Exhibit 10.1
SETTLEMENT AGREEMENT AND RELEASE
--------------------------------
This Settlement Agreement and Release (this "Agreement") is made and
entered into as of April 15, 2005. The Parties to this Agreement are:
(1) Dialog4 System Engineering GmbH ("Dialog4"), Berthold Burkhardtsmaier
("Mr. Burkhardtsmaier"), Cornelia Burkardtsmaier, and Friedrich Maier
(collectively "Shareholders"); and
(2) Circuit Research Labs, Inc. ("Circuit Research Labs"), CRL Systems,
Inc. ("CRL Systems"), Charles Jayson Brentlinger ("Mr. Brentlinger"), and Tammy
Brentlinger (collectively "Respondents").
RECITALS
--------
A. Dialog4 and Respondents are parties to litigation styled Dialog4 System
Engineering GmbH, No. CIV 05-0583 PHX EHC, currently pending in the United
States District Court for the District of Arizona (the "Arizona Litigation"). In
the Arizona Litigation, Dialog4 seeks an order confirming and enforcing an
Arbitral Award and an Addendum thereto (collectively the "Arbitral Award"), the
subject of which was an Asset Sale and Purchase Agreement and two amendments
thereto (collectively the "ASPA"), executed by Shareholders and all of the
Respondents, except for Tammy Brentlinger. A true and correct copy of the ASPA
is attached as Exhibit C to the Application filed by Dialog4 in the Arizona
Litigation. A true and correct copy of the Arbitral Award and of the Addendum
are attached to the Application as Exhibits A and B respectively. On February 7,
2005, the Higher Regional Court of Stuttgart ("HRC") issued a ruling declaring
the Arbitral Award and the Addendum enforceable (the "HRC Ruling"). A true and
correct copy of the HRC Ruling is attached as Exhibit D to the Application.
B. Mr. Burkhardtsmaier and Circuit Research Labs are parties to litigation
currently pending in the Stuttgart Regional Court (Landgericht Stuttgart) and
the Higher Regional Court of Stuttgart (Oberlandesgericht Stuttgart) in Germany,
arising out of the Service Contract of 18 January 2002 (the "Employment
Litigation").
C. Shareholders and Mr. Brentlinger are parties to a Stock Purchase
Agreement, dated November 16, 2001 (the "Stock Purchase Agreement").
D. The Parties now wish to enter into this Agreement to compromise and
resolve any and all disputes between them, including but not limited to the
claims asserted in the Arizona Litigation and in the Employment Litigation and
the additional claims which could be asserted under the ASPA and the Stock
Purchase Agreement.
TERMS AND CONDITIONS
--------------------
1. MUTUAL RELEASE AND DISCHARGE.
-----------------------------
Upon full payment by Respondents in accordance with Paragraph 3 of this
Agreement and the registration of the Shares pursuant to Paragraph 4 of this
Agreement, the Parties (including, without limitation, their officers,
directors, shareholders, employees, agents, attorneys and insurers, if any)
completely release and forever discharge each other of and from any and all
claims, actions, causes of action, in law or in equity, demands, liabilities,
rights, direct or indirect damages, or costs whatsoever, including court costs,
legal expenses and attorneys' fees, which the Parties now have or had or which
may hereafter accrue, arising from or in any way relating to any transactions,
events, and occurrences which are or could be the subject of the Arizona
Litigation, including, but not limited to, any claims and counterclaims which
have been asserted or which could have been asserted in the Arizona Litigation,
and any claims that
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arise out of or relate to the ASPA or the Stock Purchase Agreement. This Mutual
Release and Discharge shall apply to all such claims, whether presently known or
unknown to the Parties.
Notwithstanding anything in the previous paragraph, this Mutual Release and
Discharge shall not apply to any claims that a Party has breached this
Agreement. Nor shall this Mutual Release and Discharge apply to any claims
arising out of or related to the Service Contract of 18 January 2002 or the
subject matter of the Employment Litigation; instead, any release of such claims
shall be governed by the Court Settlement Agreement attached hereto as Exhibit
A.
