EXHIBIT 10.12
SETTLEMENT AGREEMENT AND APPENDED AGREEMENTS AND ORDERS
This Settlement Agreement [Agreement], Appended Agreements, and
Appended Court Orders and Confession to Judgment [collectively Court Orders} are
entered into by Plaintiffs (a) UNIVERSAL CONSULTANTS, INC. [UCI], a Nevada
Corporation; (b) NATIONAL FINANCIAL, INC [NFI], a Nevada Corporation; and (c)
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ [collectively Plaintiffs]; and Defendants (1) ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, president, chief executive officer and shareholder in American
Inflatables, Inc. [AII] and (2) ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., an officer and shareholder
in AII, and ostensible owner of record of the real property located at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ [Ocean Vista Property]
[collectively Defendants].
1. On November 13, 2001, Plaintiffs commenced an action against
Defendants in Superior Court of the State of California, County of Orange,
entitled Universal Consultants, Inc. et al. ▇. ▇▇▇▇▇▇▇▇▇▇, et al., Case No.
01CC14645 [Judge ▇▇▇▇ ▇. ▇▇▇▇▇▇] [Superior Court]. Plaintiffs contended inter
alia that Defendants had breached various contractual agreements, including an
AII Note of December 12, 2000 [Exhibit A] and a ▇▇▇▇▇▇▇▇▇▇ Guaranty thereof
[Exhibit B] [collectively Note] for $330,000 plus ten percent [10%] per annum
interest and legal costs, on which Plaintiffs sought a Writ of Attachment for
$440,000 on 3,679,984 shares of AII stock allegedly owned personally by
▇▇▇▇▇▇▇▇▇▇ [▇▇▇▇▇▇▇▇▇▇ AII Shares]; and sought rescission of a February 7, 2000
Agreement for Option to Purchase AII Stock from ▇▇▇▇▇▇▇▇▇▇ [Option Agreement]
[Exhibit C], alleging material breaches thereof, and for recovery of $250,000
#plus the legal rate of interest at ten percent [10%] per annum
SETTLEMENT AGREEMENT ATTACHMENT A-1
interest and legal costs, on which Plaintiffs sought a constructive trust on the
Ocean Vista Property. Other ancillary tort claims, not based necessarily nor
exclusively on the contractual agreements and the breaches thereof, are also
alleged.
2. Pursuant to the Application for the Writ of Attachment on the
▇▇▇▇▇▇▇▇▇▇ AII Shares, the Court deferred adjudication of the writ of attachment
pending notice to Defendants, and entered an interim Temporary Protective Order,
effective at the earliest through December 31, 2001. [Exhibit D]. This Order
enjoined ▇▇▇▇▇▇▇▇▇▇ and his agents inter alia from: (a) transferring, directly
or indirectly, any interest in the ▇▇▇▇▇▇▇▇▇▇ AII Shares; (b) assigning,
transferring, encumbering, or impairing the value of the ▇▇▇▇▇▇▇▇▇▇ AII Shares
or the certificates thereof; and/or (c) transferring or removing the
certificates of the ▇▇▇▇▇▇▇▇▇▇ AII Shares from the State of California.
3. UCI holds a Warrant to Purchase AII Stock from AII [1.32 million
shares] at $.25 per share [Warrant], which may be exercised on those terms at
the exclusive option and discretion of UCI at any time until December 20, 2003.
[Exhibit E].
4. Pending since October 12, 2000 has been a Reorganization Agreement
by and between American Inflatables, Inc. [AII] and National Paintball Supply
Co. [NPSC] [Merger Agreement], in connection with the Securities and Exchange
Commission [SEC], which deemed the Registration Statement effective November 9,
2001, and awaits only the approval of AII in a shareholders meeting and final
implementation of the Merger Agreement by AII and NPSC. Under the
SETTLEMENT AGREEMENT ATTACHMENT A-2
Merger Agreement, NPSC is acquiring all of the outstanding common stock and
warrants of AII with twenty-two percent [22%] of its newly issued stock,
assuming exercise of outstanding warrant, at a ratio of one (1) NPSC share for
every six (6) AII shares of stock.
5. Under the Merger Agreement, it is expressly understood that the UCI
1.32 million shares warrant is effective on its express terms until the
indicated deadline of December 12, 2003, and will be honored by NPSC under the
specified 1/6 exchange formula if duly and timely exercised by UCI either before
or after the effective date of the Merger Agreement. [Exhibit F]. It is also
understood between the parties that UCI is entitled at its discretion to pay the
requisite $330,000 sum owed for the 1.32 million shares under the Warrant by
exonerating the principal sum of $330,000 under the AII Note for $330,000
[Exhibit A] and the ▇▇▇▇▇▇▇▇▇▇ Guaranty [Exhibit B] at any time prior to the
distribution and valuation dates as described in Paragraphs 12 & 13 of this
Agreement and in the Escrow Instructions. [Exhibits G & I].
