Exhibit 10.3
SETTLEMENT AGREEMENT
This Settlement Agreement, dated as of December 20, 2004 (this
"Agreement"), by and between Integrated BioPharma, Inc., a Delaware corporation
("INB"), and Wolfe Axelrod Weinberger Associates LLC, a New York limited
liability company ("WA").
RECITALS
WHEREAS, INB and WA entered into a Retainer Agreement dated July 18,
2000 (the "Retainer Agreement");
WHEREAS, INB and WA now desire to settle a dispute that has arisen
between them regarding the Retainer Agreement that was the subject of an
arbitration proceeding (the "Proceeding") brought by WA and described in an
Amended Demand for Arbitration and an Amended Statement of Claim, both dated
July 2, 2004; and
WHEREAS, in connection with INB's and WA's settlement of their dispute,
the parties desire to fully document securities that were issued by INB to WA
pursuant to the Retainer Agreement, some of the terms of which the parties
believe are in need of further clarification and explication.
NOW THEREFORE, in consideration of the premises above and the
agreements herein contained, and for other good consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Termination of Obligations under Prior Agreements;
Discontinuance of Claims. This Agreement is intended to supersede in all
respects all prior agreements, understandings, disputes and Claims (as
hereinafter defined) between the parties such that (i) all prior agreements
between the parties are immediately terminated in their entirety and are of no
further force and effect and (ii) this Agreement and the Warrant (as defined
below) shall be the only agreements in effect between the parties. This
Agreement shall be deemed a stipulation of settlement settling the Proceeding
and shall, when "SO ORDERED" by the sole appointed Arbitrator, constitute an
arbitration award under Article 75 of the New York Civil Practice Law and Rules
and the United States Arbitration Act (9 U.S.C. ss.ss. 1, et seq). The parties
consent to such action by the sole arbitrator and agree that no other
arbitrators need be appointed or qualified. INB waives any objections to
jurisdiction in the Proceeding, and both parties consent to the entry of
judgment upon such award by either party. All claims in the Proceeding are
hereby finally settled and adjudicated with prejudice to both parties and
without costs to either party as against the other. WA hereby represents and
warrants that neither it nor its counsel has made any filings with the American
Arbitration Association in connection with the Proceeding.
Section 2. Mutual Releases.
(a) Release and Indemnification by WA. WA hereby absolutely,
fully and forever releases, waives, relinquishes, and discharges INB and all of
its stockholders, directors, officers, employees and agents and their respective
successors, predecessors, assigns, affiliates, heirs, executors and
administrators (collectively, the "INB Released Parties"), from any and all
Claims (as defined below) whatsoever which WA may have had, presently has or in
the future may have against the INB Released Parties which arise, have arisen or
may hereinafter arise in whole or in part out of or on account of any matter or
thing whatsoever occurring on or before the date hereof other than Claims
arising out of a breach of this Agreement. By its execution of this Agreement,
WA acknowledges and agrees that this Agreement contains a general release, which
shall operate to bar it from pursuing any claims against INB in any forum with
respect to Claims within the scope of this Section 2. WA hereby agrees to
indemnify and hold harmless each of the INB Released Parties against any Claim
(including the payment of attorney's fees and costs actually incurred, whether
or not litigation is commenced) within the scope of this Section 2, which is
asserted by one or more of WA's equity owners, directors, officers, employees
and agents and their respective successors, predecessors, assigns, affiliates,
heirs, executors and administrators.
(b) Release and Indemnification by INB. INB hereby absolutely,
fully and forever releases, waives, relinquishes, and discharges WA and all of
its equity owners, directors, officers, employees and agents and their
respective successors, predecessors, assigns, affiliates, heirs, executors and
administrators (collectively, the "WA Released Parties"), from any and all
Claims (as defined below) whatsoever which INB may have had, presently has or in
the future may have against the WA Released Parties which arise, have arisen or
may hereinafter arise in whole or in part out of or on account of any matter or
thing whatsoever occurring on or before the date hereof other than Claims
arising out of a breach of this Agreement. By its execution of this Agreement,
INB acknowledges and agrees that this Agreement contains a general release,
which shall operate to bar it from pursuing any claims against WA in any forum
with respect to Claims within the scope of this Section 2. INB hereby agrees to
indemnify and hold harmless each of the WA Released Parties against any Claim
(including the payment of attorney's fees and costs actually incurred, whether
or not litigation is commenced) within the scope of this Section 2, which is
asserted by one or more of INB's stockholders, directors, officers, employees
and agents and their respective successors, predecessors, assigns, affiliates,
heirs, executors and administrators.