With respect to this Mutual Release and Discharge, each Party acknowledges
and agrees that any and all rights granted to it under any state or federal laws
which may limit or invalidate the above, whether in whole or in part, are hereby
expressly waived.
Each Party agrees that neither this Mutual Release and Discharge nor any
other provision of this Agreement constitute, nor shall be construed to
constitute, an admission of liability or fault by any Party. This Agreement is
made solely to terminate the disputes between the Parties and to avoid the
further expense and inconvenience of the Arizona Litigation and the Employment
Litigation.
Each Party represents and warrants that he, she, or it has not heretofore
assigned or transferred, or otherwise conveyed, any claim or cause of action
that would otherwise be released or discharged herein.
2. NOTICE OF DISMISSAL AND STIPULATION RE ENFORCEMENT OF ARBITRATION AWARD.
------------------------------------------------------------------------
Upon receipt of the installment payment set forth in Paragraph 3(a) below,
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(a) Dialog4 shall cause the Application in the Arizona Litigation to be
dismissed without prejudices, by filing a Notice of Dismissal Without Prejudice
with the Court pursuant to Rule 41(a) of the Federal Rules of Civil Procedure;
and
(b) Respondents shall cause their attorneys to execute a Stipulation, in
the form attached hereto as Exhibit B, by which they agree, in the event of a
default of any of their obligations under Paragraph 3 or Paragraph 4 of this
Agreement, not to oppose or contest entry of a final judgment confirming the
Arbitral Award upon Dialog4 re-filing its Application in any Court with
jurisdiction over the Parties, including but not limited to any defense that
such re-filed Application is barred by laches or by any applicable statute of
limitation. Notwithstanding the foregoing, Tammy Brentlinger may assert any
defense arising out of Arizona's community property laws. Dialog4 shall not
re-file its Application unless and until Respondents are in default of any of
their obligations under Paragraph 3 or Paragraph 4 of this Agreement.
3. PAYMENTS.
---------
Respondents shall pay Dialog4 the total sum of $965,000 in two installments
as follows:
(a) The sum of $490,000 upon the execution of this Agreement; and
(b) The sum of $475,000 on or before April 1, 2006.
Each of these installment payments shall be made by wire transfer, without any
bank charges to Dialog4, pursuant to instructions provided by Dialog4.
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4. REGISTRATION OF THE SHARES.
---------------------------
Shareholders are the owners of 1,250,000 shares of Circuit Research Labs,
as memorialized in Certificate No. 4842 (the "Shares"). No later than June 30,
2004, at its expense, Circuit Research Labs shall file with the Securities and
Exchange Commission ("SEC") a registration statement pursuant to the Securities
Act of 1933, as amended (the "Securities Act"). Thereafter, Circuit Research
Labs shall use its best efforts to have such registration statement declared
effective by the SEC as expeditiously as practicable, keep such registration
statement effective until the earliest of (a) all of the Shares are sold
pursuant to such registration statement, (b) the Shares become freely tradeable
under Rule 144(k) promulgated under the Securities Act, or (c) five years from
the date the registration statement becomes effective. Circuit Research Labs
shall furnish to Shareholders such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of the Shares. In no event shall the release of
Paragraph 1 of this Agreement become effective unless and until the registration
of the Shares is declared effective by the SEC.
5. SATISFACTION OF MSC OBLIGATION.
-------------------------------
From the payment described in Paragraph 3(a) of this Agreement, Dialog4
will pay one-half of the amount owed to MSC Vertriebs GmbH ("MSC"), as more
fully described in the Arbitral Award (the "MSC Obligation"), and shall use its
reasonable efforts to obtain from MSC a release of the Parties of one-half of
the MSC Obligation. From the payment described in Paragraph 3(b) of this
Agreement, Dialgo4 will pay to
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MSC the remaining amount of the MSC Obligation and shall use its best efforts to
obtain a full and complete release from MSC of the MSC Obligation.