6. Plaintiffs' pending Application for Writ of Attachment for $440,000
on all 3,679,984 ▇▇▇▇▇▇▇▇▇▇ AII Shares as reflected in the October 29, 2001 S-4
Filing by NPSC, and the Temporary Protective Order based thereon, apply on their
face to that specified number of shares. In fact, the number of ▇▇▇▇▇▇▇▇▇▇ AII
Shares subject to the Temporary Protective Order is 3,053,984 shares [Adjusted
▇▇▇▇▇▇▇▇▇▇ AII Shares], as reflected in the following sequence of arms length
sales and transactions prior to the effective date of the Temporary Protective
Order on November 21, 2001:
SETTLEMENT AGREEMENT ATTACHMENT A-3
(a) ________: Original Issuance to ▇▇▇▇▇▇▇▇▇▇ 3,000,000
(b) 05-16-00: Transfer to NFI 250,000
(c) 09-27-00: New Issuance to ▇▇▇▇▇▇▇▇▇▇ 1,053,984
(d) 02-20-01: Transfer to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 250,000
(e) 03-28-01: Transfer to ▇▇▇▇ ▇▇▇▇▇▇▇▇ 150,000
(f) 03-30-01: Transfer to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 125,000
(g) 03-30-01: Transfer to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 125,000
(h) 03-30-01: Transfer to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 100,000
(i) 11-20-01: Net Balance of ▇▇▇▇▇▇▇▇▇▇ Shares 3,053,984
7. The parties hereto agree that it is in each of their interests to
resolve this action according to the following terms and conditions in lieu of
fully litigating the matter before the Superior Court.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL AND RESPECTIVE COVENANTS
AND UNDERTAKINGS SET FORTH HEREIN, IT IS HEREBY AGREED AS FOLLOWS:
8. APPENDED AGREEMENTS AND ORDERS OF THE SUPERIOR COURT: In addition to
this Agreement, the parties hereto are executing and submitting concurrently
herewith the following Appended Agreements and Orders, as indicated:
(a) STIPULATED PERMANENT PROTECTIVE ORDER AND STAY OF
PROCEEDINGS [PERMANENT PROTECTIVE ORDER], a copy of which is attached
hereto as Exhibit H, which shall be lodged with the Court within five
(5) days of the execution of this Agreement;
(b) APPOINTMENT OF ESCROW OFFICER AND ESCROW INSTRUCTIONS
[Escrow Instructions] which, with the written
SETTLEMENT AGREEMENT ATTACHMENT A-4
consent of the mutually selected Escrow Officer to be secured, Escrow
Instructions to be executed, and certificates of ownership of the
Adjusted ▇▇▇▇▇▇▇▇▇▇ AII Shares - 3,053,984 shares - to be delivered to
the Escrow Officer, shall be effected within five (5) court days of
execution of this Agreement, and upon execution the executed Escrow
Instructions will be deemed a part of and incorporated by reference
into this Agreement, as Exhibit I;
(c) CONFESSION TO JUDGMENT, a copy of which is attached hereto
as Exhibit J, which shall be held by Plaintiffs' counsel to be filed
with the Court only after and in the event of both of the following:
(1) Defendants, or either of them, or any agent
acting on behalf of either or both of them, have breached or
failed to timely perform any material obligation, duty or
condition of any one or more of the following: (i) this
Agreement; (ii) Option Agreement [Exhibit C] as incorporated
herein by reference infra, at Paragraph 13; (iii) Merger
Agreement as last attested to by AII and NPSC in an S-4 SEC
Filing dated October 29, 2001; (iv) Temporary Protective Order
[Exhibit D] except as superseded by the Permanent Protective
Order [Exhibit H]; (v) Permanent Protective Order [Exhibit H];
and/or Escrow Instructions [Exhibit I]; and
(2) Plaintiffs or their counsel have given written
notice to Defendants of the breach[es] and/or failure[s]
SETTLEMENT AGREEMENT ATTACHMENT A-5
to perform - addressed to ▇▇▇▇▇▇▇▇▇▇ and delivered by express
mail with signature waiver addressed to the then current
official address of AII, and if none after the Merger
Agreement becomes effective, the then official address of NPSC
- and fifteen (15) calendar days have elapsed since mailing of
said notice and Defendants have failed to establish to
Plaintiffs' satisfaction that he/they have fully cured any and
all breach[es] and/or failure[s] to perform.
(d) IRREVOCABLE JOINT POWER OF ATTORNEY TO ORDER TRANSFER OF
ADJUSTED ▇▇▇▇▇▇▇▇▇▇ SHARES FOR DISTRIBUTION [TRANSFER ORDER], which
shall irrevocably order the transfer agent to effect the transfer of
ownership and possession of all of the Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares to
the persons or entities to whom the Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares are to
be distributed based solely on calculations under the evaluation and
distribution formulae as set forth in this Agreement and the Escrow
Instructions, which shall be executed at the time of execution of this
Agreement, and be delivered to the Escrow Officer within five (5) days
of execution of this Agreement at which time it will be deemed a part
of and incorporated by reference into this Agreement as Exhibit K.
