(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The selling Shareholders
shall bear their proportionate cost of underwriting discounts and
commissions, if any, applicable to the Common Stock being registered and
the fees and expenses of their counsel. The Company shall use its best
efforts to qualify any of the securities for sale in such states as the
selling Shareholders reasonably designate and shall furnish indemnification
in the manner provided in Section 2 hereof. However, the Company shall not
be required to qualify in any state which will require an escrow or other
restriction relating to the Company and/or any selling Shareholders. The
Company at its expense will supply the selling Shareholders with copies of
such Registration Statement and the prospectus or offering circular
included therein and other related documents in such quantities as may be
reasonably requested by them.
(d) The Company shall not be required by this Section 1 to file a
Registration Statement or include the Shareholders' Common Stock in any
Registration Statement which is to be filed if, in the opinion of counsel
for both the Shareholders and the Company (or, should they not agree, in
the opinion of another counsel experienced in securities law matters
acceptable to counsel for Shareholders and the Company) the proposed
offering or other transfer as to which such registration is requested is
exempt from applicable federal and state securities registration laws and
would result in all purchasers or transferees obtaining securities which
are not "restricted securities", as defined in Rule 144 under the
Securities Act.
(e) The Company agrees that, commencing on the date of this Statement
and until all Shares have been sold under a Registration Statement or
pursuant to Rule 144 under the Securities Act, it will keep current in
filing all materials required to be filed with the Commission in order to
permit the holders thereof to sell the Shares under such Rule 144.
(f) No provision contained herein shall preclude the Company from
selling other securities pursuant to any Registration Statement in which it
is required to include the Shareholders' Common Stock pursuant to this
Section 1.
C-2
(g) For purposes of this Statement, the Company shall include
OneSource and any other entity which, directly or indirectly, owns,
succeeds to or is assignee of any substantial portion of the assets or
business of OneSource (or who is an affiliate of any such other entity) and
Common Stock shall include the comparable equity securities of such other
entity. OneSource shall, as a condition of any reorganization, sale or
other transaction in which another entity becomes owner, successor or
assignee of any substantial portion of the assets or business of OneSource,
require that such entity acknowledge and agree to be bound by the terms of
this Statement.
Section 2. Indemnification.
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(a) In the event of the filing of any Registration Statement with
respect to Shares pursuant to Section 1 hereof, the Company agrees to
indemnify and hold harmless each selling Shareholder against any losses,
claims, damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), to which such
Shareholder may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any such
Registration Statement, or any related preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that the
Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in such Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in
reliance upon, and in conformity with, written information furnished to the
Company by a selling Shareholder, specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability that
the Company may otherwise have.
(b) In the event of the filing of any Registration Statement with
respect to Common Stock pursuant to Section 1 hereof, each selling
Shareholder agrees to indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of the
Securities Act, against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees) to which
the Company or any such controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in any such Registration Statement, or any related preliminary
prospectus, final prospectus, offering circular, notification or amendment
or supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in
each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto in reliance upon, and in
conformity with, written information furnished to the Company by such
selling Shareholder, specifically for use in the preparation thereof and,
provided further, that the indemnity agreement contained in Section 2(b)
shall not inure to the benefit of the Company with respect to any person
asserting such loss, claim, damage or liability who purchased the Common
Stock which is the subject thereof if the Company failed to send or give
(in violation of the Securities Act or the rules and regulations
promulgated thereunder) a copy of the prospectus contained in such
Registration Statement to such person at or prior to the written
confirmation to such person of the sale of such Common Stock, where the
Company was obligated to do so under the Securities Act or the rules or
regulations promulgated thereunder. This indemnity agreement will be in
addition to any liability that a selling Shareholder may otherwise have.
C-3
(c) Promptly after receipt by an indemnified party under this Section
2 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 2, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than as to the particular item as to which
indemnification is then being sought solely pursuant to this Section 2. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under this Section 2 for
any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to
its final conclusion. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the
indemnified party; provided that, if the indemnified party is a selling
Shareholder, the fees and expenses of such counsel shall be at the expense
of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the
named parties to any such action (including any impleaded parties) include
both the selling Shareholder and the indemnifying party and the selling
Shareholder shall have been advised by such counsel that there may be one
or more legal defenses available to the indemnifying party different from
or in conflict with any legal defenses which may be available to the
selling Shareholder (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of the selling
Shareholder, it being understood, however, that the indemnifying party
shall, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the indemnified
parties, which firm shall be designated in writing by the indemnified
parties. No settlement of any action against an indemnified party shall be
made without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld.
C-4
Section 3. Contribution.
-------------
In order to provide for just and equitable contribution under the
Securities Act in any case in which (i) a selling Shareholder makes a claim for
indemnification pursuant to Section 2 hereof but is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that the express provisions of Section 2 hereof provide for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the
part of a selling Shareholder, then the Company and each such selling
Shareholder shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), in either such case after contribution
from others on the basis of relative fault as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or a selling Shareholder, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and each Shareholder
agree that it would not be just and equitable if contribution pursuant to this
Section 3 were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 3. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities or actions in respect
thereof referred to above in this Section 3 shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the
Securities Act shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
C-5
D
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OneSource Technologies, Inc.
0000 Xxxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx Xxxxxxxx
Re: Purchase of 75,694 Shares of One Source Technologies, Inc. Common Stock
Gentlemen:
In connection with the issuance of the referenced stock as partial consideration
for the settlement of the claims as between OneSource Technologies, Inc. (the "
Company") and Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx (the "Purchasers" or the
Undersigned") the Purchasers hereby represent and warrant to the Company and to
each officer, director, controlling person, and agent of the foregoing as
follows:
A. REPRESENTATION OF THE INVESTOR
1. The undersigned understands the risks of, and other considerations
relating to the purchase of and holding of the Shares of the Company's
Common Stock (the "Shares").
2. The undersigned is purchasing the shares for the undersigned's own
account, with the intention of holding the Shares for investment, with
no present intention of dividing or allowing others to participate in
this investment, or of reselling or otherwise participating directly
or indirectly, in a distribution of the Shares. The undersigned agrees
not to transfer any of the Shares unless they are registered under the
provisions of the Securities Act of 1933 and any applicable securities
laws of any state, unless an exemption from registration is available
under those laws.
3. The undersigned has knowledge of the business affairs of the Company
and has made an independent evaluation of the merits of the securities
and acknowledges the high risk of the securities.
4. The undersigned understands that the provisions of Rule 144
promulgated under the Act are not available to permit the resale of
the Shares, until the prescribed waiting period has expired and
routine sales made in reliance on its provisions could be made only in
limited amounts and in accordance with the terms and conditions of the
Rule. The undersigned further understands that in connection with
sales of Shares for which Rule 144 is not available, registration or
compliance with some other registration exemption will be required.
Rights to registration of the Shares are as provided in the Settlement
Agreement and Mutual Release.
5. The undersigned understands and agrees that stop transfer instructions
will be given to the Company's transfer agent and agrees that a legend
will be placed on the certificates for the Shares or any substitutions
therefore, the legend stating as follows:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE, IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THESE SHARES MAY
NOT BE TRANSFERRED NOR WILL ANY ASSIGNEE OR ENDORSEE HEREOF BE
RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSES, EXCEPT
IN TRANSACTIONS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS
WITH RESEPCT TO ANY PROPOSED TRANSFER OR DISPOSITION OF SUCH SHARES
SHALL BE ESTABLISHED TO THE SATISFACTION OF COUNSEL TO THE ISSUER."
The undersigned understands and agrees that the Company may refuse to
permit the transfer of Shares out of the investors name and that the
Shares must be held indefinitely in the absence of compliance with the
terms of such legend.
6. The undersigned represents, if an individual, that the undersigned is
at least 21 years of age.
7. The undersigned is not subscribing to the Shares as a result of or
subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not
previously known to the undersigned in connection with investments in
Shares generally.
D-2
B. INDEMNIFICATION
The undersigned agrees to indemnify and hold harmless the Company, its
officers, directors, agents and shareholders and any other person who may
be deemed to control the Company from any loss, liability, claim, damage or
expense, arising out of the inaccuracy of any of the above representations,
warranties or statements or the breach of the agreements contained herein.
C. GENERAL
This Investment Letter (i) shall be binding upon the undersigned and the
heirs, legal representatives, successors, and assigns of the undersigned,
(ii) shall be governed, construed and enforced in accordance with the laws
of the State of Arizona applicable to contracts entered into and wholly to
be performed in Arizona by Arizona residents (except insofar as affected by
the state securities or "Blue Sky" laws), and (iii) shall survive the sale
of the Shares.
Sincerely yours,
-------------------------------
--------------------------------
Please register my shares as follows:
------------------------------
Name or Names of Purchasers
------------------------------
EIN Number
-----------------------------
Street Address
-----------------------------
City, State and Zip Code
D-3