6. SETTLEMENT OF EMPLOYMENT LITIGATION.
------------------------------------
Mr. Burkhardtsmaier and Circuit Research Labs agree to settle and resolve
the Employment Litigation pursuant to the Court Settlement Agreement attached
hereto as Exhibit A, the terms of which are incorporated herein by this
reference, including but not limited to Circuit Research Labs' payment
obligations therein. In the event of a default of any of its obligations under
the Court Settlement Agreement, Circuit Research Labs agrees not to oppose any
effort by Mr. Burkhardtsmaier to enforce the Court Settlement Agreement or the
Court Settlement (including but not limited to not raising any objection
whatsoever, be it of a substantive or procedural nature) in any court in the
United States with jurisdiction over Circuit Research Labs.
7. RESIGNATION OF MR. BURKHARDTSMAIER FROM BOARD OF DIRECTORS.
-----------------------------------------------------------
Upon execution of this Agreement, Mr. Burkhardtsmaier shall tender his
resignation as a member of the Board of Directors of Circuit Research Labs.
8. STAND-DOWN AND TOLLING.
-----------------------
(a) Upon receipt of the installment payment described in Paragraph 3(a)
above, Dialog4 shall release the attachment upon Audio Exports.
(b) Unless and until Respondents are in default of any of their obligations
under Paragraph 3 or Paragraph 4 of this Agreement, Dialog4 shall not seek
attachment or pursue any other creditor's remedy upon any customer of Circuit
Research Labs (including customers of its subsidiaries) with respect to
Respondents' monetary obligations owed to Dialog4.
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(c) Upon full payment by Respondents in accordance with Paragraph 3 of this
Agreement and the registration of the Shares pursuant to Paragraph 4 of this
Agreement, Dialog4 shall file with the HRC a satisfaction of the HRC Ruling or
similar papers attesting to compliance with the HRC Ruling and the Arbitral
Award and shall deliver to Respondents the enforceable copy ("vollstreckbare
Ausfertigung") of the HRC Ruling and the Arbitral Award.
(d) Unless and until Respondents are in default of any of their obligations
under Paragraph 3 or Paragraph 4 of this Agreement, Dialog4 shall not seek
enforcement of the ASPA, including but not limiting to Article 4.5 of the ASPA.
In any such enforcement action filed after such default by Respondents,
Respondents shall not assert a defense that such action is barred by laches or
any applicable statute of limitations.
(e) Unless and until Respondents are in default of any of their obligations
under Paragraph 3 or Paragraph 4 of this Agreement, Shareholders shall not seek
enforcement of the Stock Purchase Agreement. In any such enforcement action
filed after such default by Respondents, Mr. Brentlinger and Tammy Brentlinger
shall not assert as a defense that such action is barred by laches or any
applicable statute of limitations.
9. CAPACITY.
---------
Each Party represents and warrants that it has the full capacity and
authority to enter into, execute, deliver, and perform this Agreement and that
this Agreement constitutes an agreement binding upon and enforceable against
that Party.
10. REPRESENTATION AND PARTICIPATION.
---------------------------------
By executing this Agreement, each Party acknowledges that it has received
the advice of legal counsel of its own selection concerning this Agreement and
that each
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Party executes this Agreement with full knowledge and understanding of its terms
and conditions after consultation with such legal counsel. The Parties further
agree that each participated in the preparation of this Agreement and, in the
event of any claim arising under this Agreement, its language shall not be
construed against or in favor of any Party.
11. MISCELLANEOUS.
--------------
(a) The Parties represent that this Agreement is fully integrated,
represents the entire understanding between them, and that there are no other
agreements, representations, promises or negotiations that have not been
embodied expressly herein. Each Party specifically agrees that, in entering into
this Agreement, it has not relied on any representation or opinion of fact, law,
or otherwise, made by the other Party or that Party's attorney, other than the
representations expressly set forth in this Agreement.
(b) This Agreement may be modified, amended or terminated only by a writing
executed by all Parties.
(c) Except as provided below, this Agreement shall be construed and
enforced under the laws of the State of Arizona as though it were executed in
Arizona and without regard to conflict of law principles. Notwithstanding the
previous sentence, the Court Settlement Agreement shall be construed and
governed under the laws of Germany.
(d) This Agreement may be executed in one or more duplicates or
counterparts, each of which shall be deemed to be a part of the fully-executed
original of this Agreement. This Agreement shall be deemed to be fully executed
when this Agreement or a counterpart thereof has been signed and delivered by
each Party.
(e) This Agreement shall inure to the benefit of and be binding upon the
Parties and each of their respective successors and permitted assigns.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date set forth above.
DIALOG4 SYSTEM ENGINEERING GmbH
/s/ Berthold Burkhardtsmaier
- ------------------------------------
By: Berthold Burkhardtsmaier
Its: Managing Director
BERTHOLD BURKHARDTSMAIER
/s/ Berthold Burkhardtsmaier
- ------------------------------------
CORNELIA BURKHARDTSMAIER
/s/ Cornelia Burkardtsmaier
- ------------------------------------
FRIEDRICH MAIER
/s/ Friedrich Maier
- ------------------------------------
CIRCUIT RESEARCH LABS, INC.
/s/ C. Jayson Brentlinger
- ------------------------------------
By: C. Jayson Brentlinger
Its President, CEO, Chairman
CRL SYSTEMS, INC.
/s/ C. Jayson Brentlinger
- ------------------------------------
By: C. Jayson Brentlinger
Its President, CEO, Chairman
CHARLES JAYSON BRENTLINGER.
/s/ C. Jayson Brentlinger
- ------------------------------------
TAMMY BRENTLINGER.
/s/ Tammy Brentlinger
- ------------------------------------
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EXHIBIT A
COURT SETTLEMENT AGREEMENT
--------------------------
to be concluded
by and between
Berthold Burkhardtsmaier,
Happenbacher Strase 57, 74199 Untergruppenbach
Federal Republic of Germany
hereinafter "Plaintiff"
and
Circuit Research Labs, Inc.
legally represented by its President Charles Jayson Brentlinger,
1302 West Drivers Way, Tempe,
85284 Arizona, USA
hereinafter "Defendant"
PREAMBLE
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(1) Plaintiff Berthold Burkhardtsmaier and Defendant Circuit Research Labs,
Inc. are parties to an employment law suit currently pending before the
Stuttgart Regional Court (Landgericht Stuttgart, Docket No. 25 0 175/04)
and the Higher Regional Court of Stuttgart (Oberlandesgericht Stuttgart,
Docket No. 12 U 228/04). Plaintiff is claiming, inter alia, outstanding
salaries for the years 2003 and 2004 and contractual compensation for one
year's salary under a Service Contract of 18 January 2002.
(2) Defendant has contested, inter alia, the jurisdiction of the German courts
in general and of the Stuttgart courts in particular. By an interim
judgement of 10 December 2004, the Stuttgart Regional Court ruled that it
has subject matter and international jurisdiction over the parties, and
Defendant subsequently filed an appeal against this judgement to the Higher
Regional Court of Stuttgart which has not yet rendered its decision.
(3) The parties hereby agree to settle the above dispute by a court settlement
to be formally entered into before the Stuttgart Regional Court in the
German language and which shall read as follows:
Court Settlement
1. Plaintiff's Service Contract with the Defendant dated 18 January 2002 has
been terminated effective 24 February 2003.
2. Defendant shall pay to Plaintiff, as a result of Plaintiff's dismissal
under his Service Contract of 18 January 2002, compensation of EUR
324,000.00 (in words: Euro three hundred and twenty-four thousand) in
accordance with Sections 3 paras 9, 24, 34 of the German Income Tax Act (3
Nr. 9, 24, 34 EStG).
3. The above compensation shall be paid by Defendant without any tax
deductions. Plaintiff shall bear all the responsibility and risks regarding
the taxation of the compensation and shall hold Defendant free and harmless
from any employer's liability as to tax deduction under German Tax Law. If
Defendant is required to make any payments of taxes on the compensation,
Defendant shall inform Plaintiff of any such tax requirements immediately
and in all relevant details and may subsequently -- at its bona fide option
- set-off such amounts against payments to be made to Plaintiff in the
future. Plaintiffs obligation to reimburse tax payments under this
Paragraph 3 extends only to any taxes levied on account of the payments to
Plaintiff required by this agreement, and does not extend to any other
taxes or any employer's liabilities levied against Defendant arising from
any other cause.