(e) AMENDED SECOND TRUST DEED ON OCEAN VISTA PROPERTY [AMENDED
TRUST DEED], a copy of which is attached hereto as Exhibit L, which
shall secure Defendants full and timely performance of all of
Defendants' financial and other
SETTLEMENT AGREEMENT ATTACHMENT A-6
obligations and performance under this Agreement, the Permanent
Protective Order, the Escrow Instructions and, if filed, the Confession
to Judgment.
(f) STATEMENT OF ACCOUNT ON LEGAL COSTS, EXPERT FEES, AND
ATTORNEYS' FEES [LEGAL COSTS], a copy of which is attached hereto as
Exhibit M, which sets forth legal costs, expert fees and attorneys'
fees incurred to date [$95,127] by Plaintiffs in connection with
enforcement of Defendants' obligations under the $330,000 Note [Exhibit
A], Guaranty [Exhibit B] and Option Agreement {Exhibit C], and which
Agreements provide for recovery of such legal costs and attorneys' fees
from ▇▇▇▇▇▇▇▇▇▇ pursuant to California Civil Code sec.1717, now
implemented via the Escrow Instructions [Exhibit I].
9. RATIFICATION OF APPENDED AGREEMENTS AND COURT ORDERS: The parties
hereby freely and voluntarily ratify fully and without condition the terms and
conditions of each of the items attached as Exhibits A-E & G-M, except as
expressly superseded by this Agreement or any attachment that was executed
subsequent in time to a previous attachment, all of which are incorporated
herein by reference as though fully set forth; and, further, along with all of
the remaining provisions of this Agreement, these attachments form part of the
consideration for this Agreement. Exhibit F is a writing from counsel for NPSC,
and as such is attached for informational purposes, and the parties hereto
affirm that they are giving these documents the interpretation and understanding
as represented in this Agreement.
SETTLEMENT AGREEMENT ATTACHMENT A-7
10. ADJUSTED ▇▇▇▇▇▇▇▇▇▇ SHARES: The parties agree that the transferred
▇▇▇▇▇▇▇▇▇▇ AII Shares set forth in Paragraphs 6, supra, are hereinafter excluded
from the pending Application for Writ of Attachment, the existing Temporary
Protective Order, the Permanent Protective Order to be filed [Exhibit H], the
Escrow Instructions {Exhibit I], and this Agreement and all internally
referenced agreements, and that any references therein to the ▇▇▇▇▇▇▇▇▇▇ AII
Shares or 3,679,984 shares belonging to ▇▇▇▇▇▇▇▇▇▇ are deemed hereafter to refer
to the Adjusted ▇▇▇▇▇▇▇▇▇▇ AII Shares in the agreed number of 3,053,984 shares.
This adjustment is based exclusively on the representations and warrants of
▇▇▇▇▇▇▇▇▇▇ as set forth in Paragraph 6; and except as to any shares currently in
the possession of plaintiffs, the reduction from 3,679,984 to 3,053,984 as
provided in this Paragraph 10 shall be rescinded and null and void if and when
it is established that such representations are materially false in respect to
such transferred shares, and plaintiffs will retain all remedies in respect
thereto as if the adjustment had not been agreed to, and irrespective of any
other provision of this Agreement; however, in no event will the affirmation and
ratification of any transfers to plaintiffs be affected by such rescission.
11. CONVERSION OF ▇▇▇▇▇▇▇▇▇▇ ADJUSTED SHARES TO NPSC SHARES: Reference
herein to ▇▇▇▇▇▇▇▇▇▇ Adjusted Shares means collectively the AII shares mentioned
in Paragraph 10 and their NPSC substitute shares to be delivered to the Escrow
Officer under the 1/6 exchange
SETTLEMENT AGREEMENT ATTACHMENT A-8
formula of the Merger Agreement, pursuant to this Agreement and the Escrow
Instructions [Exhibit I].
