EXHIBIT 10.115(a)
SHORT FORM SETTLEMENT AGREEMENT AND RELEASE
This Short Form Settlement Agreement and Release (Agreement) is made,
entered and effective on December 4, 2003 among Arglen Acquisitions, LLC
(Arglen), Garry Gyselen (Gyselen), and Barry Kolevzon (Kolevzon), on the one
hand, and Vertical Computer Systems, Inc. (Vertical), NOW Solutions, LLC (NOW),
Richard Wade (Wade), and Luis Valdetaro (Valdetaro) on the other hand.
Hereinafter, Arglen, Gyselen, Kolevzon, Vertical, NOW, Wade and Valdetaro are
sometimes collectively referred to as the Settling Parties.
RECITALS
A. The Settling Parties have been engaged in several disputes with
each other, culminating in one arbitration before the American Arbitration
Association (Case No. 72 117 510 02 MDSI), and in multiple civil actions
(lawsuits) pending in the Superior Court of the State of California (Case No. BS
077419) and the Supreme Court of the State of New York (Case No. 600644/2003).
B. The Settling Parties now wish to settle and resolve all their
disputes and differences, and to release each other, on the terms and conditions
to be more particularly described in a more formal document or set of documents,
which shall be prepared and executed on or before the Closing Date as defined
herein. Notwithstanding the contemplation that a more formal document or set of
documents is to be prepared and executed, in the event no such formal documents
are prepared and executed, the Settling Parties intend and agree that this
Agreement is fully valid and enforceable, including enforcement in the Los
Angeles Superior Court under California Code of Civil Procedure ss.664.6.
AGREEMENT
1. NOW shall pay Arglen the amount of TEN THOUSAND DOLLARS ($10,000) on or
before December 5, 2003.
2. Vertical and NOW, jointly and severally, shall pay Arglen by wire
transfer into Arglen's designated account the amount of ONE MILLION FOUR HUNDRED
THOUSAND DOLLARS ($1,4000,000) in full and final settlement, in installments, as
follows:
A. $800,000 cash at closing on January 6, 2004 (the Closing Date).
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B. $600,000 in a joint and several secured promissory note,
providing for the following installment payments: $200,000 on April 6, 2004;
$100,000 on June 4, 2004; and $300,000 on September 3, 2004. The security
interest shall be in all tangible and intangible assets of NOW, its successors
and assigns. The secured promissory note and all documents related to the
security interest shall be prepared and executed on or before the Closing Date.
3. The security interest in the note will be junior to NOW's present
indebtedness to WAMCO 31, Ltd. (WAMCO), as assignee of Coast Business Credit or
its successors and assigns. Arglen agrees that WAMCO will have the right to
require, as a condition to its consent to any security interest provided to
Arglen herein, that Arglen as the holder of the additional security interest or
lien sign an intercreditor agreement on WAMCO's then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of
WAMCO. Arglen will not take any action to enforce its subordinate security
interest so long as any Obligations, as defined in the Loan Documents between
NOW and WAMCO, remain outstanding.
4. In the event any payment under the promissory note is not made when
due, or five (5) calendar days after facsimile transmission to Vertical and NOW
of written notice to cure, at the option of Arglen, the entire remaining amounts
due under the note will become immediately due and payable, with interest at the
statutory rate, and all costs of collection, including reasonable attorneys'
fees and costs incurred, will also be payable to Arglen by Vertical and NOW,
jointly and severally.
5. Effective on the Closing Date or another mutually agreeable date,
Arglen will transfer all of its right, title and interest in and to NOW to
Vertical.
6. Effective on the Closing Date, and except for the obligations
specifically undertaken in this Agreement, Arglen, for itself and for its
principals, owners, agents, successors and assigns (the Arglen Releasing
Parties), releases Vertical and NOW, and their respective principals, directors,
officers, owners, agents, successors and assigns including, without limiting the
generality of the foregoing Wade and Valdetaro (the Arglen Released Parties),
from any and all claims and damages which the Arglen Releasing Parties ever had
or claim to have had, may now have or claim to have, or may in the future have
or claim to have, against the Arglen Released Parties, from the beginning of
time to the date of this Agreement.
7. Effective on the Closing Date, and except for the obligations
specifically undertaken in this Agreement, Gyselen and Kolevzon, for themselves,
their successors and assigns (the Gyselen and Kolevzon Releasing Parties),
release Vertical and NOW, and their respective principals, directors, officers,
owners, agents, successors and assigns including, without limiting the
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generality of the foregoing Wade and Valdetaro (the Gyselen and Kolevzon
Released Parties), from any and all claims and damages which the Gyselen and
Kolevzon Releasing Parties ever had or claim to have had, may now have or claim
to have, or may in the future have or claim to have, against the Gyselen and
Kolevzon Released Parties, from the beginning of time to the date of this
Agreement.
8. Effective on the Closing Date, and except for the obligations
specifically undertaken in this Agreement, Vertical and NOW, for themselves and
for their respective principals, owners, agents, successors and assigns (the
Vertical and NOW Releasing Parties), release Arglen and its principals, owners,
agents, successors and assigns, including without limiting the generality of the
foregoing Gyselen and Kolevzon (the Vertical and NOW Released Parties), from any
and all claims and damages which the Vertical and NOW Releasing Parties ever had
or claim to have had, may now have or claim to have, or may in the future have
or claim to have, against the Vertical and NOW Released Parties, from the
beginning of time to the date of this Agreement.
9. Effective on the Closing Date, and except for the obligations
specifically undertaken in this Agreement, Wade and Valdetaro, for themselves
and for their successors and assigns (the Wade and Valdetaro Releasing Parties),
release Arglen and its principals, owners, agents, successors and assigns,
including without limiting the generality of the foregoing Gyselen and Kolevzon
(the Wade and Valdetaro Released Parties), from any and all claims and damages
which the Wade and Valdetaro Releasing Parties ever had or claim to have had,
may now have or claim to have, or may in the future have or claim to have,
against the Vertical and NOW Released Parties, from the beginning of time to the
date of this Agreement.
10. To reinforce the foregoing releases, the Settling Parties waive the
protections of California Code of Civil Procedure ss. 1542, which provides as
follows, and acknowledge that they have been advised by counsel of the
consequences of that waiver:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
11. The Settling Parties covenant not to sue or otherwise proceed against
each other (except to enforce this Agreement or the more formal document or set
of documents), and will immediately dismiss with prejudice all arbitrations,
civil actions and all other proceedings against each other.
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12. Vertical and NOW, jointly and severally, will indemnify and hold
Arglen and its principals, owners, agents, successors and assigns, including
without limiting the generality of the foregoing Gyselen and Kolevzon, harmless
from and against any and all income tax liabilities arising from, related to, or
connected with the undistributed income or profit allocated or to be allocated
to Arglen from NOW during the time Arglen was a member of NOW through the
Closing Date.
13. Vertical and NOW, jointly and severally, will indemnify and hold
Arglen and its principals, owners, agents, successors and assigns, including
without limiting the generality of the foregoing Gyselen and Kolevzon, harmless
from and against any and all claims of, or liabilities to, Donald Hateley
arising from, related to or connected with Hatley's finder's fee or broker's fee
concerning the acquisition of NOW.
14. Vertical and NOW represent and warrant that they are not in
negotiations or discussions related to or connected with the sale, transfer or
other disposition of NOW, a majority interest in its ownership, or substantially
all of its assets, and understand and acknowledge the Arglen is relying on this
representation in entering into this Agreement.
15. Arglen represents and warrants that it is the owner of, has and will
transfer to Vertical on the Closing Date good, clear and marketable title to and
possession of Arglen's Membership Interests in NOW, as set forth in the
Operating Agreement of NOW (Operating Agreement), free and clear of all
agreements, claims, security interests, liens, encumbrances and hypothecations.
16. Arglen, Gyselen and Kolevzon represent and warrant that, to the best
of their present knowledge, recollection and belief, neither they or any of them
have made any agreement for the sale, transfer or acquisition of any interest in
the ownership of NOW, except as may have been approved by NOW's Executive
Committee, to any officer or employee of NOW.
17. A. Effective on or before the Closing Date, the Warrants (as defined
below) held by Arglen or Gyselen, whether vested or not, will be canceled and,
concurrently with the cancellation of said warrants, Vertical shall issue and
deliver to Arglen TWENTY MILLION (20,000,000) new shares (the New Shares) of 144
common stock of Vertical. Vertical will file for registration of the New Shares
no later than 180 days of the Closing Date as part of Vertical's next SB-2
filling; if no SB-2 filing is made within said period, Vertical will make a
special filing for the registration of the New Shares within 180 days of the
Closing Date. If Vertical does not file within said period, Vertical will issue
and deliver to Arglen an additional FIVE MILLION shares of freely traded stock,
in which event all 25 million shares will be freely tradeable by no later than
December 31, 2004. The New Shares are subject to a leak-out provision whereby
the sale of any Vertical stock will be limited to no more than 150% of the
average daily volume for the proceeding three (3) months for each week.
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B. "Warrants" shall mean those certain warrants for the purchase of
certain shares of Vertical's common stock, identified as "Vertical Computer
Systems, Inc., Common Stock Purchase Warrant," numbers 11 (30,763,943); 12
(25,000,000); and 13 (25,000,000), each dated March 5, 2001.