(c) Claims. As used in this Agreement, the terms "Claim" and
"Claims" mean any and all manner of action, causes of action, suits, damages
(whether general, special or punitive), debts, dues, liabilities, rights,
obligations, covenants, contracts, agreements, costs, expenses, losses,
attorneys' fees, liens, indemnities, and demands of every kind and nature
whatsoever, whether known or unknown, suspected or unsuspected, and whether
based on contract, tort, statute or other legal or equitable theory of recovery.
(d) No Assignment of Claims by WA. WA represents and warrants
to each of the INB Released Parties that it has not heretofore assigned or
transferred, or purported to assign or transfer, to any person or entity, or
encumbered or otherwise created an interest in, any claim intended to be
released herein. WA hereby agrees to indemnify and hold harmless each of the INB
Released Parties against any Claim (including the payment of attorney's fees and
costs actually incurred, whether or not litigation is commenced) within the
scope of this Section 2, which is asserted by any person or entity purporting to
be any transferee or assignee of such claim.
2
(e) No Assignment of Claims by INB. INB represents and
warrants to each of the WA Released Parties that it has not heretofore assigned
or transferred, or purported to assign or transfer, to any person or entity, or
encumbered or otherwise created an interest in, any claim intended to be
released herein. INB hereby agrees to indemnify and hold harmless each of the WA
Released Parties against any Claim (including the payment of attorney's fees and
costs actually incurred, whether or not litigation is commenced) within the
scope of this Section 2, which is asserted by any person or entity purporting to
be any transferee or assignee of such claim.
Section 3. Delivery of Warrant. Concurrently with the execution of this
Agreement, INB agrees to execute and deliver to WA a warrant (the "Warrant") to
purchase 100,000 shares of INB's common stock, par value $.002 per share (the
"Common Stock") in the form attached hereto as Exhibit A. The Warrant is
intended to replace and document both the "options" and the "warrants" granted
by INB to WA under the Retainer Agreement. The Warrant entitles WA to purchase
up to 25,000 shares of Common Stock at an exercise price of $1.75 per share
(originally covered by the 2000 warrant grant) and 75,000 shares of Common Stock
at an exercise price of $1.37 per share (originally covered by the 2000 option
grant), and expires on July 18, 2005 to the extent it is not exercised.
Section 4. Registration of Securities.
(a) Filing and Effectiveness of Registration Statement.
Subject to the other provisions of this Section 4, INB shall file, within 15
days after the date hereof, a registration statement (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
covering the 100,000 shares of Common Stock issuable upon exercise of the
Warrant (the "Registrable Shares"). WA acknowledges and agrees that securities
other than the Registrable Shares, held by third parties, may be included in the
Registration Statement unless the registration thereof delays or can be
reasonably expected to delay the effective date of the Registration Statement.
INB shall use its commercially reasonable best efforts to (i) have the
Registration Statement declared effective by the U.S. Securities and Exchange
Commission at the earliest possible date, but no later than within 90 days after
the date hereof (the "Effectiveness Deadline"), and (ii) maintain the
effectiveness of the Registration Statement until all the Registrable Shares
have been sold or are otherwise able to be sold under Rule 144 of the Securities
Act. In the event that the Registration Statement is not declared effective by
the Effectiveness Deadline, the term of Warrant shall be extended by the number
of days equal to the period from the Effectiveness Deadline to the date on which
the Registration Statement is declared effective.
(b) Expenses. All expenses (other than brokerage fees and
applicable transfer taxes) incurred in connection with registrations, filings or
qualifications pursuant to this Section 4, including, without limitation, all
registration, filing and qualification fees (including, without limitation,
registrations or qualifications to allow for the resale of the Registrable
Shares under the state securities or blue sky laws as WA reasonably requests),
printers' and accounting fees and fees and disbursements of counsel for INB,
shall be borne by INB. Further, INB shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any other outside accounting, audit or review
costs, liability insurance obtained by INB and the expenses and fees for listing
the securities to be registered on the American Stock Exchange pursuant to
Section 4(e).
3
(c) Indemnification. Each of INB and WA shall indemnify the
other party hereto and their respective officers, directors, employees and
agents against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) by the indemnifying party (or a selling stockholder obligated
to indemnify the indemnifying party) of a material fact contained in any
prospectus or other document (including any related registration statement,
notification or the like) incident to any registration of the type described in
this Section 4, or any omission (or alleged omission) by the indemnifying party
to state in any such document a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
such indemnified party for any legal and any other expenses reasonably incurred
in connection with investigating and defending any such claim, loss, damage,
liability or action; provided that no party will be eligible for indemnification
hereunder to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished by such party for use in connection with such
registration.
(d) Provision of Information by WA. WA shall furnish to INB
such information regarding WA and the distribution proposed by it as INB may
reasonably request in connection with any registration or offering referred to
in this Section 4. WA shall cooperate as reasonably requested by INB in
connection with the preparation of the Registration Statement with respect to
such registration, and for so long as INB is obligated to file and keep
effective such Registration Statement, shall provide to INB, in writing, for use
in the Registration Statement, all such information regarding INB and its plan
of distribution of the Registrable Shares included in such registration as may
be reasonably necessary to enable INB to prepare such Registration Statement, to
maintain the currency and effectiveness thereof and otherwise to comply with all
applicable requirements of law in connection therewith.
(e) Listing on American Stock Exchange. INB shall promptly
apply for the listing of the Registrable Securities on the American Stock
Exchange.
Section 5. Exercise of Warrant. WA, or any permitted transferee
of the Warrant or any part thereof, shall exercise the Warrant in accordance
with the procedures set forth in the Warrant.
Section 6. Lock-Up.
(a) Weekly Limit. WA and any other person who becomes an
initial beneficial owner of shares of Common Stock upon the exercise in whole or
in part of the Warrant (the "Initial Holders") hereby agree not to, directly or
indirectly, (i) publicly sell, contract to sell or otherwise transfer any shares
of Common Stock beneficially owned by it or (ii) privately sell, contract to
sell or otherwise transfer (unless the proposed transferee agrees to be bound by
the restrictions on transfer contained herein) any of the shares of Common Stock
beneficially owned by it, unless such sale, contract or transfer, together with
any such transaction by all other Initial Holders, will not exceed the Weekly
Limit. The "Weekly Limit" shall mean, in any calendar week on a non-cumulative
basis, the greater of (x) 5,000 shares of Common Stock, or (y) twelve percent
(12%) of the average daily volume of the Common Stock during the preceding
calendar week; provided, that the Initial Holders shall not be bound by the
Weekly Limit in any calendar week in which an executive officer or director of
INB sells shares of Common Stock. Each of the Initial Holders shall be jointly
and severally liable for breach of this Section 6 by any other Initial Holder,
with damages calculated in accordance with subsection (b) below.
4
(b) Liquidated Damages. If any Initial Holder shall breach
this Section 6, the parties hereto agree that INB shall be entitled to receive
from the Initial Holders, and that the Initial Holders shall pay to INB, as
liquidated damages (the "Liquidated Damages Payment"), the Net Gain (as defined
below), less income taxes, if any, payable on the Net Gain in connection with
the transaction(s) that caused the breach of this Section 6, after giving effect
to the Initial Holders' payment of the Liquidated Damages Payment. "Net Gain"
shall mean the full amount of proceeds received by the Initial Holders in the
transaction(s) that caused the breach of this Section 6, net of (i) related
transaction costs and (ii) the exercise price actually paid by the Initial
Holders upon the exercise of the Warrant attributable to the shares of Common
Stock as to which the breach occurred. It is expressly understood and agreed
that in the event of a breach of this Section 6, INB's damages would be
impossible to ascertain and that the Liquidated Damages Payment constitutes a
fair and reasonable amount of compensation in such event.
Section 7. Confidentiality. The fact that a settlement has been reached
in the Proceeding and the terms of this Agreement shall not be disclosed by a
party to this Agreement to any third party without the prior written consent of
the other party to this Agreement, except that the terms of this agreement may
be disclosed to (a) regulatory or taxing authorities, (b) INB's or WA's
accountants, attorneys, managers or employees; provided, however, that all such
accountants, attorneys, managers and employees are first advised that the
disclosure is subject to the confidentiality provisions of this Agreement, and
(c) transferees or proposed transferees, in order to obtain their agreement to
be bound hereby, and (d) any other third party if required by any law, court
order, rule or regulation in the opinion of counsel for INB or WA. The terms of
this Agreement may also be disclosed by INB or WA in any action or proceeding to
enforce the terms of this Agreement.
Section 8. Notices. Except as expressly provided otherwise in this
Agreement, any notice or other communication required to be given pursuant to
this Agreement shall be in writing and shall be either: (i) delivered personally
to the party to be notified, (ii) delivered by a reputable international courier
service to the party to be notified, or (iii) transmitted by facsimile to the
party to be notified, as follows:
5
If to INB:
Eric Friedman
Vice President and Chief Financial Officer
Integrated BioPharma, Inc.
225 Long Avenue
Hillside, New Jersey 07205
Facsimile: (973) 926-1735
with copies to:
Robert B. Kay, Esq.
c/o Gerschel & Co., Inc.
720 Fifth Avenue
New York, New York 10019
Facsimile: (212) 246-8331
and
Andrew H. Abramowitz, Esq.
Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Facsimile: (212) 805-5552
If to WA:
Stephen D. Axelrod, Managing Member
Wolfe Axelrod Weinberger Associates, LLC
317 Madison Avenue--Suite 515
New York, NY 10017
Facsimile: (212) 370-4505
with a copy to:
Donald Weinberger, Managing Member
Wolfe Axelrod Weinberger Associates, LLC
317 Madison Avenue--Suite 515
New York, NY 10017
Facsimile: (212) 370-4505
and to:
Barry J. Bendes, Esq.
Wolf, Block, Schorr & Solis-Cohen LLP
250 Park Avenue
New York, New York 10177
Facsimile: (212) 986-0604
6
Any such notice shall be deemed to have been given as of the earlier of: (a) the
date of actual receipt of such notice, or (b) the third business day after such
notice is delivered to an international courier service for next business day
delivery to the party to be notified, or (c) the date of the confirmed
transmission of any notice by facsimile. Any party to this Agreement may
designate a different address or facsimile number to which notices are to be
sent to such party by notifying all other parties to this Agreement as to such
different address or facsimile number in the manner set forth above in this
Section. Counsel for a party may issue notices on behalf of the party.
Section 9. Costs and Expenses. Except as provided above, each party
hereto will bear its own legal fees and other costs and expenses incurred in
connection with the negotiation, execution and consummation of the transactions
contemplated hereby.
Section 10. Waiver and Amendment. This Agreement and any exhibits
hereto may not be changed, waived or modified except by a written instrument
signed by the party against which enforcement is sought, which by its terms
makes specific reference to this Agreement.
Section 11. Governing Law; Jurisdiction. This Agreement and the rights
and duties of the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflict of laws that might cause the application of any other law. The
parties hereto hereby irrevocably agree that any suit, action or other legal
proceeding arising out of this Agreement, or any of the transactions
contemplated hereby, shall be brought only in the United States District Court
located in the Southern District of New York. Each party consents to the
jurisdiction of such courts and agrees not to seek to transfer any proceeding
out of such Court on the basis of lack of jurisdiction or inconvenient forum.
Section 12. Further Assurances. The parties hereto shall execute and
deliver such further documents and do such further acts as any party hereto
shall reasonably request in order to assure and confirm to the parties hereto
the rights hereby created or to facilitate the full performance of the terms of
this Agreement and any exhibits hereto.
Section 13. Headings. The descriptive headings of the various sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
Section 14. Survival. All covenants, agreements, undertakings and
releases contained in this Agreement and any exhibits hereto shall survive
indefinitely.
7
Section 15. Entire Agreement. This Agreement and any exhibits hereto
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties hereto relating to the
subject matter hereof.
Section 16. Illegality. The illegality or unenforceability of any
provisions of this Agreement or any exhibits hereto shall not in any way affect
or impair the legality or enforceability of the remaining provisions hereof or
thereof. In lieu of any illegal or unenforceable provision hereof or thereof,
the parties hereto agree to the substitution of a legal or enforceable provision
as similar in terms to such illegal or unenforceable provision as may be
possible.
Section 17. Counterparts. This Agreement may be executed in as many
counterparts as may be deemed necessary or convenient, each of which, when so
executed, shall be deemed an original, but all of which shall constitute one and
the same agreement. Telephone facsimile transmission or digital transmission of
counterpart originally executed documents shall constitute delivery of the
originally-executed documents and shall be binding upon the party transmitting
the same.
[Signature Page Follows]
8
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above.
INTEGRATED BIOPHARMA, INC.
By: /s/ Eric Friedman
---------------------
Name: Eric Friedman
Title: Vice President and Chief Financial Officer
WOLFE AXELROD WEINBERGER ASSOCIATES LLC
By: /s/ Stephen D. Axelrod
--------------------------
Name: Stephen D. Axelrod
Title: Managing Director
Exhibit A
Form of Warrant