4. Payment of the compensation shall be made by Defendant in 60 monthly
instalments of EUR 5,400.00, payable on each 20th day of a calendar month,
commencing on 20 April 2005. Payment shall be effected by wire transfer,
free of any bank charges, to the following bank account, or at such other
bank account as Plaintiff may, from time to time, specify to Defendant:
Berthold Burkhardtsmaier
Kreissparkasse Ludwigsburg
Postfach 620
71606 Ludwigsburg
Account no.: [omitted]
BLZ: [omitted]
Int. Bank Account no: [omitted]
5. Should Defendant be in default with any of the monthly instalments by more
than three weeks, the total of all unpaid installments shall become due
immediately and shall be subject to the accrual of interest at 10% p.a.
6. Upon full performance of its obligations set forth above, Defendant shall
be released from all and any of Plaintiff's claims arising out of or
related to the Service Contract of 18 January 2002.
7. The law suit pending before the Stuttgart Regional Court (25 O 175M) and
the Higher Regional Court of Stuttgart (12 U 228/04) shall herewith be
terminated and settled. Defendant shall withdraw its appeal of 28 December
2004 filed with the Higher Regional Court of Stuttgart. Each party shall
bear its own costs, with the court fees to be shared equally between
Plaintiff and Defendant.
8. Defendant agrees not to oppose any effort by Plaintiff to enforce this
court settlement in any court in the United States with jurisdiction over
the parties.
9. This court settlement shall be governed by German Law, and the Stuttgart
Regional Court shall have exclusive jurisdiction over any dispute arising
out of or related to this court settlement, except for any enforcement
proceedings in accordance with Paragraph 8 above.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
April 15, 2005.
BERTHOLD BURKHARDTSMAIER
/s/ Berthold Burkhardtsmaier
- ------------------------------------
CIRCUIT RESEARCH LABS, INC.
/s/ C. Jayson Brentlinger
- ------------------------------------
By: C. Jayson Brentlinger
Its President, CEO, Chairman
EXHIBIT B
[OSBORN MALEDON, P.A. letterhead]
Brett L. Dunkelman, 006740
OSBORN MALEDON, P.A.
2929 North Central Avenue
Suite 2100 Phoenix, Arizona 85012-2794
(602) 640-9000
Attorneys for Dialog4 System Engineering GmbH
Richard B. Hood, 003798
GUST ROSENFELD P.L.C. 201 East Washington
Suite 800
Phoenix, Arizona 85004-2327
(602) 257-7470
Attorneys for Defendants
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Dialog4 System Engineering GmbH, ) No.
)
Plantiff, )
) STIPULATION RE ENTRY OF
vs. ) JUDGMENT CONFIRMING
) ARBITRATION AWARD
CRL Systems, Inc.; Circuit Research Labs )
Inc.; Charles Jayson Brentlinger and )
Tammyy Brentlinger, )
)
Defendants. )
_________________________________________)
Through their respective counsel, the parties stipulate to entry of a final
order and judgment confirming and enforcing the Arbitral Award and Addendum
thereto attached hereto as Exhibit A and Exhibit B ("the Arbitral Award"), plus
interest, less amounts previously paid. Defendants furthermore agree not to
oppose or contest entry of such final order and judgment, including but not
limited to any defense that such entry is barred by laches or by any applicable
statute of limitation. Notwithstanding the foregoing, Defendant Tammy
Brentlinger may assert any defense arising out of Arizona's community property
laws.
///
///
DATED this _____ day of April. 2005.
OSBORN MALEDON, P.A.
By __________________________
Brett L. Dunkelman
2929 North Central
Suite 2100
Phoenix, Arizona 85012-2794
Attorneys for Dialog4 System
Engineering GmbH
GUST ROSENFELD P.L.C.
By __________________________
Richard B. Hood
201 East Washington, Suite 800
Phoenix, Arizona 85004
Attorneys for Defendants
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