SETTLEMENT AGREEMENT AND MUTUAL RELEASE
WHEREAS, New Millennium Capital Partners II, LLC ("NMCP"), AJW Offshore
Ltd. ("AJWO"), AJW Qualified Partners, LLC ("AJWQP") and AJW Partners, LLC
("AJWP," collectively with AJWQP, AJWO and NMCP, "Plaintiffs") entered into a
Securities Purchase Agreement with Valcom, Inc. ("VACM") on or about August
2004;
WHEREAS, pursuant to the Securities Purchase Agreement, NMCP, AJWD, AJWQP
and AJWP each purchased a callable secured Convertible Debenture from VACM on
or about August 2004 which debentures were in the aggregate principal amount of
$600,000, which the Plaintiffs funded as follows: $250,000 on August 17, 2004,
$250,000 on September 21, 2004, and $100,000 on May 13, ▇▇▇▇ ("▇▇▇
▇▇▇▇▇▇▇▇▇(▇)") and allocated as follows: AJW, $96,000 (16%); AJWO, $222,000
(37%); AJWQP, $264,000 (44%); NMCP, $18,000 (3%); and
WHEREAS, on October 17, 2005, Plaintiffs converted $41,850.23 owed under
the Debenture, which is deemed interest arising under the Debentures; and
WHEREAS, Plaintiffs commenced an action in the Supreme Court of New York,
New York County, against VACM, Index No. 020599/02 (the "Action"); and
WHEREAS, the parties to the Action are now desirous of resolving their
differences without further litigation;
IT IS HEREBY AGREED, by and between the parties hereto, for good and
valuable consideration, as of the 2nd day of February 2006, as follows:
1. THE DEBENTURES.
A. The parties agree as follows:
(i) The outstanding principal balance on the
Debentures is $600,000, allocated among plaintiffs as set forth above;
(ii) The conversion price is fixed at $.06 per share;
and
(iii) No interest or penalties are due as of the date
hereof.
2. CONSIDERATION. The parties agree as follows:
A. VACM shall deliver to Plaintiffs' counsel: (i) within
five days following the date of this Agreement, 10,000,000 shares of
common stock of VACM (the "Shares") allocated as follows: (i) seven
certificates of 18,000, 222,000, 264,000, 96,000 Shares (totaling
4,200,000 shares), in the names of NMCP, AJWO, AJWQP, AJW, respectively;
(ii) five certificates of 30,000, 370,000, 440,000 and 160,000 Shares
(totaling 5,000,000 shares), in the names of NMCP, AJWO, AJWQP and AJW,
respectively and (iii) one certificate of 24,000, 296,000, 352,000,
128,000 (totaling 800,000 Shares), in the names of NMCP AJWO, AJWQP, and
AJW, all of the foregoing as conversion in full and extinguishment of the
Debentures, at a booked conversion price of $0.06 per share, such Shares
to be held in escrow pursuant to the terms of the annexed Escrow
Agreement; and (ii) an Notice of Discontinuance with prejudice in the
form attached as Exhibit A.
B. Plaintiffs hereby agree that VACM may buy back any or
all of the Shares held in escrow at any time at $0.10 per share.
Plaintiffs hereby grant an irrevocable proxy to the Board of Directors of
VACM, or its designees, to vote the Shares that have not yet been sold.
VACM represents and warrants that the Shares are fully paid and validly
issued, are free and clear of all liens, claims or encumbrances, and are
unregistered restricted shares that may be sold pursuant to Rule 144.
C. The Shares shall be held by Plaintiffs' counsel as
Escrow Agent, pursuant to the accompanying Escrow Agreement. The Escrow
Agent shall deliver to Plaintiffs collectively 600,000 of the Shares on
the first day of each calendar month starting February 1, 2006 through
and including August 1, 2006, and 1,000,000 of the Shares on the first
day of each month thereafter through and including January 2007 and a
certificate for 800,000 shares on February 1, 2007, until all of the
Shares have been delivered; notwithstanding the foregoing (i) to the
extent any of the Shares have not been delivered from the Escrow, VACM
shall be permitted to repurchase such Shares at $0.10 per Share at any
time; any such purchase shall be exercised by written notice to
Plaintiffs, accompanied by payment in the form of a certified check or
wire transfer; (ii) Plaintiffs shall not vote the Shares and hereby grant
an irrevocable proxy to the Board of Directors of VACM or its designee to
vote all Shares that have not yet been sold; and (iii) in no event shall
any shares be delivered from escrow if it would result in Plaintiffs,
beneficially owning more than 4.99% of VACM's issued and withstanding
shares.