12. PERMANENT PROTECTIVE ORDER: The Permanent Protective Order [Exhibit
H] shall be executed and submitted to the Superior Court for approval within
five (5) court days of execution of this Agreement and shall contain the same
terms as set forth in the Temporary Protective Order [Exhibit D], except that it
shall be permanent in duration, and shall contain inter alia provisions which
are agreed to and ordered in lieu of Plaintiffs' pending Application for Writ of
Attachment, as follows:
(a) Its terms shall apply only to Adjusted ▇▇▇▇▇▇▇▇▇▇ AII
Shares and, after exchange for NPSC shares, to the latter;
(b) It shall permit timely transfer of all Adjusted ▇▇▇▇▇▇▇▇▇▇
AII Shares as required in order to consummate the Merger Agreement and
effect the transfer of those shares to NPSC in exchange for NPSC shares
under the 1/6 exchange formula, except that it shall be done by some
device arranged with agreement with NPSC so that the AII shares will
not leave the State of California until replaced by the requisite
number of NPSC shares - i.e. in a manner which ensures that the
Superior Court does not lose jurisdiction and control over the AII
shares unless and until it secures jurisdiction and control over the
NPSC shares which are to be delivered in exchange therefor under the
1/6 exchange formula;
(c) It shall provide for the delivery of the Adjusted
▇▇▇▇▇▇▇▇▇▇ AII Shares and any certificates of ownership
SETTLEMENT AGREEMENT ATTACHMENT A-9
therefor to a mutually selected escrow officer, as identified,
instructed and set forth in the attached Escrow Instructions [Exhibit
I], which shall also be attached and incorporated into the Permanent
Protective Order [Exhibit H];
(d) It shall provide for the Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares to be
valuated and distributed as specified in Paragraph 13 and the Escrow
Instructions [Exhibit I] - on a specified schedule for the valuation of
the value of the shares and the outstanding debt, including accumulated
interest and legal costs as specified in this Agreement and the Escrow
Instructions, with the further proviso that shares will be distributed
first to Plaintiffs until all of Defendants' cumulative obligations to
Plaintiffs are paid in full;
(e) It shall provide for exoneration of the $7500 surety bond
ordered and filed November 26, 2001 in connection with the Temporary
Protective Order, and a stipulation from ▇▇▇▇▇▇▇▇▇▇ granting a full and
general release of Plaintiffs and their agents for any claim based on
the application for or issuance of the Temporary Protective Order or
the Permanent Protective Order; and
(f) It shall provide that the Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares, the
certificates thereof, jurisdiction over the shares and the legal claims
and parties herein, venue, and choice of law shall remain at all times
in and of California and the Superior Court, except that Nevada Law
shall apply in respect to any issue in connection with discovery,
subpoenas,
SETTLEMENT AGREEMENT ATTACHMENT A-10
inquiries, or disclosure of information concerning any Nevada
Corporation or its officers, directors, owners or operations.
13. ESCROW INSTRUCTIONS: The Escrow Instructions [Exhibit I] shall be
executed within five (5) days of execution of this Agreement, and upon execution
will be deemed a part of and incorporated by reference into this Agreement, as
Exhibit I. The terms of the Escrow Instructions shall provide inter alia, and in
addition to other standard instructions and provisions mutually agreeable and
necessary to carry out this Agreement, the following terms and conditions:
(a) Appointment of a mutually selected person or entity
[Escrow Officer], located in California, within five (5) days of
execution of this Agreement;
(b) If NPSC so desires, the Escrow Officer may also be
designated as an agent of the transfer agent for purposes of the
exchange of AII shares for NPSC shares under the 1/6 exchange formula;
(c) Upon delivery of the 3,053,984 Adjusted ▇▇▇▇▇▇▇▇▇▇ AII
Shares and certificates of ownership thereof to the Escrow Officer per
this Agreement, the Escrow Officer will hold those shares and
certificates and their NPSC replacements, and thereafter distribute
same, in accordance with this Agreement;
(d) The Escrow Officer will be prohibited from permitting the
Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares and any certificates of ownership thereof to
leave the State of California, nor to release them from the sole and
exclusive control of the Escrow
SETTLEMENT AGREEMENT ATTACHMENT A-11
Officer or his company, except as expressly empowered to do so by the
Escrow Instructions [Exhibit I] and this Agreement;
(e) The Escrow Officer will be empowered to take such actions
as necessary to deliver to NPSC the Adjusted ▇▇▇▇▇▇▇▇▇▇ AII Shares in
exchange for the NPSC shares, after the merger under the 1/6 exchange
formula of the Merger Agreement; except, also providing that any
delivery of the ▇▇▇▇▇▇▇▇▇▇ Adjusted Shares for that purpose shall be
made to an agent of NPSC located in California, after receipt of both:
(1) written and notarized authorization from NPSC designating such
person or entity as NPSC's agent for that purpose; and (2) written and
notarized consent from plaintiffs to do so; and upon receipt of the
replacement shares from NPSC, the terms of this Agreement and any
Escrow Instructions shall transfer forthwith and without further notice
or instruction to the NPSC shares;
(f) A Valuation Date and Valuation Formula will be set for
determining for purposes of distribution the then current and actual
fair market value of the AII or NPSC shares in the escrow, which date
shall be ninety (90) days after the execution of this Agreement - or