18. Except as provided in this Agreement, for a period of two years from
the date of this Agreement, Arglen, Gyselen and Kolevzon, or their
representatives, principals, agents or advisors, will not, directly or
indirectly, in any manner: (a) acquire, agree to acquire, or make any proposal
to acquire (by purchase or otherwise) any securities (or direct or indirect
rights to acquire any securities), indebtedness, assets, property or contract
rights, of, against or respecting Vertical,; (b) make, or in any way participate
in, any "solicitation" of "proxies" (as such terms are used in the rules of the
Securities and Exchange Commission) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any securities of Vertical; (c)
make any public announcement with respect to, or submit a proposal for, or offer
of (with or without conditions) any extraordinary transaction with Vertical or
any of its securities, assets, indebtedness or contract rights, except in a
Permitted Transaction that does not violate this Agreement or that is agreed to
by Vertical; (d) form, join in or participate in any way in a "group" (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
in connection with any of the foregoing actions; or (e) assist, advise or
encourage any other persons in connection with any of the foregoing actions.
19. All information, instruments, documents and details concerning the
negotiation of the sale transaction contemplated herein relating to Arglen,
Vertical and NOW are strictly confidential, and the Settling Parties shall not,
nor will they, or any of them, allow any of their respective officers,
directors, managing members, employees, or agents to disclose any matters
relating to the business of Arglen, Vertical or NOW, as to this Agreement, its
negotiation, terms, provisions or conditions, except as may be reasonably
necessary to effectuate the transactions contemplated hereby, or as shall be
necessary to disclose to attorneys or accountants employed by the Settling
Parties; provided however, Vertical shall not be prohibited from making such
regulatory filings regarding its proposed acquisition of Arglen's right, title
and interest in NOW, including, without limitation, details as to price, terms,
and the like, as is required by law or from making such other disclosures as are
reasonably necessary or appropriate pursuant to the Operating Agreement.
Notwithstanding the foregoing, Vertical shall use its best efforts to disclose
the minimum information as may be required by law, concerning details as to
price, terms and the like in any regulatory filing.
20. Vertical and Arglen shall cooperate with each other to carry out the
purposes and intent of this Agreement, including, without limitation, the
execution of and delivery to the appropriate party of all further documents and
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instruments, and the approval of all resolutions or actions, as may be
reasonably necessary or appropriate, without limitation pursuant to the
Operating Agreement, to accomplish the same.
21. Each of the Settling Parties shall bear their own fees and costs
incurred in connection with their disputes and differences to the date of this
Agreement including, without limitation, the arbitration and civil actions
identified above; provided, however, that, in the event any of the Settling
Parties incurs attorneys' fees or costs to enforce this Agreement or the more
formal document or set of documents to be prepared and executed, the
non-prevailing party in such a proceeding shall pay the prevailing party the
reasonable attorneys' fees and costs incurred by the prevailing party.
22. Each of the Settling Parties acknowledges and represents that each has
not assigned to any person or entity any right or obligation which would
preclude or prevent each of them from performing all of their respective duties
and obligations under the terms and conditions of this Agreement. Each of the
Settling Parties further represents and warrants that each individual signing
this Agreement on their respective behalf and on behalf of any entity has the
right, power, legal capacity, and authority to do so, and that no further
approval or consent of any person, spouse, officer, shareholder, board of
directors, or other entity is necessary.
23. This Agreement and all other agreements and documents executed in
connection herewith constitute the entire agreement between the Settling Parties
with respect to the subject of this Agreement, and no amendment, alteration or
modification of this Agreement shall be valid or enforceable unless in each
instance such amendment, alteration or modification is expressed in a written
instrument duly executed by the Settling Parties.
24. This Agreement may be executed in any number of counterparts and, when
all executed counterparts are joined together, each such joined counterpart
shall be deemed to be an original instrument. This Agreement may also be
executed by facsimile signatures, which shall be deemed to be original
signatures.
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25. This Agreement is binding on the Settling Parties and their respective
successors and assigns.
ARGLEN ACQUISITIONS, LLC VERTICAL COMPUTER SYSTEMS, INC.
By_________________________________
By_________________________________ Authorized Officer
Authorized Officer
NOW SOLUTIONS, LLC
By_________________________________
Authorized Officer
-----------------------------------
- --------------------------------- Richard Wade
Garry Gyselen
-----------------------------------
- --------------------------------- Luis Valdetaro
Barry Kolevzon
APPROVED AS TO FORM:
HAMBURG, KARIC, EDWARDS & WOLMAN, BABITT & KING, L.L.P.
MARTIN LLP
By_________________________________ By_________________________________
STEVEN S. KARIC DEREK A. WOLMAN
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