D. In exchange for the consideration set forth in 1(A),
(C) and (D), Plaintiffs hereby agree to deliver to Defendants an executed
Notice of Discontinuance in the form attached as Exhibit A.
E. The executed Stipulation of Discontinuance shall be
held by the parties' counsel in escrow until Plaintiffs' counsel has
received the consideration in Sections 2.A(i) and 2.A(ii).
3. GROSS UP. Plaintiffs shall maintain trading records showing all sales
of the Shares, which must be on the open market to independent, unrelated and,
at the time of sale, unknown third parties, in sales that have not been
prearranged. In the event that by February 28, 2007, the gross proceeds from
all sales of the Shares is less than $1,000,000, then, at any time between
March 1, 2007 and April 30, 2007, Plaintiffs may make written demand upon VACM
for payment an amount equal to the difference between (A) $1,000,000 and (B)
the sum of (i) the gross proceeds of all sales of the Shares plus (ii) all
remaining Shares multiplied by $.10 or the then current market price, whichever
is higher (the "Gross Up Amount"). Plaintiffs' demand shall include a
statement showing all remaining Shares of VACM and a schedule showing all
sales, with confirmation of the gross proceeds of such sales. VACM shall pay
in full the Gross Up Amount within 30 days of receiving the demand. In the
event that VACM fails to pay the Gross Up Amount within 30 days of receiving
the demand, it shall be liable for the Gross Up Amount, plus interest on the
then outstanding balance at the rate of 9% per annum from the date of this
Agreement until the date of payment in full. In the event trading in the
shares of VACM is halted for more than 10 business days, Plaintiffs shall have
the option of (i) extending all deadlines hereunder for a time period equal to
that of the suspended trading or (ii) in connection with Gross Up Amount,
tendering any unsold Shares then in Plaintiffs' possession, provided such
Shares were received pursuant to the escrow terms of this Agreement, to VACM at
$.10 per share. For all purposes under this Agreement, sales of Shares shall
be deemed to be made on the trade date, rather than settlement date.
4. MUTUAL GENERAL RELEASE. Expressly conditioned upon timely completion
of the delivery requirements set forth under Section 2 above, the Parties, each
for themselves, their respective Boards of Directors, officers, shareholders,
members, assigns, employees, agents, predecessors, heirs, executors, and
administrators, successors, subsidiary entities, former entities, attorneys,
and any others claiming under or through them, both past and present, do hereby
release and forever discharge each other, and each of the others' Boards of
Directors, officers, shareholders, members, assigns, employees, agents,
managers, predecessors, successors, heirs, executors, and administrators,
subsidiary entities, affiliates former entities, attorneys, and all others
acting by, through, under, or in concert with the other, and each of them, from
any and all manner of action or actions, cause or causes of action, in law or
in equity, suits, debts, liens, contracts (express, implied in fact, or implied
by law), agreements, promises, liabilities, claims, set offs, rights and claims
for indemnity and/or contribution, refunds, overpayments, demands, damages,
losses, costs, or expenses, of any nature whatsoever, known or unknown,
suspected or unsuspected, fixed or contingent, which each now has or may
hereafter have by reason of any matter, cause, or thing whatsoever from the
beginning of time to the date hereof, including, without limiting the
generality of the foregoing, any matters that or might have been in any way
raised, by complaint, cross-complaint or otherwise. Notwithstanding the above,
or any other provisions of this instrument, this Agreement shall not affect,
discharge, or release any claims, known or unknown, which arise from or relate
to the rights or obligations of the parties hereto, whether presently existing
or subsequently accruing, with respect to the obligations created by or arising
out of the provisions of this Agreement.