such earlier or later date as plaintiffs shall select by written notice
to ▇▇▇▇▇▇▇▇▇▇ and the Escrow officer, in plaintiffs' sole discretion,
which period shall not exceed one hundred eighty (180) days from the
date of execution of this Agreement;
SETTLEMENT AGREEMENT ATTACHMENT A-12
(g) An Assessment Date will be set concurrently with the
Valuation Date for purposes of distribution, at which time a current
written Statement of Account will be delivered by plaintiffs to
▇▇▇▇▇▇▇▇▇▇ and the Escrow Officer, setting forth the amounts of any
unpaid balance, accrued interest, Legal Costs and/or other financial
obligations to be paid from the escrow to plaintiffs in accordance with
this Agreement;
(h) The NPSC equivalent of the 1,250,000 shares will be
delivered to NFI upon receipt by the Escrow Officer of the NPSC shares;
or if the Merger Agreement is not consummated, the 1,250,000 shares
will be delivered to NFI upon close of escrow or such earlier date
demanded in writing by NFI in its sole discretion;
(i) The valuation and distribution dates may be modified as
specified herein so as to ensure that any distribution occurs at the
earliest feasible date, in the sole judgment of plaintiffs;
(j) Irrespective of any other provision of this Agreement or
the Escrow Instructions, upon personal service of a certified and
conformed copy of any judgment in the civil action, Universal
Consultants, Inc. ▇. ▇▇▇▇▇▇▇▇▇▇, Case No. 01CC14645, the Escrow Officer
will comply with any provisions thereof by delivering within five (5)
business days to Plaintiffs' designee[s], given in writing to the
Escrow Officer along with service of the Judgment, the number of
Adjusted ▇▇▇▇▇▇▇▇▇▇ NPSC or AII Shares stated therein; and in
SETTLEMENT AGREEMENT ATTACHMENT A-13
connection therewith, the parties will hold the Escrow Officer
harmless, and indemnify the Escrow Officer, for any act taken in
compliance with said judgment;
(k) While the Adjusted ▇▇▇▇▇▇▇▇▇▇ AII Shares remain in the
escrow, ▇▇▇▇▇▇▇▇▇▇ will retain the right to vote all of those shares in
all AII matters, including but not limited to the special shareholders
meeting referenced in the S-4 filings to approve the Merger Agreement,
until such time as those shares or their NPSC replacement shares have
been in fact delivered to any plaintiff herein in accordance with this
Agreement and the Escrow Instructions; conversely, neither UCI nor NFI
will be deemed in control of those shares until actual receipt of the
AII shares or their NPSC replacement shares;
(l) While the Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares remain in the escrow,
▇▇▇▇▇▇▇▇▇▇ agrees and warrants that he and his agents may not in any
manner encumber, assign, sell, transfer, impair or dilute the value of
any of those shares; nor the certificates thereof; nor any part thereof
or interest therein; and
(m) The date for release of remaining Adjusted
▇▇▇▇▇▇▇▇▇▇ Shares to ▇▇▇▇▇▇▇▇▇▇ and the close of the escrow shall be as
specified in this Agreement and the Escrow Instructions [Exhibit I], or
when all obligations and performance required of Defendants to
Plaintiffs has been completed, whichever is the later, and Plaintiffs
have
SETTLEMENT AGREEMENT ATTACHMENT A-14
executed a written acknowledgment thereof, delivered to the Escrow
Officer.
14. OPTION AGREEMENT: Except as expressly superseded by this Agreement
or any documents concurrently executed herewith, the obligations, duties,
covenants and warranties of the Option Agreement [Exhibit C] remain in full
force and effect. The information covenant therein is hereby amended to include
information concerning the Merger Agreement and merger process, and shall
continue in full force and effect after the merger.
15. AII STOCK WARRANT: UCI expressly retains the sole option and
discretion to select whether and when to exercise the AII Stock Warrant - i.e.
1.32 million shares at $.25 per share from AII or 220,000 shares at $1.50 per
shares from NPSC [Exhibit E] during its specified term until December 12, 2003.
The following additional provisos also apply:
(a) Should UCI elect at its sole option and discretion to
exercise the Warrant [Exhibit E], UCI reserves, also at its sole option
and discretion, the right to pay for the shares by exoneration of the
$330,000 principal amount of the Note and [Exhibit A] and Guaranty
[Exhibit B];
(b) Should UCI do so before the distribution of shares under
this Agreement and the Escrow Instructions [Exhibit I] for payment of
the principal amount of the $330,000 Note and Guaranty [Exhibits A &
B], ▇▇▇▇▇▇▇▇▇▇ will be entitled to a credit for that sum against any
outstanding obligations to
SETTLEMENT AGREEMENT ATTACHMENT A-15
Plaintiffs under this Agreement and/or the Escrow Instructions;
(c) Should there be any partial or staged distributions to
Plaintiffs under this Agreement or the Escrow Instructions [Exhibit I],
such distributed amounts will be credited against any then outstanding
interest, legal costs, damages under the Confession to Judgment
[Exhibit J] or a Statement of Account for accrued interest or Legal
Costs [Exhibit M] prior to any credit against the principal amount
$330,000 Note [Exhibit A];
(d) Irrespective of any exercise by UCI of the Warrant
[Exhibit D] or the option to pay for the stock by exonerating the
$330,000 principal amount of the Note, ▇▇▇▇▇▇▇▇▇▇ remains liable via
the Escrow Instructions [Exhibit I] or any other security provision or
instrument mentioned in this Agreement, for all accumulated interest on
that Note [Exhibit A], and any accumulated Legal Costs in connection
with all of plaintiffs' claims against Defendants referenced in the
Superior Court Action and/or being resolved herein.
16. CONFESSION TO JUDGMENT: The Confession to Judgment and Permanent
Protective Order [Exhibit H] shall be executed concurrently herewith, and
retained by Plaintiffs' counsel to be only as specified in Paragraph 8(c). The
terms of the Confession to Judgment shall be as specified in Exhibit J.
17. AMENDED SECOND TRUST DEED: Within five (5) days of the execution of
this Agreement, Defendant ▇▇▇▇▇▇ will execute by notary an Amended Second Trust
Deed on the Ocean Vista Property
SETTLEMENT AGREEMENT ATTACHMENT A-16
[Exhibit L], which shall secure as a form of cross-collateralization full and
timely performance of all of the obligations of Defendants herein, as specified
in this Agreement and any incorporated or referenced documents, including but
not limited to the Permanent Protective Order [Exhibit H], Escrow Instructions
[Exhibit I] and Confession to Judgment [Exhibit J]. Defendants ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ shall, within five (5) days of execution of this Agreement, execute any
notes or other documents necessary to properly and legally secure the Amended
Second Trust Deed [Exhibit L].
18. MERGER AGREEMENT: Defendants understand that an express covenant
and condition of this Agreement is that they will timely and fully comply with
the Merger Agreement and will make all reasonable efforts to consummate the
Merger Agreement. Any material breach thereof by Defendants, or failure to make
best efforts to consummate the Merger Agreement, from the date of execution of
this Agreement, will be deemed a material breach of this Agreement.
19. INTEREST: Until the $330,000 Note [Exhibit A] is paid in full,
interest shall continue to accrue at the rate of ten per cent [10%] per annum as
per the terms of the Note, and in accordance with the provisions of this
Agreement, and, if applicable, the Confession to Judgment [Exhibit J].
20. LEGAL COSTS: On each of the date[s] of valuation and distribution
of shares under the Escrow Instructions [Exhibit I], and prior to the close of
the Escrow Instructions, Plaintiffs' Legal Costs - including inter alia
attorneys' fees, expert costs,
SETTLEMENT AGREEMENT ATTACHMENT A-17
and filing fees and costs of process - shall be assessed as of that date; and
said sum shall be added to the outstanding indebtedness of Defendants to be paid
from the Escrow, or, failing that, from other security provisions and/or
instruments referenced herein, to which Defendants herewith give their consent.
The current Statement of Legal Costs is attached hereto as Exhibit M, and by
execution of this Agreement Defendants approve and ratify Exhibit M. Until such
Legal Costs are paid in full, interest shall accrue on the remaining unpaid
balance, commencing with the date of execution of this Agreement, at the rate of
ten percent [10%] per annum.
21. INDEMNIFICATION: Defendant ▇▇▇▇▇▇▇▇▇▇ agrees to fully indemnify
Plaintiffs herein, as against any settlement, penalties of any kind, judgment or
cost of defense, for any action by any person not a party to this Agreement
asserting any alleged liability, unlawful acts, breaches of contract,
violation[s] of any law or regulation, or other causes of action howsoever
framed, by any party to this Agreement or by AII in connection with the subject
matter of this Agreement, the Superior Court Action, the Merger Agreement or its
implementation, and/or any financial or stock transaction between the parties to
this Agreement. Defendant Ariss is liable under this provision only to the
extent of his interest in the Ocean Vista Property.
22. GENERAL RELEASES OF THE PARTIES UPON COMPLETION OF PERFORMANCE:
Upon completed and timely performance by Defendants of all obligations and
conditions under this Agreement and any incorporated agreements, the Merger
Agreement, the Permanent
SETTLEMENT AGREEMENT ATTACHMENT A-18
Protective Order, and the Escrow Instructions, without any material breaches or
failures to perform during the terms of these agreements and orders, and with
Plaintiffs' written certification thereof delivered to the Escrow Officer and
close of the Escrow Instructions, this Agreement shall serve as a complete,
final and mutual release of all claims between Plaintiffs and Defendants. In
that regard, except as expressly stated otherwise in this Agreement and the
Permanent Protective Order, and for and in consideration of the above described
terms of this Agreement, attachments and Appended Agreements and Orders,
Plaintiffs and Defendants, their agents, servants, employees, heirs, successors
and assigns, forever release and discharge each other and their respective
agents, servants, employees, heirs, successors and assigns from any and all
claims, demands, debts, liabilities, accounts, obligations, costs, expenses,
liens, actions, causes of action [at law, in equity, or otherwise], rights,
rights of action, including but not limited to Superior Court Action No.
01CC14645, rights of indemnity [legal and equitable], rights to subrogation,
rights to contribution and remedies of any nature whatsoever, known or unknown,
based upon, arising out of or related to the facts underlying this action.
23. LIMITED RELEASE OF AII: Upon execution of this Agreement, including
all Appended Agreements and Orders, filing of the Permanent Protective Order
[Exhibit H], delivery of the Adjusted ▇▇▇▇▇▇▇▇▇▇ AII Shares into the Escrow per
this Agreement and the Escrow Instructions [Exhibit I], and recordation of the
Amended Second Trust Deed [Exhibit L], AII is released from any
SETTLEMENT AGREEMENT ATTACHMENT A-19
responsibility or liability for the $330,000 Note [Exhibit A], except as it
remains subject to the Warrant [1.32 million shares] [Exhibit E] and UCI's
rights, options and sole discretion thereunder as stipulated in this Agreement
and between Plaintiffs, Defendants and NPSC [Exhibits F & G]; and is further
released at such time from any further obligations under the Option Agreement
[Exhibit C]. This release is void and of no effect if, as the result of any
action by AII or NPSC, any part of this Agreement, any Appended Agreements or
Orders, or any obligations of Defendants under any of them, are voided or
prevented; or if any material breach of failure to perform by Defendants under
this Agreement or any related agreements attached is done at the behest of AII
or NPSC.
24. LIMITED RELEASE OF NPSC: Upon execution of this Agreement,
including all Appended Agreements and Orders, filing of the Permanent Protective
Order [Exhibit H], delivery of the Adjusted ▇▇▇▇▇▇▇▇▇▇ AII Shares into the
Escrow per this Agreement and the Escrow Instructions [Exhibit I], recordation
of the Amended Second Trust Deed [Exhibit L], and receipt of a written
certification from NPSC that it consents to this Agreement and to those
obligations expressly referencing NPSC as obligor, the Permanent Protective
Order [Exhibit H] and the Escrow Instructions [Exhibit I], Plaintiffs hereby
release NPSC of any and all liability for any of the obligations hereunder
except as expressly stated herein in Paragraph 13(b) in reference to selection
of a California agent to accept AII shares from the Escrow Officer for
SETTLEMENT AGREEMENT ATTACHMENT A-20
the 1/6 exchange for NPSC shares [Exhibits H & I], and Paragraph 15 in reference
to NPSC's admitted continuing obligations in respect to the Warrant [1.32
million shares], until December 12, 2003, should the NPSC merger with AII be
consummated [Exhibit E].
25. RELEASE OF DEFENDANTS FROM UNKNOWN CLAIMS: With respect to the
matters hereinabove described, except as set forth in Paragraphs 21, 23 & 24,
and Permanent Protective Order [Exhibit H], at the point in which the releases
in Paragraph 22 become effective, the parties thereto knowingly waive all rights
and protection, if any, under Section 1542 of the Civil Code of the State of
California or any similar law of any state of territory in the United States of
America. Section 1542 provides as follows:
"1542 General Release; Extent. 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."
26. CONTINUING JURISDICTION: The Superior Court of the State of
California, County of Orange, will retain jurisdiction over the enforcement of
the terms of this Agreement and the Appended Agreements and Orders. In the event
that legal action is required to enforce this Agreement or any Appended
Agreements or Orders, the prevailing party shall be entitled to its/his
reasonable attorneys' fees and costs pursuant to California Civil Code sec.1717.
In the event of any dispute over Plaintiffs' accrual and recovery from
SETTLEMENT AGREEMENT ATTACHMENT A-21
Defendants of legal costs, including attorneys' fees, beyond the date of
execution of this Agreement and not specified in Exhibit M, California Civil
Code sec.1717 shall govern its resolution.
27. APPLICATION TO AGENTS AND SUCCESSORS: All covenants, promises and
acknowledgments contained herein shall be binding upon, and inure to the benefit
of the parties hereto, or their respective agents, servants, employees, heirs,
successor, and assigns.
28. WARRANTIES OF OWNERSHIP OR RIGHTS AND INTERESTS: In executing this
Agreement, the parties expressly warrant that they have not previously assigned,
transferred, conveyed, or otherwise disposed of any or all of the rights or
claims they have or may have against any other party hereto.
29. REPRESENTATION OF COUNSEL AND LEGAL ADVICE: Each of the parties
hereto represents that he/it has received independent and competent legal advice
from counsel of his/its choosing prior to the execution of this Agreement and
Appended Agreements and Orders, and that counsel has explained the contents and
effect of this Agreement and all such related documents and orders. Each party
executes this Agreement and Appended Agreements and Orders voluntarily and with
full knowledge of their contents and effect. Each party has been represented by
such counsel in the negotiation and drafting of this Agreement and Appended
Agreements and Orders, each party has participated fully in the drafting of both
of them, and this Agreement and Appended Agreements and Orders shall not be
SETTLEMENT AGREEMENT ATTACHMENT A-22
construed in favor of or against any party by virtue of such party's involvement
in the drafting.
30. ENTIRE AGREEMENT: This Agreement, its attachments and Appended
Agreements and Orders contain the entire agreement among the parties hereto, and
the terms of this Agreement are contractual and not merely recital. Each party
represents that he/it is not relying on any promises, written or oral - except
as is set forth in this Agreement or the attachments - in entering into this
Agreement and the Appended Agreements and Orders.
31. COSTS OF ESCROW: ▇▇▇▇▇▇▇▇▇▇ shall bear the full obligation for all
costs for the Escrow Officer and Escrow Instructions, which shall be paid to the
Escrow Officer prior to final distribution of the Adjusted ▇▇▇▇▇▇▇▇▇▇ Shares.
32. AMENDMENT OR MODIFICATION OF AGREEMENT: This Agreement and its
Appended Agreements and Orders can only be modified or amended by written
instrument executed by the parties hereto.
33. AUTHORITY TO EXECUTE THIS AGREEMENT: Each of the parties hereto
represents and warrants that it has the authority to execute and deliver this
Agreement and Appended Agreements and Orders for and behalf of itself and each
entity it purports to bind.
34. COOPERATION IN EXECUTION AND FILING OF INSTRUMENTS: Following the
date hereof, the parties hereto shall take such action and execute and deliver
such further documents as may be reasonably necessary or appropriate to
effectuate the intention of this Agreement and the Appended Agreements and
Orders.
SETTLEMENT AGREEMENT ATTACHMENT A-23
35. EXECUTION OF THIS AGREEMENT AND APPENDED AGREEMENTS AND ORDERS:
This Agreement and the Appended Agreements and Orders may be executed by FAX and
in any number of counterparts, each of which shall be deemed an original and all
of which shall constitute together one and the same instrument, and will be
effective upon execution by all parties hereto. Each party shall, however,
provide all other parties original signatures within five (5) days after
execution of this Agreement.
36. SERVICE OF PERMANENT PROTECTIVE ORDER: Within five (5) days after
entry of the Permanent Protective Order, a conformed copy of the Permanent
Protective Order will be personally served upon ▇▇▇▇▇▇▇▇▇▇, which shall be
deemed effective upon express mail delivery addressed to ▇▇▇▇▇▇▇▇▇▇ at the
current official business address for AII.
EXECUTION AND ATTESTATION BY
PLAINTIFFS AND THEIR COUNSEL
I have read the above Agreement, attachments, and Appended Agreements
and Orders, and discussed their terms, as well as all alternative litigation
options, with my counsel. I hereby enter into this Agreement, attachments, and
Appended Agreements and Orders freely and voluntarily, and in the informed
belief that it is in my best interests to do so. I have been advised by my
counsel of record as to the legal implications of this Agreement, attachments,
and Appended Agreements and Orders, including my obligations under each of them
and the fact that this Agreement
SETTLEMENT AGREEMENT ATTACHMENT A-24
attachments, and Appended Agreements and orders may be enforced by appropriate
legal action in the Superior Court of the State of California, County of Orange,
as specifically set forth and limited in the Agreement, Permanent Protective
Order and Escrow Instructions.
Dated: December 7, 2001
------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - for himself and for
Universal Consultants, Inc. and
National Financial, Inc. - Plaintiffs
I am the attorney of record for Plaintiffs in the aforementioned
action, and have advised them in full concerning the above Agreement,
attachments, and Appended Agreements and Orders, and advised them concerning
their terms, as well as all alternative litigation options, including the legal
implications of this Agreement, attachments, and Appended Agreements and Orders,
and their obligations thereunder, and the fact that this Agreement attachments,
and Appended Agreements and Orders may be enforced in the Superior Court of the
State of California, County of Orange, as specifically set forth and limited in
the Agreement, Permanent Protective order and Escrow Instructions. Dated:
December 7, 2001
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Attorney for Plaintiffs
SETTLEMENT AGREEMENT ATTACHMENT A-25
EXECUTION AND ATTESTATION BY
DEFENDANTS AND THEIR COUNSEL
I have read the above Agreement, attachments, and Appended Agreements
and Orders, and discussed their terms, as well as all alternative litigation
options, with my counsel. I hereby enter into this Agreement, attachments, and
Appended Agreements and Orders, freely and voluntarily, and in the informed
belief that it is in my best interests to do so. I have been advised by my
counsel of record as to the legal implications of this Agreement, attachments,
and Appended Agreements and Orders, including my obligations under each of them
and the fact that this Agreement, attachments, and Appended Agreements and
orders may be enforced by appropriate legal action in the Superior Court of the
State of California, County of Orange, as specifically set forth and limited in
the Agreement, Permanent Protective Order and Escrow Instructions. Dated:
December 7, 2001
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ - Defendant
Dated: December __, 2001
-----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. - Defendant
I am the attorney of record for Defendants in the aforementioned
action, and have advised them in full concerning the above Agreement
attachments, and Appended Agreements and Orders and advised them concerning
their terms, as well as all alternative litigation options, including the legal
implications of this Agreement, attachments, and Appended Agreements and Orders,
and their obligations thereunder, and the fact that this Agreement, attachments,
and Appended Agreements and Orders may be enforced in the Superior Court of the
State of California, County of Orange, as specifically set forth and limited in
the Agreement, Permanent Protective order and Escrow Instructions.
Dated: December 7, 2001
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Attorney for Defendants
SETTLEMENT AGREEMENT ATTACHMENT A-26