5. ATTORNEY ADVICE. Each of the Parties warrant and represent that in
executing this Agreement, such Party has relied on legal advice from the
attorney of its choice, that the terms of this Settlement Agreement and Mutual
Release and its consequences have been completely read and explained to such
Party by that attorney, and that such Party fully understands the terms of this
Agreement.
6. NO REPRESENTATIONS. Each of the Parties acknowledge and represent
that, in executing this Agreement, such Party has not relied on any
inducements, promises, or representations made by any Party or any party
representing or serving such Party, unless expressly set forth in a written
agreement.
7. DISPUTED CLAIM. This Agreement pertains to a disputed claim and does
not constitute an admission of liability or wrongdoing by any Party for any
purpose.
8. COVENANT RE ASSIGNMENT. The Parties represent and warrant that
it/they are the sole and lawful owner of all right, title and interest in and
to every claim and other matter which each purports to release herein, and that
it has not heretofore assigned or transferred, or purported to assign or
transfer, to any person, firm, association, corporation or other entity, any
right, title or interest in any such claim or other matter. In the event that
such representation is false, and any such claim or matter is asserted against
any party hereto (and/or the successor of such party) by any party or entity
who is the assignee or transferee of such claim or matter, the Party shall
fully indemnify, defend and hold harmless the party against who such claim or
matter is asserted (and its successors) from and against such claim or matter
and from all actual costs, demands, fees, expenses, liabilities, and damages
which that party (and/or its successors) incurs as a result of the assertion of
such claim or matter. It is the intention of the Parties that this indemnity
does not require payment as a condition precedent to recovery by a party under
this indemnity.
9. COVENANT RE AUTHORITY TO BIND PARTIES. Each party executing this
Agreement represents and warrants to the other parties that the individual
executing this Agreement on behalf of each party has the power and authority to
execute this Agreement and to bind the party to the terms and conditions of
this Agreement by executing this Agreement.
10.SURVIVAL OF WARRANTIES. The representations and warranties contained
in this Agreement are deemed to and do survive the execution hereof.
11.MODIFICATIONS. This Agreement may not be amended, canceled, revoked
or otherwise modified except by written agreement subscribed by all of the
parties to be charged with such modification.
12.AGREEMENT BINDING ON SUCCESSORS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
partners, employees, agents, servants, heirs, administrators, executors,
successors, representatives and assigns.
▇▇.▇▇▇▇▇▇▇▇'S FEES. All parties hereto agree to pay their own costs and
attorneys' fees except as follows:
A. In the event of any action, suit or other proceeding
instituted to remedy, prevent or obtain relief from a breach of this
Agreement, arising out of a breach of this Agreement, involving claims
within the scope of the releases contained in this Agreement, or
pertaining to a declaration of rights under this Agreement, the
prevailing party shall recover all of such party's attorneys' fees and
costs incurred in each and every such action, suit or other proceeding,
including any and all appeals or petitions therefrom.
B. As used herein, attorneys' fees shall be deemed to mean
the full and actual costs of any legal services actually performed in
connection with the matters involved, calculated on the basis of the
usual fee charged by the attorneys performing such services.
▇▇.▇▇▇▇▇. All parties consent to the exclusive jurisdiction of the
Courts of New York located in New York County in connection with any dispute
relating to this Agreement; all parties further agree to accept service of
process by overnight courier in any such suit, to waive any defense based upon
an inconvenient forum, and to waive any right to a trial by jury.
15.COUNTERPARTS AND FACSIMILE EXECUTION. This Agreement may be executed
in one or more counterparts or by facsimile, each of which when executed and
delivered shall be an original, and all of which when executed shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto, agreeing to be bound hereby,
execute this Agreement upon the date first set forth above.
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
itle: Manager
AJW PARTNERS, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
itle: Manager
AJW OFFSHORE LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
itle: Manager
AJW QUALIFIED PARTNERS, LLC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
itle: Manager
VALCOM